Pioneering the Integration of DeFi and RWA for a New Financial Paradigm

Published in

Coinmonks

14 min readJan 15, 2024

Intro: The battle for the next big crypto headline

2022 and 2023 were great times to make gains in the bear market but even greater for accumulating all sorts of tokens. Perhaps the year’s biggest highlight, however, was a much-publicized fight for investors’ attention.

It was a battle to define the way forward in crypto development, and it hinged on the real-world use case. In the midst of this battle for the “next big thing in crypto,” two distinct trends have arisen — NFTs and Memecoins — which have garnered some attention and also signalized a few things:

Sentiments have shifted from a bear market to a sense of relief.
Excess capital is present in the system.
Early founders and adopters mixed with investors are preparing for an influx of retail.

In most respects, nevertheless, the battle is already over — especially for investors with a good sense of market sentiments and research.

The victors in this crypto competition are not NFTs or Memecoins, however, but rather decentralized finance (DeFi) and Real-World Assets (RWA). Both are a part of the biggest and fastest-growing sectors in crypto and all finance, and define so far the only proven real-world use cases for crypto.

Although the first name already rings a bell if you are at all familiar with crypto, the second one is of greater importance since it denotes a catalyst for crypto market cap enlargement.

Even though this has not yet entered public knowledge, more and more industry leaders are starting to cooperate with RWA and DeFi projects, which are the only aspects of today’s crypto with proven practical applications. In addition, institutional money is getting involved in these areas. The institutional interest combined with retail enthusiasm caused by entering a bullish crypto cycle, the existence of which is even more probable due to the Bitcoin halving, will cause the crypto market cap to soar. In addition, rising RWA blockchain-based projects will attract serious capital since the use case for RWA is significant and growing.

What is RWA, actually, and is the current crypto market mature enough for it?

RWA is a digital representation or tokenized version of anything that has value in the real world, and this tokenization makes these assets infinitely more usable and composable within the crypto and DEFI ecosystems.

With RWAs, the main feature is the ability to hold and act upon your property on a secure blockchain, which could revolutionize many industries. Previously, there was little institutional interest in blockchain solutions, and the market still needed maturation.

But you know what? We are beginning to witness the onset of just that turning.

Tokenization allows for the free movement of self-custodial assets/funds between various yield- or capital-gain-generating assets and protocols with minimal need for trusted intermediaries.

In addition to the above-mentioned RWA real use case, crypto, in general, continued its technological evolution in 2022 and 2023.

Kaspa, to name at least one milestone, is the fastest and most secure PoW, created by seasoned academics and solving the infamous blockchain trilemma. A project of such importance occurs once every seven years and heralds new horizons for many aspects of blockchain technology.
This is proof that the crypto space is maturing, and I am glad that these pioneer developers have raised the bar for the next evolutionary step in crypto; the Bitcoin ETF’s approval just seals the deal for it.

But back to the real-world use cases, the bread and butter of this article will be a project that combines RWA and DeFi, and I will showcase why their respectable historic on-chain precedence records should make you interested.

Introducing Florence Finance (FF), an Arbitrum-based RWA and DEFi bridge, a strong crypto contender for the 2024–2025 cycle, driving the real-world asset revolution in crypto.

I am firmly convinced that a grassroots, decentralized alternative to the “too big to fail” financial institutions represents the only viable escape from the current status quo, where only those with huge portfolios and established connections can access the best financial tools.

For a long time, FF founders have been advocating for allowing regular people to join these markets through many blog posts, largely unnoticed, while actively working on creating such an alternative with Florence.

It’s time to confront the establishment and take this financial opportunity directly to every last person.

Indeed, the essence of blockchain and cryptocurrency has always been about opening up new opportunities. We were simply waiting for the technology and the general sentiment towards crypto to mature. Now, we’re at a point where opportunities previously exclusive to corporations or accessible only through intermediaries are being democratized. This shift allows retail market participants to gain access to markets and advantages that were once out of reach, marking a significant leap forward in financial inclusivity and empowerment.

Meet Florence Finance

As a starter, the project lead for this project is Chiel Ruiter, former Managing Director of UBS Netherlands and at Goldman Sachs (London, South Africa & the ME).
Also, there is Leo Greveand and his experience and connections in the banking sector, gathered over decades while working at ING Bank UK and Citigroup as a Managing Director.

