Enterprise DeFi funds personal protective equipment

0

Supply chain management has always been challenging due to issues such as rising costs, consumer demands, financial risk, volatility and more. Unfortunately, the COVID-19 pandemic has created even bigger problems for supply chains globally.

A recent survey conducted by the Big Four firm Ernst & Young in late 2020 puts that into perspective, noting that 97% of automotive and industrial products companies found the pandemic had negative effects on their business. The EY study further revealed that 64% of surveyors believe the digital transformation of global supply chains will accelerate due to the pandemic.

Although just a prediction, some traditional vendors have already started leveraging blockchain technology to automate workflow verification to enable more efficient supply chains. For example, freight technology provider ConsolFreight recently formed a partnership with Centrifuge, a decentralized, asset-backed lending platform, to unlock millions of dollars in financing for personal protective equipment.

Ernesto Villa, founder of ConsolFrieght, told Cointelegraph that the company’s client, BioBX, needed to import and deliver personal protective equipment to school districts in California during COVID-19. Yet, due to the complexity and risk involved in importing PPE, BioBX struggled to secure this delivery. According to Villa, the collaboration between Centrifuge and ConsolFreight enabled BioBX to obtain funding of approximately $800,000 to ship two containers of gloves to California schools:

“Most companies don’t want to finance PPE deliveries because these orders are too large for our customers’ balance sheets. So, we tech-savvyed BioBX’s entire supply chain while financing their freight forwarding (receivables) through Centrifuge’s liquidity pool called Tinlake. It’s a great example of how decentralized finance can combine with real-world assets.

Enterprise DeFi becomes a reality

Centrifuge and ConsolFreight tokenized and then funded various business processes for BioBX, allowing the company to access financial funds that would typically have remained inaccessible for several days.

Kevin Yu, founder of BioBX, told Cointelegraph that with traditional letters of credit, the funds remain locked in for the duration of the letter of credit. However, Yu mentioned that ConsolFreight allowed BioBX to free up that cash flow quickly.

To put that into perspective, Martin Quensel, co-founder of Centrifuge, told Cointelegraph that the company tokenizes real-world assets, like LCs or bills of lading, and then places those assets on a blockchain network as non-fungible tokens. . These NFTs are then transformed into smart contracts and placed in Centrifuge’s liquidity pool called “Tinlake”, which is connected to the MakerDAO protocol. Tinlake then retokenizes these assets to create fungible ERC-20 tokens for investors. Quensel explained:

“Investors can then invest in this pool and get an ERC-20 token in return. There is also a possibility of DeFi and tokens purchased by individuals since the Tinlake pool is connected to MakerDAO.

The Tinlake Protocol ultimately allows an asset originator, like ConsolFreight, to lock up collateral in the form of NFTs and fund an asset with a stablecoin, such as Dai. Although this may seem like a foreign concept to traditional businesses, Yu shared that BioBX was able to achieve complete clarity on the supply chain and logistics events throughout this process.

Investing in real-world assets adds value to enterprise DeFi

In addition to the added value for companies engaging in DeFi mechanisms to automate supply chains, investing in real-world assets has also become attractive to retail investors.

According to Quensel, investors may find it problematic to hold only crypto assets when trying to correlate the underlying collateral to Dai, MakerDAO’s stablecoin:

“Adding tokenized real-world assets as collateral for Dai, such as corporate assets, is essential for its long-term stability and adoption, as it addresses the two main challenges the DeFi ecosystem is currently facing. faced: stability and volume.”

Quensel further remarked that a diverse pool of assets with different risk parameters will counteract some of the inefficiencies of Ether (ETH) over-collateralization while increasing overall volume and value. He said it’s a good choice for “investors who want to diversify and protect their crypto wealth by moving parts of it from crypto assets to real-world assets, while investing in crypto at the same time.” .

Challenges Facing DeFi Adoption in Enterprise

While decentralized corporate finance has the potential to disrupt global supply chains, a number of challenges remain.

For example, standards for financing real-world assets are still unclear. Paul Brody, global head of blockchain at Ernst & Young, previously told Cointelegraph that as soon as standards emerge, the company hopes to enable its corporate clients to take advantage of these DeFi markets.

Fortunately, the development of enterprise DeFi standards is well advanced. For example, Base Protocol is an emerging standard for effectively automating workflow verification. John Wolpert, co-founder of Baseline Protocol and group director for the enterprise mainnet at ConsenSys, told Cointelegraph that such standards are expected to reduce verification costs enough to make regular receivables funding something. something that small and medium suppliers can afford. “When suppliers don’t have to worry about whether or when they’ll get paid, they can help keep the economy moving by putting capital to work more confidently and faster,” said he declared.

Wolpert further added that enterprise DeFi standards are important to remove a profit motive that can emerge with competing platforms. According to him, this would divide a system better maintained as a common good:

“Essentially, if you can profit from the provisioning feature, others will find that you can make a profit and try to convince others to buy their version. This is fair and appropriate for most things. But take the Internet – here you don’t want two different versions, but rather, you want everyone contributing to the same system.

Anaïs Ofranc, head of the Oasis Open Standards and Specifications Working Group, also told Cointelegraph that adopting enterprise DeFi involves designing both businesses and investors that their existing business needs can be met from within. faster and more cost-effective way while maintaining the level of security. and commercial confidentiality to which they are accustomed. As such, Offranc noted that the key question then becomes how to convince both parties on a large scale:

“One answer could be standards. Both target groups operate in environments where standards compliance provides the level of assurance and reliability they need. One hypothesis could be that for enterprise DeFi to become mainstream, decentralized finance solution providers would need to consistently and measurably provide the same or higher level of collateral.

Standards aside, optimism remains for the future of the DeFi business. Kyle Thomas, founder and CEO of Provide Technologies – a company enabling the tokenization of real-world assets – told Cointelegraph that the opportunities to improve modern treasury operations and optimize cash management using financial instruments will incentivize large organizations to participate in the enterprise DeFi ecosystem.

Echoing this, Quensel noted that decentralized technology will be a game-changer for traditional finance in the future. “You can send millions of dollars in funding over a blockchain network. You can’t do that with traditional banking systems.

Share.

Comments are closed.