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External Asset Onboarding

Design Insight

External owners can supply inventory faster than the issuer can source, closing undervaluation without protocol fire-drills or issuer working-capital strain. When buy-side open interest exists at or above fair value, external supply becomes the first line of defense against persistent underpricing.

When your collection is trading below fair value and buyers are lining up with cash, you have a problem. The issuer could go source more assets and mint new tokens—but that takes time, capital, and operational bandwidth. Meanwhile, the pool stays underpriced, open interest sits unfilled, and everyone waits.

Or you could do something smarter: let external owners bring their assets directly to the protocol.

This isn't theoretical. Collectors own rare watches. Investors hold vintage cars. Museums have art sitting in storage. Many of them would happily tokenize those assets and access on-chain liquidity—if the protocol makes it worthwhile. When there's proven demand sitting in the order book (open interest at or above current mark), external owners can step in and supply inventory immediately, no issuer involvement required beyond verification.

Get this right and you've created a two-way market between off-chain holdings and on-chain liquidity. Undervalued pools attract external supply. Overvalued pools see redemptions. The protocol becomes self-correcting through market forces, not just issuer actions.

Get it wrong and you've either made it too attractive (flood of low-quality assets diluting the collection) or not attractive enough (external owners sit on the sidelines, issuer remains the bottleneck).

The opportunity​

Traditional asset tokenization treats the issuer as the sole source of inventory. The issuer acquires assets, authenticates them, mints tokens, manages distribution. This creates a bottleneck: supply growth is limited by issuer capital and operational capacity.

But here's what actually happens in mature markets. When a stock trades below intrinsic value, existing shareholders don't wait for the company to do buybacks. Arbitrageurs step in, buy the undervalued shares, and profit when prices correct. When bonds trade cheap, dealers provide liquidity. When real estate is mispriced, investors buy properties and hold for appreciation.

The pattern is universal: when assets are undervalued, external capital shows up to correct it—if the market structure allows it.

For RWA protocols, this means external owners of relevant assets (collectors, dealers, investors) become a natural source of responsive supply. Pool trading at $95 when fair value is $100? If there's open interest at $98-$100, external owners can tokenize their assets and immediately fill that demand. They make money (sold at good price), buyers get their orders filled (got what they wanted), pool price moves toward fair value (undervaluation corrected). Everyone wins.

This is especially powerful for undervaluation scenarios where the protocol needs more supply but the issuer is capital-constrained. Instead of waiting for the issuer to raise funds, source assets, and go through the full minting process, external owners can step in and close the gap within days instead of months.

Why this matters for undervaluation​

Let's make this concrete. You're running a luxury watch collection. Current pool price is $95 per token. Fair value (based on off-chain dealer quotes, recent auction results, and comparable sales) is closer to $102. Open interest shows $2.5M of buy orders stacked at $98-$101.

You have three options to close this gap:

Option 1: Wait for natural spot trading. Maybe prices drift upward as buyers absorb the mispricing. Could take weeks. Could never happen if there's not enough spot liquidity. Open interest stays unfilled, pool stays underpriced.

Option 2: Issuer sources more assets. Issue goes out, finds watches, negotiates purchases, arranges custody, authenticates, mints tokens, offers them at acquisition price. Takes 2-6 months. Requires significant working capital (you're buying $2-5M worth of watches up front). By the time you're ready, market conditions might have changed.

Option 3: External owners bring assets. Protocol announces: "We have $2.5M of buy-side OI at $98-$101. External owners: if you have relevant watches, tokenize them and fill these orders." Three collectors show up. One has a Patek Philippe 5711 ($800k), another has a Rolex Daytona 116500LN ($450k), third has an Audemars Piguet Royal Oak Jumbo ($1.2M). All are authenticated within a week. Tokens mint. Orders fill at $98-$101. Pool price moves to $101, converging with fair value. Total time: 1-2 weeks instead of months.

