DeFi and real-world assets
While the DeFi space has existed for several years to facilitate the sale of cryptocurrency or non-fungible tokens, the application of digitizing RWA has been relatively uncharted. Digitizing RWA is another disruptive application of DeFi, which is the term used to encompass all applications and processes relating to blockchain, cryptocurrency and a finance system that is not reliant on a centralized service such as a bank.
The DeFi market is a great enabler for RWA digitization due to its market attractiveness, proof of ownership and new financing opportunities. For example, the DeFi market is more attractive for a much larger investment market, as it increases the quantities and types of investments available. This opens the investment market for small-scale investors to invest in products that would typically be beyond their financial abilities and reduces the high barriers to entry typically involved in investing on a centralized network. A key outcome is that this affords small-scale investors the opportunity to enter a market that typically has steep entry costs and high risk.
Supply chain visibility through tokenized RWA
Inventory management is a critical component for achieving supply chain visibility, transparency and resilience. Inventory management includes ensuring accuracy among inventory values and making sure the inventory is available in the right place, at the right time, in the correct quantity, and for the right customer.
By digitizing RWAs, inventory accuracy and visibility among various stages such as storage, manufacturing or fulfilment are vastly improved. This level of tracking granularity and visibility provides organizations with opportunities to price inventory more accurately and trace how a product was processed along the end-to-end value chain.
Additional benefits from the tokenization of RWAs include:
- Tone is set for future use cases
- Elimination of intermediaries
- Fractional ownership
- Wider market reach
- Tamper-resistance
- Immutable chain of custody
- Greater interoperability
Conclusion:
Digitizing RWAs is an emerging concept. As such, few organizations have yet to fully digitize their RWAs and take the next step towards transforming their supply chain.
While most things in an organization can be tokenized, businesses should evaluate and start with their most critical assets by evaluating what transactions could benefit from additional verification on a blockchain and gain the benefits from tokenization. RWA digitization is only starting to be explored; with its complex development efforts and high startup fees, companies should begin to research and form a development group to learn how digitized RWAs can benefit their organization.
Companies can also engage external experts to capitalize on their expertise and help reduce the technological barriers to entry. Although not many organizations have implemented RWA tokenization, the numerous applications and key value it unlocks are essential to transforming organizational effectiveness and to get ahead on the technology revolution.
In our next article, we will discuss how digitizing RWAs can solve a myriad of supply chain challenges organizations are facing. In the meantime, learn more about tokenization and blockchain at EY:
Summary
To gain access to new financial opportunities and thrive in a world of disruption, organizations are adopting the concept of digitizing real-world assets. It’s important organizations thoroughly understand the complex process of how it can be executed, through the application of (DeFi) and tokenization processes to unlock blockchain capabilities.
