dexFreight, Centrifuge, and the Maker Foundation have tokenized freight invoices to use them as collateral for accessing liquidity and filling short term financing gaps for trucking companies. The pilot, conducted on top of dexFreight’s network platform, connects logistics collateral to the lower cost liquidity available in Decentralized Finance (DeFi), a new financial ecosystem based on decentralized networks and open-source software.
The 8 trillion-dollar global logistics industry is cash flow intensive and requires expensive and illiquid assets such as trucks, trailers, warehouses, etc. Very often carriers must finance the transportation of loads to cover, fuel, maintenance, and driver expenses like food and shelter. Trucking companies, however, don’t receive payment until long after shipment is delivered – on average 37 days in the US market.
For an industry in which 97% of trucking companies own 20 trucks or fewer, this lack of access to capital represents a problem. Trucking companies must sell invoices to factoring companies, who charge on average 3% of the total invoice value.
In order to offer an inexpensive alternative to factoring, this pilot proves the feasibility of connecting trucking invoices with the lower cost instant credit of DeFi. The logistics industry’s invoices can now be used in the DeFi ecosystem as collateral for short term financing.
“This is the first step towards a transformation of the logistics industry, and we could not have realized such a milestone without our partners Centrifuge and the Maker Foundation. We can now reduce friction, extend instant credit lines, and offer highly competitive rates to dexFreight platform participants,” said Justin Banon, dexFreight COO
In the pilot, a third party logistics provider agreed to pay on 45 day terms a carrier who opted to finance the shipment invoices using the dexFreight platform’s ‘dexFi’ feature. dexFreight then used the Centrifuge node to mint an ERC721 (non-fungible) tokens as digital representations of the invoices. Using Tinlake an ERC20 token representing the combined liquidated value of the assets were minted and used as collateral for the Maker CDP to borrow DAI against it.
The carrier received DAI to their Coinbase account. They could then either cash out to their bank account or hold the funds in DAI. The total advanced in the pilot was $1,600 at 70% loan to value (LTV), the ratio of a loan to the value of an asset purchased.
“I’m excited to see dexFreight leveraging Centrifuge to provide liquidity to their users, by accessing decentralized sources of capital through Maker. We are looking forward to scaling this partnership to the next level, supporting entire supply chains,” said Martin Quensel, COO of Centrifuge.
The next planned phase of the project, provided all conditions are met, will aim to tokenize invoices that can ultimately be used as collateral for Multi-Collateral DAI.
“This pilot is validating our mission and demonstrating how Maker is shaping the future of commerce. We see the potential in supporting a wide range of asset types that can serve the logistics industry as well as our Community,” Greg Diprisco, Head of Business Development at Maker said. “The future is near!”
The next step in the decentralisation of movement of goods
dexFreight is building the universal decentralized, open-source network for collaboration and coordination in the movement of goods. dexFreight facilitates lower cost access to liquidity to the supply chain and incentivize the equitable distribution of value.
The platform enables parties to move goods faster and with transparency for all actors. Safer transactions, auditable and traceable chain of custody, as well as data accuracy usher in a new era for logistics providers. dexFreight connects the logistics industry to accessible and competitive Decentralized Finance (DeFi) Capital, solving the industry’s historic liquidity issues.
Taking the financial supply chain to a new level
An open network that connects businesses in global supply chains, Centrifuge enables them to exchange business documents in a private way while allowing for an immutable single source of truth for said documents. In addition, it provides users with the possibility to create a digital representation of the assets exchanged on the network, in the form of Non-Fungible Tokens (NFTs). Tinlake is the first dApp to run on Centrifuge.
MakerDAO is a decentralized organization dedicated to bringing financial stability and transparency to the world economy. Its purpose is to create an inclusive platform for economic empowerment — MakerDAO strives to unlock access to the global financial marketplace for all. MakerDAO enables the generation of Dai, the world’s first unbiased currency and leading decentralized stablecoin.