How blockchain technology unlocks liquidity for real-world assets
Blockchain is at the forefront of disruptive technologies. Its transparency, security and cost-effectiveness have benefited many industries such as supply chain and payments in taking the next quantum leap.
However, there has been minimal traction in the $360 trillion1 The Real-World Assets (RWA) market including intellectual property, raw materials and other assets.
The marketplaces for these assets are fragmented and full of frictions resulting in a lack of liquidity and interests from both assets and investors.
After seeing the size of market opportunity, blockchain platforms emerged with promising solutions involving asset tokenization. By leveraging smart contracts and blockchain technology, RWA can be turned into digital tokens, resulting in greater access to exposure and liquidity.
1Real World Asset Value is estimated to be $256T in 2018 and with 5% annual growth until 2025 (futurism article based on Credit Suisse figures)
Bringing real values to life
Let’s choose an example of goods. Every gold bar, barrel of oil and inch of real estate has a combined value of $510+ trillion as of 2021 according to a recent McKinsey Global Institute report. However, only a fraction of these assets are considered liquid.
In order for RWA to have liquidity, the stake must be distributed, in the same way that companies raise huge amounts of money when they issue an IPO. With blockchain, the assets are represented as tokens (asset-backed tokens) that can easily be traded in an open market. Investors can avoid traditional brokers and trade at lower costs.
Blockchain also ensures transparency and provability of tokens on the distributed ledger, which helps a lot in price discovery and market making. Even on the regulatory front, companies will not have to face any scrutiny when issuing tokens backed by RWA, whether tangible or intangible.
As a result, entry barriers and the “liquidity premium” are significantly reduced. Seems like a win-win solution for both sides of the equation, right?
Unlocking Real-World Assets Financing
Converting illiquid to liquid assets is only part of the equation. In order for a company to be able to effectively use its assets to increase its working capital, they must also get valuations right. This is even more important when someone decides to use intellectual property as trademarks and patents as collateral.
But the problem with valuing RWA is that there is not enough data or economic history. It involves making many assumptions about future cash flows and growth. So an accurate value estimator is needed to fill the gaps in RWA funding. While the markets are waking up to seize this opportunity, very few financial institutions have figured it out.
On the other hand, deep technology and software platforms like Ovenue integrate blockchain combined with artificial intelligence (AI) and machine learning (ML) technologies to develop innovative solutions. From providing valuation and legal framework to asset tokenization and marketplace, Ovenue has built a perfect set of financial products to extract maximum value for RWAs. Ovenue’s model is easy to understand; value, tokenize and monetize.
Currently, it takes weeks and even months and multiple stakeholders to monetize the majority of RWAs, resulting in added complexity, cost as well as a ton of biases and errors.
With Ovenue, these processes now follow a frictionless experience through state-of-the-art technology. Valuation and tokenization now takes minutes!!
With over $80 million in RWA under management, Ovenue establishes opportunities for assets to raise capital and investors to diversify their portfolios.
Furthermore, Ovenue leverages advanced technologies to implement industry standard methods such as Relief from Royalty to fully unlock the potential of RWA. Currently, the diverse group of assets at Ovenue includes fashion brands, inventory for e-commerce platforms, medical and cleantech patents, copyright and franchise agreements, and prime real estate.
The asset-backed tokens, a form of non-fungible tokens (NFTs) issued to Asset Owners can then represent various tools and opportunities that are truly determined by the Asset Owner.
For example, the asset owner can obtain non-dilutive funding by using asset-backed tokens (in NFT format) as collateral.
As Ovenue uses smart contracts, the terms and conditions of the agreement can be customized using various financial instruments. The possibilities are endless.
Tokens issued by Ovenue are asset-backed tokens, not securities. They are a type of NFTs, a unique digital identifier that cannot be copied, replaced or subdivided, that is registered in a blockchain, and that is used to certify authenticity and ownership.
Introduction of new class of alternative investments
Ovenue can compensate for the deterioration of a company’s balance sheet by tokenizing RWA and leveraging technology. It helps create private markets for homogeneous asset pools and provides accurate valuations. As a result, assets that were simply left unused will be able to serve as a growth vehicle. Many businesses have undisclosed and undervalued assets. Ovene unlocks and monetizes the value of RWA.
In addition, asset tokenization of RWAs also creates alternative investments in the financial markets. Investors can finally tap into a wide range of high-growth asset classes and truly diversify their portfolios. With more awareness and institutional participation, such blockchain solutions can truly revolutionize finance and make the industry accessible to all.
