Cross-chain tokenized assets refer to assets for which ownership rights are represented as tokens on a blockchain and can be sent/received across multiple blockchains connected via a blockchain interoperability solution.
Web3 is moving from a multi-chain ecosystem to a cross-chain economy. Rather than assets existing on siloed blockchain where liquidity is limited, Chainlink CCIP is connecting layer 1s, layer 2s, appchains, and private bank chains to remake the global financial system into an economy of tokenized assets traded across any chain. With onchain finance projected to be worth over $867 trillion in global asset value, blockchain interoperability unlocks massive opportunity for everyone from individual builders to the world’s biggest banks.
What Is Cross-Chain?
Cross-chain refers to transferring tokens and data from one blockchain to another. The multi-chain Web3 ecosystem currently features hundreds of layer-1 blockchains, layer-2 networks, and appchains, with thousands more expected to launch. When these various chains are connected via a blockchain interoperability solution, they can be considered to be part of a cross-chain ecosystem where tokens and data can flow across chains seamlessly.
What Are Tokenized Assets?
Tokenized assets are assets that have their ownership rights represented as tokens on a blockchain. These tokens act like digital certificates of ownership that can be stored in Web3 wallets or used as collateral in Web3 protocols. Assets that have been tokenized include real-world assets such as fiat currencies, gold, and U.S. Treasuries, digital assets like BTC, ETH, and AVAX, and in-game items including skins, weapons, and armor. In theory, anything of value can be tokenized and traded onchain.
What Are Cross-Chain Tokenized Assets?
Cross-chain tokenized assets are tokenized assets that can be transferred and traded across different blockchains. They are accessible on multiple chains, whether as wrapped assets or as tokens natively minted on multiple chains. For example, Synthetix’s Synth Teleporters enable sUSD tokens to securely flow between previously disconnected blockchains thanks to Chainlink CCIP’s burn and mint cross-chain mechanism.
How Do Cross-Chain Tokenized Assets Work?
Separate blockchains are siloed from each other and cannot natively communicate. A blockchain interoperability solution enables protocols and users to transfer tokens and data between various chains, leading to a thriving cross-chain ecosystem. For example, a token representing a physical gold bar can be minted on Ethereum and sent cross-chain to Arbitrum, where it could be used as collateral in a DeFi protocol.
Mechanisms powering cross-chain token transfers include:
- Burn and mint—Native tokens are burned on the source chain and minted on the destination chain.
- Lock and mint—Native tokens are locked on the source chain and a wrapped version is unlocked on the destination chain.
- Lock and unlock—Tokens are locked in a liquidity pool on the source chain and unlocked from a pool on the destination chain.
Benefits of Cross-Chain Tokenized Assets
Asset tokenization has many advantages over traditional formats, including enhanced transparency, accessibility, programmability, and composability. Bringing tokenized assets into the cross-chain ecosystem unlocks additional benefits.
- Greater accessibility—Asset issuers can access new markets, while Web3 users can access a greater array of asset types, and at lower price points through fractionalization.
- Deeper liquidity—The greater accessibility and operational efficiency of cross-chain ecosystems enables previously illiquid assets to reach a greater pool of investors.
- Enhanced capital efficiency—Seamless interoperability enables assets to move cross-chain to wherever they can be used most efficiently, along with great liquidity, reducing slippage and making markets more efficient.
- Increased resiliency—Spreading tokenized assets across the onchain finance ecosystem reduces the risk of targeted attacks or a single point of failure.
- Seamless user experience—Users can leverage the architectural benefits of various chains, all while interacting through a single dApp.
- Connect Web3 to global markets—As the industry standard connecting bank chains and public blockchains, Chainlink CCIP is set to become the universal connectivity layer bridging the gap between Web3 and global markets.
“Just like key standards such as TCP/IP remade a fragmented early Internet into the single global Internet we all know and use today, we are making CCIP to connect the fragmented public blockchain landscape and the growing bank chain ecosystem into a single Internet of Contracts.”—Chainlink Co-Founder, Sergey Nazarov
Chainlink’s Role in Powering Cross-Chain Tokenized Assets
While tokenization and blockchain interoperability have the potential to transform global markets into an interconnected onchain economy, a secure, reliable, and future-proof interoperability standard is needed. Chainlink provides that standard with the Cross-Chain Interoperability Protocol (CCIP).
Along with leading DeFi protocols like Aave and Synthetix adopting CCIP, Swift, DTCC, Clearstream, Citi, BNY Mellon, ANZ, and many other of the world’s leading financial institutions are collaborating with Chainlink to embed CCIP into their existing systems. Recognized as the most secure, reliable, and future cross-chain solution, CCIP is set to become the interoperability standard for blockchains and power a new era of the Internet.
“Working with more than a dozen major financial institutions and market infrastructures and Chainlink, a leading Web3 services platform, Swift has successfully demonstrated that it can provide a single point of access to multiple networks using existing, secure infrastructure, thereby significantly reducing operational challenges and investment required for institutions to support the development of tokenised assets.”—Swift
“Security is critical when dealing with on-chain assets, which is why we leverage Chainlink CCIP for our cross-chain Synths Teleporter.”—Kain Warwick, Founder, Synthetix
In addition to CCIP, Chainlink’s platform includes a suite of Web3 services that deliver data and computation critical to powering the onchain economy. Chainlink Price Feeds secure onchain markets by providing highly accurate, reliable, and decentralized price data, while Chainlink Proof of Reserve provides attestations of collateral backing cross-chain or off-chain reserves. Built to be a secure, scalable, and flexible platform, Chainlink can seamlessly adapt to the changing needs of the onchain economy as it grows to secure hundreds of trillions worth of value.
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