It should be noted that — even though established names with great CVs are valuable for any project these days, Florence Finance (FF) actually aims to do away with the need for a connection to a large company. Instead, they want to allow crypto investors, big and small, to gain access to the RWA ecosystem directly without the need for a corporate or institutional middleman.

Lastly, to back it up from the blockchain side of things, the project is based on learnings from the LTO Network, some of whose technology FF utilizes. After all, Rick Smichtz, CEO of LTO Network, and his team have more than proved their value in the blockchain/crypto fields over the last five years.

The collaboration with LTO Network

This collaboration addresses the credit funding shortage for Small and Medium-sized Enterprises (SMEs) and improves real-world lending opportunities within the crypto market. A key component of this partnership is implementing LTO Network’s Proofi software, utilized for KYC and AML operations on DeFi wallets, ensuring user privacy.

The collaboration also benefits from the extensive experience in investment banking of Florence Finance’s founders, Chiel Ruiter and Leo Greve, coupled with LTO Network’s history with institutional clients like the UN and the Dutch Government. This synergy is pivotal for navigating and anticipating regulatory frameworks in the financial sector.

Both organizations share a vision for integrating real-world financial services with decentralized finance, leveraging blockchain technology for a new economic era. Integrating LTO Network’s technology into Florence Finance’s protocol signifies a significant step towards more secure, transparent, and efficient financial operations.

Why does RWA matter?

Just a few years back, the crypto world was buzzing with talks about adoption, tackling challenges, and scaling up blockchains, with a keen focus on crafting stellar Layer 1 solutions. These elements are still key, but there’s been a noticeable shift in focus. Nowadays, the buzz in the crypto sphere is all about DeFi (Decentralized Finance) and RWA (Real World Asset) solutions. We’re seeing real-world applications being built on these secure, swift foundational layers, topped with versatile application layers that open up a myriad of possibilities.
This evolution marks an exciting turn, signaling a move towards practical, impactful uses of blockchain technology.

Historical trends show that such shifts and speculations by early adopters often lead to significant developments in the industry. One could say that history may not always repeat, but damn, It sure does tend to rhyme.

So, why should you be interested in Florence Financeand their solution to connecting DeFi and RWA? Let’s have a look at their mission and a brief description.

Florence Finance Mission:

Address global Small and Medium-sized Enterprises (SMEs) funding gap with crypto-agnostic yields.
Co-operate with established SME lenders for diverse credit exposure.
Prioritize efficiency and transparency in funding, using real-world loans as collateral without leverage or fractional reserves.

Going deeper into Florence Finance

Florence Finance stands out as a DeFi platform connecting cryptocurrency lenders with real-world borrowers in a transparent and mutually beneficial way. It seamlessly brings real-world SME yields into crypto portfolios by tokenizing assets and collateral, thus integrating them into the DeFi ecosystem.

The platform’s integration with the EURS & agEUR stablecoins, issued by STASIS and Angle Protocol, respectively, marks a significant step in its evolution. This integration enhances transparency and adds stability, leveraging EURS’s Angle’s status as the widely used and successful Euro-pegged stablecoins in the DeFi space, backed by a 1:1 Euro ratio.

The primary objective is to efficiently and transparently convert users’ excess stablecoin balances into Euro-denominated, yield-generating loans for European SMEs, fostering a collaborative platform between users and SME lenders. The protocol’s design ensures that it never loans out more than the raised funds, operating without leverage or fractional reserves. This means that while users may temporarily face liquidity constraints in converting FLR to stablecoins, the solidity of Florence Finance and the underlying loan portfolio remains unaffected.

A strategic partnership with LTO Network further elevates Florence Finance’s capabilities.

Utilizing LTO Network’s Proofi software and Decentralized Identities technology, the platform addresses critical challenges in SME credit funding and expands real-world lending opportunities within the cryptocurrency market. Importantly, Proofi ensures KYC and AML compliance while maintaining user privacy.

User experience is at the forefront of Florence Finance’s priorities, focusing on a transparent and user-friendly interface.

The platform’s UI makes loan information clear and accessible, and features like the “My Portfolio” page allow users to easily monitor their investments across various financial instruments, reflecting the platform’s commitment to user accessibility and transparency.

