Trace Network plans to issue a white label stablecoin backed by its native token, which can be used for settlements and accounts based on the on-chain transactions.
Decentralized finance and non-fungible tokens (NFTs) are two core trends to emerge from the last twelve months in the cryptocurrency and blockchain space. Dubbed blockchain’s “killer use case,” DeFi has undergone meteoric growth fueled by a user appetite for low-cost lending along with high yields. Before even reaching the end of the first quarter of 2021, the DeFi market has tripled in size to reach $45 billion in total value locked.
NFTs are a more recent trend but are already proving to be a hit with the mainstream in a way that DeFi hasn’t yet managed to achieve. Digital artist Beeple hit global news headlines in early March when he sold his entire collection of 5,000 pieces as an NFT for a staggering $69 million. The sale puts Beeple as the third-most-expensive living artist behind David Hockney and Jeff Koons. The NFT trend has also seen musicians, including Grimes and Kings of Leon, enshrine their work in NFTs.
In the spirit of making hay while the sun shines, projects are now emerging that seek to converge NFTs and DeFi, as a way of allowing users to unlock some of the value in tokenized assets for yield generation. However, one project – Trace Network – has come up with an intriguing use case that brings together NFTs, DeFi, and real-world enterprise utilities that will spur adoption.
What Is Trace Network?
Trace Network is an enterprise-grade DeFi protocol focusing on the fashion, lifestyle, and luxury goods sectors. The project has identified that companies in this sector struggle with inventory and ownership management, leading to the theft of goods along supply chains and creating entry points for counterfeiters. It also aims to solve the challenges of supply chain visibility between trading partners and expensive and cumbersome financing options for businesses.
Therefore, the Trace Network protocol offers three solutions designed to assist enterprises with these issues and bring some of the liquidity benefits from DeFi into the fashion, lifestyle, and luxury goods sectors.
Firstly, the protocol enables any brand to mint an NFT that corresponds to a particular product. So a maker of designer handbags would mint an NFT when a specific bag is being manufactured. The NFT would track the bag’s movement as it travels along the supply chain through warehouses until it reaches the store and a consumer buys it. At the point of purchase, the NFT is assigned to the buyer’s digital wallet as proof of its authenticity.
If the buyer later decides to sell their handbag second-hand, the person who wants to buy it can verify it’s a legitimate product by checking the token. Therefore, fake products are evidently counterfeit by virtue of the fact that they don’t have their corresponding token.
This system also offers the dual benefit of allowing the brand complete oversight of its inventory and its location at any given moment in time.
Data Interchange and DeFi
The second pillar of Trace Network is its Electronic Data Interchange smart contract that facilitates the movement of data between trading partners. The EDI smart contract is designed to integrate into existing business systems, and data submitted via the smart contract acts as proof of transaction for financing.
Trace Network also plans to issue a white label stablecoin backed by its native token, which can be used for settlements and accounts based on the on-chain transactions.
Finally, the DeFi element aims to use decentralized liquidity rails to facilitate enterprise financial needs. So far, DeFi has had a relatively limited range of use cases. Trace wants to open it up to various business finance options, including invoice factoring and structured financial products such as packing credit loans. Trading partners could also use DeFi to generate new financial instruments such as import credits accrued based on product exports.
Enterprise blockchain has been a slow burner. However, the combined benefits of DeFi and NFTs could now prove to be the spark that ignites the touch paper. With so much focus on the value generated by these nascent sectors, there must be a bridge to the real world, allowing enterprises to capture their fair share.