Centrifuge

What is Centrifuge?

Centrifuge is a decentralized protocol that connects real-world assets (RWAs) to decentralized finance, enabling businesses to access crypto liquidity without relying on banks. Founded in 2017, Centrifuge has become one of the most established RWA protocols, facilitating over $500 million in financed assets including trade receivables, real estate loans, and revenue-based financing.

The protocol operates through Tinlake, its investment app that allows DeFi investors to earn yields from real-world assets like invoices, mortgages, and streaming royalties. Unlike Treasury-backed products, Centrifuge offers exposure to private credit markets that traditionally required institutional access, democratizing an asset class that has historically outperformed public markets.

Centrifuge's integration with [MakerDAO](/insights/protocols/maker) marked a watershed moment for RWAs in DeFi, establishing the first large-scale on-chain private credit facility. Today, Centrifuge pools back over $100M of DAI, bringing institutional-grade yields to DeFi participants.

How Centrifuge Works

The Centrifuge Architecture

Businesses seeking financing (called Asset Originators) tokenize their real-world assets as NFTs on the Centrifuge Chain. Each NFT represents a unique, legally-binding claim on an asset—whether an invoice, real estate loan, or other receivable.

Assets are grouped into pools, which are divided into tranches with different risk/return profiles:

• Senior Tranche (DROP tokens): Lower risk, stable returns (typically 4-8% APY)
• Junior Tranche (TIN tokens): Higher risk, higher returns (8-15% APY)
• Mezzanine: Optional middle tranche for balanced exposure

DeFi users supply stablecoins (primarily DAI) to pools. As borrowers repay their loans with interest, returns flow to investors based on their tranche.

Centrifuge Chain

Centrifuge operates its own blockchain (built on Substrate) optimized for RWA tokenization:

• Privacy-preserving document layer for sensitive financial data
• NFT minting for unique asset representation
• Cross-chain bridges to Ethereum and other networks
• On-chain governance through CFG token

Key Statistics

• Total Financed: $500M+ lifetime financing
• Active TVL: $250M+ across pools
• Default Rate: <2% historical default rate
• Active Pools: 20+ asset pools
• MakerDAO Vault: $100M+ DAI allocation
• Supported Assets: Trade finance, real estate, revenue-based financing
• CFG Token: Governance and network staking

Yield Opportunities

Pool Investment Strategies

Invest in senior tranches across diversified pools. DROP tokens receive priority repayment and are protected by junior tranche capital.

• Lower volatility than crypto-native yields
• First claim on pool assets in default scenarios
• Suitable for stablecoin allocation seeking real-world exposure

Junior tranche investments offer higher yields but absorb first losses. Best for investors comfortable with credit risk who seek equity-like returns.

• Higher APY compensates for first-loss position
• Potential for significant upside in well-performing pools
• Requires careful pool and originator due diligence

Pool Selection Criteria

When evaluating Centrifuge pools, consider:

1. Asset Originator Track Record: History, default rates, industry experience
2. Asset Type: Trade finance typically safer than real estate development
3. Junior Tranche Size: Larger junior tranches mean more protection for senior
4. Loan Terms: Shorter durations reduce default risk
5. Geographic Diversification: Spread across regions and currencies

Getting Started with Centrifuge

Step 1: Verify Eligibility

Most Centrifuge pools require KYC verification:

• Connect wallet to Centrifuge App
• Complete identity verification through Securitize or similar provider
• Accreditation requirements vary by pool

Step 2: Evaluate Pools

Research available pools on app.centrifuge.io:

• Review asset originator backgrounds
• Analyze historical performance and default rates
• Understand tranche structure and protections

Step 3: Invest

• Select pool and tranche (DROP or TIN)
• Supply DAI or other accepted stablecoins
• Receive pool tokens representing your position

Step 4: Monitor and Harvest

• Track pool performance through Centrifuge dashboard
• Reinvest or withdraw based on pool liquidity
• Use Fensory to compare yields across RWA protocols

Risk Considerations

Real-world borrowers may default on their obligations. Unlike over-collateralized DeFi lending, Centrifuge pools carry genuine credit risk.

Investments are locked until loans mature. Early withdrawal depends on available pool liquidity and may incur penalties.

Pool performance depends heavily on asset originator quality. Poor underwriting or fraud can result in significant losses.

Enforcement of loan claims crosses traditional and crypto legal frameworks. Recovery in default may be complex.

While audited, Centrifuge contracts carry standard DeFi risks.

Centrifuge vs Other Private Credit Protocols

Frequently Asked Questions

Centrifuge pools are backed by trade receivables (invoices), real estate loans, revenue-based financing, and other private credit. Each pool focuses on a specific asset type with its own risk/return characteristics.

DROP (senior tranche) has priority on pool returns and is protected by TIN (junior tranche). DROP offers lower, more stable yields while TIN offers higher yields but absorbs first losses in defaults.

The asset originator works to recover the debt. Losses are first absorbed by TIN holders. DROP holders are only affected if defaults exceed the junior tranche buffer.

Withdrawal depends on pool liquidity. Some pools have lockup periods or limited redemption windows. Always check pool terms before investing.

No, you can invest using DAI or other stablecoins. CFG token is used for governance and staking on the Centrifuge Chain.

[Explore Centrifuge on Fensory →](https://www.fensory.com)