EquiDEI

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  EQUI-Diversity-Equity-Inclusion

Inspiration

The SME sector is universally regarded for promoting economic growth and equitable development. It also contributes to the economy by promoting industrial development across all regions, thereby reducing regional disparities. The labor intensity of the sector provides a huge employment-generation potential in an economy with relatively low capital investments.
The inspiration came when a major blow hit the global industry during Covid, virtue of which 40%+ SMEs around the globe shut down employing 100M+ people. Despite playing an extremely important role in the development of economies, SMEs across the globe face numerous challenges in access to finance and this dearth of credit is a serious roadblock to the development of these enterprises. Close to 131 million or 41 percent of SMEs in developing countries have unmet financing needs. The outcome is a bulging finance gap of more than US$ 5 trillion. 

What it does

These SMEs have around US$ 2.7 trillion worth of assets which remain underutilized in their supply chains globally. These assets, if put into circulation, can generate an additional yield worth US$ 12.7 trillion, which presents a significant business opportunity for DeFi. We seek to tap this opportunity by effectively utilizing blockchain technology to provide low-cost credit to SMEs, and have designed a scalable consensus model to tokenize these assets. This enables us to mitigate the risk using a real-world link to such credit.   Equidei is a DeFi platform that enables manufacturing SMEs to get easy access to finance based on their assets. The idea is to tokenize under-utilized assets in manufacturing supply chains and channel the yield from these assets to provide low cost funds to supply chain entities.   Tokenization of assets refers to the securitization of real-world assets with cryptographic tokens that represent the same economic value. These tokens can then be traded by businesses amongst supply chain partners to accept and make payments. This enhances liquidity, and provides a bridge between the real world and DeFi while significantly reducing barriers to entry for investing in assets.  Equidei aims at being a lending platform with an interest lesser than banks and other FinTech companies. Equidei will also act as an umbrella for the SME allied industries and organizations. Onboarding supply chain entities from allied industries will ensure efficiency and transparency in the SME sector are maintained while facilitating liquidity for all individual businesses. 

How we built it:

We carried out a survey of 500+ SME customers and a few banking professionals to try and understand the problems from both sides. The main challenges we identified were a lack of trust and transparency amongst SMEs and banks create hinderance for both parties to do business with each other. We started as an blockchain based automation company to solve this problem by digitising their operations and making available real time data for SME shopfloors and supply chains, to fetch better transparency for banks. This would enable banks to come up with flexible credit solutions as per SME requirements. Blockchain technology would enable SMEs to maintain anonymity and share data in a secure manner. We built a scalable consensus model to leverage assets which otherwise remain underutilised in their supply chains. 
Tokenisation of these assets would open up stable and secure financing options for the sector.

Challenges:

SMEs are not comfortable with digitisation of operations. They don’t have ample budget to maintain a digital solution and afford automation product like RPA, IoT, etc. 
So we pivoted to a DeFi model where we could incentivise SMEs to adopt these technologies and solve their credit gap.

Lending is a regulated industry and there are a lot of gray areas in crypto regulations to be able to serve the full potential of a DeFI solution to SMEs.

Learning and implementation:

We implement a dual token model to bridge the gap between funds in DeFi pools and real-world operations carried out in fiat currencies. This architecture enables us to create a secondary market for all investors and helps them make more competitive returns. While helping us to manage the operational and regulatory challenges.  It is crucial for the scalability of our model that interest rates offered to SMEs are low and flexible; while volatility is minimal relative to their fiat currencies.

The model is designed to avoid any potential compliance issues, volatility risks and to keep the protocol fairly decentralized (by avoiding a situation where a large chunk of tokens can be owned by a single individual or a group of individuals). 

What's next for EquiDEI

The initial phases will create EQD liquidity by attracting investments from Private, Strategic and Public sales. While the system may be somewhat limited in this version, subsequent examples and illustrations demonstrate a compelling use case for the broader cryptocurrency community.

We parallely onboard partners and carry on the platform integrations to complete the MVP. The beta run of the MVP is tested in 5 SMEs in 5 different states in India. Once the PoC has scaled and demonstrated the necessary characteristics such as stability and reliability, we will extend it to provide liquidity for discrete digitized assets and grow our business network.

Subsequently, we will further extend the PoC to non-discrete assets, including accounts receivable (Invoices), Raw materials, Energy Data, Machinery,  Business value and Equity, and even skilled resources and intellectual property. The goal of the PoC is to create a token that is stable against inflation, instability in raw material prices and within the highly unstable cryptocurrency market. Such stability will require experimentation within a real world operating environment of our algorithms that control supply and demand of our DEI token. An additional task will be to jumpstart the ecosystem by creating supplies of both EQD and DEI tokens on the open market. 

Built With

• besu
• hyperledger
• javascript
• solidity