In-depth analysis of decentralized asset financing protocol Centrifuge

Real-world assets exist off-chain, and owners can obtain expected benefits from them. Related ownership benefits are regulated by the legal system and rooted in our social contract. For the crypto world, Real World Asset Tokenization can help crypto capital capture real-world business activity opportunities; for the real world, RWA can help assets capture the instant liquidity of the crypto world.

In the article “Citi RWA Research Report: Money, Tokens and Games” compiled by us, Citi stated that tokenization can connect the on-chain and off-chain and help the industry achieve one billion users and ten trillion asset values in 2030. As the first protocol to bring real-world assets to the chain, Centrifuge provides a channel to incorporate RWA assets into the decentralized financial system on the chain, helping RWA assets achieve iconic implementation in the crypto world.

This article is an extension of the previous article “RWA Ten Thousand Words Research Report: Dismantling the current implementation path of RWA and exploring the development logic of future RWA-Fi”. It will conduct an in-depth analysis of Centrifuge from the nature of RWA to further understand the encryption world’s impact on RWA. needs, sort out the transformation of Centrifuge from a start-up project to RWA financial infrastructure, and explore the possible exploration of future projects in the RWA field.

1. The essence of RWA

Before looking at Centrifuge, it is necessary to sort out the essence of RWA from my personal perspective (especially from the perspective of Crypto RWA). This will help us understand the current RWA market structure in the encryption world from a macro level, and find a solution like Centrifuge. Positioning of the agreement/project.

As shown in the figure above, the most important aspects of RWA are the asset side and the capital side, and both sides have their own needs.

The demand for assets in the real world is financing, whether through Security Token Offering or mortgage lending (Centrifuge). The essence of asset financing has not changed, but what has changed is the source of capital obtained—the instant liquidity of DeFi, as well as the cost reduction and efficiency increase in financing channels that blockchain and smart contracts can bring (such as the Centrifuge protocol).

The demand on the capital side of crypto capital is investment. How to capture real-world assets with low risk, stable interest-earning, scalability, and nothing to do with crypto fluctuations is the key. From a stability perspective, stablecoins are a key use case, as they serve as a medium for transactions and are not affected by crypto fluctuations; from a stability + interest-earning + scale perspective, U.S. bond RWA is a key use case, helping to capture risk-free returns.

More importantly, RWA can create U-based interest-bearing assets and become a new asset class in the crypto world. On this basis, the composability of this U-standard interest-bearing asset class + DeFi can bring a lot of room for imagination, such as interest-bearing stablecoin projects and the recently popular interest-bearing Layer 2 projects.

After identifying what I believe to be the core of RWA, it becomes evident how Centrifuge fits into the RWA ecosystem. As a channel, Centrifuge enables off-chain assets to access liquidity from the crypto world and streamlines financing through blockchain and smart contract technology. This ultimately leads to an increase in efficiency.

2. Introduction to Centrifuge

2.1 Project Introduction

Centrifuge is a decentralized RWA asset financing protocol that aims to bring real-world assets to the chain, allowing borrowers to finance without banks or unnecessary intermediaries and create on-chain loans on Centrifuge through asset mortgages. Pool that helps borrowers access instant liquidity in the crypto world.

By integrating the entire private credit market onto the chain (securitization, tokenization, DAO governance and liquidity), Centrifuge is building a decentralized financial system that is more open and transparent, has lower capital costs, and provides round-the-clock liquidity (The Platform for Onchain Credit) to reduce capital costs for small and medium-sized enterprises and provide DeFi investors with a stable source of income independent of crypto market fluctuations.

In the traditional financial system, due to the lack of an open and transparent lending market, low capital efficiency and high transaction costs, some small and medium-sized enterprises are unable to obtain competitive financing conditions. DeFi is a financial system that has no threshold, is open to everyone in the world, and is constantly maturing. Centrifuge hopes to bring the benefits of DeFi to all borrowers who have thus far been unable to access DeFi liquidity.

