A practical guide with Nimbus CEO Alex Lemberg
For fashion brands, the benefit of decentralized finance, or DeFi as it’s called, is difficult to understand and navigate. While there are a lot of potential advantages for businesses large and small in the fashion space to create opportunities in this blockchain-driven world. I spoke to Alex Lemberg, CEO of Nimbus, a DAO-governed ecosystem that delivers 16 revenue streams to users on its single platform, about his take on how engagement with DeFi can help growth. fashion companies around the world.
How can DeFi become an alternative to traditional sources of funding for a fashion brand?
Here, if you consider a small to medium-sized fashion company participating in DeFi, it accesses alternative financing that might not be available in mainstream financial institutions due to a whole list of factors checked during the assessment of risks by banks. DeFi might not replace the bank as a necessary middleman to process transactions, but it could replace it as a source of unauthorized funding.
However, if a company chooses DeFi to get a loan, it means that company is already using cryptocurrency, which allows them to transfer funds across the world in a fast, secure, inexpensive and transparent manner and to keep track of. near its financial operations. Along with this, DeFi opens doors for companies with higher profits to make more profits through a loan mechanism.
Profitable fashion companies could use excessive profits to provide direct loans to other DeFi market players while differentiating their revenue streams and receiving even more profit thus increasing the volume of their core operations. Cryptocurrency and the ability to jump directly from one token to another brings more liquidity to a business as well as the ability to use different products and services at the same time without any visits to centralized entities.
Can DeFi help brands interested in setting up their business abroad?
When a fashion company decides to move production or expand it to another country or state, but has no credit rating in that state and still needs a source of funding To cover the costs of such a move or expansion, DeFi options can be useful.
As there is no banking history in the new location, the company does not have access to the local capital market, which means that it will have to go through an even more difficult process of obtaining a loan in the new location. its home country to cover its international expansion and it might be the case that this is just not possible. Platforms like mine could help here, as there is no definition of boundaries for DeFi protocols, meaning you can use the platform as a source of funding to cover the costs of expanding to. abroad.
What about automated royalty and tax payment systems?
Fashion brands can use platforms like ours as an automatic royalty payment system for creators, which means creators who have created a design can create a locked NFT token under their name and receive automatic royalties due to them. paid for their design used by a fashion brand. At the same time, it is possible to use platforms like ours as a prepayment system for collector’s shoes in limited editions.
For such applications, a key capability of blockchain technology is smart contracts. Smart contracts are self-executing programs stored on a distributed ledger that automatically execute payments or associated actions when specific conditions are met. The contract could trigger automatic payment processing when a business verifies that it has received a shipment. This would speed up the transaction and at the same time reduce the likelihood of payment processing service errors. These could potentially automate manual processes ranging from processing compliance and claims to distributing the contents of a will.
It can be used to automate not only royalty payments or prepayment, but also automatic tax payments. Fashion brands can use their smart contracts to make organized tax payments to cover such an accounting function.
Tell us how the data acquired while operating through DeFi can be used for the benefit of a brand.
NFC chips are a great place to start. These chips are devices built into the design of a product so that the blockchain can collect, track and organize different types of information. This information could be how product logistics are organized, how long it takes for a product to reach a store or warehouse. In addition, it can be used to track other personal metrics such as, for example, related to shoes, steps, time or place of use and collect relevant big data.
This data can be used to optimize production or product design and development. Along with this, it offers a competitive advantage of incentivizing active users. Along with the ability to fund your operations through alternative peer-to-peer lending or borrowing, it opens up new, previously unavailable space for businesses of different sizes and types.
Can designers sell designs as NFTs and collect royalties? How would a designer do this?
A designer can create a digital representation of a design part and turn it into an NFT as a first step. Then during the keystroke process, which is essentially a conversion of a digital file into a recognizable and unique token locked and distributed inside a blockchain, like Ethereum or Solana.
A designer may want to specify the conditions for distributing his token. For example, when Beeple, a famous digital artist, auctioned off his “Crossroads”, it was resold on the aftermarket for $ 6.6 million, which was 100 times the original price, however Beeple received a 10% royalty on this transaction. , since it included its royalty constraints when creating a non-fungible token.
Since every smart contract is essentially code, this means that it executes when an event occurs, causing another event to occur. In our case, a designer might mention in a contract (a design converted to NFT) that every time this token is purchased, the system or platform should grab a royalty and send it back to the original creator of a token.
Due to the fact that a blockchain uses encoding, the only limitation to the constraints inside such smart contracts, like NFTs, is the imagination of the creator of that contract. A designer can enter restrictions on the number of resales or uses of their token or on how long royalties must be returned to the original owner of a design or even a percentage paid.
Another limitation could be cross-platform sales, here the limitations are imposed by a platform originally used to create a non-fungible token. In the near future, some of the conditions will be customizable and independent of the technological knowledge possessed by a user, or in our case a designer.
What about the instability of the cryptocurrency? How much should a business care about it?
Since cryptocurrencies are considered risky investments, each market player must calculate the risks themselves. However, the Nimbus platform is developing its own stable cryptocurrency – STAN – linked 1: 1 to the USD in order to mitigate some risks associated with the cryptocurrency market. Lending, borrowing and staking mechanisms will be available with STAN.
Considering the case of NFTs, companies should not be concerned about the instability of the cryptocurrency, since most transactions in the NFT market are done through auctions. When a designer or a company sells their non-fungible token, it is possible to exchange this income in fiat currency quickly and easily.