CP141: Initiate the development of Centrifuge V3, a multi-chain, EVM based protocol

cp: 141
title: Initiate the development of Centrifuge V3, a multi-chain, EVM based protocol
authors: @jeroen
contributors : @martin @mustermeiszer @0xgraham
uses-component: CP4
technical-proposal: no
requires-onchain: no
impacts/modifies:
status: rfc
date-proposed: 2025-02-03
date-ended:

Short Summary

This proposal seeks governance approval to initiate the development of Centrifuge V3, an EVM-based protocol, to drive the next phase of growth for the RWA market. Built as a multi-chain system, this next-generation protocol will introduce features such as chain abstraction, modularity for diverse assets and investors, and enhanced composability with DeFi. The protocol will also migrate governance and CFG token support to an EVM chain, aligning with the ecosystem where the majority of Centrifuge’s activity already resides. This initiative positions Centrifuge to lead the rapidly growing RWA space and meet the evolving needs of institutions and DeFi participants.

High level objective

By building on EVM, Centrifuge ensures access to the largest pool of onchain liquidity, unmatched developer tools, and robust ecosystem support, positioning itself as the go-to solution for institutions.

The proposal to prioritize building natively on the EVM stems from several critical considerations:

  • Total Value Locked (TVL): More than 95% of the total value locked in Centrifuge Liquidity Pools originates from EVM chains. Furthermore, most investors currently hold their pool tokens on EVM chains, making it the logical platform to expand our reach and impact.
  • DeFi Composability: DeFi composability is one of the key drivers for building on the EVM. By leveraging EVM standards, Centrifuge can seamlessly integrate with a wide array of DeFi protocols.
  • Developer Tooling: The EVM ecosystem offers mature and widely adopted tools, making it easier for developers to build, deploy, maintain, and integrate applications. This also facilitates seamless integration for partners and external integrators.
  • Onchain Liquidity: EVM-compatible blockchains host a significantly larger pool of available onchain liquidity compared to other ecosystems. Additionally, EVM chains offer robust native stablecoin support.
  • Ecosystem Support: EVM protocols enjoy broad support from exchanges, partners, and other infrastructure providers.
  • Institutional Support: Banks, Asset Managers, Funds all want to build on EVM chains, and these are Centrifuge’s main target audience. The EVM protocol will be best positioned to support them.

Centrifuge’s approach is purpose-built for RWAs, including systems in place for regulatory compliance, risk mitigation and seamless integration with traditional finance infrastructure. The new protocol will enable modular, interoperable ecosystems for tokenization, asset management and distribution, creating a streamlined experience for institutional users while leveraging the EVM’s unparalleled network effects.

Background

Since founding in 2017, Centrifuge has been a pioneer in RWAs, setting the standards and benchmark for innovation and institutional sophistication. As the market has evolved, so has Centrifuge - from minting the first RWA with MakerDAO, to creating the first RWA market with Aave and building the first onchain fund with BlockTower, the Centrifuge protocol has improved with every product, partnership and use case developed.

The next iteration of the protocol will take our learnings from the years, paired with customer and partner demand and the evolving industry landscape to build the best ecosystem for RWA tokenization and fund management.

Centrifuge’s evolution has been driven by a deep understanding of the ecosystem and a commitment to addressing the growing needs of bringing RWAs onchain. However, the explosive growth of the RWA space requires a next-generation protocol to stay ahead.

Centrifuge V3 is not just an upgrade—it’s a necessity. As the RWA market scales into the trillions, Centrifuge must position itself to meet the demands of a more complex and interconnected ecosystem. Building on the EVM ensures:

  • Seamless integration with the dominant blockchain infrastructure.
  • Access to the largest liquidity pools and developer ecosystems.
  • The ability to capture new opportunities and partnerships as RWAs become a cornerstone of DeFi.

This protocol will be the foundation for the next growth cycle of RWAs onchain, enabling Centrifuge to maintain its leadership and unlock new possibilities for institutional adoption and ecosystem growth.

Description of Activity

The proposal seeks the approval of the community to build Centrifuge V3 by k/factory.

k/factory is a software studio founded by the original contributors to the Centrifuge protocol.

Along with the other developers, k/factory provides core development and infrastructure to the Centrifuge Protocol since the early days.

k/factory will provide continuous updates and progress to the DAO through the development cycle.

