Ask MakerDAO #8: A Technical Dive Into Centrifuge and Tinlake With Lea, Lucas, and Martin

Join us on Zoom 2021-09-09T19:00:00Z to learn about how the Centrifuge team utilizes Tinlake to tokenize RWA (real-world assets) and NFTs (non-fungible tokens) of various types and how Tinlake is integrated with the Maker Protocol.

As its documentation describes, “Tinlake is an open, smart-contract based marketplace of asset pools bringing together Asset Originators and Investors which seek to utilize the full potential of Decentralized Finance (DeFi).”

This call will be a follow up to our previous AMA with the Tinlake team; we’ll dive more deeply into the technical side of the process and how the smart contracts bridge the divide between digital and real-world assets.

Can’t make the call? No problem! Keep your eyes out for the recordings and transcripts on the following channels:

Leave your questions below and we’ll see you on the call!

As a last minute update, @jeroen from the Tinlake team will also be joining us!

@_LS @Real-World-Finance @spin @jeroen

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This full call is now available on the MakerDAO Youtube Channel:

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AMA call - Episode #08

September 9th, 2021

Agenda

  • 00:13: Intro with Jerry Goldfarb
  • 00:29: AMA with Lea, Lucas, Martin from Centrifuge, and Jeroen from the Tinlake Team.
  • 56:14: Outro

Video

https://youtu.be/wR25evZlV8M

Introduction

Jerry Goldfarb

Agenda and Preamble

00:13

  • Hello to everybody. Thanks for coming to our AMA #08.
  • It is our second AMA with Centrifuge and the Tinlake Team. We are very excited to have them back for this Technical deep DAI-ve. Thank you all so much for joining.
  • For other episodes of AMA, please check the forum.

AMA with Lea, Lucas, Martin from Centrifuge, and Jeroen from the Tinlake Team.

Introduction

00:29 - Jerry Goldfarb: To get started, we will be doing some follow-ups. Last time we talked about how we have been starting with low DC to scale things up. This is in a prototype phase. From a technological perspective, would you consider yourselves to be in more of a V1 or V2 at this point?

01:13 - Jerry Goldfarb: Can you give us an introduction about the focus we will be having today?

Tinlake Presentation

06:20

  • Example of a pool.

  • Pool Balance

  • Assets Board

  • More information on the Assets

  • NAV Calculation

  • Epoch Model - Revolving Pool

Discussion

15:26 - Alejandro Diaz: Can one Tinlake pool be connected to more than one asset originator? Or is it a one-to-one relationship?

17:35 - Alejandro Diaz: If you have many polls, how can you connect that to one single Tinlake pool?

19:13 - Frank Cruz: If I am a pencil manufacturer in Panama, it might be a little bit difficult. The legal structure is always difficult. Eventually, will it be easier for a pencil distributor in Costa Rica to use this?

20:17 - Brad: You were talking about the striking of the NAV. Each of these pools has the net asset value at each window in time. You were describing how you re-underwrite the portfolio to come up with the value of the pool. Are there any plans to work with an independent third-party firm that does that?

22:45 - Brad: Is it because an independent valuation firm is just an extra cost, and at some point, it is not worth it?

24:45 - Aaron: There is on-chain and off-chain data. You can try to be as granular and informed about the risk adjustment to those future cash flows. What about events where the off-chain data, maybe the actual payments of the mortgages, goes out of sync with what is represented on-chain? For example, what if the risk adjustment score for the 30-day or the 60-day cash flow was off and the payments that were actually received were way under? Would there need to be an adjustment? How would that flow through to the DROP tokens? Would you potentially see DROP tokens that are adjusted downward? How would that work?

27:49 - Aaron: Carrying it a step further. If you did have a downward adjustment, thinking of other Maker collateralized debt positions where we have real-time price updates on-chain. If your collateral is Ether, I could foresee an event where you would have a lag. Let’s say you needed a downward adjustment. How severe that downward adjustment need to be? About over-collateralization. How much Dai is being minted against these assets relative to the value of the underlying collateral? Is there a buffer in there for these potential problems that could come about?

30:21 - Aaron: Part of the over-collateralization is built into the mezzanine tranches with TIN? If you are a DROP holder, who holds the 10 tokens?

31:39 - Aaron: You are saying that the asset originators are also holding the TIN tranches there. If the payers are not meeting their obligations, the TIN holders being the asset originators, is there a connection?

32:43 - Someone: How do you settle on a discount rate? How do you decide what the TIN buffer is on a per pool basis?

34:20 - Lucas: To clarify the last two questions. You are trying to choose a discount rate. How do you come to calculate your opportunity cost of capital? How do you decide on the TIN buffer on a per pool basis?

35:36 - Someone: For your particular methodology, on a new silver pool, how Centrifuge goes about figuring out what the benchmark is? If the spread above the risk-free rate and the broader markets moves is that reflected on the discount rate? Do you try to choose a benchmark that gauges the opportunity cost of capital at the beginning of the pool and then you go with that?

36:49 - Someone: What do you do respectively on the TIN buffer?

38:05 - Alejandro Diaz: I hear that you launched a version of Centrifuge consumer network. What are the main differences with Amber Flint test net that you have in your system? What can I do on the consumer network that I cannot do on Amber or Flint?

44:24 - Someone: If I want to be an originator, a non-bank lender executing the loans, what are the steps to get approved on the platform?

46:49 - Alejandro Diaz: What happens if a pool gets its portfolio empty in an Epoch? What happens when the portfolio does not have more NFT

48:18 - Someone: What does the relationship with the NFT tokens represent in terms of off-chain assets?. There are ERC 20 tokens, but there are whitelist limitations. Can you add any color to the transferability around those tokens?

50:29 - Someone: Following up on that point. They are whitelisted, meaning they are restricted. Can you send them to anybody else?

51:07 - Brad: On what you were talking about the Epochs. It looks like most of these pools are regularly valued, and any new investments or redemptions are netted together. Does an asset originator have their own UI on Tinlake? Is it the asset originator’s responsibility to monitor incoming investments and redemptions? Can you add some color to the cash management process? Is there an inflow deployed to the new capital? Is there an outflow? Do you have to have the capital to redeem those investors?

54:03 - Brad: If an LP is lending Dai into a pool, is there a standardized on-ramp and off-ramp to get that Dai into a bank account of an asset originator?

Closing Comment

Jerry Goldfarb

Outro

56:14

  • Thank you all so much for coming. Thank you everybody for the great questions.

Credits

  • @gala produced this summary.
  • Kunfu-po produced this summary.
  • Everyone who spoke and presented on the call, listed in the headers.
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