Centrifuge To Help DAOs Invest In Real-World Assets

Updated: 08 June 2023

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Recently, Centrifuge, a DeFi protocol for investing in real-world assets, launched Centrifuge Prime, a platform for DAOs seeking to manage a portfolio of RWAs, in beta. The protocol is an on-chain credit protocol enabling users to finance real-world businesses. Users gain access to various assets, including asset-backed securities, real estate, and invoice financing. Further, Centrifuge has noted that real-world assets offer DAOs a source of “predictable and sustainable yields.”

Lucas Vogelsang, Centrifuge’s CEO, and co-founder, has stated that:

Centrifuge Prime empowers [DAOs] to extend their runway and create new revenue streams. Protocols can further set up the legal, technical, and operational infrastructure needed to adopt and scale real-world asset investments safely and competently.

Nonetheless, the investors can earn a stablecoin yield and rewards through Centrifuge’s CFG token. Centrifuge has a total value locked of $200M, according to Messari. However, the DeFi protocol’s CFG governance token is down around 5.82% in the past week, according to CoinGecko.

Centrifuge Prime

Centrifuge’s CEO has further asserted that DAOs have previously struggled to access assets that do not live natively on-chain. This is due to complex legal issues, technical infrastructure requirements, and other operational headaches.

⚡️ Introducing Centrifuge Prime.

Centrifuge Prime offers the services and tech that DAOs, stablecoins, and protocols need to onboard real-world assets.

Across on-chain, legal, risk, assets, and more, we bring RWAs to DeFi-native organizations.https://t.co/IRBIEny1AN

— Centrifuge (@centrifuge) June 7, 2023

Vogelsang said:

”DAOs need specific legal structures to access real-world assets to provide legal recourse and safety when investing in RWAs. The heart of Centrifuge Prime is a technical and legal infrastructure that enables DAOs a reliable and efficient way to invest in RWAs.

DeFi Partnerships

Centrifuge is one of the leading protocols looking to bridge the gap between traditional assets and on-chain finance. Previously, the platform partnered with Aave and MakerDAO, the second and third-largest DeFi protocols. In December 2021, it partnered with Aave to launch a diversified RWA market on Aave v2.

Centrifuge notably began negotiating with MakerDAO to onboard support for RWAs in 2019. However, the initiative came to fruition in 2021, with MakerDAO enabling Centrifuge’s liquidity providers to mint Maker’s DAI stablecoin against five Centrifuge pool tokens that year.

MakerDAO and BlockTower Credit teamed up to deploy $220M on Centrifuge in December. Maker provided $150M of senior capital. At the same time, BlockTower fronted $70M of junior capital, marking the first time an institutional credit fund migrated its collateralized lending operations on-chain.

On the other hand, Vogelsang stipulated that BlockTower Credit’s Maker vault has already facilitated $140M worth of investments, with the $220M expected to be fully deployed by the end of 2023.

“Just as we did the first time, we are actively collaborating with BlockTower to tokenize this vault and bring these operations on-chain, providing a significant improvement in transparency and efficiency of this investment,” he said.

Endgame Impact

However, MakerDAO is now embarking on its controversial endgame overhaul. Rune Christensen, Marker DAO’s founder, is advocating for the platform to minimize its reliance on RWA. Despite Christensen’s position, Maker continues to expand its exposure to real-world assets, with the protocol allocating a further $750M for investment in U.S. treasuries and bonds in March.

Centrifuge’s CEO has further noted:

While the Endgame plan has many constraints and risk mitigation approaches, it creates a significant opportunity to expand the scope of RWA operations within Maker. We’re excited about the opportunity to support prospective RWA SubDAOs with our infrastructure and continue expanding DAIs reach in the RWA space.

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