How Avalanche Is Moving Institutions Onchain

Transcript

I'm Rob Hadock, a general partner of Dragonfly. As was mentioned, John Nihas, uh, Ava Lab's chief business officer. >> Chief Business Officer, >> uh, and, you know, really the guy who makes the the wheels run. So, he's we've been long friends for a long time. So, excited to be able to do this >> tokenization. >> Yep. >> Big focus of Avalanche. Um obviously this year on the tokenization side we've seen the market cap grow uh for equity tokenization tremendously about four billion today up over 300% on the year trading and spot equity uh equity tokens is up from 230 million to over 8 billion. Uh it's growing exponentially.

What changed this past year that has create created that new excitement around the asset? uh and why has Avalanche been one of the biggest proponents uh and one of the biggest beneficiaries of that? >> So, let me take a step back real quick. You know, I think this industry has spent a lot of time cycling through narratives. We've been talking about privacy. We've been talking about a bunch of things. And the most recent meta has been tokenization, but tokenization is really the promise that this industry should be making and should be fulfilling from inception. and Avalanche was created with the tagline to tokenize the world's assets seven years ago. So we have been working towards that vision for seven years. Our architecture was built for that vision 7

years ago. Um and it's nice to see I think the industry, the market and just users in general finally come around to embrace tokenization. I think we've seen different flavors of tokenization over the years that were like technological use cases that didn't really have distribution or really meaningful use cases. um they were just doing tokenization for tokenization sake. But I think with the new administration in the US, I think with growing uh clarity around compliance and rules both through genius but now even with the failure of the clarity act, you're seeing the SEC step forward. You're seeing the CFTC step forward. So you're seeing more more guidance that allows people who would be doing tokenization and would be doing it

in the right way feel comfortable enough to step in. And these are the conversations that we've been having for 3 2 1 year to bring things to market that have that distribution that have the real use case and really have the promise of tokenization behind it. >> So you you said a thing there that I want to pull on a little bit which you said doing tokenization the right way. Right. So, a lot of what we've talked about in tokenization and we we sort of um kind of put it all together as like oh tokenization is one thing but it's very clear that the way Robin Hood is doing tokenization which is sort of like writing a derivative or a swap against a US broker dealer is very different than maybe primary issuance on chain which is very different than the way people are playing in tokenization on hyperlquid

right on the synthetic side. So what is the right way to do tokenization mean to you and how are we creating a better system if we do it the right way? >> So I'll take a step back here too. I think what's happened for the past several years is you had traditional issuers saying this this is an asset that doesn't really do much but if we put a token on it the crypto people will buy it. They had no interest and crypto people said well if we take any asset and fractionalize it and make it tradable everyone will want to trade it. So you had things like the St. Reges Hotel and all these like players that wanted to tokenize their contracts and things that had no demand really um and just excessive supply that there was no desire for these things. It was more

everything was being tokenized for the sake of being a PC. So to your point, I think now there's tokenization being done right in two ways. one, whether it's Hyperlquid with with PERPS or even um Xtocks or Ono or all these other guys, they're allowing people to take directional bets on the value of an equity whether it goes up or down, right? Um you have dinari and other players like securitize and bullish who are doing primary issuance. Uh dinari is doing a fully wrapped compliant security that is fully redeemable with all the rights that come with it. All the others are synthetics and derivatives. Um so it's at this point I think the right way whether the the user and the consumer wants just a directional bet or they want the full rights and privileges of

an equity and that comes with it and you are seeing that now start to happen. So you have two versions of the assets that I think users and the market really wants whereas before you just had a plethora of these assets that were kind of for lack of a better term dumb assets. >> So let's talk about Avalanche specifically. You guys have been one of the most active in the tokenization market. You've won a lot of big deals. I think you've been, you know, probably very thoughtful on a relative basis to everyone else over the last several years of where the market was going, the tokenization. You recently announced a deal with Prog $2 billion of tokenized assets and that's moving over from sort of a like enterprise DT platform. You've announced a bunch of deals with large

