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Enterprise meets DeFi: Organizations work toward adopting blockchain tech

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Decentralized finance is quickly maturing. While the total value locked in DeFi is over $45 billion, financial institutions and large corporations are starting to implement DeFi concepts to automate business processes. This is known as “enterprise DeFi.”

For instance, invoices and other financial products can be tokenized to ensure that transactions are valid and should be processed for payment across multiple parties. Coke One North America is one of the first large corporations to demonstrate this.

CONA is leveraging the Baseline Protocol — a project that coordinates confidential workflows between enterprises using messaging, zero-knowledge cryptography and blockchain — to tokenize invoices. CONA aims to “baseline” its entire supply chain by giving internal bottlers and external suppliers access to a private, distributed integration network.

Through use cases like CONA, such solutions are quickly gaining traction. There are also a number of vendors entering this infrastructure market including Provide, an enterprise middleware provider, and Big Four firm Ernst & Young. Most recently, ConsenSys — one of the leading blockchain software companies — announced plans to use Baseline Protocol as a solution for its enterprise clients, further demonstrating the importance of enterprise DeFi adoption.

How ConsenSys plans to drive enterprise DeFi

Specifically, ConsenSys Codefi — ConsenSys’ fintech suite that connects financial use cases to blockchain counterparts — will soon offer a baseline-compliant solution for its enterprise clients.

Didier Le Floch, institutional products and engineering lead at ConsenSys Codefi, told Cointelegraph that while the Baseline Protocol was developed by EY, ConsenSys and Microsoft, Codefi has been taking steps to ensure that its products will eventually be fully compatible with it:

“We want to enable the use of digital assets and the financing of those assets for payment use cases. These use cases will generate maximum business value, combining automation of business processes and payments using things like stablecoins, for example.”

In order to achieve this, Floch explained that the Codefi tech stack will be combined with the Baseline Protocol to deliver an effortless user experience for cases such as financing supply chains. Floch remarked that this is a first step in the right direction, as Codefi strongly believes that the enterprise sector will soon converge with the DeFi market: “There will be ebbs and flows, and it will be a journey with various steps, but we’ve already seen the promise of this convergence in the DeFi market.”

To his point, MakerDAO — the protocol behind the stablecoin Dai — announced support in June 2020 to use non-crypto-native assets, such as invoices and music streaming royalties, as collateral for its Dai stablecoin. Maker also voted to support a protocol from blockchain startup Centrifuge to bring real-world assets on its platform. Known as “Centrifuge Chain,” this is built on Parity’s blockchain development framework, Substrate.

Asset originators can use the Centrifuge Chain to mint nonfungible tokens of real-world assets, converting them to ERC-721 tokens. These assets can then be added to Tinlake, which is Centrifuge’s Ethereum-based DeFi protocol for decentralized asset financing.

A Centrifuge spokesperson told Cointelegraph that the company is currently working with MakerDAO to bring New Silver, an online real-estate lender, on to the Maker platform as an asset originator. As such, NewSilver would be the first asset originator using Tinlake to get to the MakerDAO executive vote, ultimately allowing asset originators to generate Dai as a credit facility.

DeFi protocol Aave also introduced a diversified money market to support real-world assets back in October 2020. According to the Aave blog post, this money market would make it easy for the Aave community to onboard real-world assets into the protocol, allowing investors to lend against assets, such as invoices, real estate and inventory finance. “Right now, it’s at a small scale, but there are DeFi lending protocols already taking steps to incorporate real-world assets into their protocols,” said Floch.

Breaking down barriers hampering adoption

Many enterprise DeFi concepts are still in early development, as a number of barriers exist. For instance, there are concerns regarding publicly available sources to determine the price of collateralized assets. Furthermore, many DeFi protocols venturing into the enterprise space only allow solutions for borrowing in crypto, which may be unappealing to mainstream organizations. Moreover, paying transaction fees in cryptocurrency may also be problematic for enterprises that typically deal in fiat payments.

Floch explained that Codefi’s use of Baseline Protocol is intended to address these concerns. For example, he noted that there will be an “Infura ITX” integration that will enable corporations to pay gas fees in dollars rather than Ether (ETH) when using the Baseline Protocol. Since the platform leverages the Ethereum network as its mainnet of choice, or as a common frame of reference for complex workflows, this integration will ensure a better user experience overall.

In addition, Floch mentioned that ConsenSys’ open-source zero-knowledge proof library, known as “gnark,” will be leveraged to ensure enterprise data remains private, yet verifiable.

While notable, Codefi’s implementation of the Baseline Protocol isn’t the only solution intended to solve the challenges related to enterprise DeFi adoption.

