The Fungible Reserve Standard: A Deterministic Framework for Encoding Carrying Costs in Asset-Backed Tokens

Computer Science > Cryptography and Security [Submitted on 25 Jun 2026] The Fungible Reserve Standard: A Deterministic Framework for Encoding Carrying Costs in Asset-Backed Tokens JJ Jia Jing Tan, Eva Meng, Josh Ng, Zack Zhang, September Liu, Teelet Wang, Ludwig Zhang, Seth Yan The tokenization of real-world assets (RWAs) has emerged as a transformative application of blockchain technology, with market projections estimating trillions of dollars in tokenized assets within the coming decade. However, a fundamental challenge remains unaddressed: physical assets such as precious metals, stored commodities, and warehoused goods incur structural negative carry -- custody, insurance, and audit costs that accumulate over time. While existing tokenization models have successfully established the market for digital gold and treasuries, they typically manage operational costs at the issuer level. The FRS introduces a framework to bring these economics directly on-chain, avoiding mechanisms such as token rebasing that compromise fungibility and composability with decentralized finance (DeFi) protocols. This paper proposes the Fungible Reserve Standard (FRS), a deterministic token design framework that encodes carrying costs transparently into on-chain logic. The FRS introduces an asset-per-token variable q(t) that decreases according to a predefined annualized carrying cost rate, coupled with a supply reconciliation mechanism that preserves holder balances and ERC-20 composability. While mathematically inspired by the daily expense ratio accrual in traditional asset management -- which often embed centralized profit margins -- the FRS design specifically encodes actual operational carrying costs to provide pure institutional-grade accounting clarity without compromising DeFi compatibility. The framework is asset-agnostic and applicable to any real-world asset with positive, predictable holding costs. Comments: 12 pages, 2 tables Subjects: Cryptography and Security (cs.CR); Computational Engineering, Finance, and Science (cs.CE); Computers and Society (cs.CY) Cite as: arXiv:2606.26704 [cs.CR]   (or arXiv:2606.26704v1 [cs.CR] for this version)   https://doi.org/10.48550/arXiv.2606.26704 Focus to learn more Submission history From: Shixing Yan [view email] [v1] Thu, 25 Jun 2026 07:34:05 UTC (18 KB) Access Paper: HTML (experimental) view license Current browse context: cs.CR < prev   |   next > new | recent | 2026-06 Change to browse by: cs cs.CE cs.CY References & Citations NASA ADS Google Scholar Semantic Scholar Export BibTeX Citation Bookmark Bibliographic Tools Bibliographic and Citation Tools Bibliographic Explorer Toggle Bibliographic Explorer (What is the Explorer?) Connected Papers Toggle Connected Papers (What is Connected Papers?) Litmaps Toggle Litmaps (What is Litmaps?) scite.ai Toggle scite Smart Citations (What are Smart Citations?) Code, Data, Media Demos Related Papers About arXivLabs Which authors of this paper are endorsers? | Disable MathJax (What is MathJax?)