Startup fintech Republic Crypto plans to host its soon-to-launch revenue-sharing tokenized security on the Avalanche blockchain, the company told CoinDesk Friday.
The asset, called R/Note, will be the vehicle through which Republic distributes stablecoin dividends to investors who bought a slice of the upside in the company's venture portfolio. Every time Republic exits a particularly successful investment it will send holders their pro rata share of up to 25% of the dividend pool.
Part of crypto's burgeoning "real world asset" (RWA) craze, R/Note is most definitely a security – a difference between it and the thousands of other crypto tokens that claim they are not. That's by design: It'll be paying dividends from the proceeds of equity sales, after all.
Tokenization – bringing traditional investments or RWAs such as bonds or private funds to blockchains in a token form – has become one of the hottest corners in crypto, as even global banks are testing this trillion-dollar opportunity.
This distinction means R/Note must follow stricter rules around who can own and trade it than most other blockchain-based tokens. Avalanche blockchain is best-suited for RWAs "because it has innate features" that other chains don't have, like the ability to set up controllable subnets, said Andrew Durgee, head of Republic Crypto.
Subnets are highly customizable side chains that can optimize for, among other things, the regulatory rules associated with being a digital security.
Other big names in the investing world have taken a similar interest in Avalanche. This week, J.P. Morgan said it tested a tokenized portfolio on a permissioned Avalanche subnet. Avalanche's (AVAX) token is higher by about 40% over the past week.
Beyond the choice of chain, Durgee said digital securities such as R/Note have a leg up on their off-chain counterparts. For example: quickly distributing the dividends from equity exits – its raison d etré.
"It's nearly impossible for me to directly send you additional security in a regular form. But in a tokenized form I can send it to you immediately," he said.
Republic sold $30 million worth of R/Note in a recently closed public sale, according to Durgee. Once the asset is live on the Avalanche blockchain it plans to have a secondary market.
While tokenized securities are not new to crypto, Republic says its iteration is more accessible – and thus viable – than many of the preceding contenders. Durgee attributes this to Republic's "whole stack" structure for issuing and then trading these assets in-house, instead of relying on counterparties "with different goals and different motives."
"If you believe in a tokenized future, Republic is at the very top of that pyramid," he said.