The "Smart NAV" pilot project by the Depository Trust & Clearing Corporation (DTCC), in collaboration with the oracle project Chainlink and leading U.S. banks, tested the representation of market data on the blockchain.
DTCC operates the largest securities settlement system in the world. To support the tokenization of traditional assets, the clearing house launched the Smart NAV pilot. Using Chainlink's Cross-Chain Interoperability Protocol (CCIP), DTCC was able to provide net asset values (NAVs) of tokenized funds on multiple blockchains through a standardized process. Participants in the pilot include US financial giants BNY Mellon, Franklin Templeton, JP Morgan, State Street, Invesco and others.
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Key Infrastructure for Tokenization
The term tokenization refers to the representation of traditional assets also known as real-world assets (RWAs) on a blockchain network. For example, since March 2024, BlackRock is offering a money market fund on the Ethereum blockchain. Benefits include increased transparency for traditional financial products, broader accessibility and cross-border settlement.
An accurate representation of the net asset value (NAV) is critical to such efforts. This ultimately underpins the market price for new subscriptions to a product. With Smart NAV, DTCC aims to distribute this data directly on the blockchain. Chainlink's CCIP enables the application to be used across different networks, allowing the data to be queried and processed more efficiently.
Diagram of the Smart NAV Project/ Source: DTCC
Potential expansion of the experiment
According to DTCC, the pilot demonstrated how many different use cases could benefit from having key market data represented directly on the blockchain. Specifically, the clearing house mentioned tokenized funds, smart contracts for large banks, and brokerage portfolio applications. Other benefits include automated real-time data distribution and integrated access to historical data.
Based on the blockchain experiment, DTCC sees an opportunity to expand the scope of applications. This would involve exploring how the technical capabilities used in the pilot could support a broader range of use cases and across a larger number of blockchains. Smart NAV could be expanded in the following areas:
- Using a similar distribution model with expanded data sets (e.g., key reference data)
- Automating workflows across blockchains triggered by the distributed dataset (e.g., portfolio rebalancing triggered by NAV)
- Extend the smart contract governance capabilities used in Smart NAV to enable data collection directly from participants (as opposed to a centralized submission point).