asset managers in Korea and Japan and other parts of of Asia. Why are they choosing Avalanche specifically relative to, you know, any of the other chains they could? >> So, when we talked to Programmat in Japan with their 2.8 billion dollars in assets or you talked to Hana Securities in Korea or you talked about the the federal government of the UAE tokenizing 12 a.5 million resident and citizen uh identities on the UAE pass coming on to Avalanche, they all have the same common saying, it's only possible on Avalanche. So the South Korean regulator came out and said that you can only do tokenization on two hyperledger chains that are that are private permissioned and enterprise or Avalanche. Avalanche is the only public network. Same with programmat and Japan and the same with the UAE. It happens on Avalanche because

our architecture from seven years ago to tokenize the world's assets was built with the idea that these assets, these jurisdictions, separate compliance requests are going to need their own chain. They're going to need their own environment. They're not going to live alongside everything else that exists in the world. The world is not built that way. And for the idea that blockchains to take every application and every asset and every use case and fit it on an existing technology is backwards. We allow for any of these governments, institutions, their enterprises, FIFA included, to build a blockchain that services their business, their asset, their compliance needs in their jurisdictions. So what works in Japan doesn't work in Korea, doesn't work in

the UAE, and doesn't work in the US. Each of these need their own environment and Avalanche allows for purpose-built chains that are private permission or permission public or public permissionless in the crypto ethos and also for that journey to emerge. What might start as private permissioned can grow into permission public and one day potentially public permissionless. Every other blockchain says come put your asset your use case on our technology the way it is. We build the techn we give the technology to allow the company to build the best product and the best asset.

>> So is the key word there modularity and flexibility? Is that >> flexibility and customizability? >> Customizability. Okay. Well um how do you think for for a lot of the you know L1s that Avalanche are building you talked about it with all of these institutions are building them. You also have much more cryptonative use cases for some of these L1s. You have AI use cases that are building L1's. What is the benefit for all of them to have their own L1 but then they're also to be the Cchain and for them to work together and how do they work together? >> Absolutely. So look, I am really excited about the growth of kind of purpose-built chains in general. So I'll take a step back on that. Like you'll you're seeing this with Tempo and with ARC and with all these other chains that are launching, but there's only finite

amounts of engineers of resources to build. So this is the problem that people tend to do. Everyone wants to have a blockchain, but to build it, to launch it, and more importantly to maintain it is costly and requires engineers and a lot of overhead. Avalanche allows anybody to spin up a chain according to their own needs. We have service providers and even Avala Labs that can work with them to help them build that. The benefit is you have your own chain with your own rule set, with your own gas token, with your own governance token, with whatever it is that's best for your business, maybe even no gas. The benefit though there is we give you the blockchain. So all the integrations that you would do with as a blockchain developer whether it be

wallets and RPCs and APIs and exchange listings and everything else comes with an Avalanche L1 because instead of going to a stablecoin issuer and saying please issue your stable coin onto us, you can pull it from the Cchain. So the Cchain is our public permissionless EVM. It is a liquidity hub. So for all tokenized assets and stable coins and whatever it may be, they can get listed on that chain, have access to every major wallet, exchange, and infrastructure provider, but transfer easily to their own L1 and transact on there or execute on there. So you h you can have a grouping of private permission chains that only talk to each other, but that pull liquidity and stable coins from the Cchain. You can have an AI chain that

talks to other chains. You can build the rule sets that you want by using liquidity across the entire ecosystem. The ultimate goal here is to be able to move assets between chains as easy as it is to move a file between folders on your desktop. >> So, um, one of the, you know, someone who talks about the same this same topic who sounds somewhat, you know, similar to you when they talk about like why asset tokenization is happening and why to use their chain is Canton, right? when you guys go up and you say, "Hey, we we are uh the reason you should do this on Avalanche is because we have all this flexibility, this modularity, this customizability, and we have, you know, this this, you know, public or permissionless, you know, uh EVM chain

