- Physical assets known as ‘Real-World Assets’ (RWAs) exist outside of the blockchain but can be tokenized and added to the blockchain for usage in decentralized finance (DeFi).
- RWAs can stand in for both physical assets like gold or real estate and intangible ones like bonds from the government or carbon credits.
DeFi seeks to reduce or do away with middlemen, saving money and increasing effectiveness. DeFi mitigates these hazards despite its own risk concerns, such as vulnerable code, by lowering middlemen and boosting transaction transparency. Asset holders are anticipated to use RWAs more frequently as DeFi continues to develop to take advantage of the advantages it offers over traditional finance (TradFi).
Centrifugal To RWA DeFi
Small business owners can use Centrifuge, an on-chain ecosystem specializing in structured finance, to collateralize their assets on the blockchain and obtain liquidity via DeFi, which delivers a solution within its range of use cases.
The Centrifuge Protocol is used by Databased Finance, a provider of inventory technology, to enable the pooling of Amazon seller assets, their listing on Centrifuge’s marketplace, and their use as collateral for loans.
Since its founding in 2017, Centrifuge has facilitated the financing of assets totaling $317 Million on its marketplace. According to the aggregator RWA, Centrifuge is now a leader in this developing industry as a result of this success. With a wide variety of illiquid assets, such as real estate, carbon credits, and natural resources, all primed to increase in value, the industry as a whole has enormous potential.
Centrifuge: The First Protocol To Bring Real-World Assets (RWA) On-Chain
Centrifuge is dedicated to creating a more effective financial system. The ecosystem gives the following major benefits:
- Provides Transparency
By putting the complete capital structure, securitization, and debt servicing into the blockchain, Centrifuge offers end-to-end transparency. This includes several translations and tokenization with a focus on privacy, securitization, reporting and more.
- The Cost of Capital is Lower
Centrifuge lowers the expenses related to conventional off-chain securitization through a decentralized infrastructure. It reduces middleman expenses and simplifies the complications frequently present in conventional finance (TradFi) by employing open-source services.
- Equal Participation
All parties involved in the securitization process have equal and open access because of Centrifuge’s decentralized on-chain governance. This includes the capability for underwriting, servicing, and new issuer proposals, among other things.
- Accession to DeFi Liquidity
Centrifuge makes it possible for DeFi users to obtain senior and super-senior capital. Using the industry’s top DeFi stablecoin protocols, users can exploit the full capital stack.
- Diverse Yielding
By adding yield correlated to real-world assets, users can diversify their stablecoin and Treasury collateral. This promotes protocol health and stabilizes long-term value.
- Secure Platform
Centrifuge upholds a strong security architecture that includes legal recourse, compliance with regulatory and compliance standards like KYC, sanctions screenings, accredited investor checks, and stringent technical audits.
Conclusion
The Centrifuge protocol offers many advantages for integrating real-world assets into decentralized finance (DeFi), including improved stability, credibility, and accessibility. Centrifuge simplifies procedures, builds confidence, and creates new possibilities for borrowing, lending, trading, and asset management within DeFi by tokenizing physical assets.
