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 an ERC-7621 basket — a smart contract that holds a portfolio of ERC-20 tokens. Investors receive ERC-20 LP shares representing their proportional stake, while the creator holds a management NFT. 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, and minimum seed capital of just 0.1 ETH.
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 ETH (or any single token) and the protocol automatically routes through 1inch to acquire the underlying assets in the correct proportions. When you withdraw, you can either receive the individual underlying tokens or route them back to a single token. The LP shares you hold are standard ERC-20 tokens, fully transferable and tradeable.
One thing to note: on Ethereum mainnet, every BSKT currently requires an ALVA token allocation as part of its composition. This requirement is being removed with the upcoming Base deployment, which will allow fully custom allocations from day one.
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 contribute to this basket, you deposit ETH and the protocol handles the rest — acquiring each token in the right proportions via 1inch routing. You receive ERC-20 LP tokens in return, representing your share of the basket. One deposit, diversified exposure to all four assets.
The ERC-7621 Standard
Basket tokens are built on ERC-7621, a token standard designed specifically for multi-asset tokens. ERC-7621 extends ERC-721, giving each basket a unique onchain identity as an NFT, while the LP shares that investors hold are standard ERC-20 tokens — meaning they work in any Ethereum wallet and can be traded on any DEX.
The standard defines how assets are added to a basket, how weights are maintained, how contributions and withdrawals work, 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.
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 withdraw from your BSKT — either as individual underlying tokens or routed back to a single token. 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
The BSKT itself is an ERC-7621 token (extending ERC-721), giving it a unique onchain identity. But the LP shares investors hold are standard ERC-20 tokens, so they already work with existing DeFi infrastructure — DEXs, wallets, aggregators. As more protocols add native ERC-7621 support, new collateral and composability use cases will follow.
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
Building a diversified portfolio normally means five separate swaps, five approvals, and five sets of gas fees. Contributing to a BSKT is one transaction — you deposit ETH or a single token and the protocol handles all the routing. For anyone managing a diversified portfolio onchain, the simplicity and gas savings 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. Anyone can create a BSKT, which means quality is all over the map. Some baskets will reflect deep research; others won't. The public manager leaderboard on Alvara helps you compare track records before contributing, but doing your own due diligence still matters.
- 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. The ERC-7621 contracts have been audited, 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. The creation flow is three steps: Compose (select your tokens and set allocation weights), Design (name your BSKT, choose a ticker, and add branding), and Fund (deposit a minimum of 0.1 ETH to deploy onchain). No code required.
Once your basket is live, anyone can contribute by depositing ETH or a single token — the protocol routes through 1inch to acquire the underlying assets automatically. You start earning management fees from day one. As the creator, you also receive a management NFT that grants you rebalancing control over the basket's allocations. All deposits into BSKTs include automatic MEV protection, so contributors aren't exposed to sandwich attacks. Once live, your BSKT appears on the Explore page and public leaderboard for anyone to discover.
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 published ERC token standard, live baskets with real TVL on Ethereum mainnet, 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.