Interview with Martin Quensel, Co-Founder of Centrifuge

Introduction

Perspectives on blockchain technology are plentiful and its wider applications and future opportunities are arguably endless, making sense of everything, however, is not always straightforward. This is especially true when assessing the wider blockchain opportunities through the eyes of professional individuals, whose views vary significantly and are often shaped by the disciplines and industries that they may find themselves in.

Our purpose with the interview series is to dive deep into the ever-changing world of crypto and uncover industry insights through in-depth conversations with experts in the field. Our interviewees have been carefully selected, and come with interesting experiences from different functional areas and organizations, and together provide a holistic but nuanced view of the developments shaping the space and in so doing, highlight interesting opportunities and potential challenges that follow as a result.

In this second edition of our interview series we’ve had the delightful opportunity to sit down with Martin Quensel, Co-Founder of Centrifuge and serial entrepreneur, who's been accompanying us on our journey since Finoa’s early inception, and shares some very interesting perspectives that we hope you will enjoy.

Interview #2: Martin Quensel

Name: Martin Quensel

Previous: Co-founding Taulia a leading bank independent SCF platform financing more than 1m suppliers of 150+ Global 2000 companies like Coca-Cola, Pfizer, Vodafone, Airbus with around 30 bn financing volume in the last 12 months

Current: Co-founder of Centrifuge, a decentralized asset financing protocol connecting real-world credit demand with DeFi and making borrowing and lending bankless

Years in crypto: 4

Nationality: German

Please introduce yourself and explain to us how you got into crypto

I started my professional career as a developer at SAP. After building the banking and payment solution of SAP (today most likely performing 40 or 50 percent of all B2B payments), I left as a software architect and co-founded my first startup, Ebydos, in the early 2000s. Improving business processes first with process automation and later with using such efficiency gains to improve the economics on top with Taulia was always my driver, but I was always running into moats hard to pass: The well known data silos of on-premise ERP systems, SaaS/Cloud solutions for CRM or SRM, or B2B Marketplaces for e-Procurement or e-Invoicing. We improved the business processes within a data silo and improved the interfaces between them but failed with going further. I realized more and more that I had created band-aids for business processes not having changed for decades, sometimes centuries.

Invoicing is a perfect example. There is still an invoice since the Florentines invented double-entry bookkeeping even and even if the way we transmit invoices has changed from a messenger on horseback, to letters, to EDI, to PDF, to mobile apps, the process remains almost unchanged. Typical payment terms of 30 days and the Italian sconto are still there and reaching back to the delivery of invoice and payment by the pony express. Bitcoin was not able to catch my attention but Ethereum was. Reading about it first in 2016, the idea of unstoppable, immutable code caught me. I felt that the ability to build decentralized protocols to transfer data combined with logic could change how we do business in the future and that it will potentially reach further than the advent of the internet.

Tell us more about Centrifuge, the Radial Token ecosystem, and your vision for Supply Chain Finance?

Centrifuge is our attempt as entrepreneurs to radically rethink business starting with financing and the project name is an expression for it. Like a centrifuge, we dismantle today’s business processes into their parts, look at them from a decentralized perspective, remove what is not needed anymore, decentralize intra-parties' alignment and validation logic, replace intermediaries by the protocol, and assemble it in an order of magnitude better way.

We started with financing and built the first protocol for decentralized finance of real-world assets. It solves the main issues of centralized finance: Easy scale of origination and distribution of assets, transparent risk assessment, underwriting, collateralization, and securitization of such assets while data remains private and under the control of the owner. That only works without the known intermediaries, meaning we create a new bankless finance system. Every business, data aggregator, or business service provider can become an asset originator with Centrifuge. Everyone can invest. A multi-tier token model decentralizes risk assessment and underwriting. The required trust in single assets or participants is more and more minimized by our token model, which is incentifying successful financing and penalizes losses. Our own public blockchain, the Centrifuge Chain provides scalability for asset origination already today. Users can either use our dApp Tinlake or run a Centrifuge node to directly interact with the protocol.

You recently established the concept of “Regenerative DeFi” — could you elaborate on the concept?

DeFi today is a more circular finance system. ICO tokens circulating between DeFi protocols and being reused to do leveraged margin trading and optimize yield farming. That also explains the extraordinary growth of DeFi with the advent of liquidity rewards.

Regenerative DeFi is our concept to give DeFi real-world substance and to help the world to regenerate. Especially smaller businesses need easier and cheaper access to liquidity to recover from the pandemic and get back to a growth path. Several reports from the development banks around the world show how dramatic the financing gap for SMEs is and with Covid-19 it has been exacerbated.

We characterize regenerative DeFi as being more sustainable, inclusive, and reliable:

Sustainable financing provides financing to businesses that need finance. The current DeFi bubble is more of a game for yield and margin seeing “winners and losers”. Tinlake’s pools benefit both borrowers and investors, and both are providing value to each other.

Inclusive financing is not excluding businesses, because of size, industry, location, ownership (minorities, gender), or a lot of other reasons. It is a barrier-free decentralized credit system.

Reliable financing is not relying on single points of failure, it is not creating intermediaries too big to fail but establishes a credit system that is open to every investor creating a more resilient source of liquidity and removing unnecessary intermediaries.

The well-known Blockchain properties are critical ingredients and we do not see any other way than DeFi to achieve it. We hope that “Regenerative DeFi” will paint a new picture of the north star that our community will reach towards. For us, it seems like the clear next step, and is something we’ve been working towards since our beginning reflected by our never changed mission statement: “Change the rules of global trade to foster economic opportunity everywhere.”

What does your Roadmap for the next 12 months look like?

We continue to focus on two areas: Further decentralization and growing our community of users. That includes moving Tinlake to the Centrifuge Chain and improving the token model to support oracles, underwriting, and more.

Our liquidity reward program distributes our Radial token more and more broadly and to the users using our protocol: Asset originators setting up Tinlake pools and investors investing in those. The governance of the Centrifuge Chain is already in the hands of the Radial holders.

The next version of Tinlake and onboarding pools to other DeFi protocols comes soon.

Given these differences: What are the key criteria for you as a fund when working with custody/infrastructure providers?

Custody and operations security is a core dimension of risk for operators in the industry. Any mistake might be fatal and result in the loss of assets. The core selection factors for our custody service providers are in that order: security, governance (multi-sig), product and asset availability, customer service, value-added services (staking, voting),and agility concerning the onboarding of new assets and other integrations. I vetted over 20 different custody providers throughout the past 3 years, and as a customer and VC, Finoa stood out in multiple ways.

What are your token plans?

Centrifuge has started very centralized with classic VC funding. Our seed round of $8.5m helped us to develop Centrifuge to its current stage. We launched our Centrifuge Chain as a Substrate PoS chain with Radial as a token and distributed some tokens to the seed investors, early contributors, and team.

Future token sales will further fund the project and support the protocol to be more and more decentralized. Centrifuge as a company will decouple more and more from the protocol and will be less and less important.

Partners like Finoa are mission-critical to securely distribute and hold Radial in Germany and the EU. Finoa’s support of Substrate based chains and Polkadot Parachains allows our users to participate in on-chain voting and governance, staking their Radial and earning rewards while having their Radial under secure and compliant custody.