Recap: X Space with AllianceBlock’s Founder and CTO Matthijs De Vries, Arkefi CEO Mads Boi Thomsen and Avalanche Labs Luke Chmiel

AllianceBlock Founder and CTO Matthijs De Vries moderated an X Space with Arkefi CEO Mads Boie Thomsen and Avalanche Labs Institutional BD Luke Chmiel. This conversation underscores the growing importance of tokenization, compliance, and blockchain in finance and real-world asset management, with Arkefi and Avalanche playing key roles in the evolving landscape.

It has been a busy summer for AllianceBlock. As the industry continues to seed innovation in a bear market, the AllianceBlock team has continued to explore ways to continue pushing the envelope in the space. They recently introduced the Nexera Exchange, a novel take on a decentralized exchange with an array of cutting-edge features, which aims to create a secure, and user-centric trading platform. Its first trading feature, a fully on-chain order book, has just been added to the platform. This is the first of many trading tools and DeFi features which will spur the exchange towards an industry-leading exchange solution.

The future of tokenized assets recently got a boost with the release of the Arkefi platform on Avalanche. Arkefi aims to reshape the realm of real-world asset (RWA) investments, providing an accessible path for both High-Net-Worth Individuals (HNWIs) and crypto investors to invest in exclusive art, cars, and collectibles. Arkefi has leveraged the expertise of AllianceBlock’s blockchain infrastructure and decentralized finance (DeFi) technology to unlock liquidity for illiquid and unbankable assets while making top-tier art, cars and collectibles more accessible in a transparent and user-friendly platform.

To mark this exciting milestone for both companies, AllianceBlock Founder and CTO Matthijs de Vries invited ARTBANX and Arkefi CEO Mads Boie Thomsen, and Avalanche’s Institutional Business Development lead Luke Chmiel onto an X space to chat about the tokenization of real world assets, and the perception and place they will have in traditional markets moving forward.

The below recap has been curated for the community, you can find the full conversation here. Enjoy!

Institutional education and fixing inefficiencies with tokenization

Luke underscores the importance of educating institutional leaders about blockchain’s potential in traditional finance and improving user experiences for mass adoption. Mads follows up by differentiating between physical and financial asset tokenization, with a focus on addressing inefficiencies in the art market and tapping into growth opportunities in non-bankable asset markets.

Luke Chmiel, Institutional BD, Ava Labs: The way I’m thinking about it is there’s a couple things that are going on concurrently that we need to do to grow this space and to start to see real usage taking place on blockchain. It’s kind of no secret that one of the biggest things that we’re undertaking here is a massive education effort to bring institutional capital and people in leadership roles at these firms and in these seats who are the decision makers. Then we have to bring them up to speed on what the technology is, how it works and how it can be impactful for their businesses. It really is a game of scale to the extent that you can bring in this new technology and say, hey, we’re going to cut out all of these inefficiencies that are holding back your profit margins. That’s typically a good way to get a conversation started. At the same time, on the consumer side and for more consumer facing products, I think it’s really important to be able to create smooth and seamless user interfaces and user experiences. We really need to be thoughtful about how we’re onboarding new users to blockchains and bringing Web2-like experiences onto these Web3 rails and removing a lot of the pain points that have kept crypto applications from moving to millions of users. Another really interesting thing, Mads, that you touched upon and is what I think about this space is there’s a couple different types of assets that people are trying to bring on-chain. So you have physical assets, which presents a whole different set of problems and opportunities. In this case, the collectibles and art and real estate, these are all physical assets and you have to think about those very differently than you would financial assets, say stocks and bonds.

Mads Boie Thomsen, CEO Arkefi and ARTBANX: I think it’s also worth mentioning why this is such an interesting space, especially for the art. So imagine that you have, let’s say, a Modigliani worth 100, 150 million or even a work by Da Vinci, Salvador Mundi, 450 million right? The problem today is really that if you reach this extensive amount of valuable art pieces, it becomes very difficult to find a buyer. You have to imagine from the really ultra high net worth individuals there’s only a handful of buyers who then are collectors also. And then from that handful, there’s maybe only one or two who actually have the liquidity available to buy such an expensive art piece. But then you also have to find that very individual who then likes this particular Modigliani, because it’s not just one piece in the 100 million, right? There’s a couple of pieces there. So it’s a very inefficient market prior to tokenization. And I think this is not something that will happen over a day for sure not, but it will happen with time because this is the best way to trade these types of objects because there are not so many single buyers for these objects. And I think that’s why it makes sense to start with art collectibles, cars or whatever because you can really financialize those products as well, because as you mentioned, Luke, if you go into bonds or stocks or whatever, it is a very competitive market, right? But if you look into non-bankable assets (NBAs) such as art financing or car financing as an investment car financing or collectibles, there’s basically nothing existing, right? So you can actually solve a need with these NBAs, so to say. And it has a huge potential because nobody is in this space. And that’s why I think embedding tokenization in a financial way creates unique opportunities to be on the forefront.

