Corporate DeFi funded personal protective equipment

Due to increasing costs, consumer demand, financial risks, volatility and many other issues, supply chain management has always been challenging. Unfortunately, the COVID-19 pandemic has brought greater problems to the global supply chain.

recent Polls A study conducted by Ernst & Young at the end of 2020 by the big four companies showed this point, noting that 97% of automotive and industrial product companies found that the epidemic had a negative impact on their businesses. Ernst & Young’s research further found that 64% of investigators believe that due to the pandemic, the digital transformation of global supply chains will accelerate.

Although this is only a prediction, some traditional suppliers have begun to use blockchain technology to automate workflow verification in order to achieve a more efficient supply chain. For example, freight technology provider ConsolFreight recently formed a partnership with Centrifuge, a decentralized asset-backed lending platform, to release millions of dollars in financing for personal protective equipment.

Ernesto Villa, the founder of ConsolFrieght, told Cointelegraph that the company’s customer BioBX needs to import and provide personal protective equipment supplies to the California school district during COVID-19. However, due to the complexity and risk of importing PPE, BioBX strives to ensure this delivery. According to Villa, the collaboration between Centrifuge and ConsolFreight enabled BioBX to obtain approximately $800,000 in financing to ship two containers of gloves to schools in California:

“Most companies don’t want to fund PPE delivery because these orders are too large for our customers’ balance sheets. Therefore, we have technically processed the entire BioBX supply chain and used centrifuges called Tinlake’s liquidity pool. Funding its freight (accounts receivable). This is a typical example of how decentralized finance can be combined with real-world assets.”

Enterprise DeFi becomes a reality

Centrifuge and ConsolFreight were tokenized and then funded BioBX’s various business processes, allowing the company to access financial funds that would normally be inaccessible for a few days.

Kevin Yu, the founder of BioBX, told Cointelegraph that with a traditional letter of credit, funds are locked for the entire term of the letter of credit. However, Yu mentioned that ConsolFreight allows BioBX to quickly release cash flow.

To understand this correctly, Martin Quensel, the co-founder of Centrifuge, told Cointelegraph that the company tokenizes real-world assets (such as LC or bills of lading) and then places these assets on the blockchain network as irreplaceable tokens. Then, these NFTs are converted into smart contracts and placed in Centrifuge’s liquidity pool, called “Tinlake“(Connected to the MakerDAO protocol). Then, Tinlake relabeled these assets to create an alternative ERC-20 mark for investors. Quensel explained:

Then, investors can invest in this pool of funds and get ERC-20 tokens in return. Since the Tinlake pool is connected to MakerDAO, the possibility of individuals buying DeFi and tokens is also high. “

The Tinlake protocol eventually allows asset promoters such as ConsolFreight to lock in as collateral for NFTs and use stablecoins such as Dai to finance the assets. Although this sounds like an unfamiliar concept to traditional companies, Yu believes that BioBX can make the supply chain and logistical events completely clear throughout the process.

Investing in real-world assets can add value to corporate DeFi

In addition to providing value-added for companies engaged in DeFi mechanisms to automate their supply chains, investment in real-world assets has also attracted retail investors.

According to Quensel, when trying to link the potential collateral of MakerDAO’s stablecoin Dai, investors may find that there is a problem with only holding crypto assets:

“Adding tokenized real-world assets as collateral for Dai, such as corporate assets, is critical to its long-term stability and adoption, because it solves the two main challenges currently facing the DeFi ecosystem: stability and quantity. “

Quensel further pointed out that a diversified asset pool with different risk parameters will solve the Ethereum (ETH) Over-collateralization, while increasing the overall transaction volume and value. He said that this is very suitable for “investors who want to diversify and protect their cryptocurrency wealth by transferring part of their assets from encrypted assets to real-world assets, but investors who still invest in cryptocurrencies at the same time.”

Challenges facing enterprises adopting DeFi

Although decentralized corporate financing may disrupt the global supply chain, there are still many challenges.

For example, the criteria for how to finance real-world assets are still unclear.Paul Brody, the head of Ernst & Young’s global blockchain, previously told Cointelegraph that once the standard is introduced, the company hopes that its corporate customers will be able to Make the most of these DeFi markets.

Fortunately, the development of the enterprise DeFi standard is underway.For example, the benchmark agreement is Emerging standards for efficient automated workflow verification. John Wolpert, co-founder of the Baseline Agreement and head of ConsenSys’s mainnet department, told Cointelegraph that such standards are expected to reduce verification costs enough to enable small and medium-sized suppliers to afford regular accounts receivable Financing. He said: “When suppliers don’t have to worry about whether or when they will get paid, they can help maintain economic development by making funds more confident and running faster.”

Wolpert further added that corporate DeFi standards are very important to eliminate the profit motives that may be generated by competing platforms. According to him, this will demarcate a system that is better maintained as a commons:

“Basically, if you can profit from providing features, then others will find that you can profit and try to persuade others to buy their version. This is true for most things. However, please use the Internet- There, you don’t need two different versions, but you want everyone to contribute to the same system.”

Anaïs Ofranc, head of the Oasis Open standards and specifications working group, also told Cointelegraph that adopting enterprise DeFi involves enabling both companies and investors to meet their existing business needs in a faster and more cost-effective manner while maintaining security levels. And the commercial confidentiality they are used to. Therefore, Ofranc pointed out that the key question becomes how to convince both sides of the scale:

“One answer may be the standard. Both target groups provide the required assurance and reliability in a standard-compliant environment. One hypothesis may be that for enterprise DeFi to become mainstream, decentralized financial solution providers will The same or higher level of assurance needs to be provided consistently and measurably.”

In addition to standards, the future of enterprise DeFi remains optimistic. Kyle Thomas, the founder and CEO of Provide Technologies, which tokenizes real-world assets, told Cointelegraph that the opportunity to use modern financial tools to improve modern financial operations and optimize cash management will incentivize large organizations to participate in the corporate DeFi ecosystem .

Quensel agreed and pointed out that decentralized technology will change the development direction of traditional finance. “You can send millions of dollars in financing across the entire blockchain network. Traditional banking systems cannot do this.”