Vision for the new Centrifuge V3

Centrifuge V3 aims to function as a fully multi-chain system with the following capabilities:

  • Accept investments and manage pools from any chain.
  • Allow asset managers to manage their pools from their preferred chain.
  • Implement chain abstraction to ensure flexibility and efficiency.
  • Utilize a secure, multi-bridge approach to enhance security and interoperability.
  • Enable external developers to build on top of the protocol.

Enhanced Standards and Flexibility

  • Adoption of key standards such as ERC7540, ERC6909, and additional asset-side standards.
  • Support for flexible fund structures, enabling third-party development and innovation.

Synchronous and Asynchronous Composability

  • Settlement Side: Synchronous composability for seamless transactions.
  • Accounting Side: Asynchronous composability for efficient management.
  • Investment Side: Asynchronous composability with optional synchronous features for flexible investments.

Protocol-Level Enhancements

  • Multi-chain asset management: Expand asset-side and pool management capabilities to be multi-chain.
  • Synchronous composable asset integrations: Enable seamless integration with new tokenized assets on any EVM-compatible chain.
  • Asset issuance flexibility: Facilitate integrations with externally developed tokenized assets, enhancing scalability and ecosystem growth.
  • Pool management flexibility: Issuers can choose their preferred chain for pool management, improving accessibility and efficiency.

Token

Centrifuge V3 would be supported with a new native CFG token, aligning governance with the ecosystem where the majority of Centrifuge’s activity and users already reside. This move would simplify governance participation by leveraging EVM’s established infrastructure, such as wallet compatibility and governance tools, while increasing visibility and accessibility for a wider audience. If this proposal is approved, a separate proposal will follow in the coming weeks to detail the technicalities of the new token and its migration process.

Alignment to the mission of Centrifuge DAO

The development of the Centrifuge V3 aligns with Centrifuge’s mission to create a decentralized financial ecosystem and unlock liquidity for real-world assets. This initiative ensures that Centrifuge stays at the forefront of innovation, broadens its reach and utility, and maintains its position as a leader in today’s RWA ecosystem.


The RFC will be open for a minimum of 14 days.

Looking forward to any feedback and any concerns you might have with this proposal.


Next steps

If there is support for this proposal, the next steps will be to submit it to the Proposal Repository on GitHub and create an Opensquare snapshot vote.


16 Likes

We fully support the proposal!

6 Likes

This sounds like quite the development, @jeroen!

Exciting days ahead for the Centrifuge protocol and DAO. Fully support this idea and let me know if I can be of any assistance in any way :handshake:

6 Likes

interesting proposal, so does this mean we move away from polkadot ecosystem? or we run both in unison?

2 Likes

In my opinion, the goal should be to become a pure EVM-based protocol.

As many Polkadot chains already provide EVM support (including their new main chain, AssetHub), nothing is blocking Centrifuge from deploying V3 on those chains, too.

6 Likes

Is chain abstraction being built in house or are you leveraging Chainlink or Wormhole?

2 Likes

then what happens with Altair?

3 Likes

A very well drafted proposal and I strongly support it. Like mentioned it will make the job of all the fund managers, developers and everyone a whole lot easier. We should have done it a couple of years ago but never too late to make a move on right direction.

Everything is so well explained that whatever comes to my mind is already mentioned in the proposals. Some others may feel why not Solana, Cosmos and other chains but one step at a time would help us to have a clear direction and target to achieve.

What is the approximate timeline for everything from approval to implemenatation.

3 Likes

Development on Ethereum is crucial given the growth of Total Value Locked (TVL) and the expansion of the Layer 2 ecosystem in recent years.

Here are a few key areas to consider, although they might be beyond the initial scope:

  1. Smart Wallet Integration: Enable smart wallet login and support for sponsored transactions to provide a seamless Web2 type experience for investors.
  2. Extension Support: Allow external teams to build integrations on top of Centrifuge 3, enabling functionalities such as KYC support, notifications, etc. Safe has been successful in this regard, with many developers creating apps that are available through Safe’s UX.
  3. On-ramp: Numerous solutions facilitate easy onboarding to USDC or other stablecoins. We should aim to partner with one provider to integrate this feature. If future funds permit inclusion of normal retail investors, this could be a key differentiator from other tokenization platforms.
  4. DeFi Integrations: AMMs and lending and borrowing are crucial primitives for integrating with real-world assets (RWAs). We could provide a straightforward UI/Layer for creating a Uniswap 3 pool and a Morpho/Compound market, which uses a stablecoin and the fund’s token.

The proposal presented is very solid, covering all essential features while appropriately limiting the scope. Therefore, the suggestions mentioned above might be prioritized later.

