🪙Tokenized Units

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.

ERC-6909 Standard

Fume utilizes the ERC-6909 token standard, which is a minimal and gas-efficient approach for managing multiple types of tokens within a single contract. It provides a simplified alternative to the more complex ERC-1155 multi-token standard and is already being used by renowned projects such as Uniswap V4. You can think of ERC-6909 as a collection of NFTs, where each item represents a group of fungible tokens.

Why Not ERC-20?

While ERC-20 tokens are typically used for fungible assets, they are not well-suited for tokenizing fund units. Although fund units might appear fungible, they often have key distinctions:

• Subscription Timing: Investors subscribing at different times might have varying lock-up periods.

• Fee Structures: Different investors may be subject to different entry/exit fees.

• High-Water Marks: Performance fees can vary depending on the specific investment timeline, requiring a unique high-water mark for each investment.

For these reasons, Fume needs a mechanism that allows differentiation between unit series to ensure fair treatment for all investors. ERC-6909 offers the flexibility to achieve this by treating each unit series as a distinct asset, while still allowing for cohesive and efficient management.

Security Tokens

The tokenized fund units are considered security tokens, which means they are subject to regulatory restrictions. These tokens cannot be transferred as freely as standard cryptocurrencies or NFTs due to compliance requirements. For regulatory reasons, the fund manager must always know who the unit-holders are, ensuring that the fund remains compliant with applicable laws.

Secondary transfers of tokenized units are allowed, but only among already whitelisted (KYC'ed) wallets that have been approved by the fund manager. This guarantees that all holders of the tokenized units meet compliance requirements before any transfer occurs.