How Disruptive Technology Unlocks Real-World Assets’ Value
Companies often rely upon financial instruments like stocks and bonds to generate capital to fund their operations. It's mainly because these asset classes have deep liquidity and can be available to both accredited and non-accredited investors.
But there's no hard and fast rule for companies to derive value only from their financial assets. In fact, to generate operational value they must utilize Real-World Assets (RWA) such as real estate, natural resources, equipment, and intellectual properties. These assets represent some of the most valuable assets on a company's balance sheet alongside the more liquid financial assets.
Furthermore companies can improve their overall capital efficiency by taking advantage of RWA through a non-dilutive financing approach.
RWA have a problem, though - they are highly illiquid. Companies can't exchange them instantly without incurring a price slippage. Moreover, financial institutions often fail to accurately evaluate the intrinsic value of RWA.
So, for companies to efficiently unlock their RWA's value, they must first address the root cause of the problem: Asset Valuation. This article explains how.
Challenges to Real-World Asset Valuation
The lack of reliable data and the absence of efficient and effective marketplaces to capture asset transfer information makes it difficult for financial institutions to determine the fair market value of RWA. It compels them to depend excessively on set standards or methodologies that are often outdated especially when it comes to intangible assets and intellectual properties. Parameters like future projections and cash flow thus become the common denominator, without much room for adjustments.
The challenge escalates further while evaluating scarce and unique assets like artwork and paintings. Since these assets have fewer comparables, companies either undercut their value to make a deal or wait for extended periods hoping the market will catch up.
Companies face a similar problem with their intellectual property. The valuation process for patents, trademarks, and copyrights involves multiple variables that make it very challenging. Direct estimations aren't possible either since the value of the intellectual property is more than the income it generates.
In all, various uncertainties hamper adequate RWA valuation and ultimately hurts investors exploring new asset classes.
Blockchain and Artificial Intelligence Technologies Can Reveal the True Value of RWAs
The problem with RWA valuation boils down to two things: thin and inefficient marketplaces and information asymmetry. Fortunately, Ovenue's technology empowered by artificial intelligence and blockchain technology provides a viable solution for both of these issues.
First, using public blockchains makes asset-related data more reliable and easier to harness in a trustless infrastructure accessible to all market participants . Although sensitive information remains private, investors can easily verify asset ownership, attributable financial information and sales history. This empowers them to make well-informed business decisions.
Second, blockchain technology lowers barriers for entry to the market by democratizing market participation. It allows companies to represent their RWA as asset-backed digital tokens that are freely tradable worldwide with minimal capital requirement. This broadens the scope for investors significantly, ultimately boosting adoption. And with greater investor participation comes deeper liquidity and more value for RWA.
So much for evaluating RWA. But the benefits of blockchain technology don't mean much unless companies can access them through practical solutions. Innovators are catering to this demand promptly, offering compliant, deep-tech financial platforms like OvenueTM.
From Valuation to Utilization - Making RWA Worthwhile
Ovenue provides companies with an end-to-end solution for RWA management. It lets them make good use of the value that implementing blockchain unlocks.
The journey begins with Ovenue's financial protocol calculating assets' value with the aid of artificial intelligence technology, and preparing an automated valuation report. The RWA are then tokenized according to this valuation, following which the asset-backed tokens are listed on a private marketplace. Notably, these assets can be anything from real estate to internet-driven creator economies.
Besides offering innovative technology, Ovenue pursues interoperable functionalities across blockchains to further increase liquidity. Moreover, it plans to empower asset owners with additional non-traditional financial products for their RWA, including lending and borrowing.
Ovenue is a pioneer in blockchain-powered RWA management. But given the vast benefits that tokenization brings to this industry, it's not a question of if but when this will become the norm.
By removing the bottlenecks in asset-backed token issuance, monetization, and access, Ovenue is making RWAs more worthwhile for asset owners while also broadening the horizons for alternative investments.
All of this brightens future prospects, providing robust tools for companies taking the decentralized route to asset financing.
Want to join our journey? Check out our site at Ovenue.com
Want to calculate a rudimentary estimation value of your assets based on a basic implementation of relief from royalty or replacement cost method? Check out our free online calculator at app.ovenue.com/DIY/revenue
Source - Tech Times