As a crucial financial infrastructure in the RWA market, Centrifuge has emerged as a leader in private credit for RWA (Real World Asset) securitization, securing financing for assets worth $494 million and currently having a Total Value Locked (TVL) of $250 million. Centrifuge has created a significant number of RWA asset pools for MakerDAO and, along with Aave, has launched an RWA market, working together with BlockTower to bring the operations of the first credit fund onto the blockchain.

2.2 Team and Financing

Centrifuge was launched in 2017 by Lucas Vogelsang and Martin Quensel.

Lucas Vogelsang, Centrifuge’s founding engineer, serves as the company’s CEO. Previously, Vogelsang founded and successfully sold an e-commerce startup called DeinDeal. Vogelsang then moved to Silicon Valley and joined Taulia as a technical manager. Centrifuge company was jointly established in October 2017.

Martin Quensel, co-founder of Centrifuge, is now Chief Operating Officer. Quensel started his career at SAP as both a software developer and architect. Before founding Centrifuge, he worked as a co-founder of Taulia.

Centrifuge’s financing history is as follows:

In February 2021, Centrifuge received US$4.3 million in financing through SAFT, led by Galaxy Digital and IOSG, with participation from Rockaway, Fintech Collective, Moonwhale, Fenbushi Capital, TRGC and HashCIB.

On May 18, 2022, Centrifuge established a $3 million (Treasury Token Sale) strategic partnership with BlockTower. BlockTower has become a very active member of the Centrifuge community and has provided $150 million in real-world assets to MakerDAO through Centrifuge.

In November 2022, Centrifuge completed US$4 million in financing, with participation from Coinbase Ventures, BlockTower, Scytale and L1 Digital.

The strong VC lineup brings Centrifuge a wealth of assets, funds, compliance and other resources.

3. Centrifuge’s key business architecture

As a platform/protocol, Centrifuge focuses on opening up the channel between the off-chain asset side and the on-chain capital side, and reducing costs and increasing efficiency through blockchain and smart contracts. The current Centrifuge DApp has integrated the previous Ethereum-based Tinlake protocol (which serves as an open market for the RWA asset pool and accesses Ethereum liquidity), and uses Centrifuge Chain to achieve fast, low-fee transactions and cross-chain Liquidity capture (built on the Polkadot Substrate framework becomes the Polkadot parachain to achieve cross-chain).

The most important thing in the business architecture is the Tinlake protocol, which is an open asset pool based on smart contracts. It converts real-world assets into ERC-20 tokens through NFT mortgages and provides liquidity access in the crypto world. It is Centrifuge Previously the main front-end product.

Since its launch 4 years ago, Tinlake has made significant contributions to Centrifuge. These include creating the world’s first RWA asset pool for MakerDAO, launching the RWA market with Aave, and collaborating with BlockTower to operate the first credit fund on the blockchain.

In May of this year, in order to provide a better user experience, Centrifuge officially launched a new safe, reliable, and simple upgraded version of DApp, which is gradually replacing the Tinlake protocol. However, some core functions and business logic of the Tinlake protocol are still applicable, including assets. Chain, investment structure layering, on-chain net worth, circulating capital pool, etc.

3.1 Asset on-chain logic (borrower, SPV, Centrifuge asset pool)

Borrowers can tokenize real-world assets in Centrifuge’s asset pool through the SPV established by the Asset Originator, thereby obtaining stable currency funds from investors on the chain. The entire asset on-chain logic adopts the logic of asset securitization that has been operating in traditional finance for many years, and connects DeFi liquidity through the Centrifuge asset pool.

