The NFT Craze 🔥 and why Maker needs to Prioritize Centrifuge as a Layer 2 Solution

Preamble: The explosive growth of the NFT market continues with the recent success of CryptoPunks, Hashmasks, NBA TopShots, and also by attracting the interest of artists and art lovers. The recent chatter on Crypto Twitter, Clubhouse, and other social media outlets leads experts to believe that NFT are here to stay and it will drive the growth of this ecosystem.

Context and Motivation

Not only is the NFT chatter about how Hashmasks raised over $15M+, but it’s also coming from Sneaker Designers, Musicians, Digital Content Artist, Creative Consultants, and underground Art Curators. If we take the narrative that the next Sneaker (shoes) Designer will have exposure to Trade Finance because of the need to maintain & finance their supply chain, protocols like Centrifuge will benefit tremendously as they already issuing NFTs via contracts that mint an ERC20 Token (DROP & TIN) that represent a security in an RWA pool.

As we all know, Centrifuge Chain supports the ChainSafe Bridge Pallet which enables users to securely move assets between Centrifuge Chain and Ethereum. With the recent rise in Ethereum Transaction Costs, many protocols are already working on building a Layer 2 solution, including Compound who is building Compound.Cash, Uniswap with it’s innovative move to a Layer 2 solution and Vitalik Buterin calling on Power Users to Move to Layer 2 Scaling.

Maker Community it is no secret that Layer 2 Scaling is more than 12 months away for MakerDAO. In fact, with the Load of Work that the current Core Units have on their plate, and the fact that we Do Not have a Layer 2 Core Unit (it would take 3-6 months to onboard) tells us that we must improvise. And the way we extemporize is by prioritizing the onboarding Centrifuge into the Maker Ecosystem.

It is my opinion that these Real World Asset Founders will have a need to use Maker via Centrifuge–by using a Product that is very powerful. And that product is staring right at us. I ask you, Maker Community–to push forward the ability for this DAO to push forward and onboard Centrifuge as soon as possible.

But Dude… Why did you need to wake up on a Monday Morning and Ramble about Prioritizing Centrifuge as a Layer 2??

Over the weekend I was overexposed by the appearances of Stani Kulechov the AAVE founder who is a brilliant mind. Not only is he perhaps the second most popular figure in the Ethereum Community ( behind Vitalik), but the man gets things done. He is a great ambassador of Ethereum. And I don’t know how he manages to get it done–and it does not matter–but I can tell you that I am he is positive when it comes to making shit happen. I can also tell you that he publicly said that he is talking to Centrifuge about onboarding their NFTs into AAVE. Meaning that we Maker Community, perhaps we are falling asleep at the wheel?

So, I ask–do you want to innovate Maker Community?

Or, do you want to play second fiddle?

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IMO, it’s more Maker’s style to wait for a dominant L2 solution to arise, and build when practical. There’s going to be so many experiments and a lot of fragmented liquidity that I’d really be hesitant on committing to anything.

Luckily for us, mostly whales are minting/burning DAI so gas fees are less of an issue. And we need to be where the money is for liquidations to occur safely, which is L1 by many miles.

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We are indeed building part of our infrastructure on Substrate and have been running a PoS network that is used by the asset originators to communicate and compile data to the different loans that can be shared privately with investors and other service providers.

Tinlake, the set of smart contracts that is issuing the TIN & DROP tokens that are then used as collateral, is running on Ethereum and thus unfortunately can’t help with scaling a lot of this stuff just yet. This is coming soon though :wink:

But I look at these pools as a different kind of scalability solution; it allows Maker to scale on a governance level; bundling different loans means you can look at the portfolio risk of dozens of assets instead of having to make a decision for every single NFT. That’s the crux with borrowing against any NFT no matter if it’s a Hashmask or an invoice.

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Frankly I think a Maker fork to a L2 is more likely to happen, and I guess I am not getting the connection between this and Centrifuge/Tinlake, but there is just too much going on in this space for me to digest.

