E-commerce merchants usually have to wait 14 to 28 days before marketplace platforms release their earnings. Dow Protocol cuts this wait time to seconds through on-chain loans, backed by a $10.5 million seed funding round.
This funding was secured from a lineup of investors, including MH Ventures, Mapleblock, Animoca Brands, Arcane Group, HSKChain, Essentia Partners, and Quartet Group. The company has kept its valuation after this round confidential, as well as the details of the newly acquired capital allocation.
This cash flow problem has a massive market. Dow Protocol claims its innovative financing model targets the global working capital market, which is estimated to be worth up to $2.8 trillion. For cross-border merchants, settlement can be completed on the same day. This instant speed cuts traditional financing queues that often take two to three months.
Commercial Receivables as Collateral
The business model run by Dow Protocol adopts the real-world asset (RWA) based PayFi concept. However, their approach offers a differentiator from other asset tokenization projects currently flooding the market.
Over the last few years, the tokenization trend has been synonymous with conventional financial instruments. A case in point is the move by giant asset manager BlackRock to launch the BSTBL and BRSRV bond tokens. Instead of touching traditional instruments, Dow brings the concept down to earth by using commercial trade receivables from online store transactions as the underlying collateral for their on-chain loans.
The financing mechanism relies purely on the transparency of data flow. The asset manager disburses loan funds upfront based on a credit risk profile that is connected and integrated directly with the e-commerce platform where the merchant sells. When the marketplace platform eventually processes the payout, Dow’s system will automatically deduct the repayment from the merchant’s balance.
Attracting Attention from Outside the Ecosystem
The presence of Animoca Brands among the backers highlights an expansion of investment focus. The venture capital firm was previously best known for its funding in the Web3 and GameFi ecosystems. Their entry into real e-commerce financing infrastructure signals the appeal of the RWA narrative, which is slowly beginning to cross boundaries between sectors in the crypto industry.
The asset tokenization market itself continues to gather momentum. A report from CoinShares noted that RWA trading volume jumped 220% year-on-year.
On-chain financial systems are often criticized because the flow of money is only enjoyed by traders and large institutions. Through this PayFi model, blockchain attempts to prove its real-world utility. If an online retail seller can turn over their inventory capital faster without having to understand the technology behind the scenes, crypto adoption will finally find a tangible entry point.
As reported by crypto.news.
Read also: What is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
