Supply chain management has historically been a challenge due to issues such as rising costs, consumer demand, financial risk, volatility, and more. Unfortunately, The COVID-19 pandemic has created even greater problems for global supply chains.TO
A survey recently carried out by the Big Four companies Ernst Young at the end of 2020 puts this into perspective and establishes this 97% of automotive and industrial products companies felt the pandemic had a negative impact on their businesses. The EY study found this too 64% of respondents believed that the digital transformation of global supply chains would accelerate due to the pandemic.
Though it’s just a prediction Some traditional vendors have already started using blockchain technology to automate workflow review and enable more efficient supply chains. For example, freight technology provider ConsolFreight recently partnered with Centrifuge, a decentralized, asset-backed lending platform, to unlock millions of dollars to finance personal protective equipment.
Ernesto Villa, founder of ConsolFrieght, told Cointelegraph that the company’s customer, BioBX, would have to import and ship personal protective equipment to school districts in California during the COVID-19 pandemic. However, due to the complexity and risks involved in importing EPI, BioBX struggled to ensure this delivery. According to the villa, Through the collaboration between Centrifuge and ConsolFreight, BioBX was able to raise approximately $ 800,000 to ship two glove boxes to California schools::
“Most companies don’t want to finance EPI shipments because these orders are too big for our customers’ balance sheets. So we engineer the entire BioBX supply chain and finance their shipments (receivables) through Centrifuge’s Tinlake liquidity fund. An excellent example of how decentralized financing can be combined with real assets. “
Business DeFi is becoming a reality
Centrifuge and ConsolFreight tokenized various business processes for BioBX and later financed themwhat the company allowed Access to finance that was normally inaccessible for several days.
BioBX founder Kevin Yu told Cointelegraph that With conventional letters of credit, the funds remain blocked for the entire duration of the letter of credit. However, Yu mentioned that ConsolFreight allowed BioBX to quickly release that cash flow.
To put this in perspective, Martin Quensel, co-founder of Centrifuge, told Cointelegraph The company compares real assets like letters of credit or waybills and then places those assets as non-fungible tokens on a blockchain network. These NFTs are converted into smart contracts and placed in Centrifuge’s liquidity pool called “Tinlake” which is associated with the MakerDAO protocol. Tinlake then retoukenizes these assets to create fungible ERC-20 tokens for investors. Quensel stated:
“Investors can then invest in this pool and receive an ERC-20 token in return. There is also the option for individuals to buy DeFi and tokens as the Tinlake pool is linked to MakerDAO.”
The Tinlake Protocol, after all enables an asset manager like ConsolFreight to lock on collateral like NFT and fund an asset with a stable coin like Dai. While this seems like an odd concept to traditional businesses, Yu shared it BioBX was able to gain complete clarity about the supply chain and logistic events during this process..
Investing in real assets adds value to Business DeFi
In addition to the added value for companies that participate in DeFi mechanisms for the automation of supply chains, Investing in real assets has also become attractive to private investors.
According to Quensel Investors may find it problematic just holding crypto assets when trying to correlate the underlying collateral with Daiwho have favourited MakerDAO Stablecoin:
“The addition of token real world assets as security for Dai, such as business assets, is key to its long-term stability and adoption as it addresses the two main challenges the DeFi ecosystem is currently facing: stability and Volume.”
Quensel went on to point this out A diversified pool of assets with different risk parameters will counteract some inefficiencies of excess collateral in Ether (ETH) while increasing the overall volume and value. He said this is a good solution for “investors who want to diversify and protect their crypto assets by moving parts of them from crypto assets to real assets while investing in crypto”.
Challenges in the introduction of DeFi by companies
While decentralized corporate finance has the potential to disrupt global supply chains, some challenges remain.
For example, Real asset financing standards are still unclear. Paul Brody, a global blockchain leader at Ernst Young, previously told Cointelegraph that the company would like to give its enterprise customers the opportunity to take advantage of these DeFi markets as soon as the standards become known.
Fortunately, The development of DeFi standards for companies is well advanced. For example, the baseline protocol is a new standard for effectively automating workflow review. John Wolpert, co-founder of the Baseline Protocol and group executive for the main network of companies at ConsenSys, told Cointelegraph These standards are expected to reduce verification costs to the point that small and medium-sized sellers can afford regular debtor financing.. “If sellers don’t have to worry about if or when to get paid, they can help keep the economy moving by deploying capital with more confidence and speed,” he said.
Wolpert added that Corporate DeFi standards are important in eliminating the profit motive that can arise with competing platforms. According to him, this would share a system that is best sustained as the common good:
“If a delivery function can make a profit, others will find that a profit can be made and try to convince others to buy their version. This is correct and suitable for most. But let’s take the Internet as the Example: there you don’t want two different versions, but you want each to contribute to the same system “.
Anaïs Ofranc, leader of the Oasis Open working group on standards and specifications, also told Cointelegraph Companies’ adoption of DeFi requires that both companies and investors have a conviction that their existing business needs can be met faster and more cheaply while maintaining the level of security and the trade secret in which it resides. You are used to it. So Ofranc pointed out that the key question is how to convince both parties on a large scale:
“One answer could be standards. Both groups work in environments where compliance offers the level of security and reliability they need. One hypothesis could be that providers of decentralized financial solutions must consistently and measurably deliver DeFi adoption by companies, to go mainstream with the same level of security or one higher “.
Rules aside, optimism remains for the future of Enterprise DeFi. Kyle Thomas, Founder and CEO of Provide Technologies – a company that enables the tokenization of real assets – Ways to improve the modern Treasury business and the use of financial instruments to optimize cash management will encourage large companies to participate in the company’s DeFi ecosystem.
Quensel repeated this and noticed Decentralized technology will play a crucial role in 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.”
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