The logic of asset on-chain is as follows:

1. Borrower intends to finance its real-world assets (such as real estate loans, accounts receivable, invoices, etc.);

2. The asset sponsor (who has business dealings with Borrower and assumes some underwriting functions) establishes an independent special purpose company SPV for Borrower’s real-world assets (the SPV, as an independent financing entity, plays the role of insulating from the bankruptcy of the asset sponsor);

3. The asset initiator initiates and verifies Borrower’s real-world assets in the SPV, and casts an NFT on the chain related to the status of the real-world assets;

4. Borrower signs a financing agreement with the SPV and mortgages the NFT in the Centrifuge asset pool to connect DeFi liquidity;

5. SPV is only used as a pass-through financing tool, and its business scope is strictly limited and agreed through the SPV Operating Agreement;

6. The Centrifuge asset pool provides stable coins such as DAI to the SPV, and transfers funds to the Borrower account through the SPV;

7. The capital flow of the entire transaction only involves Borrower, SPV, and Centrifuge asset pools (connected to DeFi liquidity);

8. Finally, Borrower repays the principal and interest to the SPV according to the financing agreement, and deposits money through the SPV to return the Centrifuge asset pool. After the repayment is completed, the Centrifuge asset pool will unlock the NFT and return it to the asset initiator for destruction.

3.2 Centrifuge asset pool investment logic (structured layering)

After the assets are uploaded to the Centrifuge asset pool, Centrifuge asset pool introduces investment opportunities with different risk levels and return rates for DeFi investors through the design of structured products. Investors can purchase products that match their risk tolerance and return expectations.

Generally speaking, Centrifuge Asset Pool’s structured products offer two ERC20 tokens: DROP and TIN. Let’s take the asset pool of BlockTower S4 in the picture above as an example.

The DROP token is a Senior Tranche that represents the fixed interest rate portion (3.98%) of the Centrifuge asset pool and generally has lower risk and lower returns. DROP token holders have priority in profit distribution from the asset pool and have smaller risk exposures (such as loan defaults).

TIN tokens are junior and represent the floating rate portion of the Centrifuge asset pool (18.92%), which generally carries higher risk and higher returns. Compared with DROP tokens, TIN token holders have a lower priority in the profit distribution of the asset pool and have greater exposure in terms of relative returns and risks.

In the waterfall model below, although junior products (Junior) provide high returns, in the event of default, junior investors will first bear losses; similarly, senior products (Senior) provide stable and relatively low returns. rate, but in the event of default, losses will be borne in the end (subordinate and mezzanine investors will be the first to bear the risk).

Investors can invest according to their own risk preferences, which usually includes the following steps:

1. Investors first need to complete the KYC and AML certification processes on Centrifuge DApp;

2. After passing the certification, investors can review the SPV asset summary (Executive Summary) corresponding to the Centrifuge asset pool and sign an investment agreement (Subscription Agreement) with it, which includes the investment structure, risks, terms, etc.;

3. Investors can choose to use stable coins such as DAI to purchase DROP or TIN tokens later;

4. Investors can request to redeem their DROP or TIN tokens at any time.

3.3 Centrifuge Chain realizes multi-chain liquidity capture

Centrifuge previously built asset pools through the Tinlake protocol to capture liquidity on Ethereum (including multiple RWA asset pools from MakerDAO). In order to expand into a broader encryption world, Centrifuge is currently building the Polkadot parachain of Centrifuge Chain on the Polkadot Substrate framework to open up more EVM compatible chain scenarios, hoping to capture more flows on Layer 2. properties (such as Base, Arbitrum, etc.).

As a result, Centrifuge Liquidity Pools based on Centrifuge Chain came into being. Investors on any EVM-compatible chain can directly invest in the Centrifuge protocol through Centrifuge Liquidity Pools without switching any wallets and other operations.

CentrifugeLiquidity Pools serve as a bridge between various chains.

Since the launch of Centrifuge DApp in May this year, several blockbuster projects based on Centrifuge Chain will also be launched soon, such as Anemoy Liquid Treasury Series 1 (U.S. debt RWA asset pool suitable for Aave Treasury), New Silver Series 3 (real estate bridge loan Fund pool), Flowcarbon Nature Offsets Series 2 (voluntary carbon emission project in cooperation with Celo).

