We started building Alvara because we kept watching the same thing happen: someone with a genuinely good investment thesis would share it on Twitter, maybe get a few hundred likes, and then... nothing. No way to package it. No way for other people to follow it transparently. No way to earn from it. The thesis just evaporated into the timeline.
A basket token (or BSKT) changes that. It's a single ERC-7621 token that holds a portfolio of ERC-20 tokens inside it. Think of it as a tokenized strategy: one asset that represents a rules-based allocation across multiple assets, with transparent composition and built-in management fees. No fund license, no legal entity, no minimum capital.
How Basket Tokens Work
At a high level, a basket token wraps multiple ERC-20 tokens into one. When you mint a BSKT, you deposit the underlying assets in the correct proportions. When you burn it, you get those underlying assets back. The basket token itself is fully transferable and tradeable, just like any other token on Ethereum.
Here's a concrete example. Say someone creates a "DeFi Blue Chips" basket with the following composition:
- 40% AAVE
- 30% UNI
- 20% MKR
- 10% COMP
When you mint one unit of this basket token, you deposit those four tokens in exactly those proportions. You receive a single BSKT token in return. That one token gives you diversified exposure to all four assets. No need to manage each position individually.
The ERC-7621 Standard
Basket tokens are built on ERC-7621, a token standard designed specifically for multi-asset tokens. ERC-7621 is built on top of ERC-721 (the NFT standard), giving each basket a unique identity, while adding the interfaces needed to manage a basket of underlying ERC-20 assets.
The standard defines how assets are added to a basket, how weights are maintained, how minting and burning works, and how management fees are collected. Because it's a standard, any BSKT created through the protocol follows a consistent interface that DeFi protocols can integrate with. You can hold BSKTs in any Ethereum wallet that supports NFTs, and as protocol integrations grow, new trading and collateral use cases will follow.
BSKTs vs. Regular Tokens
A regular ERC-20 token represents one asset. It might be a governance token, a stablecoin, or a wrapped version of another chain's native currency. Either way, one token equals one thing.
A basket token represents many assets bundled together. The key differences:
- Diversification built in. Holding one BSKT gives you exposure to every asset in that basket. You don't need to manage multiple positions.
- Transparent composition. The underlying assets and their weights are onchain and verifiable at all times. There's no black box.
- Redeemable for underlying assets. You can always burn your BSKT and receive the underlying tokens. The basket is fully backed, always.
- Rebalanceable. The basket creator can adjust weights over time, keeping the portfolio allocation in line with their strategy.
Who BSKTs Are For
BSKTs work best for a few specific groups:
- Crypto analysts with a thesis. If you spend your time researching tokens and have strong sector views, a BSKT lets you package that conviction into something others can follow and invest in.
- DeFi-native users managing 10+ positions. Consolidating into themed baskets cuts gas costs, simplifies tracking, and forces discipline in your allocation strategy.
- DAOs diversifying treasury. A BSKT gives a DAO treasury transparent, auditable diversification without relying on a multisig signer to manually rebalance.
- Builders looking for composable portfolio primitives. Because BSKTs follow ERC-7621, they plug into DeFi protocols the same way any other token standard does.
Key Benefits of Basket Tokens
Permissionless Creation
There's no application form, no licensing requirement, and no minimum AUM. If you have a thesis about which tokens will perform well together, you can build a basket around it and let the market decide if your strategy has merit. In practice, the cost is a gas fee and whatever ETH you deposit to seed the basket.
Composability with DeFi
Because BSKTs are built on ERC-7621 (which extends ERC-721), they benefit from the existing NFT infrastructure on Ethereum. As DeFi protocols add ERC-7621 support, BSKTs will be usable across DEXs, lending protocols, and more. This growing composability is what makes basket tokens genuinely useful, not just a theoretical concept.
Management Fees
Basket creators can set a management fee that accrues over time. This creates a direct incentive for talented portfolio managers to share their strategies publicly. If your basket performs well and attracts holders, you earn fees. It's a business model that aligns incentives: the creator is motivated to maintain a good portfolio, and holders benefit from professional management.
Gas Efficiency
Buying five tokens individually means five separate transactions and five sets of gas fees. Minting a basket that contains those same five tokens is one transaction. For anyone managing a diversified portfolio onchain, the gas savings alone make baskets worth considering.
Real Use Cases
Basket tokens aren't just a neat idea. They address real problems that DeFi users face today.
Thematic investing. Want exposure to the AI token sector without picking individual winners? Create a basket of the top 10 AI-related tokens weighted by market cap. One token, broad exposure.
Portfolio management as a service. Skilled traders can package their strategies into baskets and earn management fees. Holders get access to expertise they might not have themselves.
DAO treasury diversification. DAOs that hold concentrated positions in their own governance token can create baskets to diversify their treasury, all onchain and fully auditable by their community.
Simplified onboarding. New users entering DeFi can buy a single basket token instead of trying to evaluate and purchase dozens of individual tokens. It lowers the barrier to getting diversified crypto exposure.
What BSKTs Don't Solve
Basket tokens are powerful, but they're not a fit for everything. A few things worth understanding before you create or invest in one:
- Liquidity depends on the underlying tokens. If your basket contains tokens with thin trading volume, minting and redeeming will be more expensive due to slippage. This is a real constraint today, especially for smaller-cap tokens.
- Manager quality varies. Permissionless creation means there's no quality filter. Some baskets will have well-considered allocations; others won't. That's why Alvara includes Xerberus risk ratings (AAA to D) and a public manager leaderboard, so you can evaluate before you invest.
- Regulation is still evolving. Tokenized basket products operate in a legal grey area in many jurisdictions. The protocol is decentralized and permissionless, but users should understand the regulatory landscape where they operate.
- Smart contract risk exists. BSKTs depend on ERC-7621 contracts that have been audited (by Certik, Quill, Adevar Labs, and SolidProof), but no audit eliminates all risk. This is DeFi; understand what you're interacting with.
How Alvara Makes It Simple
Alvara Protocol is the platform built around ERC-7621. It provides the smart contracts, the UI, and the infrastructure for creating and managing basket tokens. You don't need to write any code or deploy your own contracts. Pick your assets, set your weights, name your basket, and deploy. If you're not sure where to start, choose from pre-built templates like Blue Chip, DeFi, or AI that come with curated allocations.
Once your basket is live, anyone can mint it by depositing the underlying tokens, and you start earning fees from day one. Managers can verify their identity through X and Gitcoin Passport to earn trust badges, and every BSKT gets an independent Xerberus risk rating so contributors know what they're getting into.
Want to try it yourself? The easiest way to understand BSKTs is to create one. Check out our step-by-step tutorial or browse existing baskets on the Alvara app.
Why We Think This Matters
The idea behind basket tokens isn't complicated: let people package investment strategies into composable, transparent, tradeable tokens. What makes ERC-7621 different from ad hoc wrapper contracts is standardization. A consistent interface means wallets can display basket composition, DEXs can list them natively, and lending protocols can eventually accept them as collateral. Without a standard, every basket implementation is a one-off.
We're still early. But the foundation, a recognized Ethereum standard, multiple chain deployments, live baskets with real TVL, is already in place. The question isn't whether onchain portfolio products will exist. It's whether they'll be built on open standards or proprietary walled gardens. We're betting on the standard.