For example, EY has been heavily involved in the blockchain space, specifically in terms of enterprise DeFi development. Paul Brody, global blockchain lead at EY, told Cointelegraph that the firm has been working on DeFi enabling solutions since 2016, with the goal of making the inputs and outputs of enterprise business processes tokenized and then transactable:

“This means purchase orders, invoices, receivables, inventory — everything in traditional business-to-business processes should be ready to integrate into a DeFi ecosystem.”

Of course, Brody is aware of the challenges regarding this vision, noting that the first element to be tackled is achieving an acceptable level of privacy for enterprise users. Once this is accomplished, Brody explained that necessary standards need to be established where bodies, such as the Enterprise Ethereum Association, can be key partners in the pursuit of these goals.

Brody further mentioned that as an industry auditor, EY will not be offering financial services involving DeFi. Rather, the firm is devoted to ensuring that enterprise clients will be able to plug their business operations into existing DeFi solutions. For example, Brody explained that EY’s Network Procurement solution is designed to manage purchase orders and fulfillment, which would allow enterprises to exchange tokens for purchase orders, contracts, invoices and inventory transfers. “As soon as we see standards we can leverage, we hope that our enterprise users will be able to take advantage of these markets,” said Brody.

Institutions show interest in DeFi?

In addition to a growing number of enterprise DeFi solutions in development, there is now interest in DeFi from large organizations and financial institutions. This was recently demonstrated by the leading digital currency asset manager, Grayscale. On Feb. 26, 2021, the firm announced consideration to offer investors access to DeFi assets, including Aave, Compound’s COMP, MakerDAO’s MKR, Reserve Rights (RSR), SushiSwap’s SUSHI, Synthetix Network Token (SNX), Uniswap’s UNI and Yearn.finance’s YFI.

Although this is separate from enterprises using DeFi protocols to find real-world assets, Floch noted that this demonstrates more institutional players are ready to invest in prominent DeFi protocols:

“For institutional customers of Grayscale to start investing in those tokens is definitely a sign that they’re getting more comfortable with Defi, while understanding the value of those protocols (asset management, collateralized lending and trading automated in smart contracts).”

Enterprise meets DeFi: Organizations work toward adopting blockchain tech

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Wolfram Blockchain Labs Provides New Oracle to Tezos

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Wolfram Blockchain Labs Provides New Oracle to Tezos

According to the recent announcement, Wolfram Blockchain Labs is adding assistance for Tezos, providing a two-way interface with the Blockchain.


As per the announcement, Tezos gets a new oracle through Wolfram Blockchain Labs integration providing aid for Tezos blockchain data within the Wolfram Language. Wolfram Language is known to allow Blockchain developers to obtain analytical data from the Blockchain. 

The language is developed for sophisticated mathematical queries that evaluate smart contract operation, and the integration aims to make smart contract implementation on Tezos simpler.

Today, Wolfram Blockchain Labs appears to be one of the most dynamic Blockchain tech companies.

Wolfram Blockchain has Developed an Oracle for Tezos

Apart from adding support for Tezos on its platform, Wolfram Blockchain has also developed an oracle that would supply its smart contracts with data available from Wolfram Alpha. This development of oracle would make Wolfram Blockchain the third oracle provider on the network, the first being Chainlink, and the second being Harbinger.

Tezos has made several moves aimed at attracting smart contract developers and DeFi projects.

In November 2020, it was announced that Tezos is implementing a protocol upgrade that reduces smart contract gas fees by approximately 75%.

The report also mentions that Wolfram integration adds a vital component to a smart contract developer’s toolkit; still, the integration remains in its early stages and has a relatively basic set of features. 

The CEO of Wolfram Blockchain, Jon Woodard, expressed his views regarding his extended plans. According to him, he has plans to extend these capabilities in various vital areas such as analytics, computational facts delivery, and blockchain educational information.

In his words, Wolfram Blockchain Labs is also exploring the possibility of becoming a Tezos “Baker,” its term for stakers.

To get instant updates about Blockchain Technology and to learn more about online Blockchain Certifications, check out Blockchain Council. 

Wolfram Blockchain Labs Provides New Oracle to Tezos

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Moving beyond the crisis narrative: Crypto in a post-pandemic world

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Everyone knows the story. When the first block of Bitcoin (BTC) was mined, the protocol itself entered a world of grave economic uncertainty. Not long before the market would hit its lowest point of the 2009 recession, Bitcoin was quietly created, dropped like a life raft alongside a then-sinking economy. The now infamous phrase “Chancellor on brink of second bailout for banks” was cribbed from the headlines, immortalized in code in the origin story of one of the most compelling, innovative, best-performing assets of the last decade.

