ParaFi Leverages Tokenization Using Avalanche and Securitize

ParaFi’s tokenization of its fund represents the company believing in the technology it invests in and eating its “own dog food.”

Digital asset management firm ParaFi is tokenizing a portion of its portfolio, worth $1.2 billion, on the Avalanche blockchain using the tokenization platform Securitize. Through partnering with these platforms, which ParaFi is an investor in, it will offer a minority stake in its most recent venture capital fund, which closed in May. Investors can get their hands on the token shares on Securitize.

“We decided we want to eat our own dog food,” Ben Forman said regarding the motivation to do this. “We are investors in this technology, but we didn’t just want to invest in the tokenization infrastructure, we wanted to use it ourselves.” He also indicated that this is the first step, with more tokenization activity to come.

With fund tokenization, ParaFi will convert shares of its venture capital fund into tokens stored and transacted on Avalanche. These tokens represent fractions of shares, allowing investors to buy, sell, and trade them with increased efficiency engendered by blockchain technology.

Why Tokenization?

Tokenization’s benefits have allowed assets from the real world to be represented on the blockchain for easier and more secure transacting and data-keeping. Furthermore, token fractionalization allows anyone to invest in the assets they represent beyond only wealthy investors and institutions. That has led to all kinds of traditional financial instruments being brought to the blockchain.

While tokenization adoption remained slow for a long time, it has picked up recently. “We’ve probably seen more interest and activity in tokenization space in the last year than in the prior years combined,” Forman stated. He also explained why that is so, citing reasons like custody options and blockchain usage becoming inexpensive and integrating know-your-customer (KYC) and anti-money laundering (AML) protocols becoming simpler.

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