We recently connected with Dr. Amrit Kumar, President and Chief Scientific Officer of Zilliqa, an enterprise-grade blockchain development platform. Many of the more popular iterations of blockchain are not sufficiently robust to handle the high transaction rates needed today – not to mention what businesses will need in the future. Zilliqa seeks to address this shortcoming.
Dr. Kumar has previously talked about the main products and services that Zilliqa offers to its clients. He has also discussed the importance of maintaining the security of distributed ledger tech (DLT) platforms.
Our recent discussion with Dr. Kumar mainly focuses on the potential benefits of blockchain-enabled tokenization.
Our conversation is shared below.
Crowdfund Insider: Tell us more about the relationship between Zilliqa and Hg Exchange. Why are private securities exchanges such as Hg Exchange poised to bridge the gap between traditional finance and digital assets?
Dr. Amrit Kumar: Zilliqa is a founding member of Hg Exchange (HGX), Southeast Asia’s first member-driven private securities exchange that supports the issuance and trading of private company shares, including security tokens. Built on the Zilliqa blockchain, HGX is Zilliqa’s first enterprise-ready project that leverages its safe-by-design smart contracts to represent digital assets, enabling accredited and institutional investors to access unprecedented liquidity opportunities via high-growth startups and alternative asset investments.
The road to going public is long and taxing with businesses often bogged down with growth, capital, and compliance requirements. Through private securities exchanges, private companies can benefit from a fresh inflow of capital and greater liquidity while investors, therefore, gain access to exclusive private market opportunities with pre-IPO companies.
Simultaneously, private digital securities exchanges like HGX can offer investors a wider range of financial instruments beyond securities or commodities such as tokenized real estate, art, luxury collectibles, and even digital representations of assets such as insurance. For investors looking to expand their portfolio, this certainly opens up a world of possibilities.
Crowdfund Insider: Increasing economic uncertainty coupled with high inflation rates have led many to explore tokenization. Why is now a pivotal time for mainstream finance to explore tokenization?
Dr. Amrit Kumar: Now more than ever, mainstream finance needs to adapt in order to keep pace in a rapidly digitalizing commercial ecosystem. True enough, with the acceleration of digital transformation, banks are even more likely to introduce new digital financial products or collaborate with Fintech firms to bring about greater digitalization.
We saw this most clearly towards the end of 2020 when Singapore multinational banking giant DBS Bank announced that it would be launching the DBS Digital Exchange which would allow institutional and accredited investors to access a tokenization, trading, and custody ecosystem for digital assets.
Moving from the fringes of finance to the mainstream, tokenization has already brought about the creation of an alternative financial ecosystem that is more democratic and efficient. As tokenization allows assets to be exchanged without a large number of intermediaries, operations can be more effectively streamlined which would result in a frictionless trading process while also shortening clearing and settlement times.
While still very nascent, there are already signs showing that tokenization is already beginning to see greater acceptance. For instance, the creation of the InterWork Alliance in June 2020 seeks to create global standards for digital assets and tokenization, counting the likes of Microsoft, IBM, and Nasdaq among its members.
Crowdfund Insider: Whether it’s art, insurance, or real estate, tokenization of assets has certainly seen growing traction across both niche and mainstream industries in recent months. What do you think tokenization can bring to the table for investors and enthusiasts alike?
Dr. Amrit Kumar: The tokenization of traditional assets has transformed the way people invest or raise funds, providing an alternative digital form of investment with its own unique set of benefits. For one, the tokenization of assets allows for greater liquidity, particularly for private securities or illiquid assets such as whisky or art collectibles for instance. As these tokenized assets are able to be traded on a secondary market, companies have access to a larger number of traders or investors, which brings about more liquidity.
Another benefit, of course, stems from blockchain’s value propositions of security and traceability. For example, in Hg Exchange’s recent whisky-based asset-backed securities offering, our smart contract technology is used to tokenize rare whisky casks which allows for the authentication of rare spirits through unique digital tags. This provides investors with the assurance of security and traceability, minimizing the risk of fraud.
Crowdfund Insider: It was recently announced that accredited investors on Hg Exchange will be able to own tokenized shares of a rare whisky collection — and Zilliqa is the technology behind the tokenization. Tell us more about why whisky was selected as the asset of choice.
Dr. Amrit Kumar: In recent years, alternative investment instruments have grown in appeal particularly amid volatile market conditions. Coupled with high inflation rates, it’s no surprise that alternative assets, particularly those in the luxury space are increasing in popularity.
Largely unaffected by economic uncertainty, the surge in demand for whisky among ultra-high net worth individuals has seen soaring interest in its performance, having outperformed every other luxury asset by rising 564 percent over the last decade. The options for asset tokenization are endless, but the decision to select whisky came naturally considering present demand and interest.
Crowdfund Insider: We are starting to see more real-world use cases for blockchain. As blockchain continues to see rising interest, what is Zilliqa’s future roadmap for the commercialization of blockchain?
Dr. Amrit Kumar: In the short span of a decade, blockchain has progressed from its early days as the foundation to an obscure peer-to-peer payments network to today’s more commercial and business-ready solutions. As we adapt to an ever-evolving tech sector where blockchain looks to be gearing up for rapid adoption across mainstream and niche industries, Zilliqa too is looking ahead to a more enterprise-focused future.
In seeking to drive Zilliqa forward, we have started to place greater emphasis on both strategic and commercial partnerships to not only broaden the Zilliqa ecosystem but enable businesses to unlock blockchain’s benefits. From asset tokenization and ((security token offerings) STOs to marketing technology solutions and blockchain-verified certifications, Blockchain-as-a-Service will continue to play a frontline role at Zilliqa.
With the global pandemic propelling the wider acceptance and use of Fintech and digital payments, we are certain that blockchain can have the potential to play a part in bringing about new financial infrastructures fit for the digital world we are in.
As a believer in a more open and inclusive financial system, we will also continue to leverage our ZILHive ecosystem of promising projects and entrepreneurs to partner with rising talents and build future-fit solutions for the finance industry.