Bringing Securitization Into the Digital Age: Why We Invested in Tranched

The securitization market is massive—estimated at roughly €12 trillion globally—yet it’s also one of the most outdated parts of the financial system. Securitization allows banks and other lenders to package loans and sell them as securities, providing liquidity and managing risk. But despite its critical role in modern finance, the market remains weighed down by inefficiencies rooted in the inherent complexity of these structured products.

The process of bundling thousands of assets and issuing related securities involves numerous intermediaries such as banks, law firms, rating agencies, notaries, and asset managers, each with differing incentives and varying levels of information access. Due to information delays, lack of data standardization, and limited traceability of collateral flow, transparency issues persist throughout the securitization value chain. This opacity hinders investors from making timely, informed decisions independently and has prompted substantial regulatory reforms to improve disclosure requirements and introduce network governance and accountability mechanisms.

Today’s securitization is not only overly complex but also costly. High fees—often up to 5% of transaction value—exclude smaller players, while manual processes slow down execution times, delaying the deployment of capital. Even when capital is available, limited transparency creates trust issues, impacting risk management and leaving investors with incomplete information about the performance of underlying loans.

The Inefficiencies Holding Back Securitization

Traditional securitization is a maze of paperwork, complex structures, and layers of intermediaries. At every stage, costs add up—from underwriting and structuring to servicing and management. For investors, this can mean lower returns, while lenders see a reduction in capital efficiency. Additionally, these intermediaries introduce delays as each transaction moves from one party to the next, creating potential choke points and extending execution times.

These inefficiencies aren’t just a nuisance; they fundamentally restrict growth and innovation in the financial sector. They limit access for emerging markets and smaller players, making it difficult for new credit originators to find the financing they need. High costs reduce flexibility and often mean that only large, well-established institutions can effectively navigate the securitization landscape, leaving many without the financing options that could fuel their expansion.

Why On-Chain Securitization Makes Sense

Researching this market raised a crucial question on our end. Securitization has long been a cornerstone of finance, so why does this process still rely on so many intermediaries, high fees, and cumbersome workflows decades after its invention and significant events like the subprime crisis?

As you know us—hardcore blockchain enthusiasts—this curiosity led us to explore the potential of tokenization and blockchain for asset-based lending and securitization. Could smart contracts replace intermediaries, automate workflows, and bring real-time visibility into asset performance? The more we investigated, the more obvious it became that on-chain securitization could address many of the flaws in traditional finance. From asset verification and payment rules to balance updates, a blockchain-driven protocol could easily eliminate inefficiencies and manual work, creating a securitization process that’s not only faster and cheaper but also more transparent to all parties.

By embedding securitization functions within smart contracts, several key challenges in traditional finance are addressed:

• Reduced Costs through Automation: In traditional securitization, every transaction passes through multiple intermediaries, each adding costs and often slowing down the process. Smart contracts replace much of this manual work, enforcing transaction terms and managing cash flows automatically. This shift can eliminate or drastically reduce intermediary fees, making the process far more cost-effective.
• Enhanced Transparency with Real-Time Data: On-chain data brings transparency to the securitization process, giving investors real-time insight into asset performance and transaction flows. This level of transparency addresses the opacity that has traditionally plagued securitization, where a lack of data standardization and visibility often left investors in the dark and contributed to cascading defaults like those in the subprime crisis. Now, every movement of funds, asset status, and repayment could be recorded on the blockchain, offering a complete and tamper-proof view of the security’s health and structure.
• Flexibility and Accessibility with Tokenization: By tokenizing assets into smaller, tradeable units, on-chain securitization opens up new ways for investors to access and engage with asset-backed securities. Different tranches can be created and tailored to various risk and return profiles, enabling investors of all sizes and types to participate. This flexibility makes it easier for smaller investors and new market entrants to access securitized assets, increasing liquidity and expanding the investor base.

These benefits aren’t just theoretical—they represent a necessary evolution. At Blockwall, we see on-chain securitization as a breakthrough solution that addresses the long-standing inefficiencies of traditional finance, creating a more accessible and efficient path forward for lenders and investors alike. This perspective has led us to actively seek a promising blockchain-based opportunity in this field, one that can drive tangible improvements and set new standards for asset-backed finance.

Announcing Our Investment in Tranched.fi

Tranched is building a protocol designed to remove the need for multiple intermediaries. By connecting credit originators directly with institutional investors, Tranched reduces both time and cost, automating processes traditionally handled by intermediaries. In initial transactions, the platform has shown up to a 90% reduction in costs—a substantial leap forward. For lenders, this efficiency means lower overheads and faster access to capital, while investors benefit from a more streamlined process and greater transparency into the assets they’re backing.

With each transaction, the protocol leverages smart contracts to enforce borrowing terms, automate repayments, and update account balances in real-time. This level of automation and transparency provides investors with a clear, up-to-date view of their assets, eliminating the need for extensive reconciliation and manual updates. It’s a blockchain-powered approach that’s bringing a new level of clarity and trust to asset-backed finance. By tokenizing receivables and creating various risk tranches, the platform caters to a broad range of investor profiles, offering different risk and return levels within the same asset pool. This innovation means that institutions, retail investors, and everyone in between can gain exposure to asset-backed securities in a way that’s easier to manage, more liquid, and significantly less costly than before.

With a clear plan to expand beyond Europe and to bring on-chain securitization to global markets, Tranched is positioned to make a lasting impact in the financial industry. The team, led by Michael and Clément 👋, combines deep experience in both finance and blockchain, making them uniquely capable of bridging traditional finance with innovative, tech-driven solutions.

Seeing this potential, we’re thrilled to announce our investment in Tranched’s €3.4 million seed round, joining an outstanding group of investors including a16z’s CSX, SpeedInvest, and other industry veterans.

At Blockwall, we are confident in this ecosystem’s potential to revolutionize financial markets, and our investment in Tranched is a testament to our belief in a more accessible, transparent, and resilient financial future. As the market for tokenized assets grows, we’re excited to see some of our companies at the forefront of this movement and look forward to supporting their journey as they redefine what’s possible in asset-based lending.

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