What Is Enterprise DeFi? Why Are Big Businesses Entering the DeFi Space?
The Decentralized Finance (DeFi) revolution has quickly shown promise and illustrates how the future of financial services will change to adapt to and include decentralized service offerings.
DeFi is an umbrella term that includes all forms of financial services that work without intermediaries such as banks or clearinghouses. Built on smart contracts — computer code that can be designed to perform specific actions in response to specific input parameters — DeFi applications are fast and transparent and can be automated to provide many of the services that traditional finance provides but in a low-cost, accessible manner.
Enterprise DeFi is the adoption of these and similar, blockchain-based, smart contract-powered financial services solutions by large organizations, institutions, and enterprise-grade concerns.
Enterprise DeFi Services Are on the Rise
There are many innovative ways enterprises are using DeFi applications to streamline operations and improve service offerings.
For example, enterprises can use DeFi to tokenize anything from assets to contracts, purchase orders, invoices, inventory, and more, so that these functions and related processes can operate on a fast, safe, and secure blockchain ledger. Tokenization can also be used to create derivatives and synthetic assets that can act as new income-generating opportunities for investors.
Similarly, payments — whether music royalties, salaries, raw material costs, utility bills, dividends, or corporate profits — can be made on the blockchain using DeFi, as can insurance, peer-to-peer borrowing and lending, betting, margin trading, and other trade and investment-based financial actions. Enterprise DeFi can even be used for improving KYC, digital identities, asset management, and better analytics, thanks to applications such as Unido that not only provide crypto bank-in-a-box functionalities but also allow users to leverage vast amounts of their data in DeFi-based decision-making.
Changing Market Dynamics
Here are some of the players being upended by the DeFi revolution.
Commercial banks accept deposits from lenders and provide loans to borrowers. Lenders provide liquidity in exchange for interest paid by borrowers. With DeFi, lenders and borrowers can lend and borrow to and from each other without requiring the services of a bank to verify their identity or hold collateral. Interest rates that are determined by supply and demand are based on real market factors, and DeFi systems are fair and accessible by design so anyone can interact with anyone else in the market at any time, from anywhere, with any amount.
Investment banks offer advisory services for financial transactions, and they provide asset management and risk management services as well. DeFi protocols already offer many similar products, including derivatives issuance and asset management services as well as decentralized lending and borrowing.
Exchanges organize the trade of different assets. Decentralized exchanges (DEXs) can facilitate the trade of tokens and even fiat currencies without having to rely on the services of a centralized exchange that controls user funds or oversees order books and market liquidity.
Adding to these players, we are seeing hedge funds, crypto funds, index funds, and insurance companies exploring the use of DeFi alongside staying involved with their customary operations.
Overcoming Barriers to Enterprise DeFi Adoption
There are many areas in which large enterprises struggle to adopt or integrate DeFi applications into their business processes. For example, deploying new systems that work with existing infrastructure, maintaining regulatory compliance, providing customer support, and optimizing resource allocations to maximize value can be difficult for organizations that are not familiar with and do not have relevant experience handling cryptocurrency and digital asset transactions. Securely processing crypto-based digital transactions, key management, and asset custody also pose serious challenges to enterprises that wish to deploy enterprise DeFi applications or provide DeFi services.
This is where Unido can help. Three key offerings from Unido can help enterprises overcome their DeFi adoption challenges so that they can safely and securely connect to the DeFi space and provide their users with blockchain-based decentralized financial products and services.
- Unido Enterprise Platform, which helps enterprises seamlessly and securely manage their assets. It creates a bridge for businesses to interface with DeFi networks while allowing them to remain compliant with applicable regulatory requirements.
- Unido Institutional, which is a full-stack cryptocurrency bank-in-a-box that allows enterprise clients to offer crypto banking facilities similar to those provided by traditional banks to end-users who want exposure to DeFi and cryptocurrency investments.
- Unido Core, Unido’s proprietary key management and transaction signing technology that enhances security, provides flexible governance, and allows any system to seamlessly integrate with and connect to the Unido ecosystem via a simple, secure API.
When taken together, these services are helping to onboard new enterprise-grade users to the DeFi space and are allowing them to provide DeFi products and services to their customers without having to create, monitor, and maintain the necessary infrastructure, security, and relevant checks and balances themselves. As a market-ready product, Unido helps organizations save on development, deployment, maintenance, and monitoring costs so that they can quickly enter and effectively operate in the DeFi space.
What does the future hold?
Three key factors suggest that the penetration and adoption of DeFi products and services over the next few quarters will outpace that of traditional finance. As long as platforms such as Unido are available to onboard new users and help them navigate the DeFi space, we will see drastic changes taking place in the DeFi and traditional financial worlds.
Thanks to its scalability and global access, exponential growth is possible in the DeFi space. As per DeFi Pulse, which monitors the total value locked in smart contracts on various DeFi applications, billions of dollars have poured into the DeFi space in the last year alone. The maturity of the DeFi space and the effectiveness of many of the solutions now available are a testament to the benefits that these applications and platforms are delivering to users around the world.
Room for Expansion
DeFi tokens represent a small percentage of the total value of the crypto space, meaning there is a lot of room for growth — but only as long as solutions and offerings continue to perform and deliver positive results. If they can, then DeFi will continue to attract funds that otherwise would go to traditional finance.
Based on current trends, not only are funds being piled into DeFi, but as traditional institutions pivot toward DeFi, a new wave of funds and users will enter the space in the form of institutional clients and their funds. This brings us to the third point on new market segments.
New Market Segments
Two major market segments are helping to grow the DeFi space. The first is the clients of institutional players that want exposure to cryptocurrencies and digital assets. For example, JP Morgan recently announced a crypto investment basket for its clients who wanted to invest in digital currencies and tokens.
The second is unbanked users in rural or developing regions where access to traditional financial services is limited. Banks today are effectively technology companies, and by using solutions such as DeFi staking, seamless lending and borrowing, microcredit, and so on, new, unbanked users are entering the DeFi fold.
DeFi Is Here to Stay
From the above, the value proposition of DeFi is clear, and based on current trends, we can safely say that DeFi is here to stay. As more and more institutional players look for increased exposure to DeFi products and services and as these products and services improve in terms of access, ease of use, cost, and effectiveness, there are few remaining arguments for anyone to want to continue using centralized finance even a few years into the future.
Unido has the power to drive this new wave of adoption. Please visit http://unido.us/ to learn more about how the Unido platform is connecting enterprise concerns to decentralized markets with a suite of secure, high-performance DeFi products and services.