Pioneering Real World Assets: A deep dive into Polytrade

Introduction

From the inception of the financial industry, Trade Finance has been a fundamental pillar, today constituting an enormous $7 trillion market. Yet, despite its significance, an enormous opportunity remains largely untapped—the Trade Finance Gap. This gap, representing a mismatch between the demand and supply of Trade Finance, has swelled to an alarming $1.7 trillion, as indicated by a recent World Trade Organization (WTO) survey. The Trade Finance Gap, in essence, represents the surplus demand over the supplied Trade Finance and can be simply computed as the difference between the two. A vast majority of this gap pertains to the Trade Finance needs of Small and Medium Enterprises (SMEs)—a segment often overlooked by traditional banks and institutions due to a myriad of reasons ranging from perceived risks to administrative overheads.

This is where PolyTrade, a blockchain-based Trade Finance platform, comes to the fore. Established in 2021 in Dubai, UAE, PolyTrade is endeavoring to bridge this gap by focusing on the underserved SMEs. Leveraging the inherent advantages of blockchain technology such as transparency, security, and immutability, PolyTrade aims to change the way short-term financial needs, or Working Capital Requirements, of these SMEs are met. Beyond merely being a financing platform, PolyTrade is designed to be a comprehensive decentralized protocol. It seeks to transform receivables financing and orchestrate a seamless trading experience by bringing together buyers, sellers, insurers, and investors. The Polytrade platform unlocks crucial working capital for businesses by sourcing financing from crypto lenders, thereby enabling investors to cut down their cost of finance.

A report from the Boston Consulting Group (BCG) has brought to light an aspect of this paradigm shift—the burgeoning market for on-chain Real-World Assets (RWAs). Projected to reach an astronomical value between $4 trillion and $16 trillion by 2030, the on-chain RWA market stands as a testament to the transformative potential of blockchain technology.This article aims to delve into this exciting frontier and shed light on PolyTrade. PolyTrade's innovative use of blockchain technology to provide SMEs with a novel solution to meet their working capital needs while offering crypto investors an attractive investment opportunity is an embodiment of the immense potential of on-chain RWAs.

Trade Finance Bridging SMEs and Investors

Let's use a real-world example to illustrate the innovative mechanism of PolyTrade. Imagine a furniture manufacturer named John. He sells his products to IKEA with a credit period of three months, meaning he has to wait for a quarter before receiving the sale proceeds. In this interim, he must cover expenses like employee salaries, electricity bills, and raw materials for upcoming orders. The capital needed to maintain these operations is what is known as Working Capital, and this is where PolyTrade steps in. PolyTrade purchases the invoice from John, paying him immediately - let's say 95% of the invoice value. After three months, PolyTrade collects the full payment from IKEA. The 5% differential serves as PolyTrade's income for assuming the risk and providing John with immediate liquidity.

However, PolyTrade's innovation doesn't stop here. Polytrade platform obtains the funds to finance SMEs like John's company from crypto investors who deposit their assets on the platform. These funds are used to finance businesses, and in return, PolyTrade provides regular interest to the investors. By playing this role, PolyTrade essentially becomes a bridge between investors and SMEs, facilitating SMEs to meet their short-term financial requirements promptly and effectively, and giving investors a safe, secure, and profitable investment avenue.

The PolyTrade we know today was formerly Riqueza Capital, a Hong Kong-based company established in 2014. By 2020, it had onboarded 5,000 sellers and financed 250 of them, accounting for $500 million worth of invoices worldwide. Backed by industry luminaries including Polygon co-founder Sandeep Nailwal and QuickSwap co-founder Sameep Singhania, PolyTrade is poised for significant growth. The firm plans to use its raised capital to expand its product suite, hone its marketing strategy, and tap into new markets in Latin America and Europe.