Finally, the platform’s introduction of the FFM token through a public sale on the Arbitrum network illustrates its commitment to expanding its reach and utility. The sale was announced exclusively through Florence Finance’s official social media channels, reflecting the platform’s strategic approach to token distribution and community engagement.

An interview with Chiel Ruiter

To give you insights directly from those at the helm of the organization, here is a brief interview with Chiel Ruiter, the CEO of Florence Finance.

Please introduce yourself to our readers.

Hi, I’m Chiel. I am a TradFi boomer and father of three.

I quit banking in 2015 because I felt oddly disconnected from the stuff that mattered to me, and after some soul-searching, I decided I wanted to use my time and skills to help Small and Medium-sized Enterprises (SMEs).

Thus, I started by doing interim CEO/CFO/CRO work with/for SMEs in trouble with banks.

I helped an entrepreneur & friend, Tim Haaksma, do the second-only ICO in the Netherlands for his IT hardware company called Ockel.

During COVID, my interim services were in low demand as most entities were on either Government or bank support… So I did some advisory work for Bitvavo (The largest Dutch crypto exchange) and, through that, got to know my fellow founders who had been toying with the idea to create a Euro-denominated yield-bearing safe haven asset to “park” their crypto gains during the bear market….That was the start of 2021 of what now is Florence Finance.

Have you ever experienced a professional discovery or realization that was hard to believe when it occurred to you?

Yes, I remember it vividly.

Working for Goldman Sachs in the Emerging Markets (I was an early contributor to the building of Goldman Sachs’ South African office and pan-African franchise), I spent a lot of time thinking about the fate of Africa and emerging markets in general and what, if anything, could be done to alleviate that fate….I came across a report by the World Bank, the TLDR of which was that we could “solve” ALL of the world’s poverty (i.e., adequate nutrition, shelter, healthcare, and even tuition) by just abolishing one agricultural subsidy (namely those on white/beet sugar) and redirecting these funds to poverty alleviation.

I was dumbstruck…..

Surely, this was the mother of all no-brainers, and it was being proposed/calculated by the World Bank itself….Why, in God’s name, are we not implementing such policy change?

It was at this moment that I started doubting the “system” and how it was rigged…The merits of globalization and the “rules-based” global order….this was 2004!

What was the hardest part of your professional life, the hardest challenge you needed to face in your career, and what success of yours made you most proud?

After a very successful stint with Goldman in South Africa, I wanted a position that would allow me to become a Partner at Goldman Sachs, and one of the very few seats available was Managing Director of the new Saudi Arabian office, where nobody wanted to go for love or money. My parents had spent some time in the Kingdom during my youth, so I knew that it was a hardship, but not the “death sentence” that people made it out to be.

As there were no Saudi national MDs at Goldman at the time, I got the job…I moved to Dubai to get things going from there as we had an existing office there, and we had not even gotten a license to operate in Saudi at the time….Little did I know that the global financial crisis would take a turn for the worse with the collapse of Lehman Brothers six weeks later… What looked like a sure ticket to Partnership turned into my Waterloo at Goldman Sachs, as the Saudi expansion plans were amongst the first to be ditched when the sh*t hit the proverbial fan.

Having given every waking hour and much blood, sweat, and tears to GS for almost a decade and made it to MD….I was unemployed for the first time in my life.

The world was awash with unemployed bankers, making any continuation of my banking career questionable at best….And I was stuck in a sandpit where I had barely landed and had no relationship network or anything else for that matter….It was a dark and lonely period/feeling.

It took six months, during which I worked hard to create a new opening, which turned out to be returning to my home country and joining the better half of the also unemployed ex-Lehman NL team to re-start Credit Suisse’s Dutch office. Initially, it was hard as I had little relationship infrastructure in the Netherlands, having been abroad for over ten years, but I worked hard and made it happen.

What motivated you to start your blog post about the finance sector? Was there a message you want to share?

When we started Florence Finance, we needed to do marketing…As we were on a start-up budget and I am an engineer and builder at heart, I struggled with spending money/time on marketing. The only thing that came to mind was sharing knowledge and perspectives, which is the genesis of our blog…Sharing insights as they come to me and/or others on the team with the community for the benefit of all.

What is the most insightful lesson you’ve learned from your past, and how do the collective experiences of you and other founders of Florence bring unique advantages to the project?

The founding group and core team are very diverse in terms of age and background.