But Bitcoin did not immediately take root beyond a small community of true believers. Bitcoin and digital assets, in general, have been a lot of things in their relatively short histories, from purely speculative investments and “magical internet money” to a crisis-time safe haven and an attractive hedge against “the great monetary inflation.”

In the face of the COVID-19 pandemic, an associated market meltdown and huge amounts of central bank stimulus, cryptocurrencies have proved themselves to be remarkably resilient.

But as we watch vaccines being distributed around the country, cautiously optimistic that the end of the pandemic is within reach, where will crypto fit in a post-pandemic world? If its history of resilience shows us anything, we expect crypto to adapt to whatever the next few years will bring — crisis or not.

Related: How has the COVID-19 pandemic affected the crypto space? Experts answer

Crypto banks

Just three years ago, leaders of some of the largest banks in the world refused to even talk about Bitcoin in interviews, calling the asset itself a “fraud” and referring to those who would buy it as “stupid.”

Today, the general sentiment across banks is markedly different. On the heels of the United States Office of the Comptroller of the Currency’s Interpretive Letter #1170, which made explicitly clear that federally chartered banks can provide banking services to legally operated companies in the digital asset space and custody digital assets on behalf of their clients, banks have been looking for the best way to get their clients the crypto exposure they demand. We anticipate legacy financial players’ interest in crypto to only grow in the coming years, with crypto becoming a mainstream requirement of financial services.

In the short term, banks will almost certainly rely on subcustody relationships with digital asset specialists to safely and effectively get crypto into their clients’ hands. And this is because the complexity is easier to address from the crypto-native side than the other way around.

Related: The need for a dialogue between crypto businesses and regulators

We also anticipate some number of acquisitions to occur, with some crypto service providers being swallowed up by banks with pockets deep enough to buy them. As demand for crypto services grows, and as regulatory clarity comes, more and more institutions will enter.

Proliferation of decentralized apps

Just as Bitcoin was built in response to the failings of a legacy system, decentralized finance has emerged as crypto’s answer to financial intermediaries. Until recently, though, entire portions of this ecosystem have been unavailable to institutions, mostly for lack of a secure means to participate.

Slowly but surely, institutional-grade DeFi tools are coming to market, and we anticipate this trend to continue. Not only will we see a continued proliferation of DeFi growth, but institutional-grade tools will make institutional participation far more accessible.

Related: Was 2020 a ‘DeFi year,’ and what is expected from the sector in 2021? Experts answer

Despite its significant growth, the DeFi space is still very much fragmented. Cross-chain interoperability — or lack thereof — is still a problem. Institutions want to be able to put their assets to use across the DeFi ecosystem. We anticipate significant growth in this area, with more and more layer-one protocols being bridged to DeFi and the broader Ethereum ecosystem — a development that also has the potential to improve liquidity along with market stability and efficiency.

Corporate treasuries and lowered barriers to entry

Against a backdrop of seemingly endless monetary stimulus, a significant number of private companies are treating digital assets as an inflation hedge. Some of these, like Square and MicroStrategy, have taken significant positions in recent months. We’ve seen MassMutual buy up $100 million in Bitcoin. And with Tesla’s $1.5-billion dollar Bitcoin purchase this month, the trend shows no signs of slowing. In the coming years, we expect digital assets to become an instrumental part of private-company balance sheets.

Related: Tesla, Bitcoin and the crypto space: The show Musk go on? Experts answer

Another factor at play is the lowered barrier to entry on the retail front. With tools like Celo’s Valora coming to market, Diem expected to launch in 2021 and firms like PayPal making it easy for their clients to buy crypto, we expect to see more of crypto as a tool for banking the unbanked — for putting financial tools into the hands of the millions without access to traditional banking services.

Related: Will PayPal’s crypto integration bring crypto to the masses? Experts answer

Beyond the crisis narrative

By virtue of being built in response to one economic crisis, crypto seems to be locked into a crisis narrative. In reality, digital assets have more than proved to be resilient in even the most challenging economic times. Just this past year, crypto proved itself in the grips of a once-in-a-century global emergency, earning a place in the portfolios of institutional and retail investors alike.

As the pandemic (hopefully) fades into the rearview, it’s exciting to think about what crypto can do without being forced into a defensive posture — without being defined against legacy assets like gold. It would be naive to say that crypto will never face another crisis — it almost certainly will. But from here, at what feels like the tail end of the pandemic, it’s exciting to think about what crypto can do in whatever “new normal” comes next.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Diogo Monica is a co-founder and the president of Anchorage. Before co-founding Anchorage, Diogo was the security lead at Docker — an open platform for building, shipping and running distributed applications. He has a B.Sc., an M.Sc. and a Ph.D. in computer science, has published several papers in peer-reviewed security conferences on the topic of distributed systems and information security, and is the author of several patents in secure communications, encrypted hardware and payment systems.

