From Fintech loans to ships cargo, tens of million are now being lent and borrowed on Maker dai while collateralized with real world assets.
In a bridge of the physical and digital, with NFTs, Merkel Trees and P2P, as well as the legal old world structure of SPV, your house can now borrow algorithmic tokenized dollars.
We start with Tinlake which runs on the Centrifuge chain, this being a Polkadot substrate parachain. Here we have a P2P network where the root of the documents is hashed, with numerous mechanisms in place to ensure privacy and verifiability.
These documents become a unique token, an NFT, which is then bridged to the ethereum blockchain where a pool is created.
The pool has Tin and Drop tokens, using the same risk management mechanism as in traditional finance with Tin used to protect against default – meaning it’s a high risk and high return token – while the Drop is relatively safe as all the Tin would have to be consumed first, meaning it’s a low risk and low return token.
You give dai, you get Tin or Drop, or the asset originator goes to Maker itself and mints it.
The asset originator is wrapped in a Special Purpose Vehicle (SPV). That being a specific company for a specific reason, here to have ownership of, say the invoices, through the custody of the necessary legal documents that gives it such ownership.
Technically therefore it is the SPV that is borrowing and gives the funds to the actual borrower, as well as the entity you lend to.
The project provides full detail on the entire mechanism, so bringing us to the surface where we have about $86 million worth of real assets tokenized, with some $67 million used as collateral to borrow $35 million of DAI:
This is the market for real world assets at RWAmarket styled after Aave. The Cauris Global Fintech Fund is a pool which “seeks to generate uncorrelated and excess risk-adjusted returns to its investors by providing secured loans to fintechs that lend to consumers and small businesses in the Global South and Europe.”
Console Freight “advances working capital finance to stakeholders involved in international trading of goods and services.”
New Silver has nothing to do with silver, instead it’s “a technology enabled non-bank lender primarily focused on providing real estate-backed financing for the United States ‘fix and flip’ sector with a concentration on single-family residential assets.”
There’s numerous others, including institutional loans and gig economy payment advances as described on their platform.
If we want to buy one of these tokens however or even to just deposit some USDc to lend, we’re met with the above wall where we have to go through a process.
They have partnered with Securitize, a SEC-licensed transfer agent offering compliant investor onboarding services.
So you have to give them your ID and in theory you have to be an accredited investor ($100k yearly income) as well because plebs can’t have nice things.
You rely on the legal system to enforce defaults however, so for this sort of thing you have to comply with all the discriminatory laws, investment prohibitions, bought for ladder pulls, monopoly protection ‘regulations’ and anti-competition poison pills.
Besides that, it’s pretty cool, but with all that, what exactly is the point of all the complexity and P2P decentralized backend when ultimately you’re trusting the SPV based on a legal framework enforceable in court?
Except those that do get in can then trade with each other freely, but it doesn’t look like the token can quite get out because we can’t find these markets in proper defi platforms like AAve itself.
Maker should benefit however because more demand gives lenders higher interest rates, and obviously the businesses and the companies benefit because they’re getting liquidity.
Making this hybrid defi. A bit similar to traditional finance, but tokenized, although the tokens are a bit walled.
Yet, there’s close to $100 million in total in this experiment now, and so a new field may well be at its nascent stages.