4. Current project progress of Centrifuge

As the first decentralized RWA asset financing protocol, thanks to its cooperation with MakerDAO, Centrifuge has become the project with the highest TVL in private credit in the DeFi market, exceeding US$250 million. At the same time, Centrifuge is also building a U.S. debt RWA market to attract funds from crypto capitals such as Aave Treasury.

4.1 Cooperate with MakerDAO to become the king of private credit

Since Centrifuge cooperated with BlockTower to create the first RAW asset pool in MakerDAO in 2019, it has continued to explore the potential of RWA for MakerDAO. The BlockTower series and New Sliver series created still account for the majority of MakerDAO RWA asset pool.

We can see through Centrifuge DApp that among the 14 currently active asset pools, 8 are specifically designed for MakerDAO, and the TVL of these 8 Maker Pools account for more than 80% of the total TVL of Centrifuge (the Maker Pool here includes (including the Senior Tranche portion subscribed by MakerDAO and the Junior Tranche portion subscribed by asset sponsors). If the share subscribed by MakerDAO is calculated separately, it exceeds more than 50% of Centrifuge’s total TVL.

In addition to the Maker Pool, we also see asset pools from some other asset issuers. The underlying assets involve shipping invoices, payment advances from financial technology companies, inventory financing, commercial real estate, consumer loans, and accounts receivable. , structured credit and other various private credit financial instruments.

Currently, MakerDAO’s largest RWA asset pool is BlockTower Andromeda (TVL 1.21 billion) and Monetalis Clydesdale (TVL 1.15 billion), both of which are U.S. debt RWA projects. It can be seen that crypto capital has a stronger demand for U.S. debt RWA. It also prompted Centrifuge’s determination to enter the U.S. debt RWA market from the private credit field.

4.2 Cooperate with Aave to enter the U.S. debt RWA market

As early as December 28, 2021, Aave announced the launch of the RWA market, which is built on the 7 asset pools of the Centrifuge Tinlake protocol and requires KYC to invest. Aave investors can deposit stable coins to obtain reality Asset stability and interest-bearing income.

The Aave RWA market is essentially an asset pool on Centrifuge that borrows liquidity from Aave investors, and has always been tepid. Until the Aave community proposed on August 8, 2023, to cooperate with Centrifuge to invest the stablecoins in the Aave vault into RWA assets.

The proposal states: Currently, 65% of the assets in Aave’s treasury exist in the form of stablecoins (approximately $15 million). Then you only need to invest $5 million in RWA assets to obtain a risk-free return of $250,000 (based on U.S. debt RWA 5% risk-free rate of return), this will become one of the most profitable ways for DAO at present.

Centrifuge takes advantage of the situation and launches Prime service to help Aave realize the compliant procurement path of RWA assets. This service is designed to help crypto capital/DeFi protocols/DAO vaults capture the return value of real-world assets (such as U.S. Treasury risk-free returns). Through this cooperation with Aave, Centrifuge created a U.S. debt fund and entered the U.S. debt RWA field.

The Centrifuge Prime service shown above is divided into two parts:

Step 1: Legal Wrapper needs to be carried out for the DeFi protocol on the chain, such as setting up a special legal entity for Aave - the Cayman Foundation. On the one hand, this legal subject can replace the unlimited liability of DAO members. On the other hand, it can also serve as an independent subject that implements RWA value capture. It is governed and controlled by the Aave community and serves as a bridge between DeFi and TradiFi.

Step 2: Centrifuge will set up a dedicated asset pool for Anemoy Liquid Treasury Fund 1. Unlike previous asset pools where the underlying assets were private credit assets (private credit assets were loaded into SPV, NFT was generated and mortgaged into the corresponding Centrifuge asset pool), this time the underlying assets of the Anemoy Liquid Treasury Fund 1 asset pool are U.S. bonds. The Anemoy LTF fund holding U.S. debt assets needs to be directly tokenized.

