DTCC and Chainlink Collaborate on Fund Tokenization

In a major development for blockchain technology, the Depository Trust and Clearing Corporation (DTCC) joined forces with Chainlink, a key player in blockchain oracles, and leading US banks to complete a pilot program. This successful initiative focused on speeding up the process of converting traditional funds into digital tokens (tokenization). The collaboration not only marks a step towards integrating blockchain into traditional asset management but also sent the price of Chainlink’s cryptocurrency, LINK, soaring above $14.

DTCC and Chainlink- A Pilot Project for Smart NAV

The DTCC, known for its role in settling securities transactions, partnered with Chainlink to conduct a pilot program called Smart NAV. This initiative focused on establishing a standardized process to deliver net asset value (NAV) data for mutual funds onto various blockchains. The project involved prominent US banks such as BNY Mellon, JPMorgan Chase, and State Street.

What is NAV Data, and Why is it Important for Tokenization?

NAV, or net asset value, represents the per-share rate of  mutual funds, calculated by dividing total assets of the funds by the numbers of outstanding shares. In the context of fund tokenization, where digital tokens on a blockchain represent traditional funds, access to accurate and up-to-date NAV data is very important.

How Chainlink’s Technology Facilitates On-Chain Data Delivery

Chainlink, a blockchain oracle network, played a vital role in the Smart NAV pilot by providing secure and reliable data delivery on various blockchains. Chainlink’s interoperability protocol (CCIP) allows for smooth data transmission across different blockchain networks and eliminates the need for individual connections for each chain. This simplifies the process and reduces operational complexities for the DTCC.

Key Achievements of the Smart NAV Pilot

The Smart NAV pilot yielded positive results and demonstrated the feasibility of on-chain data delivery for fund tokenization. Here are some key milestones achieved:

Structured data delivery- The pilot successfully delivered structured NAV data onto blockchains, enabling its integration into various on-chain applications like tokenized funds and smart contracts.

Automated data management- The collaboration established automated data routing through smart contracts, thereby promoting efficient data management and minimizing manual intervention.

Standardization and interoperability- Chainlink’s CCIP prevented data fragmentation by ensuring compatibility across different blockchains, promoting a standardized approach.

Improved data accessibility- The pilot explored functionalities like built-in access to historical data and simplified data relay through new interfaces, enhancing data accessibility for market participants.

Benefits of Fund Tokenization

The tokenization of traditional financial assets like mutual funds presents several possible benefits.

  • Increased efficiency- Blockchain technology can streamline settlement processes and reduce costs and transaction times.
  • Fractional ownership- Tokenization allows for the division of ownership into smaller units, thereby facilitating easier access to investments for a broader range of investors.
  • Improved liquidity– Tokenized funds could trade on secondary markets and improve overall liquidity for investors.

Future Outlook for Blockchain in Traditional Finance

The successful completion of the DTCC and Chainlink pilot program implies a significant step forward in integrating blockchain technology into traditional finance. As the industry explores the potential of tokenization further, we can expect to see more collaborations and advancements in this space.

Jimi Pen

Jimi pen is a freelance journalist and Cryptocurrency expert who has completed her education from Vanier College, Quebec. She is originally from Switzerland and loves to travel in her free time. She has been associated with the cryptocurrency market since 4 years.

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