Option 3 is faster, requires zero issuer capital, and is directly responsive to proven demand. The open interest is the key: it proves buyers are willing to pay specific prices right now. External owners aren't guessing whether there's demand—they can see it on-chain, size it, and decide whether it's worth tokenizing their assets to fill it.

This transforms undervaluation from an issuer fire-drill into a market-driven correction mechanism. When pools trade below fair value with stacked buy-side OI, you've created an arbitrage opportunity for external owners. They profit, buyers get filled, pool reprices. No protocol intervention needed beyond verification and settlement.

The challenge​

But external owners aren't like issuers. The issuer is expected to act in the protocol's best interest—maintain quality standards, ensure orderly distribution, support market stability. An issuer bringing in a $2M Patek Philippe and immediately dumping all tokens would damage their reputation and their collection's credibility.

External owners have no such constraints. They're profit-maximizing participants, not stewards. If they tokenize an asset and immediately sell every token into the pool, that's their right. But it creates risks:

Quality dilution. Issuer curates carefully, rejecting assets that don't meet standards. External owner might try to sneak in a lower-grade variant ("this Rolex has replacement parts but it's still a Daytona, right?"). One bad asset can poison the pool's reputation.

Dumping risk. External owner brings asset, mints 100k tokens, immediately sells all of them into the pool. Price craters. Existing holders get diluted. New buyer filled their OI order but now the pool is trading $10 lower than before. Was that a win?

Adverse selection. External owners have information the protocol doesn't. They know if their specific asset is top-grade or marginal. They know if comparable prices are rising or falling. They know if their asset has history/provenance premium or is just "another one." If external onboarding is too generous, you attract the lemons—owners bringing assets they're eager to exit, not assets that genuinely match the collection's quality.

Use case competition. Tokenizing for protocol participation isn't the only option. External owners could use their assets for off-chain lending, store them in vaults, sell them directly through dealers, or just hold for appreciation. The protocol needs to make on-chain tokenization attractive enough to compete—but not so attractive that it distorts incentives or attracts adverse selection.

The mechanism design challenge: make external onboarding attractive enough to bring high-quality inventory when it's needed, but not so attractive that it floods the protocol with marginal assets or creates disorderly market impact.

Mechanics: how external onboarding works​

The protocol uses a structured multi-step process to balance opportunity (fast responsive supply) with risk (quality control, market impact).

1. Intake and escrow​

External owner initiates by depositing their asset with an approved custodian. The protocol doesn't accept self-custody claims—assets must enter professional custody with insurance, authentication, and proper documentation.

Custody requirements:

  • Licensed, insured facility with RWA specialization
  • Authentication protocol relevant to asset class (e.g., watchmaker certification for watches, provenance research for art)
  • Proper documentation: bills of sale, service records, authentication certificates
  • Insurance coverage at declared value
  • Title transfer mechanisms (legal ownership clearly documented)

Once the asset is in custody, the protocol mints a claim token representing the external owner's position. This is not yet the collection's fungible token—it's a non-transferable claim that says "you deposited an asset, verification pending."

2. Verification and quality gating​

The issuer (or appointed curators) performs verification:

Authenticity: Is this genuinely what the owner claims? For watches: serial numbers, movement inspection, case/dial/bracelet verification. For art: provenance research, expert attribution, materials testing.

Quality matching: Does this asset belong in the collection? Not every authentic Patek Philippe belongs in a pool focused on investment-grade examples. The protocol uses strata matching:

  • Strata definition: Collections are segmented by quality bands (e.g., "museum-grade art", "investment-grade watches", "driver-condition vintage cars"). Each stratum has specific criteria.
  • Intake gate: External asset must fall within the same stratum as the collection's existing assets. Trying to tokenize a heavily-serviced Daytona into a pool of NOS (new old stock) examples? Rejected.
  • Comparability metrics: Quantitative checks like recent sales comparables, condition reports, rarity scores. Assets that fall more than X% below the collection's median quality get flagged for additional review or placed in a different tier.

