“Centrifuge enables a radically faster, more cost-effective, and fully transparent model for connecting investors and borrowers with bank less liquidity,” -Cassidy Daly, product strategy lead at Centrifuge, explained to Decrypt this way. It denotes a DeFi ( Decentralized Leading Protocol) that enhances the accessibility to small businesses, and at the same time, provides a chance to investors by opening the pooled liquidity to traditional finance.
DeFi is changing the dynamic real-estate world by unlocking the potential of "affordable access to capital". Since its launch in 2017, DeFi has succeeded in financing $317m in the marketplace. Tokenization, liquid assets, carbon credits- all these have increased the chance of becoming real estate a $16t market in the next 7 years ( as per reports by the Boston Consulting Group).
Centrifuge creates a connection between business owners and people in the decentralized finance world. It bridges assets between the DeFi and the real world and assures the composability with Ethereum and DeFi ecosystem. It can work as the independent blockchain basing the parity’s substrate and getting connected to the Ethereum-based lending platform named Tinlake.
Based on its blockchain, the centrifuge has compatibility with Polkadot and Parachains. At the time of developing the Tinlake protocol and NFT capacities, Centrifuge sticks to the Ethereum standard. Following this trick, created a connection between Ethereum systems and Polkadots.
The core product of Centrifuge, Tinlake ( also an open platform) allows business owners to tokenize worthy real-world possessions like invoices or mortgages. A tokenized document or the invoice representation of them is committed to blockchain and verifies the facts like ownership and authenticity. After that created tokenized assets that you can use as loan collaterals that can be funded within Tinlake pools.
Lenders or investors lock the stablecoins in the Tinlake pool and give business capital. In return, investors get the yield on capital provided to the asset originators’ businesses.
Investors should do research on the asset originators before liquifying their pools to get a proper understanding of the business. After choosing a pool they have options to lock DAI and receive TIN or DROP tokens as returns.
TIN is suitable for those who love to take risky yet rewarding decisions. Investors who accept TIN need to take the risk of losing first. TIN always provides an enhanced ROI every business owner wants.
DROP is designed for investors who want a less risky and stable yield. Frontline TIN holders give protection to the investors who have chosen DROP. Investors can exchange interest according to their choice anytime for DAI if they want to remove their liquidity.
In the Real world of centrifuge, asset originators can source the crypto liquidity for financing their business and can tap into the MakerDAO liquidity. It can streamline and automate assessment management by giving real-time insights into its performance.
As said already, Centrifuge creates a bridge between conventional finance and DeFi and helps to benefit both sectors. It not only increases the growth potential of DeFi beyond limits but also stabilizes DeFi by offering capital that is not connected to the crypto assets.
However, the centrifuge market is still in the nascent stage now with a chance of growing bigger.
Many ambitious plans are there related to centrifuges. This rapidly scaling platform creates great opportunities for credit experts.
The prime goal of centrifuge lies in building a stable and institutional ecosystem that makes credit more accessible and efficient, resulting in a cheaper cost capital for the borrowers.
Besides benefitting every borrower with low-cost capital it can explore the security and access provided by the decentralized platforms.
New centrifuge pools feature different improvements like scalability, trenches, Bridging the Ethereum and Polkadot, etc.
Pools over there will focus on using more efficient runtime on the centrifuge chain that will reduce the expensive transaction fees of the Ethereum main net. Now options are available for structuring several trenches suiting the needs of different investors.
Trust depends on real-world assets on how to centrifuge and assess the risks related to investments and whether the interest rate is set properly. It takes the initiative to grab the attention of credit experts for creating an improved pool structure.
Token utilization also needs a priority. Some tricks for enhancing this utility are keeping an eye on the newly created pools, rewarding for incentivizing the protocol users, etc.
Hopefully, Centrifuge will gain the position of the top protocol for money borrowing and lending against assets and has great potential to rule DeFi World in the future.