MakerDAO, Centrifuge Bring Real World Loans to DeFi

Key Takeaways

  • MakerDAO’s community has passed a vote to introduce real world loans.
  • Centrifuge users can now deposit real world assets into a pool to receive DAI.
  • The debt ceiling has initially been set at 5 million DAI.

DeFi takes another leap forward as MakerDAO and Centrifuge launch real world loans. 

MakerDAO Launches Real World Collateral

MakerDAO and Centrifuge have joined forces to introduce real world asset loans in DeFi. 

New Silver, a loan pool on Centrifuge Tinlake, now lets users finance loans using MakerDAO as a credit facility. MakerDAO’s community passed a vote to launch the update last week. 

The integration allows anyone to deposit assets to a Centrifuge pool to receive a loan paid in DAI. These assets could encompass cars, real estate, or any other type of physical asset that can be digitized. To date, MakerDAO has only supported crypto assets like ETH and WBTC as a form of collateral. 

It will work by creating DROP tokens when a Centrifuge user drops an NFT of a real world asset into Centrifuge’s pool. The Maker Vault will then mint DAI to finance the loan. The debt ceiling has been set at 5 million DAI, while the stability fee is set at 3.5%. The update works similarly to a credit line used in traditional banking, except it will run 24/7 on smart contracts. That means it will be both permissionless and trustless, enabling anyone with an Ethereum address to receive instant liquidity by locking their assets.

Sébastien Derivaux, head of MakerDAO’s Real World Finance Core Unit, explained that the integration marks a step forward for DeFi, and makes MakerDAO more secure. He said: 

“This integration not only advances DeFi but it also brings many benefits to the MakerDAO ecosystem. By diversifying the collateral backing DAI and adding non-crypto related assets, it increases the DAI safety and makes it extremely stable. This move will also help MakerDAO meet the increasing demand of DAI by tapping in a multi trillion-dollar asset class.”

MakerDAO is seen as a “blue chip” of the DeFi ecosystem. It currently contains over $9 billion in total value locked, the highest of any DeFi protocol. It works by allowing users to lock up assets as collateral to mint DAI, an ERC-20 stablecoin. 

The Centrifuge integration will allow businesses to access liquidity by locking their financial assets and help open up the finance system. The press release concludes: 

“This is how DeFi will eat CeFi.” 

Disclosure: At the time of writing, the author of this feature owned ETH. They also had exposure to MKR in a cryptocurrency index.

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