Larry Fink, CEO of BlackRock, believes that tokenization is the future of finance and a key market evolution that affects other big financial players. Our research shows that Dusk Network and Ondo Finance show that real-world assets (RWA) are becoming a key part of the cryptocurrency industry. As of May 2024, the RWA market has exceeded $6.6 billion, and asset tokenization is expected to reach $10 trillion by 2030.
Earlier this month, the World Federation of Exchanges (WFE) published a paper on tokenization, calling it a natural progression for finance. JP Morgan has also been active in this space, with Fidelity International using JP Morgan’s Onyx Digital Assets platform to tokenize shares in its money market funds.
The Depository Trust & Clearing Corporation (DTCC) recently completed a pilot to test fund tokenization technology and standards. Deutsche Bank has joined the Monetary Authority of Singapore’s Project Guardian, a blockchain consortium that includes JPMorgan Chase, Citibank, BNY Mellon, UBS, HSBC, etc., in order to explore an interoperable tokenized fund blockchain platform.
Source: Roland Berger Research
The growing interest in blockchain narratives has led to many projects competing to become leaders in the space. Among these projects, IX Swap stands out for its unique approach and ambitious goals. IX Swap is a real-world asset tokenization launchpad and decentralized exchange (DEX) that enables trading of security tokens through licensed custodians and broker-dealers. Its purpose is to democratize access to private market investments and solve liquidity challenges faced by the tokenization industry.
Now, let’s dive into what this means.
Let’s go back to 2017. As IX Swap co-founder Julian Kwan explained in a recent interview, at the time, if you were one of the top ten cryptocurrencies, you had significant market-making support and could afford to list on a major exchange . However, most altcoins are limited to basic listing platforms, lacking order books, market makers or liquidity.
The emergence of Uniswap is a transformative innovation in the DeFi space, allowing anyone with two cryptocurrencies to create a liquidity pool through a smart contract. This enables asset holders to earn fees and trade directly on the platform.
Today, as more assets are tokenized, the RWA space faces similar liquidity challenges. IX Swap aims to be the Uniswap of security tokens, allowing anyone with RWA and USDC (or other cryptocurrencies) to legally create a liquidity pool. This facilitates the buying and selling of tokenized assets, solves liquidity issues, and makes private market investments more convenient.
Source: InvestaX
That’s a lot of information here, so let’s break it down step by step, starting with the products IX Swap offers.
Overview of IX Swap’s products
IX Swap Secondary Trading Product
Over the past decade, private markets have seen stronger capital growth than public markets, especially since around 2016. In addition, private markets have also proven to be more resilient to volatility. IX Swap aims to capitalize on these strengths by opening up private markets to everyone, providing access to previously inaccessible assets.
Source: EY Research
The platform allows trading of security tokens (STOs) and fragmented NFTs (F-NFTs), digitizing traditional asset portfolios and providing access to real-world assets such as private equity, real estate, infrastructure, natural resources, and private debt. IX Swap achieves this by providing regulatory-compliant liquidity pools and automated market making (AMM) capabilities. As a bridge between CeFi and DeFi, IX Swap conducts transactions through licensed custodians and brokers, ensuring true ownership and claim rights to these assets.
Source: IX Swap
IX Swap Launch Platform
IX Swap Launchpad is a crowdfunding platform that provides unique investment opportunities in promising startups. It allows investors to participate in tokenized transactions in the fields of finance, blockchain, energy, technology, real estate, healthcare, gaming, etc.
Every investment opportunity on the platform is reviewed by the team to ensure the safety and reliability of the investment. The IXS startup platform complies with regulatory requirements, provides a safe investment environment, and uses security tokens to represent investors' equity, making transactions transparent and secure on the blockchain.
IX Swap’s SaaS Solution
IX Swap’s SaaS liquidity solution enhances liquidity on real-world asset platforms through automated market makers and liquidity pools. IX Swap connects security token issuers with liquidity providers by providing a monthly subscription-based SaaS solution. The platform automatically matches buy and sell orders, ensuring continued liquidity of security tokens. The service utilizes smart contracts to facilitate secure and transparent transactions, making it easier for token holders to buy and sell tokens without significant price fluctuations.
Key advantages of this solution include regulatory compliance, ensuring safe and legal operations, and cross-chain compatibility. These advantages enable the solution to operate across different blockchain networks. IX Swap also provides comprehensive consulting and support services.
IXS Token
The IXS token is the native token of the IX Swap platform and is the foundation of its ecosystem. Through a built-in deflation mechanism, the IXS token increases scarcity and value by incentivizing ecosystem growth and buyback and burn operations. The benefits of using IXS include discounted fees, access to the IXS launch platform and SaaS liquidity solutions. The IXS token also serves as the native payment token of InvestaX, supports staking for rewards, and enables liquidity mining to increase returns. In addition, holding IXS tokens will also be given the ability to participate in on-chain governance and participate in the management of its ecosystem.
