Introducing The Tokenized Asset Portfolio — A Model to Leverage Real World Assets in DeFi Credit Facilities
The Tokenized Asset Portfolio (TAP) is a standard model to enable real world assets to be pledged as collateral in decentralized credit facilities, including the MakerDAO multi-collateral Dai system. We have executed a pilot transaction to demonstrate how the TAP works, pledging U.S. Treasuries as collateral for a CDP loan on the Kovan testnet.
MakerDAO has laid the groundwork for collateral-based lending on Ethereum. We believe that a transition to multi-collateral Dai, where multiple asset types other than Ether are accepted as collateral, will fuel the growth of a new and more open financial system built on Ethereum, with MakerDAO acting as a decentralized central bank. For that system to reach its full potential, we believe that real world assets should be introduced as collateral to help scale the demand for Dai while also keeping it stable.
To that end, we have developed a model to allow borrowers to obtain leverage on real world assets from a decentralized credit facility like Maker’s. To demonstrate this capability, we have executed an end-to-end pilot transaction in which we borrowed Dai from a CDP on the Kovan testnet using U.S. Treasury securities as the underlying collateral. In doing so, we have illustrated the specific steps involved in leveraging real world assets on-chain, and have demonstrated the tangible value in doing so.
See our recently published White Paper for full details.
Fluidity Tokenized Asset Portfolio (TAP)
A Model to Leverage Real World Assets in Decentralized Credit Facilities
We believe this model provides the legal and technical infrastructure necessary to help a decentralized financial (DeFi) system continue to scale. Because it allows traditional capital markets to tap into DeFi-sourced credit with potentially competitive loan terms, we believe it will incentivize these institutions to pledge stable assets (like U.S. Treasuries) into the basket of assets that backs Dai, creating a virtuous cycle. As more stable assets are pledged to back Dai, the more competitive the loan terms can become. And the more competitive the loan terms become, the more stable assets will continue to flow into the basket to back Dai. As the flywheel begins to spin, the demand for Dai should scale alongside the quality of the collateral backing it, allowing it to eventually become the primary currency of the decentralized financial system.
Unlike competitor stablecoins like Libra, for instance, this financial ecosystem will not be controlled by Facebook or a handful of other large companies. It will instead become an open system that is transparent, accessible and fully auditable. It will become a financial system that is built atop open-source protocols that can be freely integrated and stacked together, enabling iterative innovation at a rapid pace. And it will become a financial system that is open to all who would like to participate in the governance and oversight functions, as opposed to a small handful of large institutions.
Indeed, a better Libra is almost here, and it’s properly decentralized. We are excited to help this new ecosystem emerge.
The smart contracts and oracle scripts can be found on a new repo on our GitHub that we recently published. The draft legal documents can be found here and here.
Once the multi-collateral Dai (MCD) system is launched, we will petition the MakerDAO community to approve U.S. Treasuries as an initial collateral type. We will also look to expand this model to leverage other collateral types (e.g., mortgages, corporate bonds, equities), as well as other decentralized credit facilities.
Ultimately, our goal is to bridge the gap between the traditional capital markets and the growing ecosystem of open, decentralized financial applications, enabling the free and efficient flow of capital between the two. While these applications are emerging rapidly, they remain largely inaccessible to the vast majority of individuals and institutions that lack blockchain-specific technical knowledge and skills. We aim to connect these two paradigms, allowing DeFi to expand at ever increasing rates, while also expanding access to financial services for legacy participants.
We look forward to hearing community feedback as we roll this out.
Special thanks to all of those who provided invaluable feedback and support in publishing the whitepaper:
• Donna Redel, Former Chairman, COMEX, Former Managing Director and Board member at the World Economic Forum
• Greg DiPrisco, Head of Business Development at MakerDAO
• Mike Porcaro, Head of Communications at MakerDAO
• Aaron Wright, Co-Founder, OpenLaw
• Pat Berarducci, Head of Digital Assets, ConsenSys
• Steve Mckeon, Partner, Collaborative Fund
• Derek Edward Schloss, Director of Strategy, Security Token Academy
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