MakerDao’s Deal With Centrifuge Calls For Rapid Response of Crypto-Native Lending Protocols

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The crypto loan market is booming. New lending projects emerge on a regular basis, trying to achieve their own edge and tackle the limits of traditional financial institutions. The loan agreements are digital, transparent, and operating on the blockchain — but there’s one major stumbling block that makes them even more complicated than their analog counterparts: trust. Sending tokens as collateral for a loan is not impossible, but it is risky. If something goes wrong with the lender or borrower, then recovering your tokens could be hard.

This means that loans in crypto will probably remain a rare occurrence in most people’s lives for some time yet. But what if we could create a system with no trust requirements? What if lenders and borrowers did not need to trust each other because they can both see all the details of the transaction at any time? That’s exactly what MakerDao has created with its new deal with Centrifuge.

MakeDAO is making progress in its drive to finance off-chain business activities, and it isn’t crypto.

An Australian beef shipment to Hong Kong was financed by one of the vaults of the project on May 9.

With DAI, users can finance the activities of real-world businesses by using Centrifuge, a Polkadot and Ethereum-based protocol. The deal was financed by ConsolFreight, a trade finance provider on Centrifuge, via the Maker vault on Centrifuge.

Maker’s Vault Updates

Additionally, ConsoleFreight generated a NFT containing shipment and invoice details. Additionally, Mastercard’s blockchain traceability solution, Provenance, is being used to track the shipment and transaction.

Supply chains are an industry ripe for innovation, and the venture demonstrates how smart contracts and a stablecoin can bring benefit in the real world. It comes at the same time that Maker has expanded the use of its DAI stablecoin to finance businesses operating with real-world assets (RWAs) in order to hedge against a bear market. This week, when the UST disaster has weighed heavily on the sector, MakerDAO’s project stands out as a bright spot.

In response to Maker’s call, crypto-native lending protocols stepped forward quickly, but MakerDAO’s partnership with Centrifuge is aimed at attracting business outside the cryptocurrency space.

ConsolFreight posted an update about the transaction on MakerDAO’s forum. Having begun to use Maker’s vault continuously, ConsoleFreight describes this post as the first of many regular updates.

A company called FreshSupplyco, which uses Mastercard Provenance to track shipments globally, also participated in the deal.

Maker said Mastercard and FreshSupplyCo approached him to explore options to meet the growing demand for alternative sources of capital and faster approvals.

Proof of Steak Protocol Transition

Maker’s forum applauded the transaction. According to the head of MakerDAO’s growth core unit, the pilot with Mastercard is just the beginning.

We hope that this will be the first of many exciting deals with all the parties involved as we show the world we can prove provenance and help scale supply chains with this beautiful technology,” said ElProgreso.

There have been some skeptics within the MakerDAO community regarding the protocol’s pivot to incorporate real-world assets, so social media reaction to the news was less enthusiastic.

Randomishwalk commented sarcastically on Twitter: “So… RWA was a meat vault?” Hey_Johnno said “Thank god I dumped this s*%t coin beginning of April.”

“The Proof of Steak protocol transition has been successful,” Lempheter tweeted.

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Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.