Here are the current market statistics for IXS tokens as of June 20, 2024:
Market cap: $121,211,081
Fully diluted valuation: $124,855,283
24-hour trading volume: $1,624,331
Circulating Supply: 174,746,266 IXS
Total Supply: 180,000,000 IXS
Max Supply: 180,000,000 IXS
Network: Ethereum (mainnet), Polygon (bridge)
Source: ChainBroker
Source: ChainBroker
If you would like to learn more about the IX Swap product, simply visit their website to explore further. In the following sections, we will share some of our thoughts when we first explored this topic.
Exploring IX Swap: Insights and Reflections
Source: IX Swap
Understanding Fractional Ownership
Fractional ownership is often seen as a key benefit that increases liquidity. It splits an asset into smaller shares, enabling more investors to participate, which increases the number of potential buyers and sellers and enhances liquidity. However, fractional ownership is not a new concept; the traditional financial system has long offered fractional shares. For example, you can own fractional shares of a stock through services like Robinhood, or own parts of real estate through companies like Fundrise. Furthermore, fractional ownership itself does not create demand; it simply makes smaller portions of an asset available for trading. Demand depends on the value of the asset and market conditions.
IX Swap tokenizes assets, enables fractional ownership, and simplifies the issuance and trading process through its decentralized exchange, potentially enhancing liquidity. While blockchain technology can simplify the creation and transfer of fractional shares, it does not automatically increase demand for assets. Understanding the difference between fractional ownership and ease of issuance is critical to assessing its impact on liquidity.
For example, the IXApe token represents fractional ownership of the Bored Ape#2371NFT from Howey Tez’s Bored Ape Yacht Club. Tokenizing this NFT into 5,000 IXApe tokens democratizes ownership and distributes the economic benefits associated with this high-value digital asset.
Compliance and legal considerations
Under the law, partially owned digital real-world assets (RWAs) and NFTs are classified as securities. This prevents IX Swap from being traded as easily and without intermediaries as Uniswap. Security tokens need to comply with laws involving broker-dealers and custodians.
This is why Uniswap is unlikely to list RWAs. When you participate in IX Swap’s liquidity pool, your RWA is held by a licensed custodian, not just managed by a smart contract. Wrapped tokens representing your RWA go into the pool and your share is calculated. This structure allows IX Swap to bridge the gap between traditional finance and the decentralized world, providing a legal way to trade tokenized RWAs.
So while IX Swap can’t be a fully decentralized, general purpose, and permissionless protocol like Uniswap, that doesn’t necessarily mean it’s bad. Most markets still need a regulatory framework, especially for security tokens, and there are still many exciting opportunities within legal boundaries.
Despite the presence of big financial players, IX Swap’s advantages
While large institutions are exploring tokenization, IX Swap enables more users to participate in this asset game by providing accessible services within the scope of KYC. IX Swap democratizes access to tokenized assets, providing opportunities for small investors who may struggle with large institutions. Unlike traditional exchanges, on-chain transactions on public chains are open to everyone, enhancing transparency.
IX Swap builds a bridge between traditional finance and decentralized markets, complementing the efforts of large institutions while expanding access to public blockchain technology. Uniswap’s growth demonstrates the demand for cryptocurrency trading among retail investors, and IX Swap aims to meet similar demand for tokenized assets.
However, the question remains: Is there actually demand for these assets? Tokenization experiments like Galaxy Digital’s Stradivarius violins are interesting, but their long-term sustainable demand is uncertain. How many people have you met who are excited about co-owning a Ferrari or an NFT? It is questionable to assume that everything should be tokenized.
Team, Funding and Partners
The IX Swap team began working on the idea of developing an automated market maker for the security token industry in 2017. The platform was officially launched in September 2021 and was founded by Julian Kwan, Alice Chen and Aaron Ong. Julian is an entrepreneur with experience in digital platforms and blockchain, Alice has a corporate and legal background, and Aaron focuses on capital markets and investment consulting.
Source: IX Swap
Recently, IX Swap was acquired by the parent company of InvestaX, a leading Singapore-licensed tokenization platform, in order to enhance its capabilities, address liquidity issues in the industry, and expand its market presence and products.
Financing rounds
IDO Round 1 (September 7, 2021): Raised $186,165 at $0.389 per token on the OccamRazer platform, achieving a 2x ROI in USD. Pre-money valuation was $70.02 million.
IDO Round 2 (September 8, 2021): Raised $100,000 on the Poolz platform at $0.14 per token, achieving a 5.56x return on investment in USD. The pre-financing valuation was $25.2 million.
KuCoin IEO (September 3, 2021): Raised $700,000 at $0.14 per token on KuCoin Spotlight, achieving a 5.56x ROI in USD. Pre-money valuation was $25.2 million.
Private placement round (June 2021): Raised $1.75 million at $0.05 per token, achieving a 15.55x return on investment in USD. The pre-round valuation was $9 million.