People are still looking carefully at how the L2 landscape is playing out. While there are a lot of issues what I am looking at is the L2 bridging network behind the scenes. So I am watching carefully to see which L2 players look to be L2 back end hubs between other L2 networks, as I think these will be the places where infrastructure should and will appear.

Cities grow where there is an intersection of roads and business. I believe the same thing will happen in L2/sidechains when hubs start to appear.

Frankly while I can say I am not up to speed on the entirety of the L2/sidechain space, and many names have been mentioned, this is the first time I have heard of Centrifuge as a L2 player.

With Maker DAI growth I honestly wonder if Maker shouldn’t be putting a L2 analyst team together, as I have been asking different communities who is interested in putting together a L2/sidechain report (as in a matrix of the different L2/chains against a list of features, speed, tx cost, EVM compatibility, bridges, etc.) and then ranking the candidates in terms of attractiveness, growth, likelihood to be a major player etc. I think this one thing (a report providing a matrix of features and some kind of rankings on L2s) would be an excellent first goal for such a group rather than people just tossing out L2/sidechains as their favorite targets.

Lets get a team together, do some research, have a discussion and then figure out how to move forward. In this vein any suggestions of any L2/sidechain are premature and lack a proper perspective imho.

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Yes, there will be an L2 solution for voting after Liquidations 2.0 has been released. But as far for opening vaults–looking at 12 months + IMO.

The comparison for Centrifuge Chain as an L2, is based on the idea that it is built on parity substrate that allows folks to purchase NFTs of DROP and TIN tokens with DAI. meaning it will be less expensive to have access to Decentralized Finance. The fact that NFTs are :exploding_head: peoples minds, will make it easier for them to want to purchase the DROP and TIN NFTs. Hopefully that makes sense.

Now I will say–I am not sure if using the Bridge from Ethereum to Centrifuge Chain will be inexpensive, as tonight I saw one of our community members trying to cross back over to Ethereum from Avalanche:

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Maybe @spin can provide more colour on how the bridge back and forth would work for Ethereum to Centrifuge, estimated gas cost, etc. Apparently the AVA team said:

This is because of Ethereum. The bridge contract for deposits has complex logic. When you initiate an Avalanche → Ethereum transfer, you have to pay 5 relayers the Ethereum gas fees to initiate a deposit on Ethereum.”

Yes, this is something I am 100% sure has been investigated by the Maker Foundation Teams. However, with the quest to be fully decentralized, this will not be a priority IMO, in the near-term. But hopefully I will be wrong. In the meantime–why not take advantage of our resources and partners who are innovating, like Centrifuge?

BTW:
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Moving this back up as we continue to be left behind by the rapid expansion of DeFi–not only is Christie’s Auctioning their first Digital Art NFT, but also chatter has been that VCs are looking to pour money into NFT startups. Specifically led by Mark Cuban who has the vision and ideas to move this space forward.

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AAVE is at it again–partnering up with startup Charged Particles that creates NFTs that earn interest via aTokens. Should be Live tomorrow.

TBH, this is what Centrifuge is doing. Which Maker should have introduced already. What can you do…

To be clear, Centrifuge assets are not freely tradeable on-chain and do not have a market outside of the Maker system. We are nevertheless continuing to work on the “Real World Asset” proposals and will deploy them when we are assured that we can do so safely. By comparison, the code that we are evaluating for each of MIP21 and MIP22 are at the same scope as our Liquidations 2.0 module, and need the same sort of attention and diligence from the team.

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Stani on AAVE mention they were looking at onboarding Centrifuge. Also, apparently you can currently participate in DROP and TIN per their TG–but best to ask @spin

I guess my point is more about Marketing/Creating a buzz–if we can get DROP/TIN NFTs as a “thing” we can be the first Ethereum Protocol to onboard RWA using the hot “NFT” buzz word. But yea, I get your drift Brian.

Once you read about it on Esquire Magazine, it’s too late to get involved, the smart-money has come and gone: