I’m delighted to see the progress of this innovative project these days.
I’d like to gain a better understanding of the benefits that each participant can receive through Centrifuge’s RWA tokenization process. Please forgive me if my questions seem basic.
To be more specific, I’ll use BlockTower’s Pools as an example.
BlockTower (BT) aimed to raise funds in Maker’s DAI by tokenizing their assets like ABS and CLO on Centrifuge. Across their four pools from Series I to IV, BT managed to raise nearly $150 million in DAI. BT tokenizes their assets and creates DROP and TIN tokens within a tranche framework. Primarily, BT purchases TIN tokens to demonstrate their confidence in their assets, while Maker acquires DROP tokens and lends almost $150 million in DAI to BT, sharing in the interest generated from BT’s assets like CLO.
In my understanding, each participant in this process can enjoy the following benefits:
i) Reduced transaction fees: They report that it costs only 5 ETH, which is nearly equivalent to the basic fees on the Ethereum network.
ii) Portfolio diversification: BT can raise funds from the crypto environment, not just from traditional institutions.
iii) Faster settlement: Lending transactions occur in minutes, thanks to the underlying blockchain technology, as opposed to the weeks or months it might take in traditional finance environments.
i) Portfolio diversification: Maker can earn interest from BT’s assets.
i) Protocol fees
I have a few questions that may seem naive:
- How can we assess the value of BT’s underlying assets, such as ABS and CLO? Is it reliable to do so, and does the credit group in Centrifuge play a role in this assessment?
- If BT were to raise funds from a traditional environment, what might be the expected transaction fees? Could they potentially exceed 5 ETH in cost?
- What are the potential uses for the $150 million in DAI that BT raises? Do they simply convert it to US dollars through centralized exchanges like Coinbase?
I appreciate your patience with my questions, and please correct me if I’ve misunderstood anything.