I have been looking into and very attracted conceptually to the real world application/and value proposition of Centrifuge. I just wanted to share what has struck me so far in my burgeoning research. It’s still a shallow dive on my part, but I’m really intrigued and excited by the potential of this project.
An an overview, this is what has me excited about its potential as a decentralised framework for businesses interacting transacting with each other in a broad sense:
- Removal of traditional intermediaries in financing. By traditional I mean banks or conventional financial institutions that have (in the form of loan provision, factoring or reverse factoring) been required to provide financing to suppliers or expedite as I understand the payment of invoices in order to provide liquidity (for example). This arrangement has naturally favoured large companies (e.g buyers) and can disadvantage small or medium sized suppliers who might be pressured to accept unfair terms and conditions in order to maintain their relationship with the buyers or continue operating.
Intermediaries can also sometimes insist on parties having triple A credit ratings in order to participate in supply chain financing programs that provide factoring or reverse factoring and this is not always possible for small/medium enterprises.
Centrifuge removes the intermediary through a peer to peer protocol (P2P, allowing businesses to exchange documents (i.e. invoices) and tokenise real world assets (i.e receipts etc) via their conversion into Non-Fungible Tokens (NFTs) as I understand. The creation of NFTs appears to be an integral part of the protocol, because they are intrinsically valuable. Some characteristics of NFTs on Centrifuge: They are easily verifiable through metadata (ownership details, dates etc) censorship resistent, and stored and categorised on the blockchain in a decentralised way. The rich data supporting an NFT is valuable because investors can be confident about its authenticity.
The other benefit of P2P is that provides privacy and integrity of assets for the parties involved. The use of a public block chain and off-chain allows in the former for business identifying documents to be stored that mint NFTs and in the latter, the exchange of business items that are viewed only between the parties transacting.
I’d like to write about the value of the Tinlake pools in different post and how the RAD token provides users with governance rights etc but I’d like to understand those elements a bit better conceptually first.
Centrifuge aims to enable business to exchange business documents in a trustless way, tokenising assets (invoices) to allow for greater access to financing and unlocking of value that has not existed in traditional finance. This framework would allow for innovating and exciting new businesses to get the funding they need to build their business and service society.