Shifting gears: Driving enterprise DeFi adoption through tokenization

Decentralized finance has quickly risen to prominence, largely driven by the fact that there is over $11 billion of total value locked in the sector. While it makes sense that DeFi — a space characterized by terms such as "yield farming" and "meme tokens" — has captured the majority of the cryptocurrency sector's attention, the concept is also beginning to catch on within the enterprise world. 

Stefan Schmidt, chief technology officer of Unibright — an enterprise blockchain development company — told Cointelegraph that DeFi concepts can be applied within the enterprise sector where financial assets can be represented by programmable tokens: "In general, the definition of DeFi still isn't clear outside of the enterprise sector." However, according to him, DeFi is "Anything finance related that can be tokenized."

2021 to become the year of enterprise DeFi?

Although enterprise DeFi is still in development, Schmidt mentioned that this will start gaining traction very soon, as these concepts will be implemented within enterprise IT tech stacks in 2021.

In the meantime, the first step that will set the stage for enterprise DeFi will be facilitating agreements between organizations sharing data. Specifically, these agreements will show that all invoices and other financial transactions are valid and should be processed for payment. "If you don't have a trusted agreement between all parties showing that invoices are valid and should be paid, you can't move forward in the DeFi space," said Schmidt.

To enable one possible use case, enterprise blockchain development company Provide has partnered with Unibright in a joint venture. Beginning Oct. 20, Unibright will operate entirely under Provide as both companies aim to unify the technology enterprises require to safely synchronize data.

The two companies have been closely collaborating for a year already to help enterprises implement the Baseline Protocol, an OASIS open-source initiative that typically uses the Ethereum mainnet as a type of middleware to serve as a single source of truth for organizations sharing data. Coke One North America was the first publicly announced use case, demonstrating how the Baseline Protocol is allowing the bottling giant to tokenize invoices across its supply chain.

Kyle Thomas, CEO of Provide, told Cointelegraph that the Baseline Protocol is indeed the lynchpin that will facilitate the age of corporate data-sharing to enable enterprise DeFi. "The ability to seamlessly coordinate business processes such as purchasing and supply chain movements between trading partners is a game changer for global business," he remarked.

Incorporating DeFi concepts into the enterprise

Thomas further noted that a joint venture between Unibright and Provide seeks to drive an end-to-end baseline as a service offering. This will include consulting enterprises that are interested in incorporating the Baseline Protocol into their existing enterprise resource planning systems. "When this implementation is understood, enterprise ecosystems can be set up in a non-centralized way, where every participant is running their own compliant IT tech stack," he said.

The adoption of the Unibright framework will allow Provide to extend its Unibright Token (UBT) model for the upcoming launch of Provide Payments. According to Schmidt, Provide Payments will use UBT tokens to provide liquidity for its managed transaction service. This service will initially support paying gas fees for arbitrary transactions broadcast to a public blockchain network, like Ethereum. Customers will then be billed based on transaction volume.

Provide Payments will seek to enable traditional enterprise procurement of public blockchain services without the need for customers to ever buy or hold cryptocurrency. "All of Unibright's DeFi offerings will be customized for enterprise needs," said Marten Jung, CEO of Unibright. "This combined offering paves the way to blockchain-based corporate data sharing."

Tokenized standards will soon follow

Yet in order for a baseline-as-a-service offering to come to fruition, token standards around purchase orders or invoices must still be developed. Paul Brody, global innovation lead for blockchain at Ernst & Young, told Cointelegraph that eventually there will be an evolution where enterprise users will follow the path of consumers, adding: "They will start with coordination of business agreements, but they will then add payments. As the privacy tools from Baseline Protocol get more widespread usage, I think we will then see the adoption of DeFi by enterprises."

Brody further mentioned that early enterprise DeFi use cases will be represented by enterprises selling financial assets such as receivables to third parties in bidding models. However, he noted that the risk-averse nature of enterprises means that adoption will occur further down the road.

Moreover, Unibright's Jung shared that, from a customer perspective, many of the challenges expressed relate to the ease of use for a tech stack operating with the Baseline Protocol, along with the costs of ownership. Jung mentioned that transaction costs should go down in the coming years, yet this is tough to predict when using blockchain as a middleware to serve as a single source of truth. Data privacy standards and permissioned data are also challenges that need to be overcome in order for enterprises to start preparing to adopt DeFi techniques.

Interestingly, while Ethereum 2.0 has also been predicted to drive enterprise DeFi, both Thomas and Schmidt think that it will not have a significant impact on the progress of the Baseline Protocol. According to Schmidt:

"We are not restricted by Ethereum limitations since the Baseline Protocol is blockchain agnostic. But if a company wants to baseline a process using the Ethereum network, ETH 2.0 may help a bit if the throughput of the network goes up to alleviate the need for a layer 2 solution."