BlockTower Credit Embraces Real-World Assets

Key Insights

• In late December, BlockTower Credit became the first institutional credit-fund to be approved to bring their collateralized lending operations on-chain through a partnership with Maker and Centrifuge.
• While real-world assets only make up about 12% of MakerDAO’s balance sheet, they contribute over 57% of the protocol’s annualized revenue, which is up nearly 50 percentage points from July.
• Bringing real-world assets on chain involves an added degree of risk in the form of unique infrastructure, third parties, and illiquidity of the underlying assets.

Crypto has only scratched the surface of the multi-trillion dollar asset class of real-world assets (RWAs). While RWA based protocols have originated over $4 billion in loans since early 2021, there is significant room for growth as only $356 million in loans remains open. If DeFi manages to grow RWA exposure, it will help the industry scale to new levels and decouple from speculation-driven revenue. In late December, BlockTower Credit was approved to bring its collateralized lending operations on chain, making them the first institutional credit-fund to tackle decentralized finance through collateralized RWA.

BlockTower, Centrifuge & MakerDAO

In one of the largest single on-chain investments in RWA to date, BlockTower Credit partnered with Maker and Centrifuge to bring $220 million of real-world assets on DeFi rails. 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. Maker will finance four separate vaults to fund the RWA investments, with a 20 million, 30 million, 30 million, and 70 million DAI debt ceiling, respectively, while BlockTower Credit will contribute $70 million in junior capital.