Tokenization Hurdles: Why Institutions Need Purpose-Built Blockchain Infrastructure

Tokenizing real-world assets sounds straightforward in theory - represent ownership on a blockchain instead of a traditional ledger. However, institutions often run into technical and operational requirements that aren't easily met by general-purpose blockchains.

To make tokenization usable by institutions, the underlying infrastructure needs to support permissioning and access control, compliance logic, predictable execution, auditability, and interoperability.

Public, general-purpose blockchains like many others can handle some of these requirements but struggle with others. For example, fees and throughput fluctuate based on unrelated activity, making it hard to guarantee consistency and control for institutional finance teams.

A different approach is taken by Avalanche, which allows teams to launch dedicated, purpose-built blockchains called Avalanche L1s (formerly referred to as Subnets). These chains have a configurable execution environment, permissioning, and governance control, making them better suited for tokenization use cases.