As shown in the picture above, Anemoy LTF is a fund registered in the BVI. The fund is first tokenized through the Centrifuge protocol; then, Aave invests the treasury funds in the Centrifuge asset pool corresponding to Anemoy LTF, and generates fund token certificates; after that , the Centrifuge asset pool allocates the assets invested by the Aave treasury to the Anemoy LTF fund through the agreement; finally, the Anemoy LTF fund purchases U.S. Treasury bonds through deposits and withdrawals, custody, and brokers to realize the return of U.S. debt on the chain.

Although the initial amount in the Aave proposal is US$1 million, it is just a trial in the early stage. After all, there are still US$15 million in stablecoin assets in the Aave treasury. It is expected that 20% of the stablecoin holdings in the Aave treasury will be invested in it in the future.

More importantly, Centrifuge can enter the U.S. debt RWA market through this move, which is characterized by risk-free, stable interest-earning, and scalability. The TVL of some U.S. bond RWA projects currently reaches $779 million, and MakerDAO’s U.S. bond RWA holdings have reached more than $2 billion.

5. Centrifuge Tokenomics and Governance

5.1 Centrifuge Tokenomics

CFG is the native token of Centrifuge Chain, used to incentivize the operation of network protocols and the sustainable development of the ecosystem.

According to data from the official website, the initial total supply of CFG is 400 million (annual inflation rate is 3%), and the current total supply is 425 million. CFG has several major use cases such as network node pledge incentives, on-chain payment transaction fees, asset pool liquidity incentives, pledge to obtain financing qualifications, and participation in governance. CFG token supply distribution is as follows:

Most of CFG’s tokens have long-term lock-up periods. Core team members have a 48-month lock-in period after joining, followed by a 12-month linear release.

Centrifuge previously conducted two rounds of Token Sale on Coinlist on May 26, 2021. The supply of tokens in each round was limited to 17 million, and the first round price was $0.55 (can be unlocked directly on July 14, 2021). The second round price is $0.38 (unlocked linearly over two years after July 14, 2021).

5.2 Governance of Centrifuge

We can see that Centrifuge products and protocols were previously dominated by the Centrifuge start-up team. In recent years, they have gradually transitioned to the dominant form of Centrifuge DAO. The Centrifuge start-up team also established K/Factory, Centrifuge Network Foundation, EMBRIO.tech and other organizations, and jointly built the Centrifuge protocol as active contributors, entering a benign and progressive decentralization process.

At the Centrifuge DAO level, in November 2022, the community approved the DAO’s Founding Documents and gradually launched the Protocol Development Group (Protocol and Engineering Group) around the goal of creating an on-chain credit system (Bring the World of Credit Onchain). Coordination Group (Governance & Coordination Group), and Asset On-Chain Assessment Group (Centrifuge Credit Group).

Although the protocol is built on a decentralized network, the inherent risks involved in the off-chain financial asset system cannot be ignored. As a result, the Centrifuge Credit Group, composed of experts in the field of finance and lending, launched the Pool Onboarding Process V2 to further enhance the transparency of the asset onboarding process and control risks.

In addition, as the Centrifuge protocol continues to improve, the community is also actively conducting stimulating discussions on important issues such as the management purpose of the protocol vault and how the protocol charges, further enhancing the effectiveness of CFG. This is very important and will determine the subsequent value direction of CFG.

6. Centrifuge’s RWA narrative

6.1 Cooperate with MakerDAO to create a decentralized financial lending market

RWA’s narrative can also be seen as the narrative of MakerDAO’s DeFi, and it is essential to understand the significance of RWA in the DeFi world from the perspective of MakerDAO.

During the DeFi Summer of 2021, numerous unsustainable DeFi yield products emerged, leading to a collapse in the crypto market and a credit default contagion spreading throughout the ecosystem. While crypto-native assets are crucial to DeFi and offer long-term value differentiation, the current real needs fail to align with long-term development value.

For lending protocols like MakerDAO, a key consideration is: the value of the collateral is stable. We have seen that MakerDAO’s previous collateral included cryptocurrencies with unstable values. This unstable and volatile factor created risks for lending and severely limited MakerDAO’s development space.

