DeFi 2.0 — First Real World Loan is Financed on Maker

Lea Schmitt
Apr 21 · 3 min read

Centrifuge & Maker collaboration goes live, New Silver become the first to connect DeFi to Real World Assets

The worlds of TradFi and DeFi are finally colliding: New Silver, a pool of fix and flip loans on Centrifuge Tinlake, just financed its first loan using MakerDAO as a credit facility, becoming the first ever to back DAI with a Real World Asset (RWA). This opens the door for a new trillion dollar market into DeFi.

After passing the Maker Executive Vote, New Silver can now tap into a Maker vault for an initial 5M credit line, and mint new real-estate backed DAI.

The Yin and Yang of DeFi

Centrifuge and Maker complement each other and together they manage to efficiently bridge the already existing — regulated — world to a trustless system (DeFi). Centrifuge on the one side has been working meticulously with traditional SMEs and financial institutions to come up with the best infrastructure to connect the two protocols. We’ve built an integration that is founded on transparency, efficiency and trustless collaboration. On the other side Maker governance made it possible to provide instant liquidity at a minimal cost of capital to the asset originator when financing their assets.

The Maker Protocol, also known as the Multi-Collateral DAI (MCD) system, is the biggest DeFi protocol at the moment with billions in collateral. It allows users to generate DAI by leveraging collateral assets approved by “Maker Governance.”

For our asset originators such as NewSilver, this collaboration means that from now on they can source additional capital by simply minting their own. This integration allows them to open a Maker Vault, lock up their tokenized asset, draw the stablecoin and use it to finance new loans. Maker provides a revolving line of credit that includes a debt ceiling and a stability fee.

Think of when a bank issues a borrower a credit line. However, this “bank” operates 24/7, is trustlessly running on smart contracts, without intermediaries, without regulatory constraints and can offer low interest rates. It provides instant liquidity at a minimal cost of capital.

Sounds too good to be true? Welcome to DeFi.

In order to convey how this benefits MakerDAO & DeFi in general, we asked Sébastien Derivaux, who leads the Real World Finance (RWF) Core Unit at MakerDAO to give his two cents:

“This integration not only advances DeFi but it also brings many benefits to the MakerDAO ecosystem. By diversifying the collateral backing DAI and adding non-crypto related assets, it increases the DAI safety and makes it extremely stable. This move will also help MakerDAO meet the increasing demand of DAI by tapping in a multi trillion-dollar asset class.”

What does the future hold?

The potential of RWA is monumental. RWAs encompass anything and everything physical that can be digitized. We are working with a diverse group of asset originators that finance assets including invoices, real estate or music royalties, with currently six companies in the active MakerDAO governance process and together we plan to scale RWAs to back MCD up to 300M over the next 12 months.

With more RWA applications in the pipeline, Dai will become the most diversely-backed borderless currency in the world. Financing with Centrifuge and Maker will become competitive and more scalable than traditional asset financing.

And this is how DeFi will eat CeFi.

If you have any questions on the integration with MakerDAO, join us for a live AMA on Thursday 22nd April at 16:00 UTC.

Just curious about how you can contribute to the new future of finance? Follow us on Twitter, head over to our Telegram or Discord channels, or to Tinlake to explore our current pools.

Centrifuge

Decentralized Asset Financing

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