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Market Services

Blockchain in the fashion and luxury industry

The blockchain, initially used in cryptocurrencies, has then spread to the Fintech solutions sector, but is gradually taking on an important role in other sectors, including the fashion and luxury industry. Many companies are beginning to experiment with this type of technology whose potential is capable of making their brand evolve considerably: from tracing the origin of the materials used to make the products to guaranteeing their authenticity, to guaranteeing the ownership of the goods by the customer, the blockchain applied to the fashion and luxury industry is therefore a challenge that is only just beginning.

The main uses of blockchain in the fashion and luxury industry:

– Traceability of the origin of materials

Blockchain technology makes it possible to trace the transactions that take place along the company’s supply chain in a certain and unchangeable way and therefore guarantees a high level of traceability and security of online transactions and of the product along the supply chain, production and distribution. International organizations also push for supply chain tracking, such as the UN and the EU. For companies, the use of the blockchain guarantees a series of advantages among which the traceability of the different buying and selling transactions up to the different steps of processing, distribution and even in some cases geolocation of the product. In this way, also the consumer is protected: monitoring products step by step in their path from the raw material to the factory up to purchase, is a strong guarantee factor for customers who are increasingly interested in the origin of the materials of which the garments or luxury goods purchased are made, for both ethical and environmental sustainability reasons.

– Proof of authenticity of the products

The track-and-trace capability, guaranteed by the blockchain, becomes an important weapon in the fight against product counterfeiting. The blockchain in the fashion and luxury sector guarantees incontrovertible certification of the authenticity of the origin of the products, thus promoting the fight against counterfeiting and stolen goods trafficking. In addition, it allows total transparency of information up to the moment of sale: the customer receives a personalized certificate of authenticity with an integrated cryptographic system and the buyer has the possibility to make payment by cryptocurrency. The blockchain technology applied in this area also opens the door to the development of direct communication with customers and a more effective marketing strategy that also involves improving brand storytelling: in addition to increasing public awareness of the harmful effects of buying counterfeit products, brands today must think creatively about identity building, giving due importance to environmental and social sustainability aspects and maintaining constant proximity to the consumer.

Notarization: proof of ownership

Through the blockchain it is possible to associate the customer with the purchased product in an immutable and permanent way, thus guaranteeing its legitimate ownership and being able to trace any subsequent changes in ownership. This possibility is particularly interesting for luxury goods that have a significant value and for which it is important for the owner to be able to prove both their authenticity and ownership.

Examples of blockchain implementations in fashion and luxury industry

Blockchain technology is also beginning to be explored by the major fashion and luxury industries as an effective means of ensuring safety and quality and thus increasing confidence in the product within the business and also by the customer. Louis Vuitton and Dior were the first brands to enter the platform and to be able to verify the traceability and authenticity of the products. The platform, open to all luxury brands, offers them the opportunity to exploit the great potential of the technology, allowing customers to have access to the origins and history of the product they have purchased, a decisive factor against counterfeiting that is now increasingly amplified by the growth of e-commerce. The luxury fashion brand Alyx by designer Matthew William also started using the blockchain in May 2019 to monitor the production of clothes from the raw material to the final product, to allow the customer through the QR code to understand in detail the origins of their purchases and their genuine quality, thus gaining confidence in the brand.

Conclusions

Blockchain technology offers great opportunities for the fashion and luxury industry through systems that can be integrated relatively easily, in order to allow luxury companies to quickly take their first steps and become familiar with the benefits mentioned above.

Fashion companies will be able to find a significant way of innovation using the blockchain: dialogue with consumers who are increasingly attentive to values such as those of traceability and authenticity, which must be told in a transparent manner, providing detailed and simple information.

BrightNode and Alpenite are working on technological solutions specifically designed for fashion and luxury brands, for more information please contact us.

Categories
Funding Services Startups

The available funding sources for startups

Nowadays the possible funding sources for startups have expanded and diversified: new opportunities have arisen largely made possible by the internet and the fact that we operate in a globalized world.
In the startup growth process, there is a tendency to use a phase-based approach in which new financing is progressively sought. In the initial period (seed) the founders mainly draw on their entourage, apply for grants and try to enter incubators and accelerators.
In this regard, it is useful to check the Crunchbase website which lists the 100 best accelerators in the world.

