In previous years, we have seen many attempts to bring real assets to the cryptocurrency market. However, none of them has gained wide acceptance among cryptocurrencies and traditional financial players.
So why hasn’t real asset coding become a massive trend?
You may have heard how almost anything can be turned into symbolic symbols – stocks, art, real estate and more. And there have been many projects that promised to change the way you invest in assets, regardless of type. At the same time, a single company failed to achieve mass distribution in the market.
Traditional marketers have not found evidence that coding has improved existing fundraising operations. Although a review of property coding has already been discussed.
It can also be difficult for you to find real retail investors who have bought the rights to a popular work of art or part of Dracula’s castle. Although the most successful proposals have been aimed at private investors, in principle nothing has changed in the cryptocurrency market, even for cryptocurrency owners.
Why have these proposals not been widely adopted? While the term “cryptocurrency” is a better and cheaper way to raise money for issuers, there are few real benefits in the cryptocurrency market.
I have previously looked at coding problems in the form of introducing security tokens, but in short it comes down to regulation (token assets are governed by traditional rules), and there is no secondary market. Retail cryptocurrency investors can not benefit from these two releases, and there is basically no need for them to adapt to anything new, especially now with the advent of DeFi protocols.
What companies look for when collecting donations
Businesses must exist in a world with complex and outdated rules. Therefore, it is very important for them to have a clear legal model for attracting or borrowing money. Given that decentralized financing is currently over $ 20 billion dollars, this could interest business organizations and make them think about going to market – especially when you consider that the usual annual percentage rate of DeFi protocols is only 2-10% costs of obtaining financing. .
Yes, there are no ready-made legal models on the market today that allow companies to raise or borrow money using DeFi protocols. But building such a system can be done with minimal effort, since the benefits of DeFi Credits easily cover the construction business of such a system. DeFi can provide loans to companies on ideal terms, which can make them think about going to market. In the meantime, business institutions will be prepared to offer several types of fixed assets to be used as collateral for their loans.
However, there is a real need to use real assets as collateral in DeFi protocols to prevent further market downturn in the future, which solves the problem of collateral load.
Could the existing players in the market behave like this?
There are currently several attempts to bring real assets to the DeFi market. Most of them seem to accept various assets, most of which are tokens.
The main problem with the use of these assets in the protocol is the lack of publicly available price sources. This is due to a lack of transparency and the need to rely on a key party (valuation companies, insurance companies, etc.) to set the price of collateral. There is also no mechanism for monitoring prices in real time (for example, when using cryptocurrency as protection). These assets are usually not liquid; They are not traded on over-the-counter markets or digital platforms; There is no source for periodic updating of price information, which is an important factor in deciding when to end security.
There is no doubt that some of these assets may be insured, such as paying bills, which means that the insurance company will pay if the debtor defaults. But again, the insurance process lacks transparency, it is completely disconnected from the chain and does not provide real guarantees to investors or real-time information about whether an insured event has occurred.
In addition, current solutions allow strict borrowing in cryptocurrency, which is not suitable for everyone. This is not bad, but it reduces the likelihood of attracting large organizations that need to receive funding in paper form, which is used for day-to-day operations.
But a more important question arises: the possibility of large protocols to create and use real assets as collateral. And it will be very difficult, as they have to change the lending process, build a system that updates stock prices and issue new securities.