Adverse selection fee: If an asset passes authentication but is detectably lower-quality than the pool's median (within-stratum but toward the lower end), the protocol charges an adverse-selection fee—say 2-5% of notional value. This compensates the pool for accepting a marginal asset and discourages external owners from dumping their least-desirable inventory on-chain.

If verification passes, the claim token is burned and fungible collection tokens are minted to the external owner. Quantity follows the same fixed-issuance rules as issuer minting (e.g., if each asset normally mints 100k tokens, the external owner gets 100k tokens).

3. Listing and routing options​

Now the external owner holds fungible tokens and can use them across the protocol. Unlike the issuer (who must offer 80%+ at acquisition price for orderly distribution), the external owner faces no such requirement. They can:

Immediate spot sale: Dump all tokens into the pool at market price. Risky for the pool (price impact, dilution), but it's the owner's right. To limit this, the protocol may impose temporary hold periods on external onboarding (e.g., tokens unlock 10% per day over 10 days) to prevent instant dumping. This is calibrated based on pool size and liquidity.

Sell into open interest: More attractive option. If there's stacked buy-side OI at $98-$101 and current pool price is $95, the external owner can place limit sell orders at those ticks. As buy orders get filled, the external owner's tokens transfer to buyers at the specified prices. No pool impact—this is peer-to-peer settlement within the order book. The owner gets better pricing ($98-$101 vs. $95 spot), buyers get their orders filled, pool stays stable.

Participate in issuer-run RFQs: If the issuer is actively sourcing inventory to fill open interest, they might run a request for quote (RFQ) asking "who has assets they'd tokenize at $X?" External owners respond, issuer selects which assets to onboard based on quality and pricing. This is coordination layer—issuer still verifies, but external owners provide the inventory pipeline.

Hold and use elsewhere: Lending, collateralization, futures markets, index funds, or just hold and wait for price appreciation. Tokenization creates optionality. The external owner isn't forced to sell immediately—they can participate in any protocol primitive.

The protocol's job is to make selling into OI the most attractive option when undervaluation exists. That's where the incentive structure comes in.

Incentive structure​

To encourage external owners to (a) bring high-quality assets and (b) fill proven demand rather than dumping into the pool, the protocol layers multiple incentives:

Fill priority​

When external owner tokens unlock (after hold period), they get priority matching against resting open interest. If buy orders exist at $98-$101, the external owner's sell orders at those ticks fill before other sellers. This is valuable—guaranteed execution at good prices without slippage or pool impact.

Why it works: External owners can see the OI book. They know there's $2.5M of demand at $98-$101. They know if they tokenize their asset, they can immediately tap that demand with fill priority. Contrast this with selling off-chain (uncertain demand, dealer spreads, weeks of negotiation) or dumping into pool (price impact, slippage, potential losses). Filling OI is the clean exit.

Fee rebates​

Normal spot trading pays protocol fees (e.g., 30 bps on swaps). External owners filling OI get fee rebates—say 50% off protocol fees when fills occur within the top OI bracket.

If the OI book shows demand at $98-$101 and the external owner fills at $100, they pay only 15 bps instead of 30 bps. Over a $1M fill, that's $1,500 saved. Not enormous, but enough to make the difference between "worth the hassle" and "not worth it."

This tilts the decision toward patient, orderly filling of proven demand rather than impatient dumping.

Maker rebate uplift​

Similar to kernel rebates in mark-to-truth auctions (where bidders get paid for providing tight price discovery), external owners can earn maker rebates for providing liquidity near fair value when the pool is undervalued.

Mechanism: Pool is trading at $95, fair value is $100 (indicated by recent auctions or off-chain comps). External owner places limit sells at $98-$100. When those orders fill, the protocol pays a small rebate—say +0.25 bps—as a thank-you for improving pool pricing.

Why? Because external liquidity at $98-$100 corrects the undervaluation. The pool is mispriced. You brought supply that moved it toward truth. That's valuable to the protocol—worth a small subsidy.

