Physical Assets Merge with DeFi! Maker Launches "Real-World Asset DAI," MKR Surges Over 35%

On April 14th, the largest lending protocol on the Ethereum blockchain, Maker, passed a governance proposal allowing "real estate" to be used as collateral in the blockchain world to borrow the decentralized stablecoin DAI. This is a rare case of combining DeFi with real-world assets, and after the proposal was confirmed and executed, Maker's governance token MKR surged by over 35%.

How Does "Real Estate DAI" Work?

The part Maker plays is actually quite simple: I am a big treasury, and I agree to lend money to an external company backed by real estate.

The main link between real estate and DeFi is Centrifuge, a company that issues real estate information as NFT tokens (non-fungible tokens) through physical asset paper documents. The borrower's debt from real estate holdings is transformed into DROP tokens, representing the principal and interest.

Maker has approved in a governance proposal that the debt token DROP generated from a real estate loan request "New Silver Series 2" by Centrifuge can be used as collateral for Maker. Therefore, borrowers who collateralize real estate NFT tokens in "New Silver Series 2" will receive DAI minted by Maker for funding circulation.

Maker's conditions include a stable fee rate of 3.5% annually and a collateral ratio of 105%. The value of this real estate NFT is $5,634,804, with a borrowing limit of five million DAI.

24-Hour DeFi Bank Turnover

Centrifuge claims that tokenizing physical assets into NFTs and lending on DeFi through valuation has several advantages: no intermediaries, 24/7 operation, no regulatory constraints, and low rates provided through smart contracts to reduce borrowing costs and provide immediate funding.

However, there are practical considerations to address. Intermediaries still exist, and both borrowers and lenders need to trust Centrifuge's physical asset valuation mechanism, legal validity of physical asset NFTs, and ability to liquidate assets. Additionally, low lending rates in traditional markets and high Ethereum gas fees may reduce the attractiveness of DeFi borrowing.

35% Surge in MKR, Breaking All-Time High

This governance proposal and execution seem to demonstrate the power of governance token MKR, allowing the DeFi treasury to determine its platform's development direction through major token holders. However, the governance participation rate of MKR appears to be quite low based on the voting results.

The MKR token also surged over 35% today, breaking its all-time high.