3 Likes

Fully support this proposal! Look forward to reading about the technicalities of the new token and its migration process

2 Likes

Hi guys. I have been here since the very first public pool (paperchain) on tinlake, so have been an avid investor and small contributor since. I would really like some clarification here. Will we still utilize polkadot for our security and just build v3 on EVM, or are we totally leaving polkadot ecosystem? If we are leaving can you please let us know the reasons why? I am all for innovation and the time is right but also a huge believer in polkadot’s decentralization and open governance. I look forward to the clarification

4 Likes

excited for v3! composability is DeFi’s super power & enabling asset managers to manage funds on any EVM chain (many might launch their own L2s) while enabling interoperability & leveraging Eth mainnet as a credibly neutral base to make competing firms collab. is the way imo.

3 Likes

I see some really exciting potential, I’d love to explore a few opportunities for strengthening the developer ecosystem.

  • The EVM focus is smart. We’re where the liquidity and institutional interest already live.
  • The vision of a multi-chain, modular system shows real forward thinking.
  • EVM ecosystem is full of developers which we can attract them to build with us

Developer Ecosystem Suggestions:

  1. It would be really nice to see a more explicit developer attraction strategy. Right now, the “enable external developers” feels a bit abstract. Are we aiming to make our ecosystem a decentralized base for developers, if yes, how?
  2. What would you think about supporting this strategy with developer grants or bounty programs especially targeting EVM & RWA stakeholders?

Overall, I believe that’s a massive opportunity to foster more decentralized ecosystem.

My recommendation is to complement this technical roadmap with a robust community and developer engagement plan. Since you’re not just building a protocol; you’re creating an ecosystem.

Looking forward to see the updates!

5 Likes

Good KarMa Capital loves the idea of moving Centrifuge to multi-chain EVM setup. Let’s do it!

2 Likes

Thanks for all the great questions! I will do my best to answer them. We will also spend time on this in the governance call upcoming Wednesday, and we can continue the discussion there.

If this proposal is accepted, the technology of Centrifuge will move from a Polkadot parachain to an EVM-based protocol. Polkadot is currently adding EVM support to Asset Hub, and Centrifuge can choose to deploy its protocol on Asset Hub once this is live.

Since the parachain will not be used in this paradigm anymore, Altair will no longer be required and would be deprecated.

The new protocol will use multiple general message passing providers for increased security. We will consider all options in the market today, including Chainlink and Wormhole, as well as the existing support for Axelar.

If this proposal is accepted, k/factory will take ownership of delivering this new protocol. This would be expected to go live in 2025.

Thanks for your early and continued support of Centrifuge!

The proposal is to move from a Polkadot parachain to an EVM-based protocol. This new EVM-based protocol can be deployed on Polkadot Asset Hub, to keep support for the existing Polkadot ecosystem, while expanding support to the wider network of EVM-based blockchains.

The Centrifuge protocol and CFG token will remain fully decentralized and controlled by onchain governance, with the technical implementation of this moving over to Ethereum based governance tooling. This will follow best practices from existing EVM based DAOs such as Sky, Aave and Morpho.

3 Likes

Hi, thank you for taking the time to answer my questions. To be honest this has opened up a whole pandora box due to the fact the we have been in talks to FRAX to back their stable coin through anamoley using EVM chain. But you now only bring all of this too light with no disclosure about FRAX ( I love FRAX and use it and admire Sam)
We have been in polkadot ecosystem since very beginning. My fellow investors and I are all big whales in altair as we believed in the idea of chaos and using NFTS as collateral for loans.
Has Polkadot or Gavins philosophy changed since we intially signed up or is it purely for the convenience of liquidity on EVM. I seriously thought this was already implemented due to the morpho pools/ aave/mkr . Look forward to the community discussion

1 Like

This seem to be very ambitious to be considering the all the intricacies and risk management involved. As early topic I thought it CFG is supporting EVM but the present plan is to migrate and stop the chain on Polkadot. A typical approach like this has questions on multiple areas.

  1. If it will be an EVM is any L1 or L2 already selected and what is the criteria for the same.
  2. Will be get any incentive for the building on their L1 or L2 are these options already analyzed and evaluated
  3. Would it not help Polkadot to have an independent project with the expertise as starting fresh will give us a lot of flexibility and ability to move faster than moving an exiting project and once successful we can move the exiting CFG tokens on it it.
  4. I hope there will be a separate proposal with details of the cost and milestone schedule involved as of now I don’t see any where that it has been presented even at a rough estimate
2 Likes