Liquidity Pools: Real-World Assets on Ethereum, Base, Arbitrum, and Beyond

By Anna Mehrlaender, Product Manager @ Centrifuge

Centrifuge’s mission is to bring the entire world of credit onchain. As part of accomplishing this goal, we need to bring the opportunities of real-world assets to users on Ethereum as well as its Layer 2 networks. To that end: meet Liquidity Pools.

Liquidity Pools provide a fully-native investment experience to users on any supported Ethereum-based chain. For example, Liquidity Pools deployed on Base allows for Base users to invest funds into a pool of Real-World Assets on Centrifuge — all without having to move off of Base or use a different wallet.

Centrifuge Everywhere: Starting with Ethereum, Base, and Arbitrum

We’re launching Liquidity Pools on Ethereum first, with Base and Arbitrum launches coming soon after. Liquidity Pools are live on Ethereum and Base testnets, and we’re launching on Arbitrum’s testnet very soon.

Check it out! Here’s a Liquidity Pool depoyment on Arbitrum testnet, and on Base’s testnet: an investment transaction.

Once we’re satisfied with the performance, security, and robustness of our deployments on testnets, we’ll deploy to these networks’ mainnets and bring real-world assets to users of these chains.

Next up: we’re looking to integrate with Kinto, Gnosis, Celo, and Mantle L2s / rollups. Keep an eye out for these launches! A good way to do that is to subscribe to our blog here on Mirror + follow Centrifuge on Twitter and LinkedIn.

How Centrifuge Liquidity Pools Work

Recall that Centrifuge’s pools have support for multiple tranches. Liquidity Pools support these tranches. Each tranche is a separate deployment of a Liquidity Pool and a Tranche Token. Here’s how smart contracts and tokens comprise a Liquidity Pool deployment:

  • Liquidity Pool: A ERC-4626 compatible contract — also known as the Tokenized Vault Standard — that enables investors to deposit and withdraw stablecoins to invest in tranches of pools.

  • Tranche Token: An ERC-20 token for the tranche, linked to a member list that manages transfer restrictions (i.e. who is allowed to hold a pool’s tranche token representing an investment in the pool). Prices for tranche tokens are computed on Centrifuge.

The deployment of these tranches and the management of investments is controlled by the underlying Investment Manager, Pool Manager, Gateway, and Router smart contracts.

  • Investment Manager: The core business logic contract that handles pool creation, tranche deployment, managing investments and sending tokens to the escrow, and more.

  • Pool Manager: The second business logic contract that handles currency bookkeeping as well as tranche and stablecoin transfers.

  • Gateway: An intermediary contract that encodes and decodes messages and handles routing to/from Centrifuge.

  • Routers: Contracts that handle communication of messages to and from Centrifuge Chain.

Another feature of Liquidity Pools is automated stablecoin swaps. If an investor deposits a stablecoin into a Liquidity Pool that’s different from the pool’s native stablecoin, a swap operation is necessary to facilitate the investment. The same applies in reverse for redemptions.

These swap transactions take place on Centrifuge Chain; furthermore, these swaps help to ensure there is ample liquidity within the escrow contract to fulfill all orders.

New Pools Coming: New Silver 3, Flowcarbon 2, and Anemoy

As hinted during the launch of the new Centrifuge App back in May, new pools on Centrifuge Chain utilizing powerful RWA-tailored infrastructure are coming. The first pool, Anemoy Liquid Treasury Series 1, launches this month offering yields from U.S. treasuries.

New Silver Series 3, specializing in real estate bridge loans, has formed a partnership with Ankura as a trustee to fortify bankruptcy protection and recently elevated its credit line from Maker to an impressive $50 million in August.

Flowcarbon Nature Offsets Series 2, dedicated to voluntary carbon offsets, is working with Celo for their second pool within the Centrifuge platform.

The Centrifuge App
The Centrifuge App

Security and Auditing

Security is incredibly important to us — as it should be for anyone building onchain. To this end, we recently concluded an audit contest for Liquidity Pools. More audits are currently ongoing and planned for the next few months, as well as significant work on enhanced monitoring and processes, and implementing all necessary measures to ensure the secure scaling of Liquidity Pools to accommodate investors on any chain.

In conclusion: What’s next?

If you haven’t read it yet, be sure to check out today’s press release coinciding with the Real-World Asset Summit, where we’ve outlined the many new developments driving Centrifuge forward — both in terms of technical achievements as well as many new partnerships that make this all possible.

Liquidity Pools represent significant achievement for the entire engineering team at Centrifuge, and this technology brings in a new range of possibilities for real-world assets across decentralized finance. Centrifuge’s core contributors contributing to our smart contracts, Centrifuge Chain protocol, and frontend apps all came together to make this happen. We’re thrilled to see the Centrifuge platform thrive as we integrate more and more chains across Ethereum and its vibrant L2 ecosystem!

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