A Decentralized Asset Finance
Centrifuge works like a bridge that brings real-world assets like invoices, real estate, and royalties to DeFi. Borrowers can finance their real-world assets without banks or other intermediaries, and providing liquidity is open to everyone, investors receive a return plus CFG rewards. By opening these doors to small and medium enterprises, which have historically faced financial issues, Centrifuge are enabling them to access financing securely, transparently and efficiently. DeFi is a growing financial system without any barriers of entry. Centrifuge wants to bring this benefit to all borrowers that until now had no access to DeFi liquidity.
Key Features And Highlights:
Centrifuge is built with a two-layer approach: There is the Centrifuge peer-to-peer network for private, secure data exchange. Then there are the contracts deployed on Ethereum that represent business identities, document hashes from our precise proofs, and most importantly the “Business NFTs” to represent documents and make them financeable via MakerDAO, Compound, or others. Centrifuge also launched Tinlake recently, which allows the tokenization and pooling of those NFTs in an easy, standardized way.
Tinlake is an open, smart-contract based marketplace of asset pools bringing together Asset Originators and Investors which seek to utilize the full potential of Decentralized Finance (DeFi). Ultimately, Tinlake will become a fully decentralized financing protocol that interoperates with different blockchains and plugs into a variety of funding sources.
HOW TINLAKE WORKS:
Imagine you hold assets, like car loans, trade invoices, or music streaming royalties — legal documents that entitle you to cash at some point. As an “asset originator,” you can use Tinlake to turn these assets into non-fungible tokens (NFTs) with all of the necessary legal documentation attached, create an asset pool (called “securitization” in traditional finance), and then issue two kinds of ERC20 tokens, explains Vogelsang. Centrifuge calls them Tin tokens and Drop tokens.
The process is akin to issuing a “junior tranche” and a “senior tranche” of securities — a common approach in traditional finance. The junior tranche (Tin) is riskier — if losses occur, holders of this token are first in line to cover them — but can pay a higher return. The senior tranche (Drop) is more stable and less risky.
Asset originators will hold some amount of Tin tokens themselves — to have some “skin in the game,” says Vogelsang. Other Tin investors will probably be sophisticated traders who understand the particular real-world asset class well and want to have leveraged exposure, he says.