RWA attracts investors to the U.S. bond market: A review of the 6 most active RWA lending agreements

Author: Jaden, LD Capital
Preface
As risk-free interest rates in traditional finance rise and DeFi yields fall, investors are flocking to the U.S. Treasury market. In order to re-expand the market and provide users with more sustainable and stable returns, DeFi protocols use RWA as a source of collateral or new investment opportunities.
The cumulative amount of loans in the RWA lending agreement reached 4.4 billion US dollars, with a peak of 1.4 billion US dollars in May 2022. The current amount of loans in the RWA lending agreement is less than 500 million US dollars (excluding MakerDAO). Especially in the deleveraging stage of 2022, institutions withdrew funds in succession, and some lending agreements had bad debts. Although the market has paid more attention to the RWA sector, the amount of loans has not improved much. In the past year, the growth of funds in the RWA sector has mainly been for the subscription business of US bonds.
This article will focus on the most active lending protocols that access real-world assets and follow their developments, based on tracking by Nansen and Rwa.xyz. These protocols are MakerDAO, Maple Finance, Truefi, Goldfinch, Centrifuge, and Clearpool.
Figure: RWAs protocol active loan volume
Source: rwa.xyz, LD Research
MakerDAO
Rank#70
MakerDAO is a stablecoin protocol that allows users to pledge crypto assets to borrow the dollar-pegged stablecoin Dai.
The MakerDAO RWAs section is divided into two parts. The first is MIP21, which supports RWA as collateral for lending and uses Centrifuge Tinlake as the underlying layer. It usually charges a 4% stability fee. The proposal was passed in November 2020. The second is MIP65, which supports the acquisition of USDC through the PSM module and strategic investment by Monetalis. The initial debt ceiling is US$500 million, and then the debt ceiling will be increased to US$1.25 billion in March 2023. This additional US$750 million will be used to purchase US bonds in 12 installments over the next 6 months.
Figure: How MakerDAO RWA mortgage lending works
Source: MakerDAO blog, LD Research
As of June 24, 2023, according to dune data, the scale of MakerDAO RWA business is nearly US$1.4 billion, accounting for 41% of MakerDAO's balance sheet, bringing in US$5.3 million in revenue, accounting for 52.2% of the protocol's annualized revenue.
Figure: MakerDAO RWAs
Source: dune.com, LD Research
Token Model
The total number of tokens is 1 million. Due to the existence of additional issuance (to fill the bad debts of the protocol) and the protocol profit destruction and repurchase mechanism during the operation of the protocol, the current actual circulation is 977,631.03.
The main function of the token is governance, and the staking mining function will be added for the Spark protocol in the future.
Centrifuge
Rank#257
Centrifuge was founded in 2017 by Lucas Vogelsang, Maex Ament and Martin Quensel, promoted by the Pro FIT program of Berlin Investment Bank and co-funded by the European Regional Development Fund (EFE). On January 29, 2022, Centrifuge won the 8th Polkadot parachain slot auction with 5,435,100 DOT locked.
Its product is Tinlake, which supports users to pledge assets and generate an NFT for financing. Each asset pool has two tokens with different risks, Tin and Drop. Centrifuge charges a 0.4% platform fee.
Centrifuge Tinlake is the underlying layer of MakerDAO RWA mortgage lending. In April 2021, financial institution New Silver took the lead in establishing a real estate repair and flip loan pool in its Tinlake contract, relying on MakerDAO as a credit facility to complete the first loan financing.
At the end of December 2022, BlockTower Credit partnered with Maker and Centrifuge to bring $220 million in real-world assets to DeFi. Maker will issue Dai loans backed by these RWAs, Centrifuge will handle on-chain issuance and tokenization, and BlockTower Credit will act as an asset manager.
In February 2023, Centrifuge proposed to the Aave community to introduce real-world assets (RWA) into Aave and use them as collateral for the native stablecoin GHO. Centrifuge said that once GHO is ready, it will release a formal proposal.
From January to June 2023, there were no significant developments for Centrifuge.
Although the platform fee charged by Centrifuge is very low, the amount of funds it connects is large, and it is one of the first protocols to adopt risk grading.
Token Model
Centrifuge initially released 400,000,000 CFG and distributed it to the foundation and initial contributors, core team, investors and validators. In order to pay for PoS block rewards, an additional 3% of CFG tokens are expected to be minted each year, but the tokens used to pay transaction fees will be burned to stabilize the total supply of CFG tokens. However, its main chain has few transactions, so the amount of tokens destroyed is very small. Currently, some CFG is bridged to Ethereum. The main uses of CFG are staking, paying transaction fees on the main chain, and participating in governance.
Maple Finance
Rank#395
Maple Finance was founded in 2020 and officially launched in May 2021. Its products were launched on the Solana and Ethereum chains. Its main business is to provide unsecured lending services to institutions. In the past, its main users were crypto companies. Therefore, in the deleveraging market environment in 2022, it generated US$52 million in bad debts.
