Why Everyone Loves Tinlake?
Pro-crypto or anti-crypto you will love what Tinlake is doing for the world.
Do you know that 82% of small businesses fail due to poor cash flow? And one of the top reasons for a poor cash flow is the unjustifiable 45–60 days payment gap that exists in modern-day B2B trades from the day of delivery of products and services. This delayed payment schedule exposes small businesses to brutal market conditions causing hundreds of thousands of small and medium businesses(SMBs)to go out of business. The most depressing thing about this arrangement is the fact that it locks liquidity worth $30 trillion amongst global supply chains at any given point in time while a lack of liquid cash wreaks havoc for SMBs. Furthermore, the doors to traditional financing are closed or made inaccessible for these small businesses primarily due to a very high cost of financing.
On the other hand, we have decentralized finance(DeFi) where hundreds of billions of dollars are available in liquidity pools for borrowing at a very low cost. But, a lack of an appropriate infrastructure that can bridge real-world assets to DeFi has prevented these SMBs from accessing this low-cost liquidity. This is where Tinlake — an open DeFi protocol and marketplace for real-world asset pools emerges on the horizon with the promise of unlocking liquidity for SMBs globally.
But, how does Tinlake work?
Tinlake bridges real-world assets to DeFi. This makes it possible for SMBs to avail low-cost liquidity by keeping their invoices, mortgages, or streaming royalties as collateral. The loan seekers upload their financial invoices in the Tinlake ecosystem via a secure peer-to-peer network powered by the Centrifuge chain. These financial assets are then converted as Non-fungible tokens(NFTs) and hold the loan terms such as borrowing fees and maximum financing amounts for these NFTs/tokenized assets which are determined by an on-chain pricing scorecard and “Pricing Oracles”. Once the NFT is priced the Asset Originator is presented with the option to proceed with the borrowing from one of Tinlake’s liquidity pools based on their asset category. Upon repayment of the loan, the NFT is unlocked and transferred back into the Asset Originator’s wallet.
Let’s understand this process with a simple example. Imagine a pizza box manufacturing company owner - Ryan, who has been supplying his products to a multi-national pizza brand for the last 3 years. It’s the holidays and Ryan is in need of some immediate funds to pay the holiday bonus to his hard-working employees. So, he approaches the traditional financial institutions who agree to finance him but Ryan is disheartened after knowing their high cost of borrowing (15% and above p.a.) and decides to not take their offer. On further exploration, he learns about the low financing cost of Tinlake and gets his invoices(assets) uploaded by an asset originator in its ecosystem. Upon being uploaded his assets are converted to an NFT and the loan principal and borrowing cost are assigned to it. Ryan — who is satisfied by the financing terms locks his tokenized asset into the set of smart contracts as collateral and borrows the full or a part of the approved loan via Tinlake. Thus, escaping the never-ending debt trap of traditional finance.
But, what’s in it for the lenders?
These tokenized assets create a safe and stable return for retail DeFi investors and DeFi protocols like Maker DAO and Aave who are constantly plagued by high volatility of crypto assets. These investors provide the liquidity to Tinlake pools and earn lucrative yields and $CFG(Centrifuge token) rewards in return. For every Tinlake pool, two different tokens exist for investing namely - TIN and DROP. TIN is a high-risk — high-return token whereas DROP is a low-risk token with stable returns. This arrangement is similar to Junior/Senior investment structures prevailing in traditional finance. What really makes adding liquidity to Tinlake pools a no-brainer is the flexibility of withdrawing your investments at any point in time since its pools are set up as “revolving” or open-ended pools.
Who can borrow from Tinlake?
At the time of writing this article, nearly 15 asset pools are live on Tinlake’s marketplace with a Total Value Locked of 70,734,769 DAI in real-world assets. These pools address different market niches like Commercial Real Estate, Gig-Economy Payment Advances, Emerging Markets Consumer Loans, Fintech Debt financing, Cargo & Freight Forwarding Invoices, Trade Receivables, Branded Inventory Financing, Real Estate Bridge Loans, etc. and offer very innovative solutions to their unique financing needs.
What does the future look like for this promising protocol?
Tinlake — which came into existence only in 2019, has already startled the world with its distinct vision. Today, it is counted amongst a handful of elite protocols that have managed to successfully bridge the real world with DeFi creating practical use cases. With real-world assets (Real Estate, Stocks, Bonds, and so on) being valued in hundreds of trillions of dollars, Tinlake is just getting started!
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Disclaimer: This information is only meant for educational purposes and is not financial advice. DYOR before investing.
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