Alvara Leads with Implementation of New ERC-7621 Token Standard

General

The approval of spot BTC ETFs marks a significant milestone, indicating widespread acceptance of Bitcoin and digital assets in TradFi. Amid debates that this move could bolster centralization and veer away from cryptocurrency’s decentralization ideals, the conversation shifts to the innovative new token standard, the ERC-7621. This standard proposes a radical change, aiming to democratize the creation and management of funds. The ERC-7621 completely overhauls traditional fund management practices with a level of versatility, transparency, and accessibility previously unseen — while firmly adhering to decentralized principles.

The ERC-7621 is a new token standard that facilitates the construction of multi-asset tokenized baskets on-chain. This standard provides basic functionality for anyone to deploy unique Basket Tokens that can contain an unlimited number of underlying ERC20 tokens.

Basket Token Standard (BTS): Unique tokens that contain any number of underlying ERC20 tokens.
Transferable: By leveraging the ERC721 standard as a representative token of ownership, the BTS and associated management rights and fee revenue become transferable on-chain.
Fungible BTS LPs: This standard introduces ERC-7621 LP tokens, transferable ERC20 tokens representing an individual’s share in a basket. As fungible ERC20 tokens, the use-cases for these LP tokens is much broader than simply representing the stake in a BTS. They can be utilized in any way that an ERC20 can be, including DEX/CEX listings, within staking, lending and governance protocols, and much more.
Contributions & Withdrawals: Each time a new contribution is made to a BTS, LP tokens are minted. Conversely, each time a withdrawal is made, LP tokens are burned.
Management fees: ERC-7621 tokens can be coded to provide a % of TVL to the BTS holder. This occurs via the rebalancing function at monthly intervals.
Portfolio Adjustment: The rebalance function enables managers to adjust tokens and weights. Managers can rebalance the existing assets to their original weightings, or entirely change the composition of their BTS, adding or removing underlying tokens as well as adjusting weights, all within a single transaction.

The ERC-7621 solves a number of critical issues in the current fund management industry:

Lack of Transparency: ERC-7621 tokens are on-chain, offering full transparency to all.
Over Centralization: The ERC-7621 allows anyone anywhere to become a fund manager, distributing control to prevent dominance by a few entities.
Management Complexity: Simplifies management by consolidating assets into a single tokenized basket.
Limited Accessibility: Opens investment opportunities to a wider audience, removing traditional barriers.
Latency Issues: Designing and deploying a new ERC-7621 can be done in seconds.

High gas fees: ERC-7621 token transactions like minting, contributing, and withdrawing can be gas-intensive. L2s and cost-efficient blockchains solve this problem.
Limited compatibility: As a new standard, not all wallets and chains will currently support ERC-7621. As with any technological innovation it can take associated infrastructure time to catch up.
Lack of awareness: ERC-7621 is a brand new standard and is not yet widely known.

The ERC-7621 introduces a range of functionalities designed to enhance investment flexibility, simplify portfolio management, improve liquidity, and ensure transparency. By addressing the inherent challenges of centralized (or decentralized but “gate-kept”) solutions, ERC-7621 paves the way for a more efficient, adaptable, and user-friendly approach to tokenized investment fund creation, management and participation.