A case study in onchain excellence by BlockTower and Centrifuge
Type: Institutional investment firm
Credit arm specialization: Real-world credit assets, incl. consumer loans and real estate finance
Collaboration with Centrifuge: Tokenized collateralized loan obligations
$220M
97%
~24%
About the partnership
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.
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.
“We’ve turned hypotheses into a fund on Centrifuge that achieved incredible results. This is what the future of finance can look like.”
The challenge
Limitations in the $14 trillion U.S. traditional securitization market.
Inefficiencies
Traditional processes rely on a dense network of intermediaries, leading to delays, reconciliation errors, and fragmented databases. Settlement times, often T+2, can extend to weeks in practice.
High costs
Each intermediary — including trustees, calculation agents, and custodians — extracts fees, significantly driving up the overall cost of securitization.
Operational complexities
Manual processes and reliance on outdated systems contribute to structural flaws in the global financial system, hindering transparency and efficiency.
“The cost of trust and inefficiency in traditional systems is immense. Blockchain has proven it can eliminate much of this burden.”
⎯ Bank for International Settlements (BIS) report
Goals
Build a system that eliminates intermediaries, reduces costs, and delivers a real-time, transparent view for all stakeholders.
Approach the challenge not just as a technical issue but as an opportunity to rethink and transform how credit markets operate.
Leverage blockchain’s growing adoption to address inefficiencies and reshape a traditionally opaque and fragmented industry into one characterized by clarity and efficiency.
“We’re taking the first steps toward a financial system where efficiency and transparency are the norm, not the exception.”
The solution
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.”
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 collaboration wasn’t just about technology; it was about aligning incentives to solve real-world problems. We truly viewed Centrifuge as partners on the thought leadership side. Their ability to iterate, tackle problems together, and find the best solutions is one of the reasons why we chose to work with the Centrifuge team”.
The results
97% cost savings
- BlockTower achieved a 97% reduction in securitization costs by using Centrifuge’s platform.
- Over two years, managing two CLOs on Ethereum cost under $60,000 in gas fees, compared to millions in traditional expenses from intermediary fees, manual reconciliation, and administrative overhead.
Transparency and efficiency
- Centrifuge provided full transparency into the underlying assets of CLOs, rarely seen in traditional securitization markets.
- Investors gained granular access to asset-level data, enabling real-time risk modeling and cash flow tracking for confident, data-driven decision-making.
- The shared, immutable ledger ensured a single source of truth for all parties, reducing discrepancies and enhancing trust across the ecosystem.
Automation of processes
- Centrifuge’s integration with MakerDAO vaults introduced advanced process automation, enforcing key governance rules, like maintaining a 30% equity buffer for senior loans, in real time.
- Automation replaced manual reporting and spreadsheet-based tracking, reducing errors and enhancing scalability and operational resilience.
24% investor return
- By leveraging Centrifuge’s platform, BlockTower achieved its vision of becoming the first fully onchain structured credit hedge fund.
- In October 2024, they successfully returned investor capital with a 24% return, marking a pivotal moment for the financial industry.
Looking forward
The BlockTower-Centrifuge partnership reveals essential insights into the future of finance, showcasing how innovation and collaboration can drive systemic transformation.
Collaboration drives innovation
Synergy between traditional and decentralized finance enables groundbreaking solutions that neither could achieve independently.
Incremental transformation wins
As Kevin Miao aptly noted, “Transforming traditional finance isn’t about unplugging; it’s about inching forward with better systems.” Small, pragmatic steps build momentum for systemic change.
Interoperability is non-negotiable
Seamless integration of blockchain technology with existing financial infrastructure is essential for widespread adoption and scalability.
“Blockchain isn’t just about cutting costs — it’s about creating a financial system that works better for everyone."
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