Bring trillions of assets into crypto finance, Centrifuge bridges DeFi and the real world

Time:2021-12-24 Source: 3686 views DeFi Copy share


Encrypted finance has always been eager to embrace the mainstream society, link up with traditional finance, and introduce incremental funds.

However, this vision is too ambitious, requires too many elements and conditions, and faces many difficulties, so that there are only a handful of projects that are truly working in this direction. MakerDAO, known as the "crypto central bank", is one of them and one of the best. MakerDAO has tried many times to introduce real-world assets into the encrypted market, and has successively provided financing for real assets such as real estate and music copyright. Even Societe Generale also likes it.

However, the company behind MakerDAO that provides technology and service support, Centrifuge, is little known. The project is committed to bridging real assets such as invoices, real estate, and royalties to DeFi, providing companies with convenient and low-cost financing channels, reducing financial intermediary obstacles; at the same time, providing investors with high-quality investment categories and obtaining stable returns.

In the four years since its establishment, Centrifuge has been integrated with multiple DeFi protocols such as MakerDAO and Aave, and will be launched in the Polkadot ecosystem to truly realize the barrier-free flow of DeFi and real assets.

The road is long and difficult, how far can Centrifuge go?

1. Real assets expand the DeFi boundary

In the past two years, DeFi (decentralized finance) has ushered in a period of rapid development. Whether it is the number of projects or the amount of funds locked in the chain, the increase has reached hundreds of times.

The prosperity of DeFi is not an accident, but a real solution to traditional financial pain points and to cater to market demands. Taking the traditional lending market as an example, the barriers to entry are very high, and the asset review and lending process are more complicated and cumbersome. In contrast, decentralized lending can be entered without permission, 7*24 hours trading, and faster lending. Especially after the tokenization of real assets, its liquidity has also been increased.

It is with these advantages that DeFi has been able to break out in the past two years. Data on the chain shows that the current lock-up value of the entire DeFi ecosystem is approximately US$250 billion. But judging from the data in the past few months, the growth has slowed down significantly. One fundamental reason is that DeFi is currently mainly competing for inventory.

Take lending as an example, although a number of leading projects such as Aave, Curue, and Compound have emerged, and they have shined in the ecology of BSC, Polygon, and Solana. But these products are essentially homogenized competition based on encrypted native assets. Although the data is eye-catching, it hasn't had much impact on the traditional world. Moreover, the current US$250 billion seems to be an astronomical figure, but there is also a lot of water, and many projects have double mortgages, so the real encrypted mortgage demand may have to be discounted.

Today, the development of DeFi has reached a bottleneck period. Expanding outwards, out of the small world of encryption, and embracing real-world assets is the right way. From the perspective of development prospects, the world scale of global real estate financing alone has reached trillions of dollars, not to mention other credit and financing needs.

"In our opinion, DeFi is a major trend in the future of financial reforms, and its essence is to solve all trust problems. The future of DeFi should also be linked with the traditional financial industry, bringing trillions of dollars of real-world assets into encryption In the market, the future of this track is very bright.” The Centrifuge team said.

Physical assets are on the chain, which is also the direction that many projects have tried hard in the past few years, but they all failed in the end. The main reasons are as follows: First, the timing is not ripe. Such projects prospered around 2017, when the industry education had not yet been completed, and the mainstream world's recognition of crypto assets was low, coupled with the 2018 bear market, many projects died prematurely. The second is that the plan is immature. Previously, many projects were issued ERC20 tokens for financing, but there were no physical assets to mortgage or the assets were overvalued. Basically, they were cashed out in hype project tokens, and there was no real financing demand.

Nowadays, with the completion of market education and NFT becoming a more widely accepted asset carrier, the real world is more closely connected, and real assets are once again on the agenda. It is only because of the previous "failure" of the pseudo-demand project that the crypto market now wears colored glasses for long-term projects that truly promote the on-chain of physical assets.

But in the long run, the future of encrypted finance, especially DeFi, should be linked with traditional finance, and real assets can be introduced into the encrypted market to achieve industry growth.

This is a business that must be maintained for a long time. The "crypto central bank" MakerDAO has always been moving forward. Behind MakerDAO's ideals is Centrifuge's silent hard work to build a bridge to DeFi for real assets. For example, in April of this year, MakerDAO announced that it would open a credit line of up to 5 million U.S. dollars for the real estate company New Silver, and this loan was realized with the help of Centrifuge's lending platform Tinlake.

"Centrifuge's mission is to connect asset promoters and investors, make financing activities transparent and efficient, and create new opportunities for borrowers who have not been able to obtain DeFi liquid funds so far, and get rid of the intermediaries, inefficiencies and inefficiencies in the traditional financial industry. High cost. We provide DeFi investors with a stable source of income and can obtain a safer and stable rate of return." The Centrifuge team told Odaily Planet Daily.

2. How to carry out encrypted financing of real assets?

Since its establishment in 2017, Centrifuge has gone through four years. At present, the Centrifuge ecosystem mainly has the following parts:

Centrifuge Chain, a POS blockchain built on Substrate, is also the location of real world assets (RWA) on the chain. Centrifuge Chain has been bridged to Ethereum, but using its own native token, Centrifuge (CFG) token, will be bridged to the Polkadot network in the future.

Tinlake, a decentralized lending protocol based on Centrifuge Chain, serves as an open market for real-world asset pools. It is also Centrifuge's main product and faces the C-side.

The P2P network protocol provides a secure method to create, exchange, and verify asset data between partners, and tokenize assets into NFTs. The asset originator can selectively share asset details with the service provider, and the service provider can evaluate the data and provide information to the minted NFT. You can use cryptographic signatures to verify the source of the data.

CFG tokens, Centrifuge's native tokens, can provide incentives for the safe operation of the network, and token holders can also guide project development through on-chain governance. More importantly, users who provide liquidity to Tinlake can also receive CFG rewards.

So, how does Centrifuge convert real-world real assets into encrypted assets for financing?

(1) Process explanation

Below, we take the music streaming platform Paperchain as an example to explain the operation logic of Tinlake in detail.

First, music creators register with Paperchain and upload their music integration data on various platforms (currently Merlin, Spotify, Apple, and YouTube); Paperchain uses its own data model to set prices and predict its future streaming revenue ( Tentatively referred to as "accounts receivable").

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