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April 21, 2023

The Question is What Will Tokenize First, at Scale – We Think Alts

The question is what will tokenize first, at scale, we think Alts

The Question is What Will Tokenize First, at Scale – We Think Alts

The question is what will tokenize first, at scale, we think Alts. Price discovery, tokenization, and listing on global exchanges will drive greater allocation to alts. At some point in the future the current allocations will flip. Invesco put out a great piece on Sovereign Wealth Fund (SWF) allocations ( that is worth looking at. Surveying 81 SWF the average allocation to alts was 35%. These will all change, as alpha will be found in marketable alternatives, and alternatives, will become marketable when they have third party marks, are tokenized, and they are listed on global exchanges and alternative trading systems ("ATS"). (

Traditional finance relies on intermediaries who are willing to “stake their reputation” and stand behind the truth and usefulness of their data, as well as the correct computation was performed, correctly. Yet famous “trusted” parties like Arthur Anderson and AIG show that the humans can introduce as much risk as they claim to eliminate.

Smart Contracts are small pieces of code capable of implementing such common homogeneous financial transactions. Examples include simple consumer loans, insurance contracts, and home equity loans.Once the function of such contract execution can be automated—and no longer reside at one underwriter’s desk and backed by one famous intermediary’s brand—it can also be decentralized. This the core of Decentralized Finance (or DeFi).

How do you connect heterogeneous, complex limited partnership agreements, side letters, and calculations of such at scale in multiple jurisdictions which have different tax/regulatory structures. To do so in a smart contract is unfeasible over the next 20 years, much less how on earth would you do this smart contract audit? A solidity coder is going to do what a fund accountant and lawyer have trained to do over 20 years? Instead there will 7-9 smart contracts executing functions executing (think symbolic logic arguments) against off chain digital middle office...this is

Much of the tokenization of securities happening right now is like building a website of old. Internet commerce and what we now know of as e-commerce did not come about until logistics, accounting, and inventory management were tied together. Amazon has built amazing capabilities and the middle function of shipping/logistics, and the last mile are being improved upon and worked out by new competitors every day.

We see manual tokenization with individual issuances with shorter maturities and referenceable data for public products. This is the early days of manual 'pick and pack' e-commerce. When tokenization will take off is when that compute function, or programable security, can pull data real time, from multiple data sources, recreate every calculation through time (fully auditable), and do so at scale, then we will have the trading of private market assets globally in a digital form.

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