How DLT is set to upend business models for financial firms
Read time: 4 mins
Consider a hypothetical scenario where the Burj Khalifa or the Mona Lisa is up for sale. A regular Joe may aspire to buy it but will certainly not be in a position to afford it. Now imagine millions of individuals pooling their funds together and purchasing one of these prized possessions.
While it may seem like a possibility, maintaining the accounts of a massive pool of investors for a single asset will be a significant hassle. As will it be to address their individual liquidity needs.
Zensar’s distributed ledger technology (DLT) marketplace harnesses the capabilities of DLT to tokenize assets to create NFTs. These NFTs are then made discoverable and accessible via marketplaces to facilitate trading. Traditionally, for any transaction, a ledger/block of information is replicated with every market participant, i.e., issuer, investor, regulator, middlemen (broker, dealer, exchange), and more. Distributed ledger removes the need to replicate, as the ledger is distributed amongst the participants. It further alleviates the chances of falsification/manipulation as a single record of a transaction is maintained across the blockchain network.
How it works
The solution facilitates the real-time settlement of assets directly between the buyer and seller, eliminating the need for mediators and the charges they levy. Without question, this substantially reduces the settlement time and cost while also minimizing the probability of default. Both legs of the settlement will take place over the blockchain network, where the assets, in tokenized form (NFTs), will be transferred from the seller to the buyer, and the payment for these NFTs will be made through virtual currencies/stablecoins/CBDCs.
The DLT marketplace democratizes trading and investing for everyone by making digital assets more accessible and affordable to those who were previously unable to trade/invest in them. There is a potential to leverage such a marketplace model construct to enable trading across multiple asset classes, especially for buying or selling illiquid assets with larger ticket sizes such as illiquid bonds, real estate, private equity, and art.
The road ahead
Just like Amazon and eBay revolutionized the retail markets by connecting buyers directly with the sellers, Zensar’s DLT-based marketplace solution emulates the same value proposition for financial markets. It allows market makers to create a marketplace to facilitate the direct interaction of buyers and sellers.
A few key players are already building such solutions. However, the Zensar marketplace differentiates itself by providing an end-to-end experience — right from tokenization and fractionalization to trading and real-time settlement. There is no doubt that in the future, DLT-powered platforms will be the norm for financial markets, and their applications will grow exponentially. It is only a matter of time.