Grayscale's research head Zach Pandl just published a framework for how tokenization of real-world assets will unfold — and buried inside the institutional-friendly framing is an accidental admission that permissionless networks like Ethereum and Avalanche are where the long-term value accrues.
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The thesis is straightforward: tokenization happens in waves, with compliant, permissioned networks like Canton winning the early institutional mandates, and open networks capturing "more upside later." But if you read between the lines, "later" is doing a lot of heavy lifting — and it's the part that actually matters.
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The Waves Framework
According to Pandl's analysis, the tokenization of real-world assets — treasuries, bonds, equities, real estate, private credit — will play out in distinct phases. Wave one belongs to institution-friendly, permissioned networks. Think Canton Network, the Digital Asset-backed infrastructure designed specifically for regulated financial institutions that need compliance guardrails, KYC baked into the protocol layer, and the warm comfort of centralized governance.
Wave two, Pandl argues, is where public chains like Avalanche and Ethereum start capturing meaningful market share as regulatory clarity improves and institutions get more comfortable with permissionless infrastructure. The implication is that investors should position accordingly — own the institutional plays now, rotate into public chain exposure as the narrative shifts.
It's a tidy framework. It's also a framework that accidentally describes why permissioned chains are transitional technology.
Permissioned Chains Are Intranets
We've seen this movie before. In the 1990s, corporations built private intranets because the public internet felt too chaotic, too insecure, too uncontrolled. AOL and CompuServe offered walled gardens. Enterprise IT departments built internal networks with strict access controls. And for a few years, that approach looked like the "responsible" path forward.
Then the open internet ate everything. Not because it was more orderly — it wasn't — but because composability and permissionless innovation compound in ways that closed systems structurally cannot match. Every application built on the open internet could interact with every other application. Network effects scaled exponentially. The intranets didn't disappear overnight, but they became backwaters.
Canton Network is an intranet. It's a perfectly reasonable piece of infrastructure for banks that need to tokenize assets while satisfying their compliance departments and regulators. But a tokenized treasury bill sitting on Canton can't be used as collateral in an Aave lending pool. It can't be composed with a Uniswap liquidity position. It can't participate in the DeFi ecosystem that's already processing billions in daily volume across permissionless rails.
The entire value proposition of tokenization isn't putting a wrapper on an existing asset — it's making that asset programmable, composable, and accessible 24/7 without intermediaries. Permissioned chains deliver the wrapper. Permissionless chains deliver the revolution.
What Grayscale Gets Right (and What They Bury)
Credit where it's due: Pandl's phased approach is probably an accurate description of how institutions will behave. Large banks and asset managers won't leap straight onto Ethereum mainnet to tokenize their treasury portfolios. They'll start with permissioned environments, get comfortable with the technology, satisfy their legal teams, and gradually migrate toward public infrastructure as regulatory frameworks mature.
But here's what the Grayscale framework underweights: the permissionless ecosystem isn't sitting still waiting for institutions to arrive. Ethereum already hosts over $2 billion in tokenized treasuries via protocols like Ondo Finance and Backed Finance. Avalanche has its own institutional subnet architecture that lets regulated entities operate compliant environments while still connecting to the public chain. The "later" wave isn't some distant future — it's already building momentum.
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The framing from CoinDesk — and from Grayscale itself — positions this as an investment thesis: buy Canton exposure now, buy ETH and AVAX later. That's the institutional asset manager lens. But from a builder's perspective, the calculus is different. If you're developing tokenization infrastructure today, do you build on a permissioned network with a ceiling, or on a permissionless network with composability and a global user base? The builders are already answering that question, and they're not choosing Canton.
The Regulatory Arbitrage Angle
There's a subtler dynamic at play that Pandl's framework hints at but doesn't fully explore. Permissioned tokenization networks exist primarily because of regulatory uncertainty, not because of technical superiority.
Banks aren't choosing Canton because it's better technology — they're choosing it because it lets them check compliance boxes.
The moment regulatory clarity arrives for public chains (and in 2026, we're closer than ever with multiple jurisdictions developing clear frameworks), the primary advantage of permissioned networks evaporates.
This is the pattern with every wave of crypto adoption. Institutions build parallel, controlled versions of decentralized technology. Then they realize the controlled version doesn't capture the network effects. Then they migrate — or get outcompeted by native players who built on open infrastructure from day one.
We saw it with private blockchains in 2017-2019 (remember Hyperledger hype?). We're seeing the same playbook with tokenization now.
Why This Matters for Onchain Natives
For those of us who've been building and using DeFi, the tokenization narrative sometimes feels like watching traditional finance slowly rediscover what we've been doing for years. Lending against tokenized collateral? That's MakerDAO circa 2019. Fractional ownership of real-world assets? Synthetix was experimenting with that before most TradFi executives could spell "blockchain."
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The real opportunity isn't in the first wave of institutional tokenization — it's in what happens when those tokenized assets inevitably flow onto permissionless rails and plug into existing DeFi infrastructure. That's when you get a tokenized BlackRock treasury fund used as collateral for a flash loan that funds an arbitrage trade across three DEXs in a single transaction. That's the composability unlock that permissioned chains simply cannot replicate.
Composability premium: Permissionless chains will command higher TVL in tokenized assets because those assets can interact with the entire DeFi stack — lending, trading, derivatives, insurance.
Builder migration: Developers overwhelmingly prefer open infrastructure. The tooling, documentation, and community around Ethereum and Avalanche dwarfs anything on permissioned networks.
Regulatory convergence: As frameworks like MiCA in Europe and evolving U.S. guidance mature, the compliance gap between permissioned and permissionless chains narrows — removing the primary moat.
Liquidity gravity: Assets flow to where liquidity lives. Public chain DEXs and lending markets already have deep liquidity pools that permissioned networks would need years to replicate.
The Bottom Line
Grayscale's wave framework is a useful mental model, but it's a mental model designed for institutional investors who think in quarters and compliance cycles. For the permissionless ecosystem, the more relevant question isn't when institutions arrive — it's how much infrastructure will be ready for them when they do. The builders shipping tokenization protocols on Ethereum, Avalanche, and other public chains today aren't waiting for wave two. They're making wave one irrelevant.
