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By integrating with RWAs - aren't you moving from being correlated to crypto to being correlated with tradfi instruments?

Doesn't crypto stop being a hedge against fiat?

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I suspect the lacklustre demand so far for on-chain RWA securitisation is in part due to the extremely low cost of capital in the RW. Why bother with DeFi if there’s plenty TradFi sources of capital available willing to price generously? Right now Centrifuge et al. are competing with a wall of money from non-bank lenders that have stepped into the space. And mixing the two in your capital stack is hard (don’t know of anyone who’s done it).

But tbf it’s still early days. Over time I think originators will just add DeFi as another source of capital to their pool of options. Tokenising via Centrifuge is not particularly hard, and of course there’s intermediaries emerging (e.g. Fortunafi) to help with that. The cultural barrier you highlight is real, but the fintech boom in TradFi means incumbents are being quickly replaced by more tech savvy — shall I say crypto native — competitors.

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I agree with every single word you said, that’s why I think it will be easier for non-bankable new use cases that are digitally native to be financed in DeFi, but in the short run competing with bank and non bank lenders with quasi negative cost of capital and a flood of state guarantees will be impossible. I’m currently working on a primer on on-chain securitisation, I find it fascinating and hopefully the people at Centrifuge will help (they already offered). Structured credit is a hairy field where you need to know the way you can get skr***d to get it right, and maybe our experience can help. I feel like you we are building for the future, but I find building for the future energising! Thanks for your comment Andreas.

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Aug 15, 2021Liked by Luca Prosperi

Look forward to the primer on securitisation — it’s still early days but the space is evolving fast and I think in interesting ways

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