🪙 Tokenized Units
How fund units are tokenized: one permissioned security token per share class, with the ERC-3643 token interface, built on ERC-20.
Unlike other fund tokenization platforms that add blockchain complexity to the already convoluted processes of traditional investment funds, Fume brings the entire administration process on-chain, simplifying fund management by removing intermediaries. Since the investor registry is maintained directly on the blockchain, the investment vehicle's units, whether tokenized fund units or tokenized notes, are inherently tokenized.
A permissioned security token per share class
Each share class of a fund is its own permissioned security token. It implements the token interface of ERC-3643, the Ethereum standard for permissioned securities that grew out of the T-REX protocol: an identity registry of verified wallets, freezing, forced transfers and wallet recovery. Only wallets the manager has verified can hold units.
Like every ERC-3643 token, it is built on ERC-20, the standard every wallet, explorer and DeFi protocol already reads. Units sit in the investor's own wallet: investors see them next to their other assets (the platform has a button to add the token to a wallet), and the fund's unit register is simply the list of token holders.
Fume's token is its own implementation of the ERC-3643 interface, not the T-REX contracts. Identities are entries the fund manager sets after their own KYC, instead of ONCHAINID identity contracts, and the transfer rules are enforced by the fund contract instead of a separate compliance contract.
The token contracts are not upgradeable, and only the fund contract can mint, burn or freeze them.
Share classes
A fund can offer several share classes, for example a class with a lower management fee for early backers and one with a lock-up for institutional investors. Each class has:
- its own token, name and symbol,
- its own price (NAV per unit),
- its own high-water mark, which never decreases,
- its own management, performance and exit fees,
- its own lock-up period for new subscriptions.
One NAV calculation prices every class from a single equity figure, so all classes share the same underlying portfolio. Units of different classes have different prices and are never added together.
Fair treatment without per-investor accounting
Every holder of a class buys at the class price, and fees are reflected in that price. The performance fee crystallizes at the end of each period (monthly by default) and moves the class's high-water mark up, so every investor who joins a class later starts from the same mark. A NAV calculation never burns or reissues anyone's units: a holder's position is exactly their token balance.
This replaces the per-investment high-water marks and equalization of the first version of the protocol. One price and one mark per class is simpler to audit, and a plain token balance is what wallets and DeFi venues expect.
Lock-ups
When a class has a lock-up, each subscription creates a locked lot that is released after the lock-up period. Locked units cannot be redeemed or transferred until they unlock, and an investor's holding shows free and locked units separately.
Security Tokens
The tokenized fund units are considered security tokens, which means they are subject to regulatory restrictions. For regulatory reasons, the fund manager must always know who the unit-holders are, so the fund remains compliant with applicable laws.
That is why units only ever move to wallets the manager has verified, and only when the manager allows it.
Unit transfers
- Transfers between investors are switched on or off per fund in Settings. Every fund starts with transfers off. When they are on, units can only go to a wallet the manager has verified, and the change applies immediately.
- DeFi venues such as liquidity pools can be put on an allowlist by the manager, so units can be used in them.
- Forced transfers and wallet recovery: the manager can move units between verified wallets, or move everything from a lost wallet to a new one. Lock-ups move with the units.
- Freezing: the manager can freeze a wallet, or part of its units, in a class.
- Pause: a paused fund blocks transfers and new redemption requests. Subscriptions and NAV calculations continue.
All transfers are recorded on-chain and appear in the fund's unit register.