trashbin | Pingpad

Current state of banking affairs fuels the widespread fear for providing and obtaining credit. It's also revving up Defi.
Tokenization of a real world asset (RWA) eases this fear.
One that is hardly ever talked about in Defi is NOT a land, commodity nor an art ⁉️🧵

twitter.com/arndxt_xo/status/1642844427894018050

I thought I'd share with you this upcoming protocol called @Polytrade_fin.
But before the deep dive (pt 2), I would do a market research for its core concept.

1️⃣ What Polytrade does

2️⃣ Preclude to RWA

3️⃣ What are RWAs

4️⃣ RWA credit protocols

5️⃣ Alignment of macro dynamics

1️⃣ What Polytrade does

Polytrade tokenises credit (aka invoicing receivables) into a safe asset class while earning yields for its liquidity providers.
This credit tokenisation can help SMEs raise liquidity, which is crucial to keep business operations going.
Market potential here is massive as it's building in a 5T trade finance market.

Market gap exist in terms of funding, where it still lacks 1.5T.

@fitforcrypto_ shares similar sentiment that the RWA scene is just heating up

twitter.com/fitforcrypto_/status/1636727752744206338

Lets look at how RWA in trade finance transforms not only in Defi but in web2 as well!

I think that the RWA is poised to take down some of that 16 trillion market share.

twitter.com/thedefiedge/status/1641440379760443393?t=etJhc_yeyXPfK3FwY3qy2Q&s=19

2️⃣ Preclude to RWA

With the collapse of LUNA, we have seen DeFi yield taking a nose dive. The promised highlands are not longer safe.

And even the gold standards of crypto such as FTX fell prey to greed and mismagagement. Regulations were merely a facade.

So where can we look for high yields?

We now turn to new trends with the "fi"s

i.e. Gamblefi, NFTfi, LSDfi. You dont feel too SAFU isn't it?

RWA offers that assurance and yet a way to earn higher REAL yields

3️⃣ What are RWAs

These are assets that exist in the physical world, with a real impact to businesses.

RWAs have a financial value attached to them, be it a market price like a property or commodity, or a perceived value like an art.

Clearly an untapped market potential.

Giants in the web2 space are taking taking advantage of this narrative:

▫PE firm @hamilton_lane, manages $824B of assets, would tokenize a portion of its equity fund.

Whats more astounding is that governments are accepting DeFi!

▫@MAS_sg announced Project Guardian, a pilot program to tokenize bonds and deposits that can be used in various DeFi strategies.

it uses Defi protocols like @AaveAave and @compoundfinance to earn interest, or take loans. Big banks are part of this pilot too!

User benefits as traditional assets are being brought on-chain:

▫Fractional ownership; lower min investment

▫Increase asset's liquidity

▫Enhanced transparency and security

▫Better security through blockchain tech

▫Better compliance

▫Automated ownership management

4️⃣ RWA credit protocols

RWA narrative is led by web2 companies. But how about crypto native protocols?

One upcoming is @Polytrade_fin. I have seen its roadmap and can only assure you that it has solid partnerships lined up and a bullish roadmap ahead. (in the next thread)

Polytrade plans to incorporate a suite of features, which I already seen its successes with the current RWA credit protocols.

You can take a guess on the sort of features it will have.

Here's a quick competitive research of some relevant protocols that's already out there:

🔹@maplefinance credit marketplace plans expand to receivables financing up to $100M in size, as well as support US treasuries and insurance refinancing.

🔹@goldfinch_fi allows for the creation of junior and senior tranches for assets.

🔹@OndoFinance recently tokenized US treasuries, investment grade bonds, and high-yield corporate bonds.

🔹@FluxDeFi (built by Ondo) allows borrowing of stablecoins against the tokenized US treasuries.

🔹@centrifuge deals with structured credit—is focused on securitizing and tokenizing previously illiquid debt, with $298M in total assets already financed.

🔹@BackedFi a Swiss-based startup that launched its first product, bCSPX representing tokenized S&P 500 ETF shares.

Probably this is something that could interesting and also I would exercise some caution given the recent bank sentiments from the Swiss largest national bank

Generally, these protocols work largely around 2 main users: Lender and Borrowers.

Lenders provide capital to borrowers, who seek some financing.

RWA then comes in with innovation on how this can be financed through the play of various assets.

Advantages of RWA credit protocols

▫Lenders earn higher APY than most promised Defi yields

▫Presents a new source of loans, and increases capital efficiency

▫Businesses are building their on-chain credit profile

Disadvantages of RWA credit protocols:

▫Default risk posed by the borrowers

▫Defi's distaste for KYC

▫Biasness in KYC and AML process as its a human-driven process

5️⃣ Alignment of macro dynamics

I thought it was timely to bring this topic of RWA for credit as we have seen the ugly tradfi macro out there.

One of America's great bank collapsed.

Switzerland's stronghold bank Credit Suisse fell overnight and it was saved for a cheap $3B.

This sort of macro dynamics put a lot of financial strain on SMEs. They will often require more cashflow while banks become stringent in giving away credit facilities.

So where could these SMEs turn to? Either they fall or get more cashflow elsewhere.

They can turn to Defi!

For investors, RWA is now at an ATL and could be an opportunity to look at some of them. (NFA)

@Polytrade_fin have also just announced a raise of $3.8M from big names like Matrix Partners, Polygon Ventures, Alpha Wave and Coinswitch Ventures.

twitter.com/Polytrade_fin/status/1641414192724086786?s=20

@Polytrade_fin has planned some interesting features in their new roadmap and I will dive deeper into the protocol and its mechanics in the next thread.

It's also creepy that I found something from Polytrade hidden in the depths of my cupboards!