Converge by Ethena and Securitize: A TradFi–DeFi Hybrid for Tokenizing RWA

Converge is a new blockchain network co-developed by Ethena Labs (a crypto stablecoin issuer) and Securitize (a leading real-world asset tokenization firm). Its mission is to bridge traditional finance (TradFi) and decentralized finance (DeFi) by providing an institutional-grade platform for tokenizing real-world assets (RWA) at scale. With the market for on-chain RWAs growing exponentially from about $5B in 2022 to over $24B by June 2025 (a 380% increase) Converge aims to tackle the bottlenecks holding this sector back. Below, we break down what Converge is, how it works, and why it could unlock trillions of dollars in assets on-chain.

• Purpose-Built RWA Blockchain: Converge is a specialized Layer-2 blockchain (Ethereum rollup) designed to handle tokenized real-world assets and high-volume DeFi transactions. It’s built by Ethena (known for its USDe yield-bearing stablecoin) in partnership with Securitize (which has tokenized nearly $2B of assets to date). The network combines TradFi compliance requirements with DeFi flexibility, aiming to serve both retail users and large institutions.
• High Performance via Arbitrum & Celestia: Technically, Converge is built on the Arbitrum Orbit stack (an Ethereum-compatible Layer 2), with Celestia as its data availability layer. This architecture enables massive throughput: in tests, Converge handled 128 MB blocks at ~21 MB/s throughput, far above Ethereum’s limits. It targets a block time of ~100 milliseconds (about 10 blocks per second) for lightning-fast transactions. The roadmap even includes support for up to 1 GB block sizes.
• Dual Token Model – USDe and USDtb: Uniquely, Converge will use stablecoins as gas tokens. Ethena’s USDe (a delta-neutral, yield-generating stablecoin) and USDtb (a tokenized T-bill stablecoin by Securitize) will be the native currencies for paying fees. This means users and institutions can transact and pay gas in dollars, aligning with TradFi habits and avoiding volatility. Ethena’s governance token ENA will be staked by validators for securing the network.
• Converge Validator Network (CVN): To meet institutional demands for security, Converge introduces a special validator layer called the CVN. Validators in CVN (who stake ENA) have enhanced responsibilities and powers: they can provide “institutional-grade capital protection” by implementing instant finality bridges, blocking malicious cross-chain messages, and triggering circuit breakers in emergencies. In other words, CVN acts as a security council that can pause or intervene if something threatens user funds (e.g. a bridge hack or oracle failure). This discretionary authority sacrifices some decentralization but is aimed at preventing catastrophic losses – a key requirement for big money players.
• Open Yet Permissioned Design: Converge seeks a balance between open DeFi composability and permissioned control for regulated assets. By default, the network is permissionless – anyone can deploy smart contracts or use the public DeFi apps. However, certain asset tokens or dApps (especially those dealing with real securities) can have whitelisted access. These restrictions are enforced at the application or asset-issuer level, not by the base chain. Effectively, Converge can host two parallel ecosystems: (1) a fully open DeFi ecosystem (using USDe, etc.) where projects like Pendle or Uniswap-style protocols operate freely, and (2) a permissioned environment where only KYC-approved entities trade specific tokenized securities (e.g. a bond market for banks). Both types coexist on the same network, tapping into shared liquidity when possible.
• Integrated Apps and Partners: Converge is launching with an impressive roster of integrated projects:
  • Terminal Finance: A forthcoming marketplace for trading yield-bearing stablecoins and institutional assets, intended as Converge’s central liquidity hub. It uses concentrated liquidity pools (like Uniswap v3) to provide deep liquidity for assets like USDe. Terminal is already in a pre-deposit phase, gathering capital (USDe, WETH, WBTC) and has over $73M TVL locked as of July 2025.
  • Ethereal: A high-performance decentralized exchange (DEX) capable of under 20 ms latency and up to 1 million orders/second, rivaling centralized exchanges. Ethereal supports self-custody and is built as an “app chain” that integrates tightly with Converge: trade execution happens in an Arbitrum environment, final settlement on Converge L2, and data stored on Celestia. This gives it CEX-like speed with on-chain security. Ethereal currently has $714M TVL (peaking above $1B) in its beta, mainly from its perpetuals trading with USDe collateral.
  • Aave’s Horizon & others: Converge will host Aave Horizon (a permissioned lending market for institutions) and protocols like Morpho (lending optimizer) and Maple (institutional lending) as part of its ecosystem. Pendle (yield trading) is also cited. These indicate both DeFi-native and TradFi-targeted dApps are on board from day one.
  • Custody and Compliance Partners: Securitize brings its compliance platform to issue and manage security tokens on Converge (covering KYC, transfer restrictions, etc.). Institutional custodians like Anchorage and Copper will provide custody solutions for on-chain assets, ensuring big investors can safely hold their tokenized assets with familiar safeguards. Oracle/data firms like RedStone are also involved for pricing and data feeds.
• Regulatory Compliance First: A core theme is that Converge prioritizes regulatory compliance and investor trust over full anonymity. Identities can be verified for permissioned activities, transactions can be transparently audited or even halted if fraudulent. This doesn’t mean everything is centralized – rather, it’s a hybrid approach to satisfy regulators and institutions. For example, both Plasma and Stable (other stablecoin chains) tout “shielded transactions” with backdoor data disclosure; Converge similarly will have to ensure privacy features align with AML laws. Converge’s co-founders openly acknowledge that some decentralization must be traded off to bring Wall Street on-chain.

