Centrifuge aims to be “a gateway for ‘real world’ assets to the blockchain multiverse.” Centrifuge is an avant-garde project that hopes to bridge the defi lending world with a tokenized, private, scalable system. The Centrifuge Chain hopes to be the hub for on-chain financing of invoices or royalties. Overtime they hope to create a completely decentralized lending platform from start to finish. Centrifuge has received multiple Web3 grants for it’s development.
The San Francisco based Centrifuge team got its name from the idea of a high speed centrifuge which separates particles into their smaller components for analysis. They applied this idea to ‘supply chain financing’, breaking it down into smaller pieces to change the way financing is done today. In this new model, asset originators will mint tokens for invoices, that they can pool together and get loans for those assets.
By building on Parity Substrate the team at Centrifuge will be able to access the ‘multiverse’ of chains, such as Etherium and Polkadot. Parity will allow the code to be faster with consistent building blocks for better interoperability. Centrifuge will also use tokens called Radicals or rads to pay for the transactions. Rad tokens will also be used in a governance model as collateral assets through Maker Dao.
The Centrifuge Chain will give small and medium sized businesses the innovative and competitive advantage by transacting much faster and privately. Private negotiations can be held between parties transacting on a public blockchain giving permanent records. Centrifuge has an interesting use case for Business to Business transactions. Currently without Centrifuge a B2B invoice gets hung up in accounts receivable for 60 days. This slow down is a real burden to smaller businesses without financing. Centrifuge solves this problem using a Proof of Stake consensus model.
One example of a real world use case would be if a textile supplier wanted to send an invoice to a shoe manufacturer for an exchange. The textile business would use Centrifuge to quickly and easily send an invoice to the shoe manufacturer. Then the shoe manufacturer could verify the invoice and sign off on it. Then the textile manufacturer would take the signed Centrifuge invoice and mint it using Rads, into a tokenized invoice called a Non-Fungible Token (NFT).
The NFT in this case is an ERC 721 token. The NFT would then be bridged to another chain to access decentralized financing. At the same time as the NFT is being minted an ‘anchor’ is created, which anchors a hash to the blockchain and creates a unique identifier. The whole process will allow greater performance, scalability and all at a low cost.
Centrifuge has also created Tinlake to help businesses have immediate access to financing. Tinlake is a series of NFT pools built on top of Centrifuge. The NFT pools are grouped together by category and Tinlake raises money by selling interest to individual investors of the Tinlake pools. The pools will require an investment in the form of Dai tokens. The Tinlake pools will mint ERC 20 tokens as collateral for Dai that is staked to the pool of choice for a period of time. An investor chooses their risk / reward preference. There will be two levels of risk and two separate tokens. The ERC20 tokens that are minted by the pools are the ‘Drop’ token, and the ‘Tin’ token. The Drop is higher risk/ higher return and the Tin is lower risk/ lower return. At the end of the staking period the investor then trades in the Drop or Tin for their share in Dai.
It is a complete game changer and will help ease the burden that slows the growth of small and medium size businesses. In the words of the Centrifuge team, “this will change the rules of Global trade as they exist today and foster economic opportunity.” Centrifuge is going to even the worlds playing field between smaller businesses and the mega corporations. An idea that will not only be very popular but entirely revolutionary.