But for the next steps, what are the possible funding sources for startups? With regard to the search for capital, venture capitalists are undoubtedly still an important source, corporate venture capitalists and crowdfunding are another effective option to consider, as well as royalty-based financing and new ways of financing based on blockchain and cryptocurrencies.
In any case, whichever way you decide to follow, it should be considered that after the financing has taken place, a part of the company and/or its future profits or its future products or services, have in fact been transferred.

Venture Capital financing

Venture capitalists (VCs) finance companies that show high growth potential and the main sectors in which they invest are biotech, semiconductors and “tech” and “digital media” in general. VCs first ask for equity and places in the Board of Directors of the companies they have selected and financed and, once they have granted the capital, they expect the startup to be able to use it efficiently.
It should also be kept in mind that receiving funding from a VC involves the establishment of a very close bond whose term and conditions will be decided by the VC, moreover, the liquidation of his investment will take place only at the time of the sale of the company or its IPO, therefore, this type of investment usually lasts between 5 and 10 years.

Over the years, even non-financial companies have started to invest (Corporate Venture Capital) directly in startups, financing companies in their sector used to experiment with technologies and business models to be eventually bought and integrated into their own company. For the financing company this is a further way of doing research and development, and also serves to have control of technologies avoiding that they end up in the hands of competitors. Examples of some large companies that practice corporate venture capital and have internal units dedicated to this function are Google, Intel, Salesforce, etc.

The website Foundersuite has a database of over 120,000 investors and provides a range of tools to get in touch with those who are interested and to manage the relationship.

Venture financing via royalties

Royalty-Based Financing (RFB), on the other hand, consists of acquiring financing in exchange for sharing the revenue with the lender. The costs of financing are lower than those of equity financing, but higher than those of a bank loan. This method has been widely used in life science and energy companies. First, you agree with the lender the percentage of monthly turnover to be returned to him, how long and in what range will be the total amount that will be returned. Typical figures are 2-20 % of the turnover for 3-5 years, with a total figure in the range between 1.5 and 2 times the capital granted.

Crowdfunding

For some years now crowdfunding has become another important tool to finance startups and projects. It is a method to collect small amounts from a large number of people using one of the hundreds of dedicated internet platforms that act as intermediaries and retain a percentage of the funding. In a crowdfunding campaign you must first define a deadline and the amount you want to reach by that date. As far as the lenders are concerned, they contribute small amounts and receive incentives in return: discounts, early availability of products and equity.

A further effect of a crowdfunding campaign, however, is that you also get feedback from users and significant visibility. In fact, this tool can also be considered a marketing tool as it tends to turn lenders into customers and the financing becomes a sort of pre-order for the product that will be realized. Before considering crowdfunding as a source of financing it is important to be well aware that if you don’t already have a significant follow up on the internet and at least one prototype of the product, you will hardly be able to be accepted by a platform.
There are 5 fund-raising models: donation, reward, debt, royalty, equity.

The reward model provides that the investor receives a non-financial reward (early access to the product, discount, merchandise, etc.).
The main platforms that are based on this model are Kickstarter and Indiegogo: the first one requires to have a working prototype and if the campaign does not reach the objectives it is cancelled and the money returned. The average contribution of an investor is 70 dollars.
In the debt crowdfunding, the company receives a loan that will be returned with some interest, between 3 and 8%.
In the royalty crowdfunding you will give the investors rewards based on turnover as soon as you start selling.
In the case of equity crowdfunding, on the other hand, you give equity to the investors. This model is particularly suitable for startups at an advanced stage and for this type of financing some platforms only give access to accredited investors. In fact, accredited investors are venture capitalists who use the platforms and are also those who usually have access to the best opportunities.

