Revolutionizing RWA Liquidity: An IX Swap Deep Dive

13 min readJun 24, 2024

Market Opportunity

BlackRock’s CEO, Larry Fink, sees tokenization as the future of finance and a key market evolution, influencing other big players. Our research on the Dusk Network and Ondo Finance shows that Real World Assets (RWA) are becoming a crucial part of the cryptocurrency industry. By May 2024, the RWA market surpassed $6.6 billion, and asset tokenization is expected to reach $10 trillion by 2030.

Earlier this month, the World Federation of Exchanges (WFE) published a paper on tokenization, calling it a natural progression in finance. JP Morgan is also active in this space, with Fidelity International using JP Morgan’s Onyx Digital Assets platform to tokenize shares in a money market fund.

The Depository Trust and Clearing Corporation (DTCC) recently completed a pilot to test fund tokenization technology and standards. Deutsche Bank has joined the Monetary Authority of Singapore’s Project Guardian, a blockchain consortium including JP Morgan, Citi, BNY Mellon, UBS, HSBC, and others, to explore an interoperable blockchain platform for tokenized funds.

The growing interest in this narrative has led to a surge in projects competing to become leading players in the field. Among them, IX Swap stands out for its unique approach and ambitious goals. IX Swap is a Real World Asset Tokenization Launchpad and DEX that enables trading of security tokens through licenced custodians and broker dealers, with the goal of democratising access to private market investments and addressing the illiquidity challenges facing the tokenization industry.

Now, let’s dive into what that really means.

Let’s take a trip back to 2017. As explained by IX Swap Co- founder Julian Kwan in a recent interview, back then, if you were among the top 10 cryptocurrencies, you had significant market-making support and could afford listings on major exchanges. However, most altcoins were confined to basic listing decks, lacking order books, market makers, or liquidity.

Uniswap emerged as a transformative innovation in DeFi, allowing anyone with two cryptocurrencies to create a liquidity pool through smart contracts. This democratised liquidity provision, enabling asset holders to earn fees and trade directly on the platform.

Today, a similar liquidity challenge is arising in the RWA space as more assets become tokenized. IX Swap aims to become the Uniswap of the security token realm, enabling anyone with RWAs and USDC (or other cryptocurrencies) to legally create liquidity pools. This facilitates the buying and selling of tokenized assets, addressing liquidity problems and making private market investments more accessible.

There’s a lot to unpack here, so let’s break it down step by step, starting with what IX Swap is offering.

Overview of IX Swap’s Offerings

IX Swap Secondary Trading Product

Over the past decade, private markets have shown stronger growth in capital than public markets, especially from around 2016 onwards. They have also proven to be more resilient to fluctuations in sentiment. IX Swap pretends to leverage these strengths by opening up private markets to everyone, allowing access to assets that were previously inaccessible.

The platform enables trading of security tokens (STOs) and fractionalized NFTs (F-NFTs), digitising traditional asset portfolios and providing access to real-world assets like private equity, real estate, infrastructure, natural resources, and private debt. It achieves this through regulatory-compliant liquidity pools and automated market-making (AMM) functions. Acting as a CeFi-DeFi bridge, IX Swap facilitates trading via licensed custodians and brokers, ensuring genuine ownership and claims over these assets.

IX Swap Launchpad

The IX Swap Launchpad is a crowdfunding platform that offers exclusive investment opportunities in promising startups. It allows people to invest in tokenized deals across sectors like finance, blockchain, energy, technology, real estate, healthcare, gaming, and more.

Every investment opportunity on the platform is reviewed by the team to ensure confidence. The IXS Launchpad is compliant with regulations, providing a secure environment. It uses security tokens to represent people’s equity, making transactions transparent and secure on the blockchain.

IX Swap’s SaaS Solution

The IX Swap SaaS Liquidity Solution enhances liquidity for RWA platforms through automated market makers and liquidity pools. IX Swap achieves this by offering a monthly subscription-based SaaS solution that connects security token issuers with a pool of liquidity providers. This platform automates the process of matching buy and sell orders, ensuring continuous liquidity for security tokens. The service leverages smart contracts to facilitate secure and transparent transactions, making it easier for token holders to buy and sell their tokens without significant price fluctuations.

Key benefits include regulatory compliance, ensuring secure and legal operations, and interchain compatibility, allowing the solution to work across different blockchain networks. IX Swap also provides comprehensive advisory and support services.

The IXS Token

The IXS Token is the native token of the IX Swap platform, serving as the foundation of its ecosystem. It incentivizes ecosystem growth with built-in deflationary economics, using net fees for buyback and burn operations to increase scarcity and value. Benefits of using IXS include discounted fees, access to the IXS Launchpad, and SaaS liquidity solutions. It also acts as the native payment token on InvestaX, supports staking for rewards, and enables liquidity mining for boosted returns. Additionally, holding IXS grants on-chain governance capabilities for ecosystem management.