Calibration matters. The rebate needs to be large enough to matter (25 bps on $1M = $2,500, not nothing) but small enough that it doesn't create perverse farming incentives. The goal is to reward genuine liquidity provision near fair value, not to turn this into a yield farm.

Quality premium​

Assets that pass verification with flying colors (top-tier within the stratum, excellent provenance, near-mint condition) might earn a quality premium—additional tokens minted beyond the standard fixed-issuance amount.

Example: Standard minting is 100k tokens per asset. An external owner brings an exceptional Patek Philippe 1518 in steel (one of four known examples, museum-quality, impeccable provenance). The protocol mints 105k tokens instead of 100k—5% premium for exceptional quality.

This attracts the best inventory. If you're an external owner deciding whether to tokenize your crown jewel asset or keep it off-chain, a quality premium tips the scales. It also aligns incentives: you benefit from bringing genuinely rare, high-quality assets, not marginal ones.

Implementation note: Quality premia require trusted curators who can assess objectively. If premium allocation becomes subjective or political, it breaks. Start conservative (few/no premia in V1), expand as curator track record proves reliable.

When external onboarding shines​

Three scenarios where external asset onboarding becomes critical:

1. Undervaluation with stacked buy-side OI​

Pool trading at $95, fair value $100+, $3M of buy orders at $97-$101. Classic undervaluation scenario.

Without external onboarding: Issuer needs to source $3M+ worth of assets, months of lead time, significant working capital. Meanwhile, OI sits unfilled, pool stays underpriced, buyers get frustrated.

With external onboarding: Protocol broadcasts "we have $3M of proven demand at premium prices." External owners step up within days/weeks. Assets tokenize, orders fill, pool reprices. Undervaluation corrects through market forces.

This is the best case for external onboarding: fast responsive supply when it's most needed, directly matched to proven demand.

2. Issuer capital constraints​

Issuer wants to grow the collection but is working-capital limited. Can't afford to purchase $5M of new assets outright. Traditional solution: raise more capital (dilutive, slow) or pause growth (stagnation).

Alternative: External onboarding as pipeline. Issuer focuses on verification and curation (their core competency), external owners provide the inventory. Instead of buying assets, issuer is authenticating and quality-gating assets others bring. Capital efficiency improves, collection grows faster, external owners get liquidity.

This is a strategic partnership model: issuer as authenticator/curator, external owners as inventory providers. Both benefit.

3. Market-driven quality discovery​

Sometimes the market knows more than the curator. An asset the issuer considered "marginal" might have hidden value—recent comp sales, renewed collector interest, newly-discovered provenance. External owners with specialized knowledge can bring those assets on-chain and let the market price them.

If OI materializes at good prices, the market validated the asset. If OI is thin or absent, maybe the issuer was right to pass. This creates a market test for quality decisions that might otherwise be subjective or incomplete.

When external onboarding doesn't help​

Three scenarios where external onboarding provides little value or even creates problems:

1. No open interest​

Pool is undervalued but there's no stacked OI. Buy orders are thin, scattered, or non-existent. External owners would need to sell into the spot pool to find liquidity.

Problem: Now you've just dumped new supply into an already-undervalued pool with no proven demand. Price drops further. Existing holders diluted, new supply made the problem worse.

Fix: External onboarding should be conditional on OI existence. Require minimum OI depth (e.g., $500k stacked buy orders above current mark) before accepting external assets. If OI is thin, the issuer should use other mechanisms (calibration sales, WIND-DOWN, pool closure) rather than bringing in external supply.

2. Overvaluation scenarios​

Pool trading at $105, fair value $98. You don't need more supply—you need less (redemptions, calibration sales, WIND-DOWN). External owners bringing assets now would just make overvaluation worse.

Fix: External onboarding gates should check directionality. If the pool is overvalued (spot price > recent auction clearing prices or off-chain comps), pause external intake until pricing corrects. You want external supply when it closes undervaluation, not when it amplifies overvaluation.