Partnerships
This year, IX Swap has secured several key partnerships to enhance its platform. The partnership with Electrowizy will focus on gamifying renewable energy asset management, while the collaboration with Nanuhm Angels aims to bring Korean content tokenization to global retail. Support from Spartan Group and Faculty Group demonstrates IX Swap’s commitment to democratizing access to RWAs. Partnerships with Cogito Finance and QuillAudits improve liquidity and security, while alliances with AlphaX and RealtyX aim to revolutionize real estate tokenization. Through these strategic partnerships, IX Swap is committed to pushing the boundaries of the RWA market and driving innovation in decentralized finance.
competitor
IX Swap provides a unique, legal and compliant secondary trading platform for the trading of RWA tokens. Unlike other platforms, IX Swap has a working AMM model and provides a securities license for retail investors to support stock trading, which is unique in the industry.
Source: IX Swap
In addition to the RWA projects that Greythorn has already evaluated, Centrifuge is a key player in the RWA space, specializing in tokenizing assets such as invoices, royalties, and real estate. It integrates well with DeFi protocols such as MakerDAO, adding liquidity. However, its focus on specific asset types may be limiting, and it does not have the same user base or liquidity as some of the larger platforms.
Tinlake, a project by Centrifuge, allows the creation of asset-backed pools, providing flexibility in managing different assets. It ensures transparency and on-chain securitization, but can be difficult to understand and use, and also faces liquidity issues.
RealT is focused on tokenizing real estate, enabling fractional ownership of properties and providing rental income dividends. While this is great for real estate enthusiasts, its narrow focus and primary concentration in the U.S. market may not appeal to investors looking for more diversified or international investments.
Maple Finance is aimed at institutional borrowers and lenders, offering a secure platform with credit risk assessment and low collateralized loans. It is well suited for institutional use, but may not be ideal for those seeking broader RWA investments, and also faces regulatory challenges due to its lending model.
Goldfinch aims to provide credit to emerging markets, offering a unique investment opportunity and engaging the community in underwriting and governance. However, this focus comes with higher risks due to the unstable economic conditions in emerging markets, and liquidity is limited.
Tokeny provides a comprehensive asset tokenization solution, including compliance and issuance, and has strong partnerships with financial institutions. However, it focuses mainly on token issuance and compliance, with less attention paid to secondary market liquidity, and has failed to gain the same adoption and user base as some large platforms.
IX Swap aims to connect DeFi with security tokens, providing liquidity and compliance for tokenized real-world assets. This gives it a unique advantage, but IX Swap still needs to build its liquidity and user adoption to rival the larger players in the space.
On-chain analysis
The IXS token has been outperforming the market since November last year, entering a sustained uptrend with several consolidations in between. Despite the strong performance, the project's market cap remains relatively small, leading to occasional swings and high volatility. While technical analysis may have limited validity for such projects, here is an overview of the token's performance since then.
Source: TradingView
The data comes from Nansen’s Smart Money feature, and the number of smart wallets and holders has been steadily increasing since the beginning of the year. However, this growth was not accompanied by a significant increase in balances. It is important to note that this feature only takes into account wallets that have performed well over an extended period of time. In today's market, individual investors often use multiple wallets, so this data may not fully reflect the full picture. Still, it's an interesting trend.
Source: Nansen
Last week, an address belonging to one of the largest wallets accumulating IXS was discovered, holding assets worth a total of $1.1 million, including 198,839 IXS tokens, which is approximately $150,000. The wallet belongs to well-known KOL and investor Chicken Genius, who made his wallet public this year. The wallet address is: 0xeb2eb5c68156250c368914761bb8f1208d56acd0. There has been no significant selling of IXS in this large wallet over the past week.
According to Bubble Maps, the distribution of tokens after excluding exchange balances and bridge assets is as follows:
Bullish fundamentals
IX Swap is telling a compelling story that is gaining significant traction and demonstrating significant growth potential. If this momentum continues and the project is able to maintain consistent, credible activity, it could eventually be considered a pioneer in its field and have the potential for a higher valuation.
In the current market, many newly launched projects have high fully diluted valuations (FDV), which indicates that they may be overvalued relative to their fundamentals and market position. However, IX Swap has an FDV of approximately $135 million, which is comparable to its market capitalization. This provides a more balanced valuation and an attractive risk-reward ratio.
The project prioritizes security and compliance, which is essential to earning investor trust. This focus reduces the risks associated with fraud and legal issues, making it a more reliable investment.
IX Swap is led by a transparent and experienced team, which is critical to understanding the market, avoiding common pitfalls, and effectively executing its vision.
Bearish fundamentals
Although IX Swap has a market capitalization of less than $200 million and has some appeal, there are still risks in the highly volatile cryptocurrency market. A sudden market downturn could negatively impact the value of IXS tokens and investor sentiment, leading to potential losses. Investors should be prepared for possible market volatility.
The evolving regulatory environment for DeFi and tokenized RWAs means that IX Swap may not be able to operate in many countries. Regulatory changes or stricter compliance requirements could adversely affect IX Swap’s operations and growth prospects.
The DeFi space, including real-world assets, is highly competitive. IX Swap faces stiff competition from established players and new entrants, which could limit its market share and growth potential.
Achieving widespread adoption and maintaining liquidity for tokenized RWAs may be challenging. If IX Swap is unable to attract a sufficient user base or liquidity providers, it may struggle to achieve its growth and revenue goals.