Therefore, MakerDAO or DeFi urgently needs a more stable base layer level of collateral to support the large-scale adoption of the stable currency DAI in the crypto world and build a sustainable and scalable path.

As one of the most important issues in MakerDAO, RWA is constantly discussed and verified by the community and is regarded as an important solution. The benefits of RWA include: (1) increasing transparency in market risks and asset usage; (2) providing composability in DeFi; (3) improving accessibility to underbanked and underfunded populations; (4) drawing from larger Capture value in more stable traditional financial markets.

For MakerDAO, RWA has two important characteristics - stability and scale. Furthermore, DAI can expand the scope of use by anchoring assets that are free of cryptographic volatility risks, stable interest-earning, and scalable, especially in today’s market environment where crypto-asset yields are low and U.S. bond yields are high. Through RWA’s value capture, MakerDAO can continue to scale and grow in bear markets and be fully prepared for the next bull market cycle.

Most importantly, RWA can help MakerDAO realize its grand vision: allowing a credit-neutral, decentralized channel to add utility to people’s daily lives and the development needs of enterprises. Through an open chain, community-driven, programmable, and decentralized protocol, we will open up a new DeFi financial market.

However, it is not easy to put real-world assets on the blockchain. It will involve new product architecture design challenges, financial and technical risks, and other unknowns. Ultimately, how to achieve a balance between innovative cutting-edge technology and traditional financial stability requires the joint assistance of RWA industry participants.

6.2 Tokenized Asset Coalition

In September 2023, Centrifuge jointly launched the Tokenized Asset Alliance with Aave, Circle, Coinbase, RWA. The system is unified. The goal is: to accelerate the adoption of tokenized assets on the blockchain by global institutions and jointly promote trillions of dollars of assets on the chain. The Alliance uses a collaborative approach to bring together organizations with a shared vision to enable tokenization for real-world impactful use cases that embody the true value of crypto assets.

The Tokenized Asset Alliance is composed of seven founding members, all of whom are currently the most important players in the RWA field: Centrifuge and Credix are RWA asset financing protocols, representing the asset side; Aave and Goldfinch are DeFi lending protocols, representing the capital side; Circle, Coinbase serves as an important RWA infrastructure, providing stablecoin exchange, asset custody and other services; RWA.xyz is the RWA on-chain data analysis platform; Base is the Layer 2 participating in RWA. The alliance also invites all market participants to join, contribute to the transformation of the current traditional financial system, and jointly build a new open decentralized financial market.

7. Future outlook for Centrifuge

Although we can see the efforts of the Centrifuge team in continuously improving the protocol, as well as the benefits brought by heavyweight capital and top partners, before imagining the bright future of RWA, we still need to talk about the possible development obstacles of Centrifuge.

7.1 Possible barriers to development

From a liquidity perspective, expanding from Ethereum’s Tinlake protocol to Centrifuge Chain’s multi-chain seems to be able to add more scenarios and capture more DeFi liquidity. But from another perspective, has Ethereum’s liquidity reached its peak?

In addition, Centrifuge also needs to break through the limitations of a single major customer (MakerDAO).

From a macro perspective of the encryption market, the current development of RWA is limited by the size of the 1.5 trillion encryption market. The opening up of deposits and withdrawals, the relaxation of supervision, and the education of the public are not an overnight process. However, traditional finance’s first recognition of distributed ledger technology, blockchain payment settlement, and tokenized assets will accelerate this process, especially the approval of BTC ETF.

From the perspective of project governance, how to design Protocol Fees to help CFG capture value and how to make good use of treasury funds to motivate users and ecological development are more realistic issues at hand.

7.2 The improvement of Centrifuge protocol will create more connections

The Tinlake protocol previously deployed by Centrifuge on Ethereum helped it become the leader in the private credit field. The Centrifuge DApp that integrates the Tinlake protocol can bring a richer cross-chain experience. With the improvement of Centrifuge Chain and the continuous launch of Centrifuge Liquidity Pools in Layer2 such as Arbitrum and Base, it will help capture more DeFi liquidity.