3. Quality erosion risk​

External owners have adverse selection incentives. They'll bring their marginal assets first (easier to let go, less valuable off-chain) before bringing crown jewels. If the protocol isn't careful, external onboarding leads to quality dilution: collection starts with museum-grade assets, gradually drifts toward average as external inventory skews lower-quality.

Fix: The strata matching and adverse selection fee are critical. Strict quality gates, objective comparability metrics, penalties for marginal assets. If verification becomes rubber-stamp, quality erodes fast. Better to reject 50% of external submissions and maintain high standards than accept everything and see the collection's reputation degrade.

Comparison to alternative uses​

An external owner considering tokenization faces a choice. They could bring their asset on-chain via the protocol, or they could use it in other ways. The protocol's design needs to be competitive.

Off-chain lending​

Owner could use the asset as collateral for a private loan. Dealer, bank, or specialty lender provides liquidity against the asset (typical LTV 50-70% for luxury assets). Owner keeps the asset, gets cash, pays interest.

Pros: Fast (days), private, no market exposure, retain upside if asset appreciates.

Cons: Lower LTV than selling (50-70% vs. 90-100%), interest costs, risk of losing asset if you default, limited lender competition (few players do RWA collateral lending).

Protocol's pitch: Tokenize instead and you get fuller valuation (sell at market price ~100% of value), no interest payments, permanent liquidity (24/7 on-chain trading vs. locked for loan term), composability (use tokens in DeFi, not just for cash).

Off-chain sale​

Owner sells asset through traditional channels—dealer, auction house, private sale.

Pros: Established market, trusted processes, large buyer base (traditional collectors, no crypto knowledge needed).

Cons: High friction (5-15% auction fees + taxes), slow (weeks to months), dealer spreads, uncertain demand (will it sell? at what price?), illiquid (once sold, it's gone—no ongoing exposure).

Protocol's pitch: Tokenize and you get fractional liquidity (don't have to sell entire asset, can monetize partially via lending/futures), ongoing exposure (still benefit if collection appreciates), faster settlement (days vs. months), transparent pricing (on-chain orderbook vs. dealer quotes).

DeFi composability​

Once tokenized, assets unlock DeFi primitives:

  • Lending markets: Supply tokens, earn yield
  • Borrowing: Use tokens as collateral, borrow stablecoins
  • Futures: Hedge or speculate on collection value
  • Index funds: Diversified exposure across multiple collections
  • Options: Write covered calls, buy protective puts
  • Liquidity provision: Earn fees by providing liquidity to the AMM

None of this exists off-chain. Traditional RWA markets have lending (barely) and spot sales (high friction). No futures, no options, no yield farming, no composability.

The protocol's value proposition: tokenize once, unlock all DeFi primitives. Your asset becomes productive capital, not dead inventory. That's the long-term draw—not just "sell into OI and get good price" but "enter an entire financial ecosystem that doesn't exist for RWAs off-chain."

Implementation priorities​

The protocol rolls out external onboarding in phases:

V1: Minimal viable external intake​

Features:

  • Basic intake and escrow (approved custodians only)
  • Issuer-led verification (authenticity and quality checks)
  • Strata matching (hard requirement—assets must fit collection tier)
  • Simple hold periods (10-day linear unlock to prevent immediate dumping)
  • Manual routing to OI (external owners can see buy orders, place limit sells manually)

What's missing: Automated fill priority, maker rebates, quality premia. Those come later once we see real participation patterns.

Goal: Prove the concept. Can external owners actually provide responsive supply? Do they bring high-quality assets or try to game the system? How much demand exists for this? V1 answers those questions without complex incentive engineering.

