This article is from:Hashpie (ID: hashpie), author: not broken, forwarded with authorization.
This article is from:
Hashpie (ID: hashpie)
, author: not broken, forwarded with authorization.
The enthusiasm for the concept of DeFi (decentralized finance) has made MakerDAO, the first decentralized stablecoin project on Ethereum, a hot topic in the circle.
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MakerDAO's ETH lock-up situation (data source: mikemcdonald.github.io/eth-defi/)
However, the rapid development of the project has gradually decoupled DAI from the anchor target. In order to alleviate the supply-demand imbalance and liquidity problems behind the phenomenon, MakerDAO adjusted the stability fee one after another in more than two months, gradually increasing the latter from 0.5% to the current 14.5%.
After six stabilization fee increases, as Pan Chao, the person in charge of the project in China, did promote the repayment of token holders, but the price of DAI did not return to $1 as expected; at the same time, it also led to an interesting phenomenon— —Compared with the MakerDAO platform, it is currently more cost-effective to borrow DAI in similar DeFi applications.
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DeFi application with lower DAI interest rate than MakerDAO
MakerDAO is the most representative encrypted asset-collateralized stablecoin project; in essence, it is also a decentralized lending protocol. The related token DAI can be automatically generated in the Maker system through the CDP smart contract mortgage ETH; it can also be lent in the same type of decentralized applications.
For example, the amount of ETH locked up is second only to MakerDAO's Compound;
Similar to how MakerDAO generates DAI, users of Compound and Dharma can also obtain DAI by mortgaging cryptocurrencies such as ETH; the only difference is that the lender is changed from the Maker system to the platform fund pool (Compound) or the direct borrower (Dharma).
In the same way, the stability fee mentioned above can be compared to the loan interest, which is also the platform fee that needs to be paid when redeeming mortgage assets. According to the data on the official websites of each project before the publication of the manuscript, the borrowing rates of DAI on the Dharma and Compound platforms are 8.5% and 12.73%, respectively, which are lower than the 14.5% stable rate of the Maker system.
So what is interesting is that under the condition that the current pledge ratio of the three is 150%, compared with generating DAI through Maker, the fees required to lend tokens in the Dharma and Compound protocols are less.
Note: In response to the fifth stabilization fee increase vote initiated by the MakerDAO community, Multicoin Capital analyst Ben Sparango wrote: Currently on Compound, the borrowing rate of the stablecoin DAI is 11.36%. If the MakerDAO stable rate is raised to 11.5%, this will lead to an interesting thing - the interest rate for lending DAI on Compound will be lower than the interest rate for lending DAI through creating CDPs on Maker. In other words, it is cheaper to borrow DAI on Compound.
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DAI Stability Fee and Interest Rate Model of Compound and Dharma
The more cost-effective features are bound to attract the influx of users. However, limited by its own interest rate model and related protocol settings, the DAI interest rate difference between the two lending platforms and the Maker system will not have a long-term impact on the latter.
DAI lending and deposit rates on the Compound platform (data source: app.compound.finance/#Markets; time is 6:52 am on April 23, 2019)
Annual loan interest rate = 10% + (capital utilization rate × 30%)
Fund Utilization Rate = All Loans / All Deposits
It is not difficult to see from the logic of the formula that the rise and fall of the annual loan interest rate depends on the change in the utilization rate of funds. Therefore, the difference in DAI interest rates between the two platforms will be quickly smoothed out as borrowers flock to the Compound platform; because the increase in loan funds will increase the utilization rate of platform funds, and the annual interest rate of loans will rise sharply.
The historical data of Maker’s last stable fee increase also just confirmed this point; on the day when the price increased to 11.5%, the amount of ETH locked in Compound surged in a straight line, and at the same time, the DAI loan interest rate soared from 11.35% to over 13%, returning to a high level. At the level of Maker's stable fee. Perhaps it is a summary of experience that the price increase of the stability fee in the past few days did not cause an increase in the amount of ETH locked on the Compound platform; and the current DAI interest rate is still lower than 14.5% after the price increase.
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As for the Dharma platform, although the loan interest rate remains fixed for a certain period of time and is lower than Maker’s stable fee rate; however, given its P2P transaction model and related loan restrictions, the current DAI volume affected by Dharma is negligible.
In fact, Dharma officially opened encrypted loans to the outside world at the beginning of this month. At the beginning, the DAI loan interest rate provided by the open source smart contract Dharma Lever was 0.1%, which was lower than all the stable fees in DAI history. However, this ultra-low interest rate setting is more like a promotional behavior when the project was just launched.
From Dharma’s point of view, as a venture capital-backed company, it has the responsibility to create returns for investors; and without making profits in the form of currency issuance, the platform will eventually have to charge fees from loan issuance. For this reason, this measure of lowering interest rates to attract users will not last long; of course, Dharma announced at the end of last week that it will provide Maker mortgage debt warehouse refinancing at a rate of 8.5%. From this point of view, the DAI interest rate on the platform will gradually approach Maker's stability fee in the future.
At present, there is still a certain gap between the two interest rates, and the loan limit of 25,000 US dollars in the platform has reduced the impact of Dharma on DAI to a certain extent. On the other hand, the P2P operation mode that requires one-to-one pairing of counterparties limits the liquidity of borrowing and lending on the platform, and accordingly avoids the situation where someone uses the interest rate gap between platforms to launch Soros-style attacks.
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Decentralized lending protocols take advantage of momentum, but fail
In the long run, the fact that DAI lending rates on Compound and Dharma platforms are lower than Maker’s stability fees will not have much impact on DAI; and in the short term, it can also promote the development of these two decentralized lending protocols.
Nowadays, Dharma only provides ETH and DAI loans; while Compound supports BAT, ZRX, REP, WETH and other five currencies, but DAI is the main force of the platform, accounting for more than 91% of the loan share. Because of this, the increase of Maker's stabilization fee will inevitably have an impact on the DAI secondary lending market composed of Dharma and others. Judging from the current data, these effects are mostly positive.
Note: The top three DeFi applications are all decentralized lending protocols: MakerDAO, Compound, Dharma; in addition, Dharma ranked fifth at the beginning of the month (data source: defipulse.com)
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Indeed, since 2018, market participants represented by MakerDAO and Compound have performed well, distributing most of the digital asset loans in the DeFi market. But to be honest, there are not many actual users in these decentralized lending protocols.
Even if DeFi applications have the advantages of no access and anti-censorship, which can be accessed by anyone connected to the Internet and transactions cannot be blocked by any third party, they cannot really attract users to use these protocols for lending; DeFi is still in its infancy or speculation stage The field is still the second-best choice in the financial market. Most of the current support for the development of these decentralized lending protocols are institutional investors and market arbitrageurs.