Moving beyond the crisis narrative: Crypto in a post-pandemic world

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2021 Sees DEXs Push Past $120 Billion In Trade Volumes

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The Ethereum network, as it stands now, is rife with high transaction fee problems. However, that hasn’t stopped the decentralized exchanges, or DEXs, within the network are still reaching spectacularly large trade volumes. In 2021 so far, over $120 billion in DEX transactions have been processed.

2021 Proving To Be Very Good For DEXs

What’s amazing about this, is that 2021’s first two months have managed to generate enough trading volume to beat all the previous years combined. As is the norm, the two biggest fish within the Ethereum space is Uniswap and Sushiswap, Uniswap’s cloned counterpart. These two DEXs constitute about 65% of the entire trade volumes for February, with Uniswap boasting over double the volumes of its competitor. Uniswap alone boasts almost 50% of the entire market share within the DEX space.

BSC Turning Significant Volumes

That metric doesn’t say it all, however. Once you start looking at the weekly number of active traders within every platform, it’s clear that Uniswap boasts three-quarters of the DEX users for Ethereum. Uniswap recorded close to 142,000 users within the past seven days of trading on its platform.

Uniswap

By comparison, SushiSwap only holds 8,911 users.  Interestingly enough, while Sushiswap is second place in terms of volume, it’s third in users. It’s beaten out by 1inch, which boasts a seven-day user tally of 18,450.

Another big competitor in terms of blockchains for the DeFi space is none other than the Binance Smart Chain (BSC). Pancake Swap, the big boy for BSC, managed to report a daily volume of above $1.1 billion. Binance being Binance, it’s not quite clear whether or not those are actual or inflated volumes.

The Year Of The DEX

The DEX space within the DeFi sector has, more or less, risen to new all-time highs. DEXs across boast an aggravated Total Value Locked (TVL) of more than $40 billion. Many a user have moved from Ethereum to BSC, pushed out by the rampant congestion and transaction fees. Once Ethereum manages to fix this, either through L2 or full rollout of ETH 2, it’s to be expected that there will be a large influx of people from other networks at large.

Now, however, these high transaction fees, and the sheer volume of users still taking part, stands as a testament to how dedicated the crypto space is for DEXs. The great Gamestop fiasco’s subsequent backlash, where exchanges started to refuse retail clients the ability to buy certain stocks, certainly didn’t hurt the attractiveness of DEXs either.

2021 Sees DEXs Push Past $120 Billion In Trade Volumes

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Tokenization of assets is not taking off, but it really should

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For years, experts have been talking about how tokenization — the act of creating a digital representation of an asset on a distributed ledger — of a financial or real asset can unlock trillions in illiquid assets, giving retail investors access to investments with previously high minimum capital requirements thanks to fractional ownership or settle trades on a distributed ledger instantly. 

But if we investigate the current tokenization offerings, none is truly taking off and attracting the masses. If the theoretical advantages are true, millions of investors must be onboarding on exchanges that offer tokenized assets. However, this is not the case.

What is the problem of most tokenization offerings?

Let us take the example of tokenized equity to showcase the current issues and hurdles. The tokenization lifecycle of an equity consists of multiple steps. The first is the legal structuring followed by the minting (creation) of the tokens, in most cases with ERC-20 tokens on the Ethereum blockchain. Contrary to many beliefs, minting is one of the easiest parts of tokenization — the bigger challenges follow. As the purpose of the equity tokens is to be traded, we need to have a marketplace. With this comes the questions of token custody, liquidity, settlement and regulatory compliance.

If we look at the current service providers in this space, there is nearly no one who can offer all the steps of issuance, custody, marketplace, liquidity, settlement, etc. in one integrated offering. This has some major implications for why tokenization is not taking off — namely, that issuers and investors must deal with multiple service providers. Most probably these service providers are also located in different jurisdictions, which adds a whole new dimension to it, as equity tokens should ideally be able to be traded internationally just like traditional equity. And that is not possible as regulation differs from country to country.

Another major problem of tokenization marketplaces is liquidity. Currently, there is very low liquidity on tokenized marketplaces if we are to look at the trading volumes while the volumes of cryptocurrencies are currently reaching new all-time highs on a weekly basis. A reason for this is that the few exchanges that are on the market cannot attract enough investors. The easiest solution to solve this issue is for tokenized asset marketplaces to be connected to traditional exchanges and to leverage their customer base as they already have the desired liquidity.

