First class review Centrifuge: connecting real-world assets to DeFi

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Centrifuge recently launched the trial network Altair on Kusama. Holders of Centrifuge tokens will receive Altair’s token AIR 1:1.

Author: First Class

The current DeFi market is in full swing. Various DeFi products such as AAVE, Maker, Compound, Year, etc., have shined in the ecology of Ethereum, BSC, Solana, etc., and most of these products are decentralized replicas of traditional financial products. , Such as various derivatives agreements and margin trading leverage on Ethereum. The problems faced by these products based on encrypted native assets are: they cannot solve the problem of DeFi’s current asset scale and the stock market. It is also difficult to solve the problem of too small an asset scale and fighting in the stock market. Have an impact on the existing economy. Going out of the stock market, putting physical assets on the chain, or one of the ways to expand the current DeFi market.

Centrifuge is a DeFi protocol on Polkadot, which can bridge assets such as invoices, real estate and royalties to DeFi, and mortgage physical assets in smart contracts in the form of NFT. Borrowers can use their own real assets for financing without a bank or other intermediary, and use the tradable and mortgageable NFT to realize a diversified DeFi product experience.

Introduction to Fundamentals

team

Centrifuge was founded in 2017 and was co-founded by Lucas Vogelsang, Maex Ament and Martin Quensel. Currently, there are 35 teams on LinkedIn. One of the founders, Maex Ament, has long been engaged in traditional supply chain finance and has many years of industry experience. Software engineer Alina Sinelnikova graduated from Massachusetts Institute of Technology with many years of development experience. Other core members are in traditional finance. The industry and technology development all have good capabilities. Centrifuge is promoted by the Berlin Investment Bank’s Pro FIT program and is jointly funded and developed with the European Regional Development Fund (EFE).

funds

  1. Received a $3.8 million investment led by BlueYard Capital and Mosaic;
  2. Received US$3.7 million in financing led by Crane Venture Partners;
  3. Through the Simple Agreement for Future Tokens (SAFT), it completed $4.3 million in financing, led by Galaxy Digital and IOSG, and participated in the investment by Rockaway, Fintech Collective, Moonwhale, Fenbushi Capital, TRGC and HashCIB.

Cumulative financing : USD 11.8 million. At the same time, Centrifuge will conduct a token sale on Coinlist on May 26. Participating users need to register before 23:59 UTC on May 21 (approximately 8:00 on May 22, Beijing time).

Business mechanism

The current Centrifuge ecosystem includes Centrifuge Chain (bridged to Ethereum), Tinlake Lending DApp, and P2P messaging protocol. Among them, the main product of Centrifuge of Tinlake is for the C-side.

Tinlake is an asset pool based on smart contracts. Asset promoters can create an asset pool and mortgage the asset as NFT for financing. Each asset pool has two tokens: TIN and DROP. TIN is a risk token. Investors who invest in TIN tokens need to bear the risk of asset default, but they can get a higher return. DROP is a stable token, which allows investors to avoid the risk of default and obtain stable returns. Investors can join and exit the asset pool at any time, and asset promoters can continuously redeploy the provided assets unless the investor redeems the asset. Different physical assets will correspond to corresponding pools. There are currently 9 pools on the Tinlake application side, including: lending, trade, supply chain finance, music media and other assets, such as ConsolFreigh’s pool:

Figure 1 ConsolFreight asset pool

We can see that the total asset value of the pool is 490,264 DAL, the number of assets is 21, and the average expiration time is 46.4 days. The price of DROP token is 1.0283, and the annual interest rate is expected to be 8%. The price of TIN token is 1.0705, and the rate of return is floating.

The above figure shows that DROP tokens are protected by TIN tokens. This is because in the income distribution, the income of DROP tokens has priority over TIN tokens, but it is a fixed proportion of income. For example, the asset promoter pledges a physical asset of US$1 million and sets a share of US$800,000 as DROP tokens and a share of US$200,000 as TIN tokens. The payment interest is 9%, and the income interest of DROP tokens is 5%. When the asset is fully returned, investors who invested in DROP tokens can get 5% of USD 800,000 = USD 40,000, and the remaining USD 50,000 in interest will be all allocated to TIN token investors. In terms of the income of TIN token investors, it has a 25% interest return.