What Is Converge and Why It Matters

Converge is essentially a bespoke blockchain for real-world assets, addressing pain points that neither pure public chains nor private ledgers have fully solved. Today’s RWA tokenization efforts face a dilemma: if you use a public chain like Ethereum, you get openness and liquidity but sacrifice some control (compliance, predictable fees, privacy of sensitive data). If you use a permissioned chain or enterprise blockchain, you get control but lose the composability and user base of public DeFi. Converge’s answer is to combine both via a modular Layer 2.

Ethena’s founder Guy Young describes Converge as “a high-performance EVM-compatible network with enhanced security features beyond what existing solutions offer.” In practice, this means it’s Ethereum-compatible (so it can run existing smart contracts and integrate with the Ethereum ecosystem easily), but it’s souped-up for institutional needs. By building on Arbitrum’s tech, Converge inherits Ethereum’s security and EVM functionality. By plugging into Celestia’s data network, it can handle large throughput without clogging Ethereum. This is crucial for things like market data, high-frequency trades, or bulk asset transfers that large institutions require.

The market context is also important: Tokenization of real-world assets is widely seen as a multi-trillion dollar opportunity. BlackRock’s CEO has spoken about the potential to tokenizemassive markets (bonds, real estate) in coming years. Consulting firms like McKinsey predict $1–$3 trillion of value could be on-chain by 2030. Already, including stablecoins (which are essentially tokenized dollars), the on-chain RWA market is around $240B. Excluding stablecoins, it’s nearing $20B and climbing fast. This includes things like tokenized U.S. Treasury bills (e.g., Franklin Templeton’s fund, or projects like Ondo’s tokenized bonds) and tokenized private equity or credit. Converge’s timing – launching in 2025 – aims to capitalize on this wave by providing infrastructure that can handle RWA at scale and with compliance.

Architecture and Performance

Converge’s architecture is notable for prioritizing throughput and low latency. By using a dedicated sequencer (Conduit G2) and frequent mini-block production (~0.1s intervals), it can offer ultra-fast trade execution. This benefits applications like exchanges (Ethereal) where speed is essential. The use of Celestia is cutting-edge: Converge writes transaction data to Celestia as blob storage, which is far cheaper and more scalable than posting everything on Ethereum blocks. Tests of 128 MB blobs at high speed indicate Converge can support, for instance, high-frequency trading data, or batched settlements of thousands of securities trades in one go. In the future, 1 GB blocks could even allow things like on-chain order book matching with no off-chain compromise.

Because USDe and USDtb are gas, users won’t need ETH or another token for fees. This is similar to what some specialized chains (like Stable, discussed in the next section) are doing – it’s more user-friendly for TradFi participants if they can pay fees in the same USD-based asset they’re transacting. USDe is particularly interesting because it’s yield-bearing (it represents a claim on a strategy that earns yield from DeFi). This means holding USDe on Converge could automatically generate yield, which then can be utilized by protocols or returned to users. Terminal Finance’s model of capturing yield in its pools and distributing it as “Roots” rewards ties into this.

Governance, Security, and the CVN

One of Converge’s distinguishing features is its approach to governance and security via the Converge Validator Network (CVN). In typical proof-of-stake chains, validators just propose/validate blocks and maybe run a bridge. Converge expands their role: CVN validators act as a guardian council. For example, Converge will have a native bridge for instant withdrawals (likely bridging assets from Converge L2 back to Ethereum or other chains). CVN validators oversee this bridge and can enforce “instant finality” – meaning once something is finalized on Converge, it can be immediately usable elsewhere, thanks to CVN’s guarantees. They also monitor cross-chain messages, especially from LayerZero’s decentralized verification networks (DVN), since Converge intends to connect with LayerZero for interoperability. If a malicious message (like a forged proof) is detected, CVN can halt it – preventing a common cause of bridge hacks.

