Blockchain oracle provider Chainlink has introduced its Proof of Reserve (PoR) service, aiming to enhance transparency and security in asset tokenization. The move comes as financial institutions increasingly explore blockchain technology for applications like crypto ETFs and asset tokenization.
According to a recent blog post by Chainlink, their PoR service facilitates custodian and auditor verifications by establishing an on-chain authentic record of asset backing. This progress is a pivotal part of Chainlink’s broader initiatives to bolster the expanding tokenization marketplace.
Benefits of Chainlink PoR in tokenization
Chainlink’s PoR brings many benefits to the tokenization ecosystem. It offers secure and top-notch reserve data sources, facilitating real-time validation of asset backing. Additionally, the system allows for automatic on-chain audits, providing users with increased confidence in the support for underlying assets.
It is effectively applied in the context of the gold-backed token PAXG. This service guarantees the complete backing of PAXG by off-chain gold reserves. Moreover, PAXG has adopted the Secure Mint feature of PoR to prevent the creation of tokens without sufficient backing, thereby safeguarding against potential infinite mint attacks.
The ARKB Bitcoin ETF, developed by 21Shares and ARK Investment Management, is a standout example. It leverages Chainlink PoR for asset transparency, accessing reserve information directly through its custodian, Coinbase Prime, and relaying it on-chain via Ethereum mainnet.
The service arrives as the financial sector increasingly embraces asset tokenization. This practice brings numerous benefits, such as broadened market entry, continuous asset trading, and improved market visibility. Through its foundational support for tokenized assets, Chainlink strives to propel the evolution of on-chain markets.
The company’s goals go beyond just PoR. They involve enhancing tokenized assets with real-world data, promoting cross-blockchain and traditional system compatibility, and guaranteeing the smooth synchronization of tokenized assets across various chains.
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