Below are the current market statistics for the IXS Token as of June 20, 2024

Market Cap: $121,211,081
Fully Diluted Valuation: $124,855,283
24 Hour Trading Volume: $1,624,331
Circulating Supply: 174,746,266 IXS
Total Supply: 180,000,000 IXS
Max Supply: 180,000,000 IXS
Network: Ethereum (Mainnet), Polygon (Bridged)

If you want to learn more about IX Swap’s products, you simply visit their website and explore further. In the next section, We will try to share some reflections that came to mind when we first explored this topic.

Navigating IX Swap: Insights and Reflections

Understanding Fractional Ownership

Fractional ownership is often seen as a key benefit for increasing liquidity. It involves dividing an asset into smaller shares, making it accessible to more investors. This can enhance liquidity by increasing the number of potential buyers and sellers. However, it’s important to note that fractionalization isn’t a new concept; traditional financial systems have long offered fractional shares. For instance, you can own fractions of stocks through services like Robinhood or fractional real estate through companies like Fundrise. Also, fractionalization alone doesn’t create demand; it simply makes smaller portions of an asset available for trading. Demand depends on the asset’s value and market conditions.

IX Swap enables the tokenization of assets, allowing for fractional ownership and potentially enhancing liquidity by simplifying the issuance and trading process on its decentralised exchange. However, while blockchain technology can streamline the creation and transfer of fractional shares, it doesn’t automatically increase demand for the assets. Understanding the difference between fractional ownership and ease of issuance is crucial in assessing its impact on liquidity.

For example, IXApe tokens represent fractional ownership of Howey Tez’s Bored Ape #2371 NFT from the Bored Ape Yacht Club. Tokenizing this NFT into 5,000 IXApe tokens democratises ownership and distributes the economic interest tied to this high-value digital asset.

Compliance and Legal Considerations

Fractionalized digital RWAs and NFTs are classified as securities by law. This prevents IX Swap from operating like Uniswap, where transactions are simple and without intermediaries. Security tokens require compliance with laws involving a broker-dealer and a custodian.

This legal requirement is why Uniswap is unlikely to list RWAs. When you participate in a liquidity pool on IX Swap, your RWA is held by a licensed custodian, not just managed by a smart contract. The wrapped token representing your RWA goes into the pool, and your share is calculated. This structure allows IX Swap to bridge traditional finance and the decentralised world, offering a legal way to trade tokenized RWAs.

So, while IX Swap can’t become a completely decentralised, universal, and permissionless protocol like Uniswap, with a limited number of jurisdictions in which the company will be available, it doesn’t necessarily mean it’s a bad thing. Most markets still need regulatory frameworks, especially for security tokens, and there are still exciting opportunities within legal boundaries.

The Case for IX Swap Despite Big Players

While major institutions are exploring tokenization, IX Swap has a role to play by providing accessible services within KYC boundaries, enabling a broader range of users to participate. IX Swap democratises access to tokenized assets, offering opportunities for smaller investors who might struggle with larger institutions. Unlike traditional exchanges, on-chain movements on public blockchains are open to all, enhancing transparency.

IX Swap bridges the gap between traditional finance and decentralized markets, complementing major institutions’ efforts while expanding access to public blockchain technology. The growth of Uniswap highlights the demand from retail investors eager to trade cryptocurrencies, a demand that IX Swap aims to meet for tokenized assets.

However, the question remains whether there is genuine demand for such assets. Tokenization experiments, like Galaxy Digital’s Stradivarius violin, are intriguing but their long-term sustainability demand is uncertain. How many people do you see excited about co-owning a Ferrari or an NFT? The assumption that everything should be tokenized is questionable.

Team, Fundraising and Partnerships

The IX Swap team started working on the idea of an automated market maker for the security token industry in 2017. The platform officially launched in September 2021, founded by Julian Kwan, Alice Chen, and Aaron Ong. Julian is an entrepreneur with experience in digital platforms and blockchain, Alice has a corporate and legal background, and Aaron specialises in capital markets and investment advisory.

Recently, IX Swap was acquired by the parent company of InvestaX, a leading Singapore-licensed tokenization platform. This acquisition aims to enhance their capabilities, address liquidity issues in the industry, and expand their market presence and offerings.

Fundraising Rounds

IDO Round 2 (8 Sept 2021): Raised $100,000 at $0.14 per token, achieving a 5.56x ROI in USD. The pre-valuation was $25.2 million, and the round was hosted on the Poolz platform.

IDO Round 1 (7 Sept 2021): Raised $186,165 at $0.389 per token, resulting in a 2x ROI in USD. This round had a pre-valuation of $70.02 million and took place on OccamRazer.

IEO on Kucoin (3 Sept 2021): Raised $700,000 at $0.14 per token with a 5.56x ROI in USD. The pre-valuation stood at $25.2 million, and the event was conducted on KuCoin Spotlight.

Private Round (June 2021): Raised $1.75 million at $0.05 per token, with an impressive 15.55x ROI in USD. The pre-valuation was $9 million.