The Team Behind Polytrade

PolyTrade was founded in 2021 by Piyush Gupta, a respected veteran in trade finance with over 15 years of experience. Known for his successful tenure at the Riqueza Capital Group, Gupta currently serves as PolyTrade's CEO. His guidance, coupled with strategic advice from notable advisors such as Sandeep Nailwal, co-founder of Polygon, and Sameep Singhania, co-founder of QuickSwap, has positioned PolyTrade for success.

Adding to its strength, PolyTrade has forged strategic partnerships with several cutting-edge enterprises. Unreal Finance, an unrealized-yield-futures platform, and SupraOracles, a company bridging traditional financial markets with the Web 3.0 world, are among the significant collaborators. These partnerships aim to offer institutional-grade tools and bring off-chain data into the blockchain, thereby supercharging PolyTrade's capacity to secure funding swiftly from crypto lenders.

Further collaborations include a partnership with Dfyn, a multi-chain AMM DEX functional on the Polygon network, that will list PolyTrade's native TRADE token and support liquidity programs. Also, PolyTrade's alignment with Teller Protocol, a decentralized lending protocol focusing on SMEs in developing markets, marks a significant stride in meeting the capital needs of trade finance SMEs by linking with larger liquidity pools and tokenizing invoices on-chain.

Unlocking Liquidity and Democratizing Asset Access

Diving deeper into the workings of PolyTrade reveals its potential to the financing landscape for small and medium-sized enterprises. The heart of this concept of an Asset-based NFT Marketplace, which leverages the power of blockchain technology and non-fungible tokens (NFTs) to democratize access to high-value, real-world assets. But how exactly does this work in PolyTrade’s context? It all begins with the role of asset originators—these could be individuals or businesses that own legal rights to an asset. For instance, a small business owner awaiting payment on an invoice, an artist with a unique painting, or a real estate developer with a commercial property, can all be asset originators.

In a traditional setting, the small business owner would have to wait for the payment terms to mature before receiving their funds, which could put a strain on their operational capabilities or growth plans. But in the world of PolyTrade, they have an alternative: selling the invoice as an asset on the PolyTrade Real-World Asset (RWA) Marketplace. The business owner can create an NFT representing their invoice, effectively turning their receivable into a tradeable asset. This NFT is then listed on the RWA Marketplace, where potential buyers can purchase it at a discounted rate. The transaction not only ensures immediate liquidity for the business owner but also promises a profitable return for the buyer when the invoice matures.

On the buyer's end, they can invest in a variety of NFTs representing diverse real-world assets—from a fraction of a Walmart invoice to carbon credits issued by a Dutch company or loans from Latin America. The advantage of this system is its inclusivity, enabling a much wider range of investors to access asset classes traditionally reserved for the elite or specialized institutions. When an asset originator approaches PolyTrade, their asset—be it an invoice, loan, carbon credit, real estate, or structured debt—is converted into an NFT complete with the necessary legal documentation. This tokenized representation decreases entry barriers, expands asset financing, and liquidity, and facilitates a smooth, seamless bridge between the physical world and the DeFi realm.

The token of the Polytrade: TRADE

The Polytrade platform introduces its proprietary utility token, known as the TRADE token, serving as the primary payment and reward mechanism within the Polytrade ecosystem. Being an ERC20 token, it adheres to the standard protocol for fungible tokens on the Ethereum blockchain, ensuring compatibility with the broad spectrum of Ethereum-based DeFi protocols.

The TRADE token plays several crucial roles within the Polytrade platform. Its primary use cases include:

• Platform Governance: TRADE token holders have the power to influence the direction of the Polytrade platform, proposing and voting on key governance decisions.
• Staking Rewards: Users who stake their TRADE tokens can earn additional rewards, thus incentivizing user participation and platform loyalty.
• Reduced Interest Rates: Sellers who stake TRADE tokens can benefit from reduced interest rates, further encouraging the use of the Polytrade platform for trade financing.
• Invoice Discounts: Buyers who settle their invoices on the Polytrade platform can earn discounts if they choose to pay with TRADE tokens.
• Service Provider Rewards: Service providers active on the platform can earn TRADE token rewards for their participation, fostering an ecosystem of various stakeholders.

