Onyx by J.P. Morgan Leverages Avalanche To Explore a New Paradigm for Portfolio Management
Onyx by J.P Morgan and Apollo Global have announced a collaborative effort under the Monetary Authority of Singapore’s (MAS) Project Guardian, showcasing a proof-of-concept (PoC) that marks a first and pivotal step toward revolutionizing the asset and wealth management industry.
The POC demonstrates how blockchain technology, smart contracts, and tokenization can potentially help automate portfolio management while including alternatives (“alts”) alongside liquid assets in discretionary portfolios. Traditional portfolios have historically been under allocated to alts, such as private equity, private credit, real estate, and infrastructure, because they are normally cumbersome and operationally intensive to trade and administer. The initiative builds upon the Onyx Digital Assets offering, which already processes $1B-$2B in tokenized assets per day and has settled $950B+ in tokenized treasuries since launch.
In preparation for a multi-chain future, Onyx Digital Assets leveraged a variety of interoperability protocols to tap into assets tokenized on blockchains beyond its platform built on Consensys Quorum. To that end, LayerZero connected Onyx Digital Assets with a permissioned Avalanche Evergreen Subnet, which facilitated subscriptions and redemptions for funds offered by WisdomTree, a leading asset manager and pioneer in fund tokenization.
Avalanche Evergreen Subnets are individual blockchains customized for institutional applications, specifically designed to account for company-specific and industry-wide considerations. Built-in and further customizable features include EVM compatibility, permissioning at the validation, smart contract deployment, and transaction levels, as well as network privacy and custom gas features. Overall, Evergreen Subnets reap the benefits of public network development, innovation, and native integrations while enabling embedded, blockchain-level features only possible in enterprise blockchains.
Leaders in the financial services industry are increasingly viewing blockchain, smart contracts, and tokenization as a way of improving legacy capital markets infrastructure and institutional workflows. WisdomTree and other Wall Street firms are already participating in Spruce, a separate Evergreen Subnet, allowing institutions to test the merits of on-chain finance.
“This initiative under Project Guardian fundamentally aligns with Ava Labs’ mission to provide the tools and tech to digitize and tokenize the world’s assets while harnessing the speed, scalability, and customizability of Avalanche,” said John Wu, President, Ava Labs. “We are proud to be working with such industry leaders as they help drive forward the future of finance.”
According to the PoC participants, the initiative yielded several learnings that validated key benefits:
- Inclusion of alts in discretionary portfolios: Representing investments as tokenized funds can help standardize and automate funding, order execution, and settlement for both traditional asset classes and alts. It can also simplify how investments in alts are managed by replacing manual subscriptions with automated, straight-through processes using smart contracts for payments and investor register updates. As such, it could enable wealth managers to include more alts in client portfolios.
- Efficiency and scalability: By deploying smart contracts representing discretionary portfolios, the PoC demonstrated that many portfolios could be programmatically linked to representative models and automatically rebalanced en masse.
- Broadening the investable universe with ledger interoperability: Interoperability protocols enabled wealth managers to access funds tokenized on various blockchain platforms without having to move the underlying assets from their base ledger of record.
- Improving the blockchain user experience: Novel Account Abstraction concepts, such as Biconomy’s Paymaster service, abstracted the complexities of interacting with blockchains, including the need to pay for blockchain transaction fees. Interoperability solutions abstracted the complexities of accessing assets across disparate blockchains and managing blockchain private keys.
"Our work under Project Guardian demonstrates a significant opportunity for the asset and wealth management industry,” said Tyrone Lobban, Head of Onyx Digital Assets. “By leveraging the power of blockchain technology we have shown how the construction and management of discretionary portfolios could be revolutionized.”
While the POC has been operationalized in a testnet environment, it represents an ambitious effort to take the first steps towards enabling personalized investment portfolios at scale, with vastly simplified and streamlined order execution and settlement processes.
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