A Review of RWA Lending Protocols
Introduction:
With the rise of risk-free rates in traditional finance and the decline of DeFi yields, investors are flocking into the U.S. bond market. To re-expand the market size and provide users with more sustainable and stable returns, DeFi protocols are turning to Real-World Assets (RWAs) as a source of collateral or new investment opportunities.
The total borrowing volume of RWA lending protocols has reached $4.4 billion, peaking in May 2022 at $1.4 billion. The current borrowing amount is less than $500 million, excluding MakerDAO. Particularly during the deleveraging phase in 2022, multiple institutions withdrew their investments in quick succession, resulting in bad debt in some lending protocols. Despite the growing market interest in the RWA sector, the borrowing volume has not shown significant growth. Over the past year, the capital growth in the RWA sector has been primarily focused on U.S. bond subscription business.
This article, based on tracking data from Nansen and Rwa.xyz, will primarily introduce and follow up on the development trends of the most active lending protocols incorporating real-world assets. These protocols include MakerDAO, Maple Finance, Truefi, Goldfinch, Centrifuge, and Clearpool.
Figure: Active Loan Volume in RWA Protocols
MakerDAO
Rank#70
MakerDAO is a stablecoin protocol that allows users to collateralize crypto assets and borrow the USD-pegged stablecoin, Dai.
The RWA section of MakerDAO is divided into two parts. The first is MIP21, which supports lending against RWAs as collateral, and uses Centrifuge Tinlake as the underlying infrastructure, typically charging a 4% stability fee. This proposal was passed in November 2020. The second part is MIP65, which supports obtaining USDC through the PSM module and strategic investments by Monetalis. The initial debt ceiling was $500 million, which was later increased to $1.25 billion in March 2023. The additional $750 million will be used over the next six months to purchase U.S. bonds in twelve installments.
Image Caption: Operation of RWA Collateral Lending in MakerDAO
As of June 24, 2023, according to data from Dune, MakerDAO’s RWA business size is nearly $1.4 billion, accounting for 41% of MakerDAO’s balance sheet and generating $5.3 million in revenue, which accounts for 52.2% of the protocol’s annual income.
Figure：MakerDAO RWAs
Tokenomics:
The total token supply is 1 million. However, due to the protocol’s inflation (to fill bad debt gaps) and profit-driven token burn/buyback mechanism, the current actual circulation is 977,631.03. The main function of the token is governance, and a staking mining feature for the Spark protocol will be added in the future.
Centrifuge
Rank#257
Centrifuge was established in 2017 by Lucas Vogelsang, Maex Ament, and Martin Quensel, and is driven by the Pro FIT scheme of a Berlin investment bank, co-financed by the European Regional Development Fund (ERDF). On January 29, 2022, Centrifuge won the 8th Polkadot Parachain slot auction by locking 5,435,100 DOT.
Its product, Tinlake, allows users to collateralize assets to generate an NFT for financing, with each asset pool having two tokens, Tin and Drop, with different risk profiles. Centrifuge charges a 0.4% platform fee.
Centrifuge’s Tinlake is the underlying asset for MakerDAO’s RWA collateralized lending. In April 2021, financial institution New Silver first established a fix and flip loan pool in its Tinlake contract, using MakerDAO as the credit facility to complete the first loan financing.
At the end of December 2022, BlockTower Credit, in collaboration with Maker and Centrifuge, brought $220 million of real-world assets into DeFi. Maker will issue Dai loans backed by these RWAs, Centrifuge will handle on-chain issuance and tokenization, and BlockTower Credit will act as the asset manager.
In February 2023, Centrifuge proposed to the Aave community to introduce real-world assets (RWAs) into Aave and use them as collateral for the native stablecoin GHO. Centrifuge stated that once GHO is ready, it will release an official proposal.
From January to June 2023, Centrifuge made no significant progress. Despite the low platform fees charged by Centrifuge, the volume of funds it attracts is large, and it is one of the earliest protocols to adopt risk-tiering.
Tokenomics
Centrifuge initially issued 400,000,000 CFG tokens, distributing them to the foundation, early contributors, the core team, investors, and validators. To pay for PoS block rewards, it is estimated that an additional 3% of CFG tokens will be minted each year, but tokens used to pay transaction fees will be burned to stabilize the total supply of CFG tokens. However, due to the few transactions on its main chain, the amount of tokens burned is very minimal. Currently, some CFG tokens are bridged to Ethereum. The primary uses for CFG are staking, paying transaction fees on the main chain, and participating in governance.
Maple Finance
Rank#395
Maple Finance was established in 2020 and officially launched in May 2021. The product is live on the Solana and Ethereum chains, with the main business being providing uncollateralized lending services to institutions. In the past, the user base was primarily crypto companies, which led to $52 million in bad debt in the deleveraging market environment of 2022.
