Thread by @CryptoWhyBother

🟠 #Crypto use case insights

Ep. 5️⃣ - Centrifuge

• Purpose: DeFi lending based on tokenized real-world assets (RWAs)
• Chain: Polkadot parachain
• Launched in 2020

🧵👇

@centrifuge #RWA #Polkadot @Polkadot #DeFi

Real-world assets (RWAs) are tangible assets or financial primitives that are not crypto-native:

• Cash
• Metal (gold, silver, etc.)
• Real estate
• Corporate debt
• Insurance
•Salaries
• Invoices
• Consumer goods
• Credit notes
• Royalties

etc.

The crypto market capitalization - currently less than $1 trillion - is a blip compared to the total value of global RWAs, e.g.

~$10 trillion Gold market cap
~$100+ trillion fixed income debt market cap
~$350+ trillion real estate market cap

With blockchain technology, we can bridge RWAs to DeFi:

1. Create a token to represent the RWA on-chain
2. Provide (off-chain) guarantees that the token can be redeemed for the underlying RWA

Stablecoins such as $USDT and $USDC are a common use case for this

Let's imagine we could make the corporate debt market accessible for DeFi applications such as lending

The world's biggest borrowers are real-world companies (& countries)

They don't have crypto assets to post as collateral

Through protocols like @centrifuge these companies can finance their real-world assets by borrowing capital without banks or other intermediaries

Thanks to the decentralized infrastructure, the costs of borrowing money are much lower

Lenders gain access to other asset classes than crypto, with the following benefits:

• Sustainable, less volatile yields (~4%)
• High yield compared to crypto-native DeFi in the bear market
• Backed by productive real-world assets
• Portfolio diversification

As loans on @centrifuge are always asset-backed (vs. unsecured aka uncollateralized loans), lenders are better protected against credit default

Especially institutional investors are expected to move to safer crypto investments

Centrifuge has accomplished impressive milestones in the last few months:

• Hit $100 million RWA TVL in Jan 2023

• Launched a $220 million fund with BlockTower Credit and @MakerDAO in Dec 2022, leading the largest on-chain investment in real-world assets (RWAs) to date

• Raised $4 million in a strategic round from investors including @coinbase Ventures and @BlockTower in Nov 2022

That's a wrap!

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