Create a Centrifuge AMO to provide liquidity across our Senior pools.
Centrifuge is a pioneering project that connects real-world assets (RWAs) to DeFi offering a fully transparent protocol which allows borrowers and lenders to transact without unnecessary intermediaries. Ultimately, the protocol aims to lower the cost of borrowing for businesses around the world, while providing users with a stable source of collateralized yield that is uncorrelated to the volatile crypto markets. Centrifuge was the first DeFi protocol to bridge RWAs on-chain and has integrated with some of the leading protocols, including MakerDAO and Aave.
Centrifuge asset pools are fully collateralized by underlying RWAs and investors have legal rights to the collateral in the case of a default. This makes Centrifuge unique versus many of our RWA peers that largely focus on undercollateralized lending. NFTs are used as digital representations of the RWAs on-chain, allowing investors to have full visibility on the exact collateral they finance. The protocol is asset class agnostic and has created pools for assets such as mortgages, invoices and consumer finance. Centrifuge on-chain stats can be found here. Key metrics:
- $85M TVL
- $125M+ in net assets financed
- 100s of underlying assets financed
Issuers use Tinlake to access capital, which in turn is used to finance real-world businesses. Assets are posted as collateral (visible on-chain) and users are able to generate yield according to their risk appetite. Much like many traditional asset finance transactions, Tinlake pools are divided into two tranches (senior and junior). These tranches are used to offer investors differing risk/reward profiles.
- Senior tranche (DROP): The senior tranche is the largest tranche and is structured to have a stable fixed return. It is insulated from losses by the riskier junior tranche, which in the case of default will absorb any losses before the senior tranche is affected. This is a lower risk offering that is designed as a fixed income product.
- Junior tranche (TIN): The junior tranche is a smaller percentage of the overall pool and is structured to offer investors a variable return. The junior tranche will capture the residual cash flows in the pool after the senior investors have been fully paid back. As mentioned above, this means that any losses will first be attributed to this riskier tranche. The junior tranche is designed to potentially offer higher returns, but is volatile in nature.
See our docs for a deeper understanding of how our dapp Tinlake works.
Senior (DROP): returns vary according to the asset class and the corresponding risk of the underlying assets being financed. Current live opportunities on Tinlake have an APY between 3.5 - 10%.
Junior (TIN): returns are riskier and highly variable. Current live opportunities on Tinlake have an APY between 15 - 50%+.
Centrifuge offers revolving pools. Revolving pools mean users can invest/redeem at any time they wish. A decentralized solver mechanism matches investments and redemptions with the available liquidity in the pool, allowing users to move in and out of the pool if/when liquidity is available. This brings liquidity to a traditionally illiquid asset class.
Our top priority is investor protection. As a result, we created a template legal structure that is unique in the DeFi ecosystem and gives users protection should a pool go into default. As is seen in traditional financial structures, users sign agreements that give them legal recourse to the underlying assets used as collateral in the pool.
Read more about our template legal structure here.
Frax is one of the most advanced and promising stablecoins in the Web3 ecosystem. As FRAX looks to diversify their collateral base the community has been forward looking in using RWAs to do so. RWAs offer FRAX a unique source of yield that is uncorrelated to the broader crypto ecosystem, while offering the necessary stability to underpin long-term growth. Centrifuge offers FRAX the opportunity to participate in a wide range of asset classes that can truly diversify the FRAX collateral base. It also offers FRAX the opportunity to proliferate outside the crypto ecosystem and impact the lives and livelihoods of many people around the globe.
From the Centrifuge side we are keen to work with what we view as the fastest growing stablecoin in the ecosystem. FRAX has proven it can scale and we therefore view FRAX as a long-term sustainable source of capital that can help shape the RWA dream. We would be excited to welcome such a partner to the Centrifuge community and very much look forward to the potential collaboration.
Create a Centrifuge AMO and authorize up to $100M worth of liquidity for use in the AMO.