“For the last 20 years, I have talked to many SMEs around the globe and they have the same problems. Whether they are in Ghana or the US, banks are not lending to them,” says Bhairav Patel, Co-Founder & Technology Lead of Defactor
“And if they are, the process is long, drawn-out, and has so many conditions that they find it difficult to grow. In 2012, I was the CTO of a startup that was providing global supply chain finance to companies around the world. We supported one company that was growing 30% year on year. They could not gain financing from the banks because they were growing too fast and had a small balance sheet. If that company hadn’t received financing from us, they would have had to lay off staff and say no to contracts.”
The Decentralised Finance (DeFi) revolution brought about new opportunities to bypass the banks and give the public permissionless access to liquidity and financial products that were previously only available to institutions and large corporations.
Over the last few years, a plethora of new businesses have emerged to tap into the increasing amount of liquidity in DeFi.
But despite its growth levels, DeFi remains heavily reliant on volatile crypto assets, which make it a high-risk environment.
Wider adoption is also hindered by barriers to entry for companies that don’t have the infrastructure or don’t know how to use DeFi liquidity.
Ernesto Vila, Co-Founder & Commercial Lead of Defactor, believes that “DeFi has enormous potential to become the alternative for businesses across the globe that are struggling to access financing, but the space hasn’t matured yet. There are knowledge gaps, long on-boarding times and technical hurdles still to overcome. ”
That’s why Vila, Patel and Gutierrez came together to found Defactor.
What is Defactor?
Defactor is a bridge between decentralised finance and traditional businesses.
It provides a gateway for businesses to access the billions of dollars currently available in the DeFi liquidity pool.
With Defactor, businesses, asset managers, or any legal entity that has a real-world asset they wish to get financing for, become asset originators.
Through the platform, asset originators can digitise their data so they can easily plug into the liquidity pools available through existing and emerging DeFi lending protocols.
Defactor’s Vision
For Alejandro Gutierrez, Defactor’s Co-Founder & Operations Lead, “the end vision is to make DeFi a true competitor in the financial services market and decrease the barriers of entry for SMEs and developing countries to allow them to access alternative sources of credit. In this context, Defactor will become the gateway to DeFi”.
Defactor is also an answer to the record-low interest rates that have left investors with few options for positive-yielding investments.
The project provides investors with exposure to a diverse range of opportunities to earn yield from real-world assets. It opens additional channels to put their capital to work, and gives them the tools to mitigate risk.
How Asset Funding Works on Defactor
The process to access liquidity on Defactor is straightforward:
- The Real-World Asset Originator (RWAO) passes the validation and set-up process and is granted access to the Funding Portal.
- RWAO submits the assets to the platform via the funding portal or a standard set of APIs for their asset class, depending on the volume of funding required. Matching the asset information with the platform trading history and other data sources, Defactor automatically determines the risk score for the deal.
- RWAO submits their assets to the available funding pools. The platform determines the optimum pool based on terms and limits. Investors pledge their crypto as approved stablecoins into the pools, which are then converted into Fiat and paid to the RWAO.
- Once the funding term is completed, the RWAO deposits Fiat into a bank account, which is then converted into stablecoin and returned to investors.
Yes, it’s that simple.
What about investors? They have access to a portal that contains high-level data, relevant to the transaction they have funded. This includes asset composition of the funding pools and governance information to show that covenants are being adhered to.
Investors also have access to aggregated data to see risk, dilution, default and repayment information.
Defactor’s founding team are pioneers in bringing real-world assets to DeFi and have placed over 460 assets through liquidity pools such as Centrifuge/Tinlake.
This is a big advantage of Defactor over the other alternatives in the Blockchain field.
Asset Classes Founded on Defactor
Let’s start with inventory finance and take the example of Irish whiskey, the world’s fastest growing spirits category of the past decade — with 140% growth volumes.
With the surge in demand of Irish whiskey, there is a boom of small distilleries that require liquidity to fund their operations without sacrificing future stock (Irish whiskey requires aging for at least three years for it to be considered whiskey).
Thanks to Defactor, these small distilleries can generate NFTs to represent the barrels of whiskey and use them as collateral for borrowing funds in the liquidity pool. That’s how they can unlock the capital invested, even before making any sales from their products.
But the real innovation is that Defactor will not be tied to one single asset class.
“We have a clearly defined asset class roadmap,” says Gutierrez. “Our idea is to first focus on traditional financial services like trade finance, factoring and inventory finance. After that we will explore luxury goods. The third stage is real estate, NFTs and digital assets, which will allow us to create sustainable growth in the ecosystem.”
Financing will be available for invoices and goods. In the future, the community will determine the types of asset classes that can be accepted. Holding $FACTR tokens will give holders the ability to have a say in Defactor decision making.
$FACTR Token
$FACTR is the native token of Defactor, designed to coordinate the network, align interests and incentivise the growth of the ecosystem.
Incentivise positive actions
The purpose of the $FACTR token is to coordinate the Defactor ecosystem and incentivise positive actions from all participants — whether they are validators, asset originators or active token holders. Tokens are awarded for actions, such as referrals and completed deals. They are also offered as incentives to key ecosystem partners that contribute to the platform.
Network access
Holding Defactor’s token is required to access the platform’s services. Asset originators pay a fee in $FACTR based on a spread of the financial value of the processed transaction.
Staking
Token holders who stake $FACTR are eligible for staking rewards. This gives a further incentive to hold the token and enables a wider global community to participate in the Defactor ecosystem and benefit from it.
Governance
$FACTR is the governance token of the Defactor network, which allows holders to support the operations of the ecosystem and delegate powers to its participants.
APYs
Important benefits of $FACTR are the APYs offered to all token holders.
Here below are the APY options available at launch for the first 30 days (in February the APY will be halved for all staking options):
- 16% APY with no Lockup
- 40% APY with 30-Day Lockup
- 60% APY with 90-Day Lockup
- 80% APY with 180-Day Lockup
Investing in the Future of DeFi
The total value of all real-world assets on Earth — every bar of gold, every barrel of oil, every piece of real estate — is estimated to be $256 trillion.
Once asset owners are able to record that ownership on a distributed ledger on the Blockchain, they will leverage that wealth to unlock endless opportunities for growth.
Defactor is developing the ecosystem that will solve the issues that are preventing DeFi’s adoption at the macro-and micro-level.
By participating in Defactor’s ecosystem, investors will create an alternative to traditional finance for businesses across the globe. They will contribute to the growth of DeFi and discover new yield pathways for themselves.
Do you know that one of the best ways to get involved is to stake Defactor’s tokens?
Find out more about the $FACTR token.