The above are the benefits that the improvement of the agreement brings to the financial side. So for the asset side, with the continuous improvement of the governance level, such as the launch of the POP V2 solution of the asset on-chain evaluation team, it will help create a better asset pool to reduce the overall protocol risk.

The most important thing about RWA is the asset side and the capital side. The continuous improvement of the Centrifuge protocol will create more connections between these two sides.

7.3 While consolidating the leadership in the private equity credit field, expand into the U.S. debt RWA field

U.S. debt assets have the important characteristics of being risk-free, stable interest-bearing, and scalable. Therefore, once the crypto market expands, U.S. debt RWA will be more widely applicable. We can see this from the 72.5 billion U.S. debt assets of Tether, the issuer of USDT stable currency, and the largest U.S. debt RWA asset pool of crypto capital MakerDAO.

After Centrifuge has become the leader in the private credit field, it has relatively large room for imagination to enter the U.S. debt RWA market through cooperation with Aave.

Currently, Franklin Onchain Funds alone has $328 million in TVL, followed closely by Ondo Finance with $177 million in TVL. This does not include MakerDAO’s two largest U.S. debt RWA asset pools: BlockTower Andromeda ($1.21 billion TVL) and Monetalis Clydesdale ($1.15 billion TVL).

7.4 Experiments based on USDⓈ interest-earning assets

In the previous article “RWA Ten Thousand Words Research Report: Dismantling the current implementation path of RWA and exploring the development logic of future RWA-Fi”, we stated: The subsequent application logic of USD-based RWA interest-earning assets and ETH-based LSD The application logic of interest-earning assets is consistent. RWA mapping interest-earning assets onto the chain is only the first step. It will be very interesting to use DeFi composability and build DeFi Lego in the future.

Case 1: Interest-bearing stable currency based on U.S. debt.

Mountain Protocol, an interest-bearing stablecoin project that previously received investment from Coinbase Ventures, has a current TVL of $12.14 million since the launch of USDM on September 11, 2023. Different from USDC/USDT, USDM provides users with daily rewards in the form of rebase. The current annual interest rate is 5%. This part of the income comes from the income of the underlying asset U.S. debt. Non-U.S. users can also earn stablecoin income by holding USDM. USDM is designed to provide any non-U.S. user with a crypto wallet around the world the opportunity to earn U.S. Treasury bond yields.

Case 2: Layer 2 based on U.S. debt and ETH staking—Blast

Blast is the only Ethereum Layer 2 project with native income from ETH and stablecoins. It was launched by Blur founder Pacman. The project team has received US$20 million in financing from Paradigm and Standard Crypto.

Blast believes that cryptocurrencies are also inflationary. The base interest rate for funds deposited on other Layer 2 is 0%, and the value of users’ assets will depreciate over time. What Blast wants to achieve is to let Layer2 bring its own income, that is, if users deposit assets, Blast will regularly distribute income. The essence of Blast’s profit realization is to stake ETH to Lido and use stablecoins to buy U.S. bonds.

The above two cases perfectly prove the value of U-standard interest-bearing assets. So for the positioning of Centrifuge’s current RWA asset financing agreement, if this scenario can be grafted well, it will bring a qualitative leap.

8. Write at the end

As @wassielawyer said, RWA has actually existed for a long time, and the North Korean project team has also received multiple rounds of financing, although each has its own path, and everyone has shown their unique abilities in this venture.

But there is no doubt that RWA has become an important form of asset in the crypto world. The Centrifuge team has made significant progress in the crypto industry with years of effort and practice. They are also collaborating with heavyweight partners in the crypto industry to promote the development of the RWA industry. The future looks promising.

But before opening up the imagination of RWA, Centrifuge still needs to cover more market depth (U.S. debt RWA market) and breadth (multi-chain liquidity capture).

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