By: Cameron Nili, Banking & Capital Markets Lead at LayerZero
Have you ever been to a concert or sports event in a large stadium and you find yourself paying 2-3X what you’d usually pay for a bottle of water or a hotdog?
I’d wager most of you have. This is due to a marketing principle known as distribution. In-stadium experiences are an example of closed distribution, where customers have no choice but to purchase that USD 15 water bottle or that USD 26 hotdog at the World Cup from the vendor in the stands because it’s ultra-convenient and the only other option is to leave the stadium, which people obviously won't do until the event is over.
Distribution has many contexts – from the food service at sporting events to capital markets – and has evolved over time thanks to the advent of digital channels that allow manufacturers to access customers using direct-to-consumer models rather than only relying on intermediaries.
Now, consider the World Cup hotdog example but inverted. What if you could optimize for open distribution so there is never a moment where you as an issuer (or manufacturer) cannot reach a customer?
Digital assets (or, financial products issued on blockchain technology) are a great use case here. These are products that are financial instruments, such as onchain cash (stablecoins, etc.), fixed income securities (bonds, treasuries, etc.), equities (public stock, pre-IPO/private, etc.), commodities (gold, etc.), and many more.
Tokenization, the concept of representing these financial instruments on blockchains, unlocks new distribution channels because you as a manufacturer of digital assets can deliver both information and value directly to your customer, rather than relying on traditional intermediaries.
Traditional finance companies operate much like product manufacturers aiming to grow adoption of their products (stablecoins, funds, equities) in an increasingly 24/7, always-on world.
For the first time ever, you can now have your equities, cash, real estate, meme coins, bitcoin, and ether all on the same control plane – i.e., your digital wallet. Before the advent of crypto, it was impossible to store millions of dollars of your financial assets in your pocket; but, now with private keys and digital wallets, it’s completely possible (and increasingly commonplace). But to capitalize on this composability, you need distribution so you can always access your money when you need it, wherever you are.
Why should the financial markets care about distribution as it pertains to tokenization? Growth, AUM/TVL, market advantage, revenue, investor experience – the list goes on.
But, building a tokenization-first distribution strategy is incredibly difficult. Imagine: there are hundreds of blockchains, thousands of applications, billions of potential users, and trillions in total addressable market.
Onchain distribution boils down to three elements: Application, Standards, and Governance.
Application
Theoretically, anything can be tokenized and traded. A car title, a diamond, a picture of a monkey, and even the entire Russell 1000 Equities. It’s quite literally limitless.
What product you are building is the first step toward understanding your onchain distribution strategy. The application – whether as onchain cash like a stablecoin or a fixed income security like Theo's thBILL tokenized treasury fund – heavily influences your strategy. The entire product design, from customer profiling, growth targets, to compliance build and chain selection will all be driven by this initial decision.
Build purposefully: Choose the financial instrument, productize it, and distribute it.
Standards
Many institutional engineering teams spend months, if not years, re-creating the wheel, building custom, bespoke integrations for every chain they select. This is the truly hard part of adhering to the high level of variance across blockchains today.
Take, for example, the Stellar Network alone. It has two smart contract layers: Stellar Classic and Soroban VM. For an asset issuer with a legacy asset on Stellar Classic (like Franklin Templeton's BENJI), they must first work toward establishing interoperability between Stellar Classic and Soroban VM. And that's just one chain.
Then, for example, the issuer realizes there are four chains their customers are demanding – Canton Network (for its privacy), Solana (for its speed), Aptos (for its reliability), and Ethereum (for its reach). Each of these has its own primary token standard – CIP-056, SPL, Digital Asset (DA)/Fungible Asset (FA), ERC-20 – respectively.
Suddenly you’re faced with a need to skill up on Daml, Rust, Move, and Solidity – respectively (again).
Operationally, this is a nightmare. Finding talent across these areas is costly, slow, and puts your products at risk if something were to go wrong if that engineer(s) churns.
Governance
Once your digital asset product is live on one – or, ideally, many – chains, how do you manage and govern its respective lifecycle?
Issuing an asset onchain is not the endgame. Managing that asset throughout its lifecycle and showing agility to manage policy enforcement, for example, will be crucial.
Everything from pausing, freezing, wiring up new chains, de-commissioning old chains, to changing security configurations will be essential to have a strong operational capacity from Day One will set those who distribute products cross-chain apart from the rest.
LayerZero's approach to multi-chain governance has evolved over the years. Using generalized message-passing and robust signing infrastructure, all compliance functionalities can be executed in a synchronous fashion with a high degree of granularity (e.g., freeze a single customer's assets on two chains only). Compliance, running on the same rails as the assets themselves.
How LayerZero Helps Issuers Maximize Distribution
Customers often come to LayerZero in one of three scenarios, each with its own unique approach to minimize disruption and maximize distribution.
