Introducing Tokenfabrik
With the invention of doubly-entry bookkeeping in Northern Italy during the 13th century, a systematic method of accounting was created which enabled economic coordination in much larger scale than any time before in history. Soon after, Florence rose to become the financial center of the world and cradle of the renaissance.
Today, blockchain technology enables triple-entry accounting and with it a systematic way of unprecedented global economic coordination over the internet. In this era, it is not a city and its physical infrastructure facilitating trade and economic growth. Computer protocols powered by decentralized, crypto-economic networks are the protagonists in this financial revolution. This revolution will not be won alone though. Only by merging the traditional and future financial system it can succeed.
At Tokenfabrik, we are initiating the leading Decentralized Asset Financing Protocol for crypto Real World Assets. We are developing a solution to redefine financing by providing a seamless, simplified and global protocol that enables simple and transparent asset financing.
We believe that blockchain technology, crypto assets and decentralized finance will reinvent the global financial system. Building financial infrastructure on open, permissionless and globally accessible systems allows for new business models and financial opportunities.
While the disruptive potential of decentralized finance and shifts towards a protocol based financial system becomes ever more apparent, closing the gap between the rising crypto native industry and traditional financial system remains a prevalent challenge. We believe that the next frontier and big leap forward lies in bringing Real World Assets on-chain.
The Market for crypto Real World Assets
The DeFi space is lacking Real World Assets to be used as collateral within financial protocols. Today, the financial stack is almost solely confined to high volatile crypto tokens with underlying protocol risks. For DeFi to cross the chasm between early adopters, speculators and the mainstream, Real World Assets need to be tokenized and made available to be used as productive assets.
Everything will be tokenized and connected by blockchain networks in the future. In consequence, the total available market for asset financing of Real World Assets holds potential in massive scale.
Several existing and new markets can be subsumed and potentially addressed through the Decentralized Asset Financing Protocol developed by Tokenfabrik. In the long-term, we aim to disrupt the global US$ ~1,500 billion leasing and equipment financing market of Real World Assets. We are building towards a vision where IoT devices, connected machinery in production facilities and autonomous vehicles are financed decentrally and respective cash flows made available via asset tokenization.
In the short-term, our go-to-market strategy is a clear focus on crypto Real World Assets as primary target market. We believe that the crypto industry grows as an inside-out-market. As such, most innovation and progress take place at the edge of the crypto native market. In our terms, this translates into providing a solution for Real World Assets of crypto native industry participants. These crypto Real World Assets primarily consist of blockchain infrastructure in the form of mining rigs, data centers and other devices . The economic potential of our short-term target market is estimated at US$ 4 billion per year. In the mid-term, we will expand our activities in the market for IoT devices, 5G infrastructure and HPC equipment.
Meeting challenges of asset financing
Adding Real World Assets as standardized tokens to blockchain networks will bridge the gap between traditional and decentralized finance. Currently, the DeFi space is lacking these Real World Assets. This will open up a blue ocean of financial opportunities and innovative features based on composability across the DeFi stack. Enabling asset financing for crypto infrastructure providers while at the same time financialising these crypto Real World Assets within DeFi applications will generate a positive feedback loop propelling the whole industry forward.
Today’s asset financing market is broken. Globally, many financially sound businesses struggle to access adequate capital to finance and grow their operations. In particular, businesses in the crypto industry have been met with increasing challenges concerning financial services. On the other hand, investors are faced with a lack of attractive investment opportunities.
Existing financing options are limited and slow. Access to capital financing through the traditional financial system is a cumbersome process. Banks, as centralized service providers, are selective and intransparent. In many cases, for participants of the crypto industry this system is marginalizing and discriminatory. Restricting transactions in relation to activities within the crypto industry is a regular occurrence as recently seen with Barclays in the UK.¹ Access to capital financing or raising liquidity for crypto Real World Assets is met with even more scrutiny and restrictions.
Asset owners of crypto Real World Assets have one of the strongest necessities for financing. The crypto industry in general has been growing exponentially over the last years and with it the underpinning technological infrastructure. In this dynamic and increasingly competitive market environment, miners require more expensive hardware while facing shorter lifetime and decreasing margins. Manufacturers and suppliers of blockchain network node infrastructure need to scale their operations to reach economies of scale and profitability.
At the same time, crypto native businesses are most likely to adapt a crypto native solution to asset financing. Managing private keys and transactions utilizing stablecoins represent regular business activities. Familiarity with the mechanics of blockchain-based protocols and decentralized finance applications ensures an understanding of the underlying advantages of these systems. The current struggle, increasing need and low barriers to adoption make it an ideal focal point to bootstrap the Decentralized Asset Financing Protocol.
On the other hand, investors are faced with a lack of attractive investment opportunities within the paradigm of a negative interest rate environment. Earning yield on capital without taking on outstanding risks is becoming the market norm. There is a growing need for investable assets outside of tech stocks and volatile crypto protocol tokens. Real world assets such as mobility fleets, industrial machines and renewable energy infrastructure hold potential to meet this demand in the long-term.
In the short-term, crypto Real World Assets are highly attractive as they represent stable, cash flow producing assets within an exponentially growing market. Tokenizing these assets will provide retail and institutional investors with more diversified options to gain exposure to the crypto market. For investments in the latter, liquidity providers have difficulty accessing creditworthiness and establishing legal frameworks. By outsourcing this process in an open and transparent manner, the Decentralized Asset Financing Protocol provides a turnkey solution.
The Decentralized Asset Financing Protocol
Tokenfabrik brings all relevant stakeholders and capabilities together to realize our vision. The Decentralized Asset Financing Protocol has the goal to break siloed and monopolistic structures. Designed for the financial system of tomorrow, open standardized procedures will enable scalability and composability. The decentralized and permissionless nature of crypto allows for more efficient and fair financing approaches as well levels of transparency unrivalled by traditional banks.
As a protocol, it will allow for a coopetitive, fairer and more efficient approach across all stages. Taking into consideration all relevant aspects of the asset financing lifecycle, the protocol will consist of an end-to-end solution connecting both asset owners and investors. An underlying token design will strengthen this concept and incentivizes stakeholders to participate early in building the ecosystem of relevant institutions and on the placement of financing assets.
Tokenfabrik is proud to have successfully completed the Outlier Ventures Base Camp. The outstanding accelerator program including its excellent team support and vast network across the whole crypto industry reinforced our vision, partners, and capabilities. We are looking forward to giving you more insights into Tokenfabrik and our track-record in the next blog post soon.
Sources:
¹https://www.coindesk.com/u-k-bank-barclays-blocks-payments-to-binance
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