Securitize and Ethena Labs, both collaborating with BlackRock’s money market token BUIDL, have developed an Ethereum-compatible blockchain named Converge. This blockchain aims to facilitate the tokenization of assets and offer institutional investors access to the advancements of decentralized finance (DeFi).
Ethena, which issues a yield-bearing USDe token alongside a BUIDL-backed USDtb stablecoin, plans to transition its $6 billion DeFi ecosystem to Converge. At the same time, Securitize, acting as the transfer agent for BlackRock’s BUIDL token, will migrate its range of tokenized real-world assets (RWAs), including the newly-launched Apollo credit fund token, onto the new blockchain.
From the inception of DeFi, there has been a focused movement to extend beyond just cryptocurrencies and integrate traditional assets as collateral on-chain. Currently, established financial firms are eager to participate in the tokenization trend, making it logical for companies like Securitize and Ethena to forge an institutional-friendly route into DeFi.
“Tokenization is fundamentally about placing your securities onto a distinct ledger, which results in cost efficiencies. However, it doesn’t necessarily transform what you can do with these assets,” remarked Securitize CEO Carlos Domingo in a discussion. “Conversely, crypto is evolving with innovative methods for utilizing digital assets. If we can incorporate that DeFi creativity back into the RWA sector, it could lead to significant growth.”
Securitize and Ethena have already secured a solid group of initial partners for Converge, including Pendle, Avara (the parent company of Aave Labs), Ethereal, Morpho, and Maple Finance. Custodial services will be rendered by Copper, Fireblocks, Komainu, and Zodia, while interoperability will be achieved through LayerZero, Wormhole, and oracle support from RedStone.
Looking ahead, Ethena’s founder Guy Young indicated that there will be new offerings from Securitize available on the chain, which will create new use cases.
“This could involve using these assets as collateral in custom money markets or trading different assets not currently available on-chain at scale, such as equities moving forward,” Young noted in an interview. “We believe that developing a platform specifically designed for the convergence of traditional finance and DeFi represents one of the largest opportunities in the next few years.”
Converge is set to be compatible with the Ethereum Virtual Machine (EVM), allowing it to execute Ethereum-based smart contracts, decentralized applications (dApps), and tools without requiring modifications. According to a press release, its performance is expected to align with industry-leading blockchains.
Ethena’s native governance token, ENA, will act as a stakeable asset (through sENA) on Converge, ensuring network security via a permissioned validator set including traditional financial institutions and centralized exchanges. Both USDe and USDtb will function as gas tokens for the network.
Converge is an open public chain that incorporates a type of know-your-customer (KYC) framework that extends beyond simple wallet whitelisting, according to Domingo.
“Today’s DeFi is primarily structured for permissionless and anonymous participants and assets that can be transferred freely,” Domingo explained. “To introduce this innovation in a situation where the collateral and assets being pledged are regulated instruments, you must account for various factors beyond just wallet whitelisting and KYC requirements.”