Scenario #1: Currently No Asset on Any Chains
When an issuer has no existing digital asset footprint, the first question is, “Are we scaling cash or assets?”. LayerZero’s OFT standard has evolved to address either situation. Both the Single Asset OFT and the Multi-Asset OFT standards can be leveraged by asset issuers, depending on the nature of the product.
- Single Asset examples: Stablecoins, Bonds, Money Market Funds
- Multi-Asset examples: Equities, Mutual Funds, Multiple Currencies
These standards offer immediate, multi-chain capabilities built in from Day One rather than a patchwork of tokens on disparate chains. One standard – every chain, from Day One.
An example of an issuer with no assets on any chains going live on Day One is the Keeta Network and Bivo Financial LLC who recently announced their Multi-Currency tokenized deposits using LayerZero’s Multi-Asset OFT standard for nine currency tokens on Ethereum, Base, and Solana. A unified smart contract standard – the cleanest model.
Scenario #2: Expanding One Asset on One Chain to One Asset on Many Chains
Adding one layer of complexity, suppose a customer has an existing asset on one chain and seeks to go multi-chain. We have a solution for this as well.
We call them OFT Adapters – in this case, we will focus on the mint and burn adapter, rather than lock and mint OFT adapter (which is also supported on LayerZero).
In the mint-burn OFT implementation, the original parent smart contract (typically an ERC20 or SPL), remains in full custody of the issuer on Chain A while additional smart contracts are deployed (the adapter) to Chains B, C, D, and E (illustrated above). These adapters, fully owned and controlled by the issuer, are permitted to mint and burn between each other and the original parent smart contract based on qualified user interactions (e.g., KYC’d user sending 100 tokens between Chain B and E). We call this a "mesh" whereby balances can be seamlessly credited and debited between blockchains.
The OFT standard was adopted by PayPal, who chose LayerZero as its canonical cross-chain infrastructure. Deployed on five chains, the PayPal (PYUSD) USD stablecoin is operated through the OFT standard contracts, coordinating a series of mints and burns to unify supply. Another institutional, Genius-ready stablecoin that adopted the OFT standard is Agora Finance’s AUSD product.
LayerZero does not custody funds or approve transactions. The LayerZero protocol and the deployment of the OFT adapter are entirely permissionless and configured by the asset issuer – something we are proud of.
Scenario #3: Seeking Many Assets on Many Chains
Lastly, say a customer wants to issue multiple assets on multiple chains while minimizing complexity. The best example here is tokenized equities.
Imagine wanting to issue 100 U.S. stocks onchain – such as AAPL, TSLA, NVDA, SPCX – all the big blue chips. Let’s say you want to distribute to four chains. That would be hundreds of individual smart contracts – 1 for each asset on each chain. An operational nightmare.
Imagine needing to update compliance rules for one or more equity tokens – that would be literally dozens of transactions to manage, each individually, to push state changes. Further, imagine deploying to a fourth and a fifth chain. You’d need a team of people just signing multi-sigs using hardware wallets.
This is a non-starter and defeats the purpose of revolutionizing finance (why we’re all here).
Instead, LayerZero offers a token standard purpose-built for this exact scenario: the Multi-Asset OFT standard (also referred to as Nexus) and it powers all of the Ondo Stocks tokenized equities (250 stocks on 3 chains, and growing) as well as Dinari’s tokenized equities (150+ stocks on multiple chains, including a private-permissioned Avalanche L1).
Nexus is a generalized smart contract system for issuing, redeeming, and moving tokenized assets across chains at scale. Built with the LayerZero OApp + OFT Mint And Burn Adapter contract interfaces, Nexus standardizes token issuance, cross‑chain movement and configurations, policy enforcement, and rate limiting so issuers can retain all necessary controls when tokenizing and managing any number of assets across any number of chains with no added operation or technical overhead.
Each chain has a Messenger Factory, which stores and updates the Token Registry. Each Token Registry keeps a synchronized state of all tokens deployed across all chains. Much simpler to manage.
Bringing it all home
Multi-chain issuance today is operationally fragmented. Teams deploy contracts, manage gas, and build costly infrastructure chain-by-chain. Signers coordinate across many external tools. Configuration sprawl leads to inconsistent policy enforcement, and engineering teams stay in the loop for routine actions.
LayerZero is the enterprise control plane for issuing, governing, and operating tokenized assets across chains. It transforms multi-chain token management from bespoke infrastructure coordination into a unified, secure, and enterprise-grade product experience.
Your institution’s multi-chain product distribution journey will make or break your digital asset strategy. Evaluate your options, choose the optimal path forward, minimize manual operations and heavy engineering dependencies by default from Day One. Choose LayerZero.