Some TradFi, some entrepreneurs, some crypto OGs, and some IT buffs….So, a good mix of skills and styles. Whatever the problem at hand, we usually have someone in the group who can either help directly or knows someone who can. We rely very little on outsiders for anything that is mission-critical…. It is entirely organic & self-built.

Regarding lessons, I used to hold myself and my perspectives in pretty high regard.
As an investment banker, you advise the most important people (CEO/CFOs) at the largest companies, and they pay astronomical amounts for that advice…So it’s only natural that you start to think you are very good at providing that advice. Else, why would they pay so much?

In fact, if you were to doubt it for only a second, you would fail miserably in that profession.

The truth is, however, they’re not paying for you.
They are paying for Goldman or some other banks’ “cover their ass” insurance….
So, I try to be less opinionated and/or overbearing in group discussions nowadays and give people more space to share/air their perspectives.

What is the vision for Florence Finance, and what is your vision for crypto?

Florence Finance bridges on-chain (DeFi) liquidity to existing real-world lending platforms. Thereby, we provide the real-world, sustainable, euro-denominated yield on-chain while addressing the societally important SME funding gap.

What are the biggest obstacles RWA and DEFI must address to become mainstream?

The UI/UX experience and the cost of doing business on-chain (the scaling problem) mean that most DeFi apps today are still for degens only. The risks inherent to self-custodial assets and interacting directly on-chain are still too great for mainstream adoption.

There must be either substantial intermediation and/or improvement to the above to enable mass market adoption, like what CoinBase is doing with its Wallet and Base-related ecosystem, making it easier/safer to interact within that curated environment.

The other thing is, of course, that we need as an industry to stop the scamming and rugging,
as that is just bad for all.

What are the biggest misconceptions about Florence Finance?

Florence is not a Ponzi.

Our project is a community-driven alternative to credit creation for SMEs using existing lending partners/infrastructure. If successful, it will provide an alternative funding source for these FinTechs and help alleviate their perennial funding constraints.

What are the biggest hindrances in your mind for Florence Finance’s success?

Funding…i.e., finding people who understand our cause and have the patience and stamina to help us through the next cycle to build a sustainably sized lending book (>50m).

Where do you see Florence Finance two years from now?

Reaching 50m-100m of TVL running on the next iteration of our protocol (V3).

Together with vertical integration with lending platforms and CEXs, you can access the vaults/yield directly from Aave, Maker, Coinbase, and/or Bitvavo.

What milestones would you propose for Florence Finance, and why?

The next step has to be acquiring one or more centralized exchange listings, using the dynamics around that to build the community further and increase the liquidity of the various tokens/pools, as well as the TVL, through securing the funding necessary to realize the above ambition.

What are your beliefs about the future of other crypto projects in this bear market?

What Bear Market?

The next 12–18m will be the most bullish period for crypto we have ever witnessed.
Whatever you thought was difficult or impossible in the last cycle will become feasible as scalability, speed, and block space cost issues resolve to enable ever-more/larger use cases.

What Florence and the Medici’s were to the Renaissance, Digital Ledger Technology will be to the fourth turning.

The end of the interview.

Tokenomics for Medici token (FFM)

“Transparency, fair distribution, and community engagement.”

FFM Token Overview:

Central to Florence Finance’s ecosystem.
Minted as ERC20 tokens on Ethereum, bridged to Arbitrum.
Real-world interest from loan vaults is used to buy back and burn FFM, aiming for consistent market demand.

FFM Token Distribution:

The total supply is capped at 1 billion FFM tokens.
Treasury: 15% for project funding and growth initiatives.
Community: 50% to incentivize protocol liquidity and adoption, supporting fair distribution.
Core Team: 10% with an 18-month lock-up period.
Seed Investors: 25% with a 6-month lock-up period.

Governance with FFM Tokens:

Token holders are involved in approving collateral, lending terms, and creating Loan Vaults.
Aim for decentralized governance and operations.

Outro

Florence Finance harnesses the power of blockchain to utilize the potential of RWA and connect it to DEFI liquidity. This will allow crypto investors to connect to the existing stock of over 500 trillion worth of real-world assets.

FF token Medici (FFM) allows anybody to participate in this groundbreaking way of decentralized credit creation. So far, FF connected over 5.5 million dollars worth of loans, and they haven’t even gotten started.