Perhaps most importantly, CVN can trigger circuit breakers at different scopes. This is analogous to stock exchanges halting trading during crashes. If an oracle is exploited or a smart contract is behaving erratically (say a DeFi app is draining funds due to a bug), CVN validators can pause either the specific contract or even the whole chain in extreme cases. While decentralized purists may cringe at this centralization, institutional players want such kill-switches to limit damage. Guy Young acknowledges some community members might dislike giving validators these powers, but he argues it’s necessary to address key institutional pain points (like fear of hacks or runaway protocols).

The governance likely involves both Ethena and Securitize and perhaps other stakeholders in deciding CVN membership and policies. Over time, one could imagine CVN itself being governed by a DAO of ENA stakers – but with strong guidance to ensure it remains institution-friendly.

Bridging TradFi and DeFi: Permissionless vs Permissioned

Converge’s strategy of allowing both permissionless and permissioned apps on one chain is somewhat novel. Instead of splitting into separate networks (one public, one private), they partition at the app level. For instance, Pendle (a DeFi yield trading platform) can run permissionlessly – anyone with USDe can use it. Meanwhile, Aave Horizon (a KYC-only lending market) can restrict its pools so only verified entities borrow or lend certain assets (perhaps real-world debt tokens). Both share the same underlying ledgers and tokens. This could enable a scenario where, say, an ordinary DeFi user indirectly interacts with institutional capital – perhaps a permissioned pool on Aave Horizon sources USDe liquidity from retail users in the open pool, but only whitelisted borrowers can tap it.

The benefit here is composability across the divide. For example, an NFT representing a real estate asset (permissioned) could still be used as collateral in an open marketplace if wrapped appropriately, or an open AMM (like Terminal Finance) could aggregate liquidity from both retail and institutions. Converge developers explicitly note that neither validators nor core devs will centrally control access – the controls lie with asset issuers or app owners. So, a bank issuing a tokenized bond on Converge can make that token transferable only among KYC-approved addresses (enforced by the token’s smart contract), but the base chain doesn’t block unknown users from deploying unrelated contracts.

This dual approach mirrors what Hyperliquid (a high-performance trading chain) did with its HyperEVM environment. Hyperliquid initially was a closed trading system, then added an EVM side to open it up. Converge from the get-go is embracing both: serving as the “Wall Street blockchain” while also being part of the general DeFi world.

Outlook: Trillions on Chain?

Converge is still early – as of mid-2025 it’s preparing for mainnet launch (expected in Q3 2025). But it has significant backing and a clear value proposition. If it succeeds, Converge could become the go-to network for any large entity that wants to put real assets (stocks, bonds, funds, etc.) on blockchain in a compliant way. Securitize, one of the partners, already works with firms like BlackRock (Securitize helped tokenize a portion of BlackRock’s $1B digital private bond fund). Those relationships could funnel big assets onto Converge.

Moreover, Ethena’s USDe stablecoin could gain broad adoption as a base-layer currency if Converge attracts many users. By integrating USDe deeply (gas token, collateral, etc.), Converge ensures demand for it. USDe’s model of being fully collateralized and yield-generating (via delta-neutral positions) appeals to both crypto users and TradFi (it addresses stablecoin yield and risk concerns). And Securitize’s USDtb (tokenized T-bill yields) provides a “risk-free” dollar instrument for conservative investors on-chain. Together, these form a robust economic base for the network.

Converge is sometimes described as bringing Wall Street into Web3 without compromising either side’s principles. In practice, it does ask Web3 to compromise a bit on decentralization, and it asks Wall Street to compromise a bit on their walled gardens (by embracing public chain elements). If it strikes the right balance, the reward is huge: the tokenization wave could indeed be worth trillions of dollars in coming years. Converge wants to ride that wave by being the settlement layer where those trillions flow.

In summary, Converge by Ethena & Securitize is a bold attempt to create a hybrid blockchain – as fast and controlled as institutional systems, but as open and innovative as DeFi. It addresses scalability with cutting-edge tech (Arbitrum+Celestia), addresses trust with strong governance tools (CVN), and fosters an ecosystem that mixes permissioned and permissionless finance. If it delivers on its promise, Converge could significantly accelerate the mainstream adoption of on-chain finance, unlocking real-world capital to interact with crypto markets on an unprecedented scale.