BlockTower Capital, a leading institutional investment firm, partnered with Centrifuge to revolutionize the securitization process in credit markets. By leveraging blockchain technology, they addressed the inefficiencies of traditional financial systems and achieved extraordinary results, including a 97% cost reduction in running securitizations. This collaboration demonstrated the potential of tokenized real-world assets to improve efficiency, enhance transparency, and reduce costs.

“The cost of trust and inefficiency in traditional systems is immense. Blockchain has proven it can eliminate much of this burden.” – Kevin Miao, General Partner, BlockTower Credit

With Centrifuge’s platform, BlockTower tokenized 92 assets into NFTs, created structured credit pools, and automated key processes, setting a new standard for onchain securitization.

About BlockTower and Centrifuge

BlockTower Capital is a pioneering investment firm that bridges the worlds of traditional and decentralized finance. Its credit-focused arm specializes in real-world credit assets, including consumer loans, auto loans, and real estate finance. By combining structured credit expertise with blockchain innovation, BlockTower has established itself as a leader in modernizing financial systems.

Centrifuge, on the other hand, is at the forefront of tokenizing real-world assets, offering a robust platform to digitize and transform traditionally opaque processes into efficient, onchain systems.

The Challenge

Inefficiencies in the $14 trillion U.S. traditional securitization market

Traditional securitization processes have long been plagued by inefficiencies, high costs, and operational complexities. These systems depend on a dense network of intermediaries — trustees, calculation agents, paying agents, custodians, and others — each extracting fees and contributing to delays. Settlement times, often touted as T+2, can extend to weeks in practice due to reconciliation errors, manual processes, and fragmented databases. These inefficiencies are not merely an inconvenience; they reflect a structural flaw in how the global financial system operates.

“Waiting for T+2 to T+25 settlements isn’t just inefficient; it’s a symptom of a broken system.” – Kevin Miao, General Partner, BlockTower Credit

These inefficiencies create a cascading impact: higher costs for borrowers, reduced yields for investors, and slower capital flows across the economy. For borrowers, these costs translate into elevated interest rates, while investors grapple with suboptimal risk-adjusted returns.

Recognizing these pain points, BlockTower sought to redefine securitization by leveraging blockchain’s inherent strengths — automation, transparency, and immutability. Their objective was clear: to build a system that eliminates intermediaries, reduces costs, and provides all stakeholders with a real-time, transparent view of the financial ecosystem.

This challenge wasn’t just a technical problem but an opportunity to rethink how credit markets operate in a world increasingly embracing digital transformation. As blockchain adoption accelerates in finance, it promises to address many of these inefficiencies, transforming what has traditionally been an opaque and fragmented industry into one defined by clarity and efficiency.

The Solution

The rise of onchain finance has demonstrated significant potential to disrupt the status quo. Blockchain technology enables real-time settlements, verifiable data tracking, and the automation of processes through smart contracts, eliminating many traditional pain points. As institutions like J.P. Morgan and Goldman Sachs began exploring blockchain for cross-border payments, tokenized bonds, and other financial products, the industry is moving closer to mainstream adoption.

In 2017 BlockTower and Centrifuge recognized this opportunity to not just participate in this trend but to lead it. Their collaboration brought innovation to securitization, creating a transparent, efficient, and scalable solution for institutional finance, benefitting investors and managers alike.

“We’re taking the first steps toward a financial system where efficiency and transparency are the norm, not the exception. ” – Kevin Chan, Vice President, BlockTower Credit

Centrifuge technology in action

BlockTower leveraged Centrifuge’s platform to represent credit assets with non-fungible tokens (NFTs). These asset-level NFTs represented tranches of credit-backed securities, offering full transparency and real-time cash flow tracking. By pooling these digital assets into tokenized collateralized loan obligations (CLOs), Centrifuge enabled a structured credit framework with clear delineation between senior and junior tranches, giving investors more precise risk-reward options.

Centrifuge’s smart contracts automated functions traditionally handled by multiple intermediaries, including payment distribution, fees, and rule enforcement. Tasks like maintaining equity buffers, which typically require manual oversight and cumbersome reporting, were seamlessly executed onchain, eliminating human error and reducing operational overhead.