as well. What is that conversation like with those institutions relative to the competitors? Like how do what do they compare? What are the things they point to? what are the ways in which they say this is what specifically Avalanche can do even though others are talking about you know the same exact topics. >> So I think if you take a look at the market you have Canton on the very institutional kind of set way and then you have Ethereum on the other end that's very you know crypto ethos uh public permissionless and very open. The benefit that we have with Avalanche is we sit in the middle and we can be a hybrid. When we talk to major institutions, they like the customizability that something like a canton has, but they also like the the the innovation that exists in the crypto

ethos like on Ethereum. So, we have a vibrant and robust DeFi ecosystem. We have developers and builders building new primitives and protocols. And to be honest with you, when we first started, we were very focused on institutions and enterprises. But what got us to the table was our DeFi growth back in 2021. And when we would talk to institutions, they they would listen. But once we had that growth in DeFi, the in the innovation that crypto actually brings to financial markets, that DeFi innovation, that cryptonative innovation is what forces the incumbents to move forward. It forces them to adapt, to grow, to learn, and to actually take some of these things and use them. So, you know, we talk to institutions that go, you know, we want to have a borrow

protocol. Can we talk to an a or or or or an equivalent? We want to have an AMM. can we talk to a a unis swap or an equivalent? Um so they they are as eager to embrace the cryptonative side and crypto innovation that we have an ecosystem of builders to support but also within the parameters that they need. >> Yeah. So there's probably there's always been skeptics of tokenization. There's been a lot of kind of PC's that people have announced and that have kind of turned into very little uh actual onchain usage. Why is this time different and what are the you know metrics or the specific things you can point to that the audience can say I see

evidence of this happening now? >> So I can tell you from where I sit people used to come to us and they used to be the innovation department. They had no budget and they just had a mandate from the CEO of the board to do something with blockchain and that meant a PC. They would do it, everyone gets happy and they move on. Um, first they would crawl, then they would walk, then they would run into things. Now we get reached out to by the office of the CEO, the office of the CTO, the office of the CFO. CFOs want to save money through operational efficiencies. CTO's want to build new things. CEOs want to transform their businesses. So the stakeholders that are coming to the table are different. They are dedicated. They no longer want to crawl. They want to walk or run first and they want to go in.

they they come to us instead of with how do we do this or what should we do with this is what we want to do this is the timetable these are the deliverables can you help us get to market so it's completely changed I mean this conversations the the level of the conversations and the depth that they come in with an understanding is completely different >> so it's not yet metric driven but it is you >> there are metrics too I mean FIFA came to us and wanting to do stuff and we ended up powering nearly 20% of their secondary to uh uh ticket sales for the World Cup. Um they came first with a a collectibles platform, then they ramped up into World Cup secondary tickets and now they're going to continuously do more stuff. So you're seeing real stuff

come on chain. We did stuff with the California DMV years ago and they announced that and you know California bureaucracy aside that never really grew as much. But now you have the federal government of the UAE saying we are putting a nationwide pass that every user every inhabitant of the UAE uses in a daily basis on a blockchain and how do we grow this? Maybe one last question and we're about running up on time, but if you look across, you know, we started the talking about equities. There's obviously um like money market funds were one of the first big pieces first kind of big growers in tokenization.

Stable coins before that. What pieces of or what assets or what pieces of the economy are you most excited about growing over the next, you know, call it few years? >> Tokenized equities for sure. I mean, that's what people are mostly accustomed to, right? um the general population still doesn't understand that much about crypto assets. They will become more educated about it, but explaining it to the average person is still difficult, right? For tokenized equities, I think will eventually all live on chain. They're going to need many chains to do it. There's many jurisdictions and tons of uses and use in users. So tokenized equities are what people are mostly familiar with. Giving people a better experience and access to that where they

can borrow and lend and do innovative things with it on a front end with the blockchain just enabling it on the back end I think is the master unlock. >> Awesome. Well, thank you John. Thanks. Give him a round of applause.