Partnerships

This year, IX Swap has secured several key partnerships to enhance its platform. Collaborations with Electrowizy focus on gamifying renewable energy asset management, while Nanuhm Angels aids in tokenizing Korean content for global retail participation. Support from Spartan Group and Faculty Group underscores IX Swap’s commitment to democratising access to RWAs. Partnerships with Cogito Finance and QuillAudits boost liquidity and security, while alliances with AlphaX and RealtyX aim to revolutionise real estate tokenization. IX Swap has established these strategic partnerships in hopes to push the boundaries of the RWA market and drive innovation in decentralised finance.

Competitors

Apart from the RWA projects already reviewed by Greythorn, Centrifuge is a key player in the RWA space, known for tokenizing assets like invoices, royalties, and real estate. It integrates well with DeFi protocols like MakerDAO, boosting liquidity. However, its focus on specific asset types can be limiting, and it doesn’t have the same user base or liquidity as some larger platforms.

Tinlake, a project by Centrifuge, allows for creating asset-backed pools, offering flexibility in managing different assets. It ensures transparency and on-chain securitization but can be complex to understand and use, and it also struggles with liquidity.

RealT specialises in tokenizing real estate, making properties accessible for fractional ownership and providing rental income dividends. While it’s great for real estate enthusiasts, its narrow focus and primary concentration on the US market might not appeal to those looking for more diverse or international investments.

Maple Finance targets institutional borrowers and lenders, providing a secure platform with credit risk assessment and undercollateralized lending. It’s excellent for institutional use but may not be ideal for those seeking broader RWA investments, and it faces regulatory challenges due to its lending model.

Goldfinch focuses on providing credit to emerging markets, offering a unique investment opportunity and involving the community in underwriting and governance. However, this focus comes with higher risks due to unstable economic conditions in some emerging markets, and it has limited liquidity.

Tokeny provides comprehensive solutions for tokenizing assets, including compliance and issuance, and has strong financial institution partnerships. However, it focuses mainly on token issuance and compliance, with less emphasis on secondary market liquidity, and it hasn’t achieved the same adoption and user base as larger platforms.

IX Swap aims to connect DeFi with security tokens, providing liquidity and regulatory compliance for tokenized real-world assets. While this gives it a unique edge, IX Swap still needs to build up its liquidity and user adoption to match the larger players in the space.

On-Chain Analysis

The IXS Token has been outperforming the market since November of last year, entering a sustained upward trend with a few periods of consolidation. Despite this strong performance, the project still has a relatively small market cap, leading to occasional spikes and high volatility. While technical analysis may have limited effectiveness for such projects, here is an overview of its token performance since then.

∞According to the Nansen Smart Money feature, the number of smart wallets and holders has been steadily increasing since the beginning of the year. However, this growth has not been accompanied by a significant rise in balances. It’s important to note that this feature only considers wallets that have performed well over an extended period. In today’s market, individual investors often use multiple wallets, so the data might not fully capture the entire picture. Nonetheless, it remains an interesting trend to observe.

Last week, one of the largest wallets accumulating IXS was identified, holding a total of $1.1 million worth of assets, including 198,839 IXS tokens valued at approximately $150,000. This wallet belongs to the well-known KOL and investor Chicken Genius, who publicly revealed his wallet this year. The wallet address is:

0xeb2eb5c68156250c368914761bb8f1208d56acd0

There have been no significant sales of IXS from large wallets over the past week.

According to Bubble Maps, after excluding exchange balances and bridges, the token distribution among holders is as follows:

Bullish Fundamental Factors

IX Swap is working on a compelling narrative that is gaining significant traction and demonstrating immense growth potential. If the momentum continues and the project maintains consistent, trustworthy activities, it could eventually be considered an original pioneer in its field with a potentially higher valuation.
In the current market, many newly launched projects have high FDVs, suggesting they might be overvalued relative to their fundamentals and market position. IX Swap, however, has a FDV of around $135M, which is similar to its market cap. This offers a more balanced valuation and an attractive risk-reward ratio.
The project prioritises security and compliance, which are crucial for gaining investor trust. This focus reduces risks related to fraud and legal issues, making it a more reliable investment.
IX Swap is led by a transparent and experienced team, key for understanding the market, avoiding common pitfalls, and effectively executing their vision.

Bearish Fundamental Factors

With an attractive market cap of less than $200M, IX Swap comes with risks, especially in the highly volatile cryptocurrency market. Sudden downturns could negatively impact the value of IXS tokens and investor sentiment, leading to potential losses. Investors should be prepared for a potentially rough road ahead.
The evolving regulatory landscape for DeFi and tokenized RWAs means that IX Swap may not be able to operate in many countries. Changes in regulations or stricter compliance requirements could adversely impact IX Swap’s operations and growth prospects.
The DeFi space, including for Real-World Assets, is highly competitive. IX Swap faces stiff competition from established players and new entrants, which could limit its market share and growth potential.
Achieving widespread adoption and maintaining liquidity for tokenized RWAs can be challenging. If IX Swap fails to attract a sufficient user base or liquidity providers, it may struggle to achieve its growth and revenue targets.

Disclaimer

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