There’s no denying the fact that the DeFi market has scaled up to dizzying heights recently, something that is made evident by the fact that the total value locked (TVL) within this space has increased from $23 billion to a whopping $93 billion over the course of 2021 alone. Not only that, as this burgeoning sector has continued to mature, so has its list of practical use cases, that seems to be growing at a rapid pace with each passing day.
Additionally, as per a recent report, as the crypto market has continued to draw the interest of investors across the globe, it is estimated that the DeFi sector is poised to grow by a factor of 10x over the course of the next year, which means that by the turn of 2023, the total valuation of this market could be hovering close to the $1 trillion mark. And while that number may sound quite outlandish at first sight, it is worth remembering that between May 2020-2021, the total amount of money entering this space grew by a staggering 88x — rising from $1 billion to $88 billion.
With that being said, we should look at what the term ‘Real World DeFi’ means. Simply put, it refers to a decentralized project that can be used to solve everyday issues affecting people globally, especially those individuals who don’t have access to basic emittance services. In that sense, it bears mentioning that there currently exist just a select few DeFi applications that actually have the potential to facilitate real-world change.
Centrifuge and MakerDAO are two examples of projects that fit the bill perfectly, with the latter having paved the way for other similar projects since it was the first to feature its very own stablecoin that could be used for things like payments, invoice issuance, transfer of assets — all using crypto assets.
An overview of Centrifuge
In its most basic sense, Centrifuge can be thought of as a decentralized asset financing protocol that enables users to tokenize real-world assets, which can then be used as collateral to access a range of financing options via Tinlake, the company’s asset-backed lending dApp.
Furthermore, it should also be pointed out that the Centrifuge ecosystem seeks to help unlock a plethora of economic opportunities for all participants — i.e. lenders/borrowers — in a manner that is extremely transparent, cost-effective as well as devoid of any intermediaries. Not only that, it also helps iron out many of the operational and monetary inefficiencies that currently plague the traditional finance system (such as high transaction fees, slow transaction throughput rate, etc).
As a result of its future-ready design, Centrifuge has been able to raise over $12 million from prominent market players including IOSG, Fenbushi, Blueyard, Galaxy, Fintech Collective, Mosaic, Rockaway, amongst others.
Straight off the bat, it should be mentioned that Centrifuge helps bridge the gap that currently exists between the digital token market, DeFi and physical assets such as real estate. Thanks to its novel infrastructure, it helps reduce the cost of capital for small and medium-sized enterprises (SMEs), all while allowing DeFi investors to draw passive income on the side.
To further expound on the matter, Centrifuge allows borrowers to finance a range of real-world assets without having to employ the services of a centralized financial institution (such as a bank). In fact, the protocol offers liquidity to anyone with the touch of a button, with investors even receiving Centrifuge Token (CFG) as incentives for their participation. These tokens can subsequently be used for a wide array of actions including staking, payment of transaction fees as well as in the facilitation of certain on-chain governance activities (such as voting).
Also, using Tinlake, Centrifuge’s consumer-facing Dapp, individuals can gain access to an open marketplace of real-world asset pools. In fact, the platform is designed to enable on-chain borrowing against collateralized assets that are governed in a completely automated fashion — i.e. via the use of smart contracts — and are therefore completely immune to any sort of human manipulation/error.
The future is already here
In addition to all of the features that have been outlined above, it also bears highlighting that Centrifuge’s privacy-enabled NFTs are designed to serve as tokenized representations of individual assets, thereby allowing for some of their attributes to be stored on a peer-to-peer (p2p) protocol as well as a public, decentralized ledger. As a result of such a unique structure, it is possible for users to share their data with third parties on a totally need-to-know basis.