“Centrifuge’s platform didn’t just replicate the old system; it replaced inefficiencies with auditable, trustless automation. It’s a great showcase of what an end-to-end system can do — running securitization operations and a private credit fund built on Centrifuge’s platform. This system stripped out fees and inefficiencies.”  – Kevin Miao, General Partner and Head of Credit at BlockTower Credit

This innovative approach ensured that every participant in the ecosystem — from borrowers to investors — benefited from lower costs, increased transparency, and faster execution. By leveraging blockchain’s inherent strengths, Centrifuge and BlockTower demonstrated the potential of decentralization to overhaul even the most entrenched financial systems.

Collaborative ecosystem

The success of this initiative was rooted in collaboration. BlockTower’s partnership with Centrifuge and MakerDAO resulted in a $220 million securitization fund that showcased the power of decentralized finance to complement traditional finance. MakerDAO contributed $150 million in senior capital, while BlockTower added $70 million in junior capital, aligning risk exposure with investment preferences.

This collaboration offered mutual benefits. BlockTower accessed decentralized liquidity through MakerDAO’s stablecoin, DAI, providing efficient funding for tokenized assets. Simultaneously, MakerDAO diversified its collateral pool with real-world assets, enhancing the stability and resilience of DAI.

This partnership underscored a broader trend in financial innovation, where DeFi platforms and traditional institutions work together to redefine how capital flows. Centrifuge acted as the critical bridge, demonstrating the transformative potential of tokenized assets and the efficiencies of blockchain-powered systems.

Results

97% cost savings

BlockTower’s adoption of Centrifuge’s cutting-edge platform led to an unprecedented 97% reduction in securitization costs compared to traditional methods. Over a two-year period, the total gas fees to manage two CLOs on Ethereum amounted to just under $60,000 — expenses that would traditionally run into millions when factoring in intermediary fees, manual reconciliation, and administrative overheads.

This level of cost efficiency demonstrates the transformative potential of blockchain technology in financial markets. As Centrifuge’s platform continues to evolve and Ethereum Layer 2 solutions mature, these savings are likely to grow even more substantial. With advancements in scalability, transaction throughput, and cost optimization, the financial barriers to securitization are poised to diminish further, unlocking broader adoption of tokenized credit instruments.

“We’ve turned hypotheses into a fund that achieved incredible results. This is what the future of finance can look like.” – Kevin Chan, Vice President, BlockTower Credit

Transparency and efficiency

Centrifuge enabled investors to achieve full visibility into the underlying assets of the CLOs, a level of transparency rarely seen in traditional securitization markets. This granular access to asset-level data facilitated real-time risk modeling and cash flow tracking, empowering investors to make data-driven decisions with confidence. The shared, immutable ledger ensured that all parties were working from a single source of truth, reducing discrepancies and enhancing trust throughout the ecosystem.

This enhanced transparency also has the potential to redefine investor behavior. As blockchain adoption scales and standardization improves, this model can enable faster decision-making, more accurate pricing, and better risk management in even the most complex financial instruments.

Automation of processes

Centrifuge’s integration with MakerDAO vaults took process automation to new heights. Key governance rules, such as maintaining a 30% equity buffer for senior loans, were enforced in real-time, eliminating the reliance on manual reporting and spreadsheet-based tracking. This automation not only reduced errors but also dramatically improved scalability and operational resilience.

Together, these results demonstrate the immediate benefits of blockchain in securitization, while pointing to a future where tokenized finance achieves even greater efficiencies, accessibility, and scale. The BlockTower-Centrifuge collaboration has set a benchmark for what’s possible, underscoring the immense potential of onchain solutions to revolutionize credit markets.

Looking Forward

The BlockTower-Centrifuge partnership reveals essential insights into the future of finance, showcasing how innovation and collaboration can drive systemic transformation.

Scaling impact

BlockTower’s ambitious vision to become the first fully onchain structured credit hedge fund represented a bold step forward for the industry. Not only did they achieve this, but in October 2024, they fully returned investor money with a return of 24%.

Broader implications

The tokenization of financial assets is poised to disrupt sectors beyond credit, including mortgages and consumer loans.

“Blockchain isn’t just about cutting costs — it’s about creating a financial system that works better for everyone.” – Kevin Miao

These efforts mark a pivotal moment in financial evolution, with tokenization unlocking new efficiencies, accessibility, and trust across global markets.