The AFI Approach: On-Chain Proof Of Reserve Vaults
Tokenization solved the representation problem — converting real-world assets into transferable digital tokens. What it did not solve is the verification problem: proving, in real time, that those tokens remain fully backed by their underlying reserves.
AFI introduces Proof-of-Reserve (PoR) Vaults as a foundational primitive for the RWA ecosystem. These vaults create a cryptographically enforced linkage between off-chain collateral, on-chain supply, and DeFi composability.
What AFI Proof Of Reserve Vaults Do
At their core, AFI PoR Vaults perform three functions:
1. Escrow On-Chain the Tokenized Asset
The issuer deposits their entire supply of the tokenized asset (e.g., rwaX) into a non-custodial ERC-4626 vault.
The vault locks and publicly displays the balance.
These tokens cannot be rehypothecated, redirected, or silently re-used.
This creates a verifiable, immutable reserve floor.
2. Mint a New Receipt Token with Cryptographic Supply Limits
When the vault receives the base RWA token, it mints afi-rwaX — an ERC-4626 receipt token representing provably backed collateral.
afi-rwaX supply cannot exceed the balance of rwax held in the vault.
The cap is enforced by the vault contract itself.
Anyone can independently verify the mint cap using on-chain data.
This converts issuer-backed assets into math-backed assets.
3. Bind Off-Chain Reserves to On-Chain Enforcement
AFI integrates reserve attestations into a Proof Registry that encodes the relationship:
afi-rwaX supply ≤ rwaX locked < attested off-chain reservesIn practice:
The left inequality is enforced by the contract (cannot mint beyond on-chain collateral).
The right inequality is enforced by continuous reserve attestations (via auditors, oracles, or AVS networks).
Any discrepancy triggers alerts or supply restrictions.
This creates a real-time solvency guarantee, anchored both on-chain and off-chain.
Why This Is Transformative
AFI’s PoR Vaults fundamentally change how RWA tokens behave:
A. RWA Tokens Stop Being “Issuer IOUs”
Traditional RWA tokens rely on:
Custodian certificates
Corporate balance sheets
Legal contracts
Human trust
AFI converts them into cryptographically enforced assets, with deterministic visibility into reserves.
B. DeFi Protocols Gain a Safe RWA Collateral Layer
Protocols like Aave, Compound and Morpho require:
Programmatic verifiability
Deterministic risk limits
Predictable solvency
afi-rwaX satisfies all three:
It is always fully collateralized by locked rwaUSD.
Its supply cannot exceed verified reserves.
Its backing is independently confirmable by any contract.
This unlocks:
Lending markets
Stablecoin minting
Structured yield products
On-chain treasuries
All without counterparty risk.
C. Issuers Gain Institutional-Grade Transparency
For RWA issuers, AFI becomes a distribution and trust layer:
Reserves → Attested
Tokens → Verified
Integrations → Safe
Liquidity → Composable
Market Access → Expanded
Issuers effectively “upgrade” their tokens into assets that DeFi can use safely.
From Human Assurance to Programmatic Proof
With AFI, the RWA stack evolves:
Before AFI
Issuers provide PDFs
Users trust issuers
DeFi trusts users
Risk flows downstream unchecked
With AFI
Issuers deposit & attest reserves
Vaults enforce supply limits
On-chain proofs confirm solvency
DeFi integrates fully verified collateral
The trust chain moves from people → paperwork → protocols.
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