This is only possible if the UI/UX is equal to traditional exchanges, and the investors do not see and interact directly with the blockchain. If investors need to set up their own wallet and deal with the blockchain directly, then we will never see a big inflow of mainstream investors into tokenized assets, as this makes the whole process more difficult and inconvenient, which is the exact opposite of the end goal.

A good UI/UX is very important in tokenization offerings as opposed to crypto applications such as DeFi platforms, where the UI/UX may not be the best. But despite the fact that the product is revolutionary, the masses are unwilling to deal with tokenization because it’s inconvenient and not seen as a groundbreaking innovation.

Another big topic in tokenization is regulatory clearance. If we continue with our example of tokenized equity, there is the question of how to deal with a digital representation of a security. In most jurisdictions, a token is not a security by itself. Rather, the token just represents the right to own the equity, but the equity still also exists in its “traditional” form. In other jurisdictions, however, there is even less clearance.

While tokenization is without question one of the most promising use cases of blockchain technology, the current setup is in most cases worthless, as it renders things more complicated rather than effective. To change this, we need a clear regulatory environment, such as in Switzerland, for example, to integrate all elements of the tokenization lifecycle into one offering, and have a “traditional” UI/UX for the investors. If we can get these three elements right, there is nothing to stop tokenization to become a major game-changer and open many new asset classes to the market. I believe that tokenization marketplaces should partner up with traditional exchanges to offer liquidity, especially for tokenized equity.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Darius Moukhtarzadeh is in the sales and clients team of Sygnum Bank. Sygnum is a digital asset bank that received a Swiss banking license from the Swiss Financial Market Supervisory Authority in August 2019. Prior to Sygnum Bank, Moukhtarzadeh worked for Ernst & Young in blockchain consultancy and for several startups in the Swiss Crypto Valley.

Tokenization of assets is not taking off, but it really should

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Second-Largest DeFi Liquidation Day Sees $24 Million Lost

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Well, it eventually happened. The 22nd of February marks a crypto DeFi market crash. In fact, the crash itself has caused enough liquidations to rank it the second-highest liquidation event within the DeFi space’s history. Within just 24 hours, $24.1 million in loans were liquidated.

Compound Accounting For 60% Of Liquidations

DeBank, one of the many crypto data aggregators out there, revealed that the majority of these losses, $13.7 million, comes from Compound, constituting almost 60% of the entire market crash. The only one being close to those losses is Aave, which saw a relatively small loss of $5.4 million in liquidations.

The only other liquidation event larger than this one, and that’s by more than three times, occurred back on the 26th of November, 2020. That crash, in particular, was thanks to the DAI suddenly and spectacularly increasing in price, which caused a whopping $93 million worth of margin calls.

On Coinbase Pro alone, DAI recorded a whopping 30% increase. This, in turn, caused over $88 million in crypto loans to be liquidated within the protocol itself.

Every Factor Worsened The Event

Another important metric measured by DeBank was the total value locked (TVL) within the crypto space. According to the crypto aggregator, this saw a significant drop from $44.5 billion to $38.8 billion within just 24 hours, amounting to a decrease of 12.8%.

The only other time the DeFi markets managed to lose more in terms of percentage was back in January, when the DeFi market shed caused a decrease of 15.4% in TVL.

DeFi

Another compounding factor comes from the Ethereum mainnet itself, primarily its staggering gas fees. Merchants are now reporting a total price tag of $30 just to enact a transaction of any kind. As one would imagine, that doesn’t really encourage small-scale operations.

Couple this with crypto traders being in a constant state of bidding war just to ensure that their transactions are pulled through, alongside tumbling token prices and massive network congestion, it’s easy to see why some traders couldn’t manage to close their positions in time.

Kraken In A Bit Of A Pickle

As is always the case in these matters, the ones most affected by this spectacular DeFi crash are the margin traders and DeFi users. Kraken, in particular, is having a rough time of it, as mass liquidations shot the price down to as little as $700 while it was trading at the $1,400 range on various other exchanges. Needless to say, more than a few customers have voiced their opinions that compensation must be given.

All those major corporations that invested so heavily into Bitcoin also saw multi-million USD worth of losses as they managed to buy at the peak just to see their assets tumble down in value. The 22nd of February saw $9,000 wiped out of a single Bitcoin’s value, reminding everyone just how insane the crypto market can be once you get too comfortable with it.

Second-Largest DeFi Liquidation Day Sees $24 Million Lost

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