Centrifuge pools are evolving to support more than just private credit securitizations and as such certain features, fee structures and governance processes can’t be applied universally for these pools. This proposal introduces pool types for different applications of Centrifuge pools and proposes new parameters as well as governance processes for the different types.
Note: while I tried to put somewhat reasonable estimates on the fees listed here, they require further modeling beforehand.
A few assumptions were made on the original design of pools and previous versions of Tinlake regarding how they would be used. Some of these assumptions have proven to not always be the case. For example, new applications of Centrifuge pools include:
- Assets aren’t limited to private credit, users like BlockTower are working on tokenizing US treasuries and public credit.
- Pools are not just securitizations where an issuer onboards multiple investors to participate in a pool. Another use case of the pools functionality is Centrifuge Prime where a single DAO might be the only investor in a pool. This is already true in the case of BlockTower’s pools.
- Pools have historically mostly been used for off chain real world assets but Linked Pools allows them to be used for onchain tokenized assets (e.g. implementing index tokens or using a pool to manage a portfolio of RWAs for a DAO)
In finance what we would call a pool in Centriufge is usually either a syndicate, a securitization or a portfolio/investment account.
A pool can contain tokenized assets that are brought onchain such as individual loans, public or private bonds, etc. A pool can also contain RWAs that already exist onchain such as a linked pool that invests in other credit pools. Looking at the different use cases for Centrifuge, I would say we can put pools into the following types of asset classes:
|Asset class||Underlying assets|
|Private Credit & Securities||Debt directly from originators|
|Debt purchased on secondary market|
|Public Securities & Credit||T-bills, government debt, money market funds|
|Public Credit such as Corporate Bonds|
|Secured debt such as CLOs, MBS, ABS|
|Equities and funds inc. ETFs|
|On chain tokenized assets||Other pools on Centrifuge|
|Third party RWAs|
A pool can be:
- Open Pools: An open pool that allows for a broader distribution to third-party investors as well as DeFi protocols. Generally such pools have multiple unrelated token holders and can onboard third party investors.
- Closed Pools: A closed pool allows different users to contribute capital to a single pool. It is not connected to any DeFi protocols. It has very limited distributions and is not available for investment on the app.
- Portfolio Pools: A self-managed portfolio owned by a single entity (DAO, protocol or offchain entity) primarily used to manage a dedicated RWA portfolio for a single counterparty. There’s only one owner/controller of the pool and any pool tokens aren’t transferable. They’re intended for DAOs using Centrifuge Prime.
The pool onboarding proposal (POP) was proposed and approved as a process for pools to onboard to Centrifuge when most pools fit into a specific subset: Open Pools available to external investors with a focus on complex private credit assets. With the evolution of Centrifuge, there are now other pools that don’t fit as well into this group. For example, the proposed linked pools functionality can be used by users of Centrifuge Prime to construct private portfolios of pools. Requiring these pools to go through a governance process that involves a credit assessment, community feedback etc. doesn’t make sense as the pools aren’t offered to other Centrifuge users.
Thus, I would propose we split the pool onboarding process in different tracks:
Closed Pools: can be launched by anyone with a sufficient CFG deposit (for spam prevention) and a protocol fee
Open Pools: will require a full POP process
Portfolio Pools: the nature of these pools will be more varied (for example, how the portfolio in the pools is controlled) and as such, we won’t be able to create a one-size fits all solution to the onboarding process. To start off, I would propose Portfolio pools go through the standard CP4 Proposal governance process requiring a simple RFC on the forum and subsequent onchain vote.
I also would propose to allow pools to become public at a later point in time by going through a POP to turn it into a public pool.
The biggest difference between Open and Closed Pools will be the functionality available to pools.
Closed Pools will have the following functionality:
- Public loan tape/asset list
- Information onchain and in the app on loan performance, accounting etc.
- Allowing issuers to add stablecoins to pools and manage their asset/loan portfolios
- The number of pool token holders is limited to a predefined set of people.
- There is no automated pool onboarding and KYC integration.
Open Pools will have all the Closed Pool functionality, as well as:
- They will be prioritized in the UI for users navigating to Centrifuge
- They will come with integrations into KYC & onboarding tools allowing easy onboarding of investors
- They will be able to support DeFi integrations to add these pools as collateral to lending markets and other functionality
- They will receive a Credit Group report which is shown on the pool overview page for prospects to review
- They can become part of a Centrifuge Prime portfolio
Portfolio Pools will have the following functionality:
- All reporting and performance data will be public
- DAOs and other users of Prime will have access to reporting both onchain and offchain
- At launch, users can define custom rules around the portfolio definition and who can change it, giving DAOs fine grained control over their RWA portfolio
Pool fees should also be re-assessed. They were originally designed for a narrow set of possible use cases on Centrifuge; private credit pools open to different investors. Paying 0.4% anually on a pool is competitive for pools with tokenized private credit but a linked pool containing other pools paying the 0.4% effectively twice would make Centrifuge unattractive. When looking at other products like tokenized T-Bills (effectively a product that competes with ETFs in TradFi), a 0.4% fee also becomes too high. Therefore I would suggest we introduce different fee categories that better fit the different use cases of Centrifuge.
|Pool Type / Asset Class||Private Credit and Securities||Public Securities & Equities|
Centrifuge Prime is creating a managed portfolio for the DAO with investing in multiple assets but with a single investor. These pools come with some setup overhead but have very little transaction volume and simply invest into other pools. Therefore I think a tiered fee structure makes sense.
|Portfolio Size||Fee Tier|
|$0 - 50M||0.35%|
I would like Centrifuge users to comment on the above topics at a high level and invite anyone to reach out if you’d like to help turn some of these ideas into more specific proposals that can be voted on. After a first round of discussion I will be turning this into a more detailed governance proposal. @sirj and @ImdioR are working on building out a financial model which we want to publish for the DAO to evaluate how the different parameters impact the protocol. @akhan - your thoughts on Prime would be great to hear and @ctcunning of course for feedback on the fees and pool types.