When the asset defaults, for example, the default rate is 6%, and the interest income is reduced to 8.46 (94% of 90,000 US dollars). At this time, the income of DROP tokens is not affected, which is still 40,000 US dollars, but Investors of TIN tokens need to bear part of the default losses, and their income will drop to 44,600 US dollars, which is a 7.7% loss compared to the previous loss. If the default rate continues to increase, TIN token investors may lose money.

During the investment cycle, investors who hold TIN/DROP want to redeem (part of) TIN/DROP tokens and can lock these tokens into Tinlake at any time during this cycle. At the end of this period, all locked orders will be processed and executed at the current Tin/Drop price. And as long as you participate in the investment on Tinlake, you can get CFG token rewards.

At the same time, Centrifuge provides a secure and private channel for creating, exchanging, and verifying asset data between collaborators through the P2P network protocol. While protecting the privacy of the asset sponsor’s information, it tokenizes these assets into NFTs. The asset originator can optionally share the detailed information of the asset with the service provider, and the service provider can evaluate the data and submit the information to the NFT being cast.

Currently, Centrifuge’s lock-up volume is 18,144,810 DAL. A total of 77 companies/asset promoters have created pools for mortgage loans. There are 9 asset pools that can be seen on the homepage of the app. Centrifuge has also reached agreements with many financial companies. Long-term partnerships, such as: New Silver (technical non-bank lending institution), ConsolFreight (trade finance and factoring provider), Harbor (supply chain finance).

Economic model

Centrifuge initially released 400,000,000 CFG and distributed it to the foundation and initial contributors, including: the core team, investors, and validators. Since the genesis block, approximately 25 million additional tokens have been minted as block rewards.

First class review Centrifuge: connecting real-world assets to DeFi Figure 2 CFG token distribution

After Centrifuge completes the ICO, starting in July 2021, the core contributors and early supporters will be released linearly for one year. Most of the CFG will be locked for a long time, and the block reward part will not be locked. The specific release conditions are as follows:

First class review Centrifuge: connecting real-world assets to DeFi Figure 3 Token release

At the same time, in order to pay for PoS block rewards, it is expected that an additional 3% of CFG tokens will be minted each year, but the tokens used to pay transaction fees will be burned to stabilize the total supply of CFG tokens.

The main purposes of CFG are pledge, payment of transaction fees, and participation in governance, such as: 1) Reward liquidity providers in Tinlake; 2) Pay transaction fees and be burned to make the token supply stable for a long time; 3) CFG can bridge In Ethereum, WCFG can be used as an ERC20 token; 4) Participate in community governance, and issue proposals to modify the fee structure and risk model.

Overview

  1. As a DeFi protocol, Centrifuge allows financing demanders to mortgage their assets and introduce them to the chain in the form of NFT. DeFi provides various financing methods for assets, opens the door for the real economy to enter DeFi liquidity, and attracts trillions of dollars in value from traditional finance.
  2. Before the off-chain assets are put on the chain, the centralized partners of Centrifuge will conduct a risk assessment. The P2P protocol protects the information security of the asset originator, but lacks a decentralized mechanism to provide additional guarantees for the assessed assets. If centralized If the partner commits evil or generates moral hazard, it will directly affect the investor’s income on the chain. There will always be a centralized part of assets on the chain, so Centrifuge needs to implement more decentralized mechanisms to ensure the security of assets off-chain and on-chain.
  3. Centrifuge has announced its cooperation with Maker, Centrifuge can provide transparency of off-chain assets, and Maker can provide credit lines for on-chain assets. The current Maker agreement has billions of collateral. Asset promoters can NFT real-world assets and put them on the Maker platform for mortgage to obtain loan lines. Maker is an agreement that operates around the clock, with no intermediaries, no regulatory restrictions, low interest rates, and instant liquidity with minimal capital costs. The collaboration between Centrifuge and Maker complements each other.
  4. Centrifuge recently launched Altair, which is the Kusama version of Centrifuge. Using the same code base and token model, Kusama will be online earlier than Polkadot, giving Altair a first-mover advantage. When Altair goes online, CFG holders will receive Altair’s token AIR 1:1, becoming an early liquidity player in the Altair network, and Centrifuge will remain on Polkadot. The simultaneous operation of the two allows Centrifuge to more fully cover the two cross-chain DeFi systems.

Disclaimer: As a blockchain information platform, the articles published on this site only represent the author’s personal views, and have nothing to do with the position of ChainNews. The information, opinions, etc. in the article are for reference only, and are not intended as or regarded as actual investment advice.

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