According to Defillama, March 2023 was the historical low point for Maple Finance’s Total Value Locked (TVL) at $24M. However, the protocol’s TVL rebounded after launching a cash management pool for US Treasuries in May. Compared to the soon-to-be-released Treasury pool from Truefi, Maple Finance does not have a minimum subscription amount, but the on-chain records still show a predominance of large subscriptions. On June 12, they launched an open-term loan pool to increase protocol flexibility. As of June 24, 2023, Maple Finance’s TVL reached $62.82M, with the RWA sector’s TVL at $22.83M.
Maple Finance charges a 0.66% platform fee and a 2.5% performance fee (paid as a percentage of interest when repaying the loan).
Figure：Maple TVL on Ethereum
Tokenomics
Maple Finance has issued two tokens: MPL, which was issued on Ethereum, and SYRUP, which was issued on Solana. Each has a total supply of 10,000,000. Users can obtain xMPL by staking MPL, with 50% of protocol revenue being used to buy back MPL on the market to reward xMPL holders. The current circulating supply of MPL is 7.96 million, of which 30.41% is staked. To date, 30,010 MPL have been bought back.
Truefi
Rank#429
Truefi is a non-collateral lending protocol created by the TrustToken team in 2020 for investment institutions. TrustToken previously created TUSD, but sold this division to a company called Techteryx in 2020.
Truefi’s TVL fell below $10 million and shows no signs of rebound. The protocol currently has no active loan pools. Adapt3r digital is about to open a U.S. bond pool with a minimum subscription of $100,000 and is currently in the registration application stage. The protocol charges a 0.5% platform fee.
Figure：Truefi TVL
(The TVL displayed within the protocol is $17.25M, with an outstanding loan amount of $7.17M, which differs from DeFillama)
Tokenomics
The maximum supply of TRU is 1.45 billion, with a current token supply of 1,198,450,773 and a circulating supply of 1,061,445,050. 251 million tokens have been burned. As of May 22, 2023, according to team data, about 140 million tokens are locked in the team, token sales, liquidity rewards, and governance sections. The value capture of TRU comes from:
1) Staking, approving or rejecting new loans;
2) Reserve funds;
3) Liquidity incentives;
4) Governance.
5) Goldfinch
Goldfinch
#737
Goldfinch Finance’s main business is providing loans to physical companies, targeting borrowers such as debt funds and fintech companies, and providing them with credit lines in USDC.
According to Dune data, Goldfinch’s active loan volume and protocol TVL have been stagnating since May 2022, with total loan limits maintaining around $100 million. The primary reason is that unsecured lending requires thorough investigation of the entities, and lenders are usually institutions. In a bear market, it’s challenging for lenders and borrowers to align risk and return assessments. Goldfinch’s revenue comes from the interest paid by borrowers and the withdrawal fees generated by LPs. The DAO collects 10% of these fees. When LPs withdraw from the senior pool, they need to pay a 0.5% withdrawal fee, which is also distributed to the DAO.
Figure: Goldfinch Active Loan Volume/TVL
Tokenomics
The total token supply is 114,285,714, and there may be a moderate inflation plan introduced in the future (2 years later), which will ultimately be decided by the community. The current token circulating supply is 51.9 million, accounting for 45% of the total token supply. Nearly 55% of the total token supply will be released over three years after TGE, with an approximate monthly release volume of 1.76 million tokens.
Clear Pool
Rank#960
The protocol was launched on the Ethereum mainnet in Q1 of 2022. The team members primarily come from traditional financial institutions, and the protocol products include permissionless pools and permissioned pools.
Permissionless pools refer to pools where anyone can offer a loan, but borrowers still need to apply for a list from the team. The size of the permissionless pool is dynamic, and there is no limit to the amount of liquidity lenders can provide. Borrowers can use the utilization rate/interest rate curve to optimize the pool size, with no definite loan repayment time and dynamically calculated interest. Its lending method is similar to collateral lending protocols such as Aave. However, the pool’s utilization rate needs to be kept below 95%. When the utilization rate exceeds 95%, borrowers can no longer take out loans. If it exceeds 99%, lenders cannot withdraw, and borrowers need to repay a portion of the funds.
Prime is a permissioned pool that Clearpool is about to launch, built on Polygon, and currently in the testnet phase. All participants in the Prime pool need to undergo KYC and AML investigations.
The protocol’s TVL hit a low point in March 2023 ($2.6 million). The current TVL is $28.49 million, but its growth rate has slowed since May.
Figure：Clearpool TVL
The total supply of CPOOL tokens is 1 billion, with an initial public offering valuation of $40 million, currently in a state of below-issue-price.
Before January 2024, 3.11% of the total circulating supply of tokens is released on the 28th of each month.
Token value capture comes from:
1) 5% of protocol revenue is used for buybacks;
2) Pledged to receive token rewards;
3) Participation in governance.
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