According to Defillama, March 2023 was the historical low of Maple Finance TVL (24M), and then the TVL rebounded after the protocol launched a cash management pool for US Treasuries in May. Compared with Truefi's upcoming US Treasury pool, Maple Finance does not have a minimum subscription amount, but judging from the on-chain records, it is still dominated by large subscriptions. On June 12, an irregular loan pool was launched to increase the flexibility of the protocol. As of June 24, 2023, Maple Finance TVL reached 62.82M, of which the RWA segment TVL was 22.83M.
Maple Finance charges a 0.66% platform fee and a 2.5% fulfillment fee (paid as a percentage of interest when the loan is repaid).
Image: Maple TVL on Ethereum
Source: Defillama, LD Research
Token Model
Maple Finance issues two tokens, MPL on Ethereum and SYRUP on SOL, with a total of 10,000,000 each. Users can obtain xMPL by staking MPL, and 50% of the protocol revenue will be used to repurchase MPL on the market to reward xMPL holders. Currently, the circulation of MPL is 7.96 million, of which 30.41% are involved in staking, and the number of MPL repurchased is 30,010.
Truefi
Rank#429
Truefi is an unsecured lending protocol for investment institutions created by the TrustToken team in 2020. TrustToken previously created TUSD, but sold that business to a company called Techteryx in 2020.
After Truefi’s TVL fell below $10 million, there was no sign of rebound, and the protocol currently has no active lending pool. Adapt3r digital is about to open a US bond pool with a minimum subscription amount of $100,000, and is currently in the registration application stage.
The protocol charges a 0.5% platform fee.
Figure: Truefi TVL
Source: DeFillama, LD Research
(The agreement shows that the TVL is $17.25M, of which the outstanding loan amount is 7.17M, which is different from DeFillama)
Token Model
The maximum supply of TRU is 1.45 billion, the current supply of tokens is 1,198,450,773, the current circulation is 1,061,445,050, and 251 million tokens are destroyed. As of May 22, 2023, the team statistics show that the team, token sales, liquidity rewards and governance parts have locked about 140 million tokens.
TRU value capture comes from:
1) Pledge, approve or reject new loans;
2) Reserve funds;
3) Liquidity incentives;
4) Governance.
Goldfinch
#737
Goldfinch Finance's main business is to provide loans to physical companies. Its target customers are lending companies such as debt funds and fintech companies, providing them with USDC credit lines.
According to dune data, Goldfinch's active loan volume and agreement TVL have basically stagnated since May 2022, and the total loan amount has remained at around US$100 million. The main reason is that unsecured lending requires a detailed investigation of the entity, and the lenders are usually institutions. In a bear market, it is difficult for lenders and borrowers to match their risk and return assessments.
Goldfinch earns revenue from the interest paid by borrowers and the withdrawal fees generated by LPs, of which the DAO takes 10%. LPs pay a 0.5% withdrawal fee when withdrawing from the premium pool, which is also allocated to the DAO.
Figure: Goldfinch Active Loan Volume/TVL
Source: dune.com, LD Research
Token Model
The total number of tokens is 114,285,714. A moderate inflation plan may be introduced in the future (2 years later), which will be decided by the community. The current circulation of tokens is 51.9m, accounting for 45% of the total tokens. Nearly 55% of the total tokens will be released 3 years after TGE, with a monthly release of about 1.76 million tokens.
Clear Pool
Rank#960
The protocol was launched on the Ethereum mainnet in Q1 2022. The team members mainly come from traditional financial institutions, and the protocol products include permissionless pools and permissioned pools.
A permissionless pool means that anyone can provide loans, but borrowers still need to apply to the team for a list. The size of the permissionless pool is dynamic, and there is no limit on the amount of liquidity that lenders can provide. Borrowers can use the utilization/interest rate curve to optimize the size of the pool. There is no fixed loan repayment time, and the interest is calculated dynamically. Its lending method is similar to collateralized lending protocols such as Aave. However, the utilization rate of the pool needs to be kept below 95%. When the utilization rate exceeds 95%, borrowers can no longer borrow. If it exceeds 99%, lenders cannot withdraw funds, and borrowers need to repay part of the funds.
Prime is Clearpool’s upcoming permissioned pool, built on Polygon and currently in the testnet stage. All participants in the Prime pool are required to undergo KYC and AML investigations.
March 2023 was the low point of the protocol's TVL (2.6m), and the current TVL is 28.49m, but the TVL has been slowing down since May.
Image: Clearpool TVL
Source: Defillama, LD Research
Token Model
The total number of CPOOL tokens is 1 billion, and the public offering round valuation is 40 million US dollars. It is currently in a broken price state.
Before January 2024, 3.11% of the total circulating supply of tokens will be released on the 28th of each month.
Token value capture comes from: 1) 5% of protocol revenue is used for repurchase;
2) Stake to get token rewards;
3) Participate in governance.