Avalanche driving the tokenization of real-world assets

This part of the space highlights the growing importance of tokenizing real-world assets in the Avalanche ecosystem. Luke emphasizes the shift towards utility-focused blockchain use cases. Traditional financial institutions are now compelled to explore blockchain technology, with no need for further convincing. Ava Labs has committed to advancing asset tokenization, seeing it as a crucial part of their mission, backed by initiatives like the $50 million Avalanche Vista program.

Matthijs de Vries, Founder and CTO, AllianceBlock: Luke, can you maybe tell a little bit from an Ava Labs’ perspective why is tokenization of real-world assets such an important value of the Avalanche ecosystem?

Luke: Yeah, both great questions. And I love how you just laid that out as well, that it’s really exciting to see some of these more real-world and real utility use cases coming to the fore now. From an institutional perspective, there were a lot of large names who timed the market quite poorly from a crypto asset perspective. They put a lot of initiatives that they had around blockchains and around public blockchains on pause, but you’ve had a lot of education that’s been done throughout that multi-year period and I don’t think you can really understate that. So the knowledge and understanding of what the actual benefits are of doing things on public blockchain rails from an efficiency, transparency, interoperability and utility standpoint, the benefits of having an open-source developer community and all of these kinds of things are not lost on every large financial institution that we speak to.

At this point, we don’t convince anyone from the traditional finance world to pursue blockchain initiatives or, you know, use blockchain in any way. There’s no convincing that really needs to be done at this point. It’s kind of you’re not going to be competitive and you’re not going to be able to survive if you’re not, you know, taking this seriously. And from an Ava Labs standpoint, the roots of our firm and really of the Avalanche Network had this idea of tokenization and digitization of the world’s assets as the North Star that’s been guiding us since inception. We have a large contingent of the Ava Labs team that comes from this traditional Wall Street background. So it’s very much something that we see as carrying the future forward. We have initiatives like Vista for instance, which is a $50 Million purchase program from the Avalanche Foundation to allocate towards the actual tokenized assets themselves and not just providing grants or venture funding to early-stage projects, but actually buying assets that are being tokenized today and putting our money where our mouth is. I think this speaks volumes beyond what we are saying publicly, and what we’re actually doing in this space is to really support projects and high-quality builders and help them find those distribution channels and find demand in the market so that they can bootstrap liquidity even in a difficult environment.

How to register and participate on the Arkefi platform

Mads goes over the simple process to register, verify, connect, and purchase a fractionalized art piece using the Arkefi platform. For a detailed dive into this process, you can check out an easy six-step tutorial that AllianceBlock recently shared here.

Matthijs: Can you briefly describe how a user can register and what do you need in order to be able to participate in that platform? And what are the steps in the process from start to beginning, and what are the possible kinds of outcomes after you’ve bought a fraction?

Mads: Sure, we wanted to make it as simple as possible. We didn’t want to have too much noise on the platform. We wanted to really keep it to the basics. So if you go to Arkefi.com, you can sign up with a user, you will then just have to verify your email, once your email is verified, it’s a simple KYC process so once that has been approved, you simply connect your wallet and from your wallet, you have the ability to buy a fraction from 100 USDC, and then basically there is a one month funding period. And if the entire piece gets fully funded, there will be a two-month duration for a buyback option. Now, what will happen in these two months’ time is either the collector, will repurchase the art piece, which will result in a 4% return to the investors or he will not repurchase the art piece and the investors will get upwards of 50% performance, which is in my opinion, unheard of because it’s secured by the art piece. But how is this possible? It’s possible because we want to beat all the secondary lenders. And so this is not a loan, it’s an option. And that’s very important because lending causes a lot of regulatory challenges across countries. And this would complicate things and will then have to be classified as a security.

So since we’re doing an acquisition option, that means that investors are the owners of the art piece at the moment that they buy a fraction. But in the smart contract, there is an option for the seller to exercise [a buy-back] within the two-month periods. And if the seller doesn’t exercise as well, then buyers have the full upside potential. So I think this is a new way to bring liquidity to the collectors, but making a super sexy opportunity for the investors at the same time. And this is really where we see the uniqueness of our offering. But we have a lot of more things on the roadmap. We also want to embed a DeFi academy in such a way that we basically educate the users around the art world. This is quite interesting because we are combining it not only with what you see on Arkefi, but also what we have in the main company, which is access to data. And with this data, we can basically make it more investable, more transparent because we have all this data at hand.

Self-regulation for tokenized assets and Arkefi’s future plans

Mads emphasizes the importance of proper knowledge and due diligence in the tokenization of art and collectibles. He discusses the challenge of valuation and the need for trustworthy appraisers who stand behind their assessments. Mads advocates for self-regulation within the art and collectibles space to maintain credibility. He then touches upon Arkefi’s future plans.

Mads: Regulation is a very important element. The big deal is going through the actual due diligence process, the valuation, knowing the right and wrong; because how the world is today on the art side is basically that not every appraiser would stand behind their own appraisal. So you can have a company popping up doing tokenization all of a sudden but they don’t really have anything to share at all because nobody wants to stand behind the valuation, not even the company themselves. Right. And this is what we are doing. We will happily stand behind a valuation as we do in this case or when we have it from a third party. This will be a third party that will be visible because it’s very important that whomever is giving a valuation and confirmation of due diligence actually stand behind those products, essentially. So when it comes to the regulatory side, I think it’s very important, at least for art and collectibles, that there is some kind of self-regulation aspect that has to be fulfilled because all the way around everybody can just say, hey, I’m an art expert, right? Because today there is not really anything. But that doesn’t really change if it’s on-chain or off-chain, but it just has a wider reach when it’s on-chain. So therefore, I really think that this should be some kind of self-regulatory space where you have to adapt to certain things.

Now, circling back to your question, what do we have up next for Arkefi? We have, first of all, the Academy where we would like to educate the users a bit more around the entire art scene. We are right now in a large negotiation regarding giving a very large amount of guaranteed investment opportunities directly onto our platform. And then we also have new asset classes coming in soon. We had actually last week more than 15 million worth of requests for financing for cars. I believe a lot of people are very interested in seeing car financing on the platform. So this is something that is very close to us. But one of the major things I cannot say exactly when that will come, but that would basically be to trade the options, because at some point, if an investor is locking in an investment over a year and would like to trade that option at some point in time, it would make a lot of sense that we give them this ability. So these are some of the things that we have on the roadmap for the future.

Matthijs: Yeah, amazing, man. I’m personally looking forward to a tokenized classic or exclusive cars/hypercars. I would really love to hope to own at least a fraction of that in the future, so at least I can say I own a bit of a hypercar. But yeah, we’re looking forward to that and I fully agree with you with regards to self-regulation. I believe self-regulation can help our industry form even stricter regulations that we cannot avoid if we keep going forward. It’s interesting to see the kind of similarities between the art industry, which existed thousands and thousands of years longer than blockchain, and the young blockchain industry, and we still face the same kind of issues. I hope we solve them a little bit faster in the decentralized space and the art space.

***

The tokenization of real-world assets has the potential to revolutionize various industries. Matthijs, Mads and Luke emphasize the need for user-friendly platforms and enhanced compliance in the space. Future plans for the Arkefi platform include education, guaranteed investment opportunities, and the introduction of completely new asset classes. Overall, the discussion highlights the growing importance of blockchain and tokenization in finance and asset management, with Arkefi and Avalanche at the forefront of innovation in this field.

The Arkefi platform and the simple registration process is highlighted. For the inaugural luxury collectible investment, the platform will feature the renowned Danish-Vietnamese installation artist Danh Võ, who is based in the vibrant art hub of New York City. Võ’s work has earned him global recognition, with his art showcased at prestigious events and institutions such as La Biennale di Venezia, the Solomon R. Guggenheim Museum in New York City, and Palazzo Grassi in Venice. Notably, Võ’s works have experienced consistent annual appreciation rates exceeding 10%.

Despite the high value of the exclusive collectibles featured on Arkefi, the platform’s inclusive approach means anyone can get involved. For example, the first listing will accept investments for as little as 100 USD. You can find out more about how to invest in this revolutionary fractionalized asset by following the six steps in this tutorial.

About AllianceBlock

AllianceBlock is an infrastructure provider for decentralized tokenized markets. It empowers businesses with liquidity provisioning and allows them to compliantly issue, manage, and trade tokenized digital assets, including real-world assets (RWAs).

The AllianceBlock ecosystem of partners, clients, and ventures consists of top stakeholders from the financial industry and the decentralized finance (DeFi) sector. Their unique product suite complies with global regulations and seamlessly integrates with legacy systems.

Follow AllianceBlock on Twitter and join the Telegram Community to stay updated on the latest AllianceBlock news and updates.