The Polytrade platform has established a comprehensive tokenomics structure for its proprietary TRADE token. With a total supply of 100 million TRADE tokens, the platform has designed a detailed distribution model to cater to various participants within its ecosystem.

Each phase of the TRADE token's sale had a different pricing structure, as outlined below:

• The strategic sale price was set at $0.08 per TRADE token.
• For the seed sale, the price per TRADE token was $0.04.
• The private sale price of the TRADE token was $0.12.

During the public sale, each TRADE token was sold for $0.15.

The token distribution is structured to support the growth and sustainability of the Polytrade ecosystem. Here is the breakdown of the TRADE token distribution:

• Strategic Round: 3.25% of tokens (3,250,000 TRADE tokens)
• Seed Round: 7.5% of tokens (7,500,000 TRADE tokens)
• Private Round: 7.5% of tokens (7,500,000 TRADE tokens)
• Ecosystem Partners and Advisors: 4% of tokens (4,000,000 TRADE tokens)
• Team: 17% of tokens (17,000,000 TRADE tokens)
• Public Round: 1.33% of tokens (1,333,333 TRADE tokens)
• Community Incentivization: 39.42% of tokens (39,416,667 TRADE tokens)
• Marketing and LP Rewards: 20% of tokens (20,000,000 TRADE tokens)

This structure ensures a balanced distribution of TRADE tokens, with a substantial portion dedicated to incentivizing the community. The goal is to foster active participation and engagement within the Polytrade platform while aligning the incentives of various stakeholders. Polytrade is already live, and the TRADE token economy is in full swing, driving the interactions between buyers, sellers, and service providers on the platform.

Traction

Having successfully raised $3.8 million in a seed funding round, by notable contributors such as Alpha Wave, Matrix Partners, Polygon Ventures, and CoinSwitch Ventures, Polytrade is emerging as a formidable player in the trade finance sector.

Even more impressively, Polytrade has reported deposits exceeding $11 million and has funded invoices amounting to over $2 million. These figures illustrate the tangible impact and growth of the platform, revealing its ability to service the financial needs of SMEs while providing a robust and appealing platform for investors.

Moreover, the price of Polytrade's native TRADE token stands at $0.114994 as of recent data, with a promising market capitalization of $2.7 million. This further underscores Polytrade's rising prominence and potential in the world of decentralized finance and beyond.

Final Thoughts

The mechanism of Polytrade becomes apparent in practical terms, offering immediate liquidity to SMEs like John's furniture company, while simultaneously offering investors a safe, secure, and lucrative avenue. The implications of Polytrade's model are significant, as it has the potential to democratize access to the $7 trillion trade finance market and transform the way SMEs operate on a global scale.

Polytrade’s innovative use of the Asset-based NFT Marketplace, where real-world assets are tokenized and transformed into tradeable commodities, promises to revolutionize traditional asset financing. This groundbreaking approach could open the doors to previously inaccessible high-value assets for a broad range of investors. Meanwhile, the use of Polytrade’s TRADE token bolsters the platform’s functionality, serving as a versatile tool for platform governance, staking rewards, reduced interest rates, invoice discounts, and service provider rewards.

Investors must be aware of the inherent risk of default by sellers, which could impact the return on their investments. The recent price volatility of the TRADE token also points towards potential investment risks, underscoring the importance of due diligence and careful consideration before investing. Additionally, the SME sector's lack of liquidity can be a hindrance to growth, a gap that Polytrade seeks to bridge.

While Polytrade carries potential risks, it represents an exciting step towards bridging the monumental Trade Finance Gap and transforming the financial industry. The platform's innovative approaches, robust governance structure, and clear vision for the future have positioned it as a promising player in the evolving landscape of trade finance. If you want to learn more about Polytrade you can watch our recent interview with the founder Piyush Gupta.