V2: Incentive layer​

Additions:

  • Fill priority (automated preferential matching against OI)
  • Fee rebates (50% off protocol fees when filling OI within top bracket)
  • Maker rebate uplift (small subsidy for providing liquidity near fair value)
  • Adverse selection fees (2-5% charge for lower-quality assets)
  • RFQ coordination (issuer can broadcast "need $X of Y-grade assets", external owners respond)

Calibration: All numbers here are guesses until we see V1 data. Maker rebate might need to be 0.50 bps instead of 0.25 bps if participation is weak. Fee rebates might need to be 75% off, not 50%. We iterate based on what actually drives behavior.

V3+: Advanced features​

Possibilities:

  • Quality premia (bonus tokens for exceptional assets)
  • Cross-collection routing (tokenize your Rolex, but sell into OI for a different watch collection if pricing is better)
  • Private OI (external owners commit to filling OI before it's publicly visible, preventing front-running)
  • Dynamic hold periods (shorter holds if you're filling OI, longer holds if you're dumping into spot)
  • Reputation scores (external owners who consistently bring high-quality assets get preferential terms)

All depends on whether V1/V2 prove external onboarding is meaningful or niche.

Open questions​

A few things we won't know until real participants interact with real incentives:

Will external owners actually participate? Maybe tokenization is too much hassle compared to traditional channels. Maybe custody requirements are too stringent. Maybe the incentives aren't compelling. V1 tells us whether this is a real channel or just theoretical.

What quality standards can realistically be enforced? Issuer verification works for one-off assets the issuer sources carefully. Does it scale to 10x volume from external owners? Can curators maintain standards when they're processing dozens of submissions per month? Or does quality inevitably drift?

How much adverse selection? Do external owners bring their best assets or their marginal ones? If adverse selection is mild, great—strata matching and occasional fees handle it. If it's severe, external onboarding might need tighter gates or abandonment.

Does OI provide sufficient demand? Maybe OI is always thin—buyers prefer instant spot liquidity to placing limit orders. Then external onboarding has no natural counterparty. Need to see real OI depth before betting too heavily on this channel.

How do hold periods affect participation? A 10-day unlock might be fine for patient external owners filling OI at good prices. Or it might kill the channel—"why bother tokenizing if I can't access liquidity immediately?" Calibration matters. Too long and participation dies. Too short and dumping risk emerges.

Summary: external onboarding as responsive supply​

The core insight is simple. When pools are undervalued and buyers are ready, external owners can supply inventory faster than the issuer can source. This closes mispricings through market forces rather than protocol intervention.

But external owners aren't protocol stewards—they're profit-maximizing participants. The mechanism design challenge is making on-chain tokenization attractive enough to bring high-quality inventory when it's needed (proven OI, undervalued pool), while preventing adverse selection (quality dilution, dumping, marginal assets).

The solution layers multiple mechanisms:

  • Quality gates: Strata matching, adverse selection fees, issuer verification
  • Market impact controls: Hold periods, gradual unlocks, conditional intake based on OI existence
  • Incentive alignment: Fill priority, fee rebates, maker uplift when filling proven demand
  • Composability value: Tokenization unlocks DeFi primitives that don't exist off-chain

When it works, external onboarding transforms undervaluation from an issuer fire-drill (need to raise capital, source assets, mint, distribute) into a market-driven correction (external owners step in, fill proven demand, pool reprices). The protocol becomes self-stabilizing, not just issuer-dependent.

The issuer remains critical for verification and quality control—that's their core competency. But external owners provide the inventory pipeline, especially when the issuer is capital-constrained or moving too slowly. Both benefit: issuer scales collection growth without capital strain, external owners gain liquidity and DeFi composability for assets that were previously illiquid.

Rarity starts conservative in V1 (basic intake, manual routing, minimal incentives) to validate the concept and observe real participation patterns. V2 adds the full incentive layer (fill priority, rebates, fees) once we understand what actually drives behavior. V3+ explores advanced features (quality premia, cross-collection routing, reputation systems) if the channel proves meaningful.

Result: faster supply response when it matters most, without compromising quality or creating disorderly market impact.