Unlocking the Future: Introducing Alvara’s Revolutionary New Token Standard
The world of cryptocurrencies and blockchain technology has witnessed remarkable innovations over the past few years, transforming the way we think about finance, investments, and digital assets. One such groundbreaking development is Alvara’s ERC-BTS (Basket Token Standard), the game-changer, designed to revolutionize the creation and management of tokenized baskets of digital assets. In this article, we’ll explore what an ERC-BTS is, how it works, and the potential it holds for the world of decentralized finance (DeFi) and beyond.
ERC-BTS (or BTS for short), which stands for “Basket Token Standard,” is an Ethereum-based standard for creating and managing tokenised baskets of assets. The fully open-source BTS sets a common framework for developers to create and interact with tokenized baskets, making it easier for users to invest in multiple assets simultaneously.
The key idea behind the BTS is that it represents, in a single token, a diversified portfolio of 100% collateralized assets, such as cryptocurrencies, stocks, bonds, or any other tradable tokenised asset with a liquidity pool.
Management: Discretionary vs Governance-Based
Once minted, BTS tokens are held by their creator who can manage the basket accordingly, with varying degrees of management rights depending on whether their BTS is discretionary - all management decisions are made at the sole discretion of the BTS creator or current holder; or governance-based - all major management decisions must first be voted upon and passed by a BTS DAO in order to be enacted.
In creating the ERC-BTS, Alvara must maintain its decentralized role as the educator, rather than the savior. The Alvara Protocol provides core DeFi infrastructure and must remain as such. That said, Alvara has developed the new token standard with transparency and security in mind, including the two following key features:
1. Emergency Stables:
Every ERC-BTS, whether under discretionary or governance-based management, has an “Emergency Stables” feature, whereby the entire basket can immediately be swapped to a specified stable coin by the BTS holder in case of black swan events.
2. Non-Custodial Baskets:
Although the BTS token itself is held by the manager, all underlying assets are non-custodial. A user’s stake in the BTS (including that of the initial creator) is instead represented by BTS LP tokens, which can be redeemed, traded on decentralized exchanges (DEXs), transferred, and even used as collateral in DeFi protocols, simplifying the investment process for both retail and institutional investors.
ERC-BTS LP tokens
ERC-BTS Liquidity Provider (LP) tokens are unique transferable ERC-20 tokens that represent a user’s stake in an ERC-BTS basket. They can be traded on any exchange where listed, effectively mirroring all of the benefits of traditional ETFs. BTS LP tokens enhance liquidity, tradability, and offer arbitrage opportunities, allowing investors to easily buy and sell their positions in BTS baskets. This feature seamlessly integrates ERC-BTS into both decentralized and centralized financial ecosystems, making it even more accessible and versatile for a broader range of investors.
How ERC-BTS Works
ERC-BTS tokens are minted through smart contracts deployed on the Ethereum blockchain. Alvara’s BTS Factory is a sleek, straightforward BTS minting dApp, simplifying the process for non-developers and providing a seamless and unmatched user experience. ERC-BTS smart contracts define the rules and parameters of the tokenized basket, including the list of assets included, their respective weights, and the rebalancing mechanism.
Here’s a simplified overview of how ERC-BTS works:
- Creation of a Basket: To create an ERC-BTS token, an Alvara user or developer deploys a smart contract specifying the assets and their initial weights. For example, a basket might include 50% Ethereum, 30% Doge, and 20% Chainlink. The creator must also denote a name, ticker and image for their BTS token, and can also provide a detailed description of the basket and/or strategy.
- Rebalancing: ERC-BTS allows for periodic rebalancing of the underlying assets to maintain the desired weightings. This can be done manually or automatically through the smart contract, ensuring that the basket remains diversified.
- Minting and Trading: After the ERC-BTS has been designed, the creator must contribute a minimum of 1 ETH as initial liquidity. This serves to prevent the frivolous creation of numerous BTS tokens. Once minted, all ERC-BTS tokens, whether minted via Alvara’s BTS Factory or coded and deployed manually, will be pulled through automatically onto Alvara’s Leaderboard. Third party users can then contribute to the new basket and, if listed, trade its LP tokens on Alvara’s HiveX.
- Withdrawal: ERC-BTS LP tokens can also be redeemed for their ETH value or underlying assets. Users can send their LP tokens back to the smart contract and receive the proportional balance of the underlying assets in return.
Benefits and Use Cases
ERC-BTS offers several advantages and opens up exciting possibilities in the world of blockchain and finance:
- Scalability: The BTS is now the undeniable token standard for all basket funds on-chain. Alvara has removed every reason why any individual or institution wouldn’t use the standard for building or migrating an existing fund on-chain. Alvara and their new token standard are infinitely scalable. They are effectively releasing the “NFT” (ERC-BTS) whilst also providing the “Opensea” (the Alvara Protocol) for the largest financial market in the world - the investment fund market.
- Diversification: An ERC-BTS can hold any number of underlying assets. It allows for easy diversification of investments, reducing risk exposure to individual assets.
- Accessibility: ERC-BTS tokens provide a simple way for both retail and institutional investors to access diversified portfolios without the need for extensive knowledge or management.
- Liquidity: ERC-BTS LP tokens can be traded on DEXs, providing liquidity and flexibility for investors.
- Automation: Smart contracts can automate the rebalancing process, ensuring that the basket’s composition remains aligned with the predefined strategy.
- DeFi Integration: ERC-BTS LP tokens can be used as collateral in various DeFi protocols, unlocking additional governance, reward streams and financial services.
- Build and Sell Your Business: Perhaps most notably, BTS tokens themselves can be sold and purchased via Alvara’s Marketplace. The holder of a BTS token will not only hold the management rights, but also the valuable revenue stream derived from the management fee (1% AUM as standard). This gives the basket an intrinsic value and for the first time, allows tokenized basket managers the ability to sell their business.
By simplifying the creation and management of diversified portfolios, Alvara brings an air of innovation and accessibility to the world of blockchain and finance. Alvara’s novel ERC-BTS (Basket Token Standard) isn’t merely a participant in the cryptocurrency arena; it’s a game-changer that’s rewriting the rules. As DeFi continues to evolve, Alvara stands at the forefront, ready to revolutionize the way we invest and manage digital assets. With its compelling features and immense growth potential, this groundbreaking protocol merits a prominent place on your watchlist as it moves to reshape the financial landscape.
About Alvara Protocol
The Alvara Protocol is a decentralized platform that utilizes the ERC-BTS (Basket Token Standard) to create and manage funds on the blockchain. Alvara offers a comprehensive fund Factory and Marketplace, with a transparent leaderboard showcasing the performance of every BTS created. ALVA and veALVA tokens assume crucial roles in driving the ecosystem’s growth and governance with veALVA holders wielding significant influence over the substantial ALVA reward stream. Removing traditional barriers, Alvara fosters a democratic meritocracy in crypto investing, enabling full lifecycle fund management, from creation to ownership transfer, within its seamless framework.