If ICOs were the theme of 2017, stable pieces of 2018, DeFi certainly seems to dominate 2020.
Now, Centrifuge, a company founded in 2018, is looking to make its mark in space with the launch of new products. The firm's thesis seeks to allow individuals and businesses to free up capital and finance real-world assets via a large, but decentralized, funding pool.
Tokenization of real world assets
Referring to DeFi, Centrifuge recognizes that it is in the midst of a young ecosystem that is "ready to prove itself in the world of finance". The company is building a framework for lending to real-world assets, which allows businesses around the world to tap into new capital.
Today, the company is launching two major versions: an asset-backed loan Dapp called Tinlake, and the general availability of the main network of the centrifuge chain.
Tinlake, the dApp, offers two pools: a pool of shipping invoices in partnership with ConsolFreight and a music streaming pool which uses Paperchain data. So far, the former has funded 49 freight invoices totaling 278,000 DAI , and information on the latter's pool for Spotify invoices can be assessed here.
Centrifuge notes that the “investor side” should be even more decentralized, as the two pools have requested that MakerDAO be guaranteed against MCD.
In a version shared with CryptoSlate , the firm noted that crypto-assets remain highly correlated, which causes instability with most DeFi systems. For example, MakerDAO suffered a $ 4 million crisis in March after ETH's guaranteed positions on the platform were reduced to zero when the ether fell 45% in two trading sessions .
But according to Centrifuge, using real-world assets as collateral avoids and even solves the above problem.
Tinlake and NFTs
Tinlake allows investors and borrowers to finance their own asset pools. Its smart contracts are open source and easily integrate into the DeFi ecosystem. The native “centrifuge chain” is used to create individual non-fungible assets used as collateral for loans.
The centrifuge chain, on the other hand, is the block of proof of participation without authorization from the company built on the substrate. It is touted as the "starting point for creating real-world assets" and a one-stop platform for deploying assets as "non-fungible tokens" on the chain.
Here's how Tinlake works; Asset creators launch their Tinlake pools, making them available to everyone to invest. Investors can browse a list of pools to be funded based on asset type and risk. All of this happens without third parties; and transactions are settled with confidence on the chain.
The graph below illustrates:
NFTs are easily linked to Ethereum from day one. The centrifugation chain is fed by the Radial token, which gives the holder governance and encourages the validators to operate the chain. Centrifuge launches with 10 validators securing the chain.
Using Centrifuge Chain and Tinlake, any business can now generate real assets online and access liquidity through Centrifuge.
Tinlake issues DROP and TIN tokens based on ERC20 against a loan portfolio. These tokens are stable, supported by individual loans, but also bear interest: this creates a whole new way of participating in DeFi and crypto.
Centrifuge Chain and Tinlake.js are open source platforms. Developers can rely on Centrifuge Chain and develop their own decentralized asset finance protocol with Tinlake.js.
DeFi has a lot to develop
DeFi systems like Centrifuge and Tinlake force to move away from centralized financial systems, swelling fiat currencies, unverifiable asset finance and the damaging effects of trade wars. These systems help cut red tape and mitigate risk with better data and untrusted technology.
Founder Lucas Vogelsang believes the DeFi ecosystem has a lot to offer beyond trading-based platforms, which seems to be the flavor of the day. He explains:
It is only when we move from building DeFi only for crypto traders to meeting the needs of the average Joe, that DeFi will become truly decentralized and open to all. Integrating real-world assets into DeFi is the first step for DeFi to fulfill this promise.
"Our chain is designed as a foundation for the decentralized financial network, providing the gateway for any real-world asset to enter the blockchain multiverse," said the statement.