Treating data as an asset has immense potential, but it also comes with its own set of challenges. NFTs (non-fungible tokens) are a solution to get over these technological, legislative, and incentive-related obstacles.
Although data and data analytics are undoubtedly vital, many businesses are losing faith in their ability to extract value from them. They are missing here: sustainable value creation is possible when data is exchanged within a company and beyond the company boundaries to derive insights and effectively train artificial intelligence (AI) algorithms. For example,
- The inventory data of the suppliers might be precious to manufacturing enterprises.
- Likewise, banks can reduce their loan risk by looking at their borrowers' transaction history.
- If suppliers submit the necessary data, brands can develop environmental, social, and governance (ESG) credentials for their products.
The problem is that each company possesses the data but is either unwilling or unable to share it with other companies in the network. Data is like oil in the absence of a digital B2B data exchange ecosystem. It can be extracted and refined, but it cannot be transported to the place where it is needed the most. Why is that?
This is the incentive problem.
Why should a supplier allow a manufacturer to access its inventory? Why should a business be ready to give a financier access to its transaction data?
Although there's no one-size-fits-all answer to this question, there are three rising trends that encourage businesses to share data:
- As an incentive for the business partner to share data, the data requester gives them preferential treatment. For example, a bank might provide a cheaper loan rate to businesses that disclose their transaction data.
- The data requester has sufficient bargaining power to compel the data provider to share the data. For example, a multinational equipment manufacturer requires its suppliers to share inventory data.
- The data requester proposes compensating the data owner for disclosing the data. Another example is Insurance firms are willing to pay automakers for vehicle telematics data.
For the foreseeable future, all three possibilities, as well as others, are likely to coexist.
What to share?
This is the regulatory problem.
Businesses must be aware of what data they can share, with whom, and for what reason, given the ever-changing data-privacy legislation worldwide. Before exchanging data with a partner for a defined purpose, organisations may demand the explicit approval of the data provider in specific circumstances.
For example, a bank may need the customer's consent to exchange a retail customer's data with another service provider for fintech services.
How to share?
This is the technology problem.
How do businesses build a digital infrastructure that allows data to be shared as a common asset in B2B ecosystems? This is a non-trivial problem.
A data-sharing solution is now available on several cloud-based platforms. On the other hand, existing systems are unsuited for B2B data-sharing due to regulatory and incentive constraints.
For example, before exchanging data with a partner, businesses may need to obtain the end-approval users, and they may also need to demonstrate that the consent has been given. Some end-users may agree, while others may not. Others may agree to share only a portion of their data. The ideal digital platform should be able to address these issues.
Blockchains and NFTs enable data-as-an-asset
We need a digital pipeline that allows data to move across business boundaries in a secure, trustworthy manner while respecting the rights of all stakeholders to unlock the actual value of data.
The blockchain-based 'enterprise NFTs (non-fungible tokens)' provide a solution to this problem. Blockchain has expanded from its origins as a ledger for securely storing cryptocurrency transactions to a platform for storing any type of information that has to be exchanged in a secure, trusted manner.
Assets such as financial instruments, real estate, and luxury goods are now immutably recorded on the blockchain. It's past time for businesses to consider their data as a valuable asset. They can do so thanks to enterprise NFTs.
When information about an asset is kept in a blockchain-based registry, a one-of-a-kind token, also known as an NFT, is created to represent that asset. Consider it as a 'title deed' of the asset. This title deed can then be shared throughout an enterprise or a group of enterprises.
Enterprise NFTs provide quick and safe data sharing within an ecosystem for three reasons:
Automating data sharing
Enterprises can share NFTs as an asset once data has been containerised as an NFT. Smart contracts can be utilised to automatically execute processes and financial terms that govern the sharing of these NFTs. While the business terms can be customised, many incentives can be incorporated and enforced in data sharing.
Given the volume and velocity of data generated by businesses, a manual accounting layer to enforce commercial data-sharing rules between enterprises is unreasonable. Without manual intervention, smart contracts automate this procedure in a secure and verifiable way.
Containerisation of data
NFTs for enterprises enable data to be packaged into assets that can be shared, traded, and tracked. A case where enterprises can use NFTs is Product Passports. Product Passports allow manufacturers to communicate lifespan data on their products as an NFT.
Manufacturers can offer pay-as-you-go models, financiers can minimise risk by lending against a digital asset, insurance companies can offer usage-based insurance, and secondary buyers can acquire a reliable record of the goods, allowing for increased value and reduced cost of ownership.
Outstanding invoices or bills of lading can be turned into assets whose ownership can be simply and securely transferred without time-consuming processes. These document-based assets can be utilised as collateral in supply chain finance, which can help supply chains unlock capital.
Enabling secure compliance
A hybrid system combining permissioned and public blockchains can be used. Every transaction using a blockchain-based NFT is digitally signed and time-stamped, resulting in a secure and verifiable audit trail of the asset the NFT represents.
When data is transformed into an NFT, the creation, modification, sharing, and consent of the data can all be tracked, resulting in a verifiable audit trail that allows businesses to comply with applicable rules.
The NFT for enterprises can be exchanged between enterprises on a private blockchain. At the same time, the audit trail can be maintained on a public blockchain, allowing auditors and regulators to check for compliance.
Large volumes of data are being produced and consumed due to advances in digitalisation and connected technology. Due to incentivisation, regulatory, and technological hurdles in data sharing among organisations, the potential for creating value from this data stays locked up.
Considering data is the "new oil," companies must embrace data-sharing rules to compete and innovate in the long run. Enterprise NFTs enable enterprises to treat data as a valuable asset that they can share safely and securely.