Ethereum Chainlink Integrates Real World Assets Into DeFi On Ethereum
Martin Young | Mar 03, 2020 | 04:00
Developments in decentralized finance are coming thick and fast as the ecosystem evolves. The latest offering from Chainlink and DMM acts as a bridge between Ethereum crypto assets and real world assets.
DeFi Money Market Bridges The Gap
A recent announcement by Chainlink has unveiled a collaboration with the DeFi Money Market (DMM), which offers higher yield money markets on the Ethereum mainnet backed by tokenized real world assets.
The article asserts that there will be exponential growth for crypto assets in the coming years as fiat currencies are increasingly converted into digital ones. The current total crypto market capitalization of around $250 billion is miniscule compared to the estimated $90 trillion of physical money and money held in easily accessible accounts in the world.
The vast majority of this money is earning virtually nothing in terms of interest and could soon be in negative interest territory if the central banks keep dropping rates and printing money.
“Herein lies a massive opportunity to capitalize on declining yields in traditional money markets through the creation of higher yield decentralized money markets via blockchain technology.”
Defipulse, which today reports a total value locked of $967 million, added that banks had better watch out …
1/ Banks better watch out because the dream of integrating real world assets into #DeFi is becoming a reality.
Take for example @DMMDAO which acts like a bridge between crypto and fiat using @chainlink oracles to offer car loans funded by stablecoins. https://t.co/Z6Sqi36XFj pic.twitter.com/yTOL63t79W
— DeFi Pulse 🍇 (@defipulse) March 2, 2020
DeFi markets will allow borrowers to pledge real-world assets represented on-chain as collateral for crypto asset loans and DMM aims to create the first blockchain-based money market to bridge this gap.
Effectively it will enables low-risk investors the ability to lend crypto currency for passive interest income. Borrowers can receive crypto currency loans for short-term capital by pledging their real-world assets as collateral.
At the moment crypto collateral can be pledged to earn interest on stablecoins such as through the Dai Savings Rate which currently offers a bank beating 7.5%.
Chainlink’s decentralized oracle network comes into play allowing DMM to obtain on-chain information about these tokenized assets based on a secure connection to reliable sources of data off-chain.
The Medium goes into much greater detail on how this is achieved showcasing how the collaboration has resulted in a new money market that is collateralized by $10 million in tokenized car loans on Ethereum.
Assets backing DMM can include vehicles, property and other ‘hard’ real world assets, which are income generating. They are secured through a first lien, senior-secured position which has first rights to sell the assets on failure to repay the loans, just like a bank.
The partnership is another step in the evolution of the rapidly moving DeFi market which is one of the most vibrant aspects of the crypto ecosystem this year.
Will ETH and LINK prices benefit from new DeFi solutions? Add your comments below.
