CENTRIFUGE

Today, I will take a closer look at the Centrifuge Protocol, an infrastructure platform designed to enable decentralised financing of real-world assets on the blockchain. Let's dive into the @centrifuge

Centrifuge is an infrastructure designed to enable decentralized financing of real-world assets on the blockchain, eliminating unnecessary intermediaries for transparent transactions between borrowers and lenders. It offers fully collateralized asset pools, legal recourse for liquidity providers, and supports a wide range of asset classes, including mortgages, invoices, microlending, and consumer finance. The protocol aims to reduce borrowing costs for businesses globally while providing DeFi users with a stable, collateralized yield independent of volatile crypto markets. By bringing the structured credit market onto the blockchain, @centrifuge aims to create a more transparent, affordable, and limitless financial system, addressing the disparity in access to capital between large corporations and SMEs. Centrifuge has led the creation of the Tokenized Asset Coalition, a collaboration between industry leaders such as @AaveAave, @circle, @coinbase, @rwa_xyz and others. This coalition's goal is to advance real-world asset tokenization, aiming to bring a trillion dollars' worth of assets onto blockchain platforms, with a strong focus on education and advocacy.

At the time of preparing this review, Centfrifuge's TVL was $246M.
Centrifuge Protocol

Tokenization and Private Data Sharing

▫️ Borrowers mint NFTs to represent off-chain assets for financing.
▫️ On-chain data linked to NFTs is public, but private data is secured with the Private Data Layer.
▫️ Private Data Layer is a peer-to-peer network (PODs) for secure information sharing.
▫️ Issuers and investors decide how and with whom to share asset data privately.
▫️ On-chain transparency provides immutable financial transaction records. On-chain
▫️ Real world assets are illiquid, so pooling assets for financing is essential.
▫️ Revolving pools allow continuous investment and redemption orders.
▫️ Mechanisms include epochs for coordination and on-chain Net Asset Value (NAV) calculation.
▫️ Pricing considers different loan types and asset defaults.
▫️ Tranching allows investors to choose risk profiles, and tokens represent tranches. Tranche tokens are securities and require KYC for holders.
Built on Centrifuge Chain

▫️ Centrifuge Protocol is built on @centrifuge Chain, a dedicated blockchain for real world assets.
▫️ Advantages include lower costs, flexibility, dedicated blockspace, and on-chain governance.
▫️ CFG token holders govern the blockchain and pay transaction fees. Integrated with DeFi ▫️ Centrifuge Protocol provides Connectors for direct integration with EVM blockchains. ▫️ This enables DeFi protocols to invest in real world asset pools.
▫️ A multi-chain ecosystem is possible with multiple chain interactions.
Linked to the Real World

▫️ Real-world legal structures, such as special purpose vehicles (SPVs), mirror the protocol.
▫️ Legal entities separate asset originators from financing activities.
▫️ Recovery processes for defaulted assets vary by asset class.
▫️ KYC and accreditation checks are necessary for investor onboarding.
▫️ Third-party e-KYC providers assist with onboarding and verification.