How to Optimize Your Business with Non-Traditional Asset-Backed Financing
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Non-traditional financial systems based on blockchain technology have emerged to address long-standing inefficiencies in the financial industry. The downsides of the traditional non-blockchain finance industry include data breaches, high transaction costs, opaque economic structures, limited success rates, and investor access.
Financial protocols developed on blockchain have managed to overcome such problems and make a big difference in key areas such as credit, payments and commerce. Now it’s time to apply the same blockchain technology to an even larger real-world asset (RWA) market.
Every company has assets that are not traded in an open market. Every business has assets that are necessary to the organization but whose value cannot be easily separated and which are not traded in an open market. With no options, companies seek financial support through debt or equity, which can increase liabilities and decrease ownership. The perfect alternative to this is asset-backed financing. Which assets? Already owned by the company.
Blockchain finance is becoming the new norm
Blockchain-driven financial systems are inevitably becoming the new norm in the financial industry. First of all, they significantly reduce the costs for institutions. Overhead costs for centralized databases, accounting and administrative work can be completely eliminated. In addition, the blockchain controls financial risks by promoting better auditing and overall transparency in the system.
These advantages can be used immediately to disrupt asset-backed financing with RWA. Traditional financial institutions have had full autonomy in valuing RWA for decades. They also often follow proprietary standards to value a group of similar assets based on flawed forecasts and fail to take into account ever-changing economic conditions.
The right way to fair valuation is to create transparency between asset owners and investors, make assets liquid and allow a broad range of investors to explore a new asset class. To introduce fresh liquidity, RWA can be converted into asset-backed tokens, a type of non-fungible tokens (NFT) representing ownership of assets on the blockchain. This is not a security but a digital representation of RWA technology for transactions. Companies can also assign these tokens another use in the form of licenses or royalties.
Choosing the right blockchain platform is important
The fundamental benefits of using blockchain technology can be transferred from one financial protocol to another. However, when it comes to asset-backed finance, there are other variables to consider, such as: B. Marketplace offering, cross-chain functionality, liquidity and appropriate asset valuation. One platform that has all of these utilities is VenueTM.
Ovenue is an artificial intelligence and blockchain platform that helps financial institutions and B2B companies convert illiquid off-chain assets into liquid on-chain asset-backed tokens.
With over $400 million in Tokenized Assets Valued (TAV), Ovenue has tokenized a wide range of asset classes including but not limited to franchises, commodities, real estate and intellectual property.
Companies can create private markets and tap liquidity following a step-by-step process on Ovenue. Here’s a quick breakdown of how it works:
- Company assets are valued using Ovenue’s AI-enabled, industry-standard asset calculator and a first estimate is generated.
- The next step is to tokenize RWAs and create a non-fungible token (NFT), which is a digital representation of the asset.
- These asset-backed tokens will be listed on the asset owner’s Web 3.0 business storefront and on Ovenue’s marketplace for transactions involving the asset, either through a sale transaction or asset-backed financing.
- The asset-backed tokens can also be connected to other platforms and services to enable funding.
Save millions while promoting financial inclusion
Blockchain-based asset-backed finance eliminates two long-standing problems at once. Tokenizing assets opens up opportunities for companies to grow by adding more funding options.
At the same time, it creates a market with unprecedented asset classes for investors.
By injecting liquidity and raising investor awareness, blockchain technology can also save millions of dollars for the financial industry. With these assets valued at trillions, incremental improvements can make a world of difference. Platforms like Ovenue are pioneers in this new open finance movement with a vision to bring RWA to life.