Blockchain-based crowdfunding

Blockchain-based crowdfunding is a decentralized and international crowdfunding system that, if successful, can very quickly raise large amounts of money. The mechanism used by this system is the Token Sale. A Token Sale can only be proposed by startups that have their roots in blockchain technology and through it startups can sell to the public their tokens that are not a currency intended as a means of payment, but a kind of coupon that can be converted into company products or services (utility tokens). Initially, startups publish a white paper in which they describe both the company and what they intend to make and on this basis the public can adhere to the proposal made by deciding to buy tokens. To take advantage of this financing method it is necessary to have a business based on blockchain and the support from experienced lawyers to avoid the violation of regulations that are different from country to country and are often unclear. Switzerland is currently the most advanced country in this respect.

Conclusions

It is clear that it is impossible for a startup to grow without adequate capital. In this regard, a certainly positive factor to consider is that today you can find capital at a global level, although then obviously also the competition will be global.
Moreover, incubators, accelerators, Capitalist, Corporate Venture Capitalist, crowdfunding and all the options described so far, can certainly help in a concrete way to progressively grow a startup. After having deepened all the possibilities of choice, the startup can follow the path most appropriate to its characteristics, also considering its willingness to give up participation within the company.

Categories
Market Services

Interbank Payments: where incumbents meet the Blockchain

Many people, mostly in the aftermath of the 2017-2018 hype, are questioning whether the blockchain technology has any actual use case. In this respect, some of the harsh critiques it received were constructive and honest whilst others were clear attempts to create FUD (Fear Uncertainty Doubt) in the market.

While this debate is still open and has yet to be resolved, some interesting signs may foreshadow which side will prevail.

In fact, several incumbents have started large scale projects that involve blockchain technologies. In this article, we will look at some of them.

Project Ubin

In November 2016 the Monetary Authority of Singapore (MAS) announced it partnered with R3 to create a proof of concept project to conduct interbank payments through a DLT (Phase 1). Phase 1 was successfully completed in March 2017, Deloitte was commissioned a report documenting it.

In October 2017 the MAS and Association of Banks of Singapore (ABS) initiated Phase 2 of Project Ubin. This Phase explored specifically the use of DLTs for Real Time Gross Settlements (RTGS). Throughout Phase 2 MAS and ABS experimented with 3 different proof of concepts built on 3 enterprise-DLT platforms (Corda, Hyperledger and Quorum).

Ubin Phase 2 successfully demonstrated that RTGS functions could be decentralised without compromising privacy, furthermore it marked the significance of an industry-wide collaboration in laying the foundation for future innovation.

IBM BWW

IBM is transforming cross-border payments with IBM Blockchain World Wire (BWW), an integrated network for real-time clearing and settlement. This new global financial rail allows banks and financial institutions to send and settle payments around the globe with finality in a matter of seconds.

To build the platform IBM partnered with Stellar, BWW uses XLM as a settlement tool for “fiat-coins”. Recently six international banks have signed letters of intent to issue stablecoins (backed by fiat currencies). The BWW platform allows the creation of ad hoc tokens (e.g. for national currencies) but also opens up the possibility of banks using XLM (the native token of the Stellar blockchain) as a “bridge currency” when it is hard to trade a currency pair.

SWIFT R3

SWIFT, the largest global banking payments network that uses a financial messaging network to facilitate cross-border payments, has announced a collaboration with R3’s Corda Settler to begin testing GPI payments.

The Corda Settler platform focuses on the settlement of global cryptocurrency payments within enterprise blockchains.

The company also announced that this would be a trial to see how well the integrated system will perform. It will connect the SWIFT payment GPI gateway with R3’s Corda platform. The objective behind this is to create a transparent system where the company can easily monitor the flow of payment and also support application programming interfaces (APIs).

Conclusion

In this brief article, we only discussed a few examples of one very specific use case (interbank payments and settlements). Nonetheless, this brief extract already shows that the stakes are very high and sizeable incumbents players are working behind the scenes after acknowledging the potential of DLTs. There are many more projects being developed and even more to come, so while blockchain is definitely not the panacea people tried to sell during 2017-2018, it has the potential to shake the foundations of several industries and enhance them.