Institutional Tokenization 3.0: Break Silos
October 2024 Institutional Tokenization 3.0: Break Silos Since Tokeny started building tokenization solutions in 2017, we have seen financial institutions exploring tokenization of assets in…
The Truth & Nonsense of Blockchain Interoperability
As we acquire more and more financial institutions as customers, a recurring question arises: Are Tokeny’s solutions interoperable/multichain/chain agnostic/magical?
The answer is: “Yes, but…” In fact, if you’re a regular reader of our newsletter, you may recall that last May we talked about our partnership with Polygon, a framework for building and connecting blockchain networks in the Ethereum Virtual Machine (EVM) ecosystem. That marked the beginning of our cross-chain solutions. Since then, we have migrated $28 billion worth of tokenized equity and other assets from Ethereum to Polygon.
So, what is the EVM ecosystem? In short, EVM-compatible blockchain networks share the same technology stack. It is like if EVM was a Nespresso coffee machine, the smart contracts are coded in the same programming language Solidity, much like the capsules for the Nespresso coffee machine, you could choose Starbucks or L’OR coffee based on your needs, but they are all compatible with the coffee machine. It enables very interesting features: for example, wallets can be switched from one network to another but with the same address. Now, Tokeny is even able to get the same smart contract address on different blockchains. However, the consensus mechanism and the participants can be totally different. These blockchain networks can be public or private.
Non-EVM-compatible blockchains such as Tezos and Solana, on the other hand, don’t share the same technology basis. Each of them is like a different coffee machine that takes different capsules, as they use different programming languages. E.g. SmartPy and LIGO for Tezos, and Rust C & C++ for Solana.
In order to allow blockchains to “communicate” with each other, “bridges” were created. A bridge solution is a set of smart contracts that freeze tokens on one blockchain, then create their representation on another blockchain. For example, you can move tokenized assets from Ethereum to Polygon.
Many people have asked us how to make Corda, or other private networks, interoperable with EVM blockchains such as Polygon, in order to access its active ecosystem of users. It is possible, but these systems work totally different. Can you use a fax to send an email? Yes, but it is not done for this. An additional system or intermediary will need to be set up, and it becomes a potential point of failure, increasing risk. We saw this no later than last week with the hack of the Wormhole bridge connecting Solana and Ethereum, where $300m+ was stolen.
From day one at Tokeny, we chose to not build the blockchain network itself but to use public blockchains, with an active ecosystem of developers and users. On top of these resilient infrastructures, as they are decentralized, we are bringing compliance and control with a complete suite of business applications.
We want our customers to be able to choose which blockchain network suits their needs. For the moment, the EVM environment and especially the Polygon network is the best fit for tokenized securities. We migrated 2 more tokens last week, so the issuers and token holders are benefiting from a highly-efficient infrastructure. That’s what we call interoperability in early 2022.
