DeFi introduces real asset pledge, is it reliable.

The OKEX market shows that 24 hours after the vote was passed, the MakerDAO governance token MKR rose by 30%, reversing the decline and setting a new high this year-749 USDT, as the earliest DeFi (decentralized finance) lending project on Ethereum Compared with Compound and other DeFi upstarts, the early MakerDAO has been quite conservative in accepting collateral.

Before November 2019, MakerDAO had been single mortgage (Sai) and only accepted ETH as collateral; then it was converted to multi-collateral (Dai), and successively accepted BAT, USDC and WBTC as collateral.

But this time, MakerDAO extends the lending boundary to real assets, which seems to be ahead of other lending agreements.

How to convert real assets into stablecoin DAI? Why should real assets be introduced into DeFi? What problems can DeFi solve, and can it bring liquidity to real assets? Will breaking the barriers between the encrypted world and the real world be the way forward for DeFi? This article, Odaily Planet Daily, will try to answer these questions.

According to reports, the proposal to convert real assets into MakerDAO collateral was made by a startup called Centrifuge.

The company created a lending platform called Tinlake based on the Centrifuge protocol it developed. On the Tinlake platform, asset promoters can convert real-world assets (invoices, mortgages, auto loans, or royalties) into tokens for loan financing; simplify the financing process to reduce costs, thereby improving the liquidity of physical assets and Transparency of investment.

Currently, Centrifuge has reached cooperation with Paperchain and ConsolFreight to tokenize music streaming royalties and trade invoices.

1. Detailed process

Below, let's take Paperchain as an example to explain in detail how real music royalties are converted into stablecoin DAI?

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").

Then, Paperchain packaged the accounts receivable and sent it to the Tinlake platform to generate non-homogeneous tokens (NFT) with legal effects; then convert the NFT into interest-bearing ERC20 tokens, and Paperchain can set the revenue of the tokens Rate and number of issuances.

Investors use the stablecoin DAI to purchase these interest-bearing ERC20 tokens for investment; these stablecoins will be sent to Paperchain and converted into legal tender by it.

DeFi introduces real asset pledge, is it reliable?

At this point, although the accounts receivable have not yet arrived, music creators can directly advance their copyright income from Paperchain.

When the accounts receivable arrive, Paperchain obtains the income of the music creator, and then redeem the CRC20 tokens purchased by the previous investors and destroy them, thus forming a complete closed loop.

The above is the default general version of Tinlake. After joining MakerDAO, the "investor" in the above process becomes MakerDAO, that is, MakerDAO accepts interest-bearing ERC20 tokens as collateral and generates DAI, as shown below:

DeFi introduces real asset pledge, is it reliable?

2. Issues that need attention

After understanding the entire operation process, there are a few more questions to explain:

First of all, there are currently two interest-bearing ERC20 tokens generated by Tinlake: Tin and Drop.

Drop tokens are similar to senior bonds in traditional financial investment portfolios, with small returns, which are generally fixed and less risky; Tin tokens are similar to primary bonds, with high returns, but they first assume the risk of default, and only Drop tokens are all When it is redeemed, Tin tokens can obtain investment returns, which is more risky and may lose principal.

DeFi introduces real asset pledge, is it reliable?

In addition, if the asset promoter does not want to issue two tokens to set up an investment portfolio, it can also issue only one token, but it must be Tin. If TIN and Drop are issued, different types of assets have different TIN issuance ratios.

For example, in the freight invoice of Consolfreight, the TIN issuance ratio is at least 10%. This means that only when the loss exceeds 10% of the value of the portfolio, the holder of the Drop token will incur losses.

Second, the asset originator can create a separate Tinlake pool (asset pool) for each asset type, for example, a Tinlake pool for invoices and a Tinlake pool for mortgage loans.

All Tinlake pools are independent of each other, and interest rates are configured separately. Therefore, each group of Tin and Drop is unique and not universal. For investors, risks and benefits are limited to the Tinlake pool they belong to and cannot be shared across Tinlake pools.

Furthermore, the current conversion of real assets into cryptocurrency is not open to everyone. For example, ConsolFreight and Paperchain are both located in the United States, so they must comply with U.S. securities laws. This means that you must be a U.S. citizen and qualified investor, otherwise you will be turned away.