Produced by Odaily
Author |
Editor | Lu Xiaoming
This article is referenced from:Coindesk
Main points:
Produced by Odaily
Author |
Editor | Lu Xiaoming
This article is referenced from:
Main points:
The ethereum protocol for programmatic lending, MakerDAO is the market leader in part because of its rock-bottom interest rate of just 0.5%.But the code behind MakerDAO requires interest rates not just to extract business from borrowers, but also a technical need to keep its DAI stable at $1.With interest rates rising to 19.5% and DAI still below $1, some early borrowers felt as though they were being misled.
Investors began to accuse the project of describing its marketing strategy as akin to a digital “lender shark,” and said the project’s experience with decentralized finance was worse than with traditional banking.When a credit card company starts a loan offer, it tells the borrower how long the offer will last. But this practice has not yet been practiced in the encrypted world.This change is all the more important given the recent changes in the market, which have seen an increase in the number of companies offering loans in cryptocurrencies as part of their business model. So far this includes
(they hold cryptocurrencies and loan cash), and blockchain protocols that provide more exotic services.
The leader in the latter category is undoubtedly MakerDAO, a protocol built on top of ethereum that has been in development for years, and borrowers can use code to obtain loans called secured debt positions (CDPs). So far, the protocol has locked
2 million ETH
, while the protocol’s stablecoin DAI currently has $82 million in the market, all backed by active loans.19.5％While investors and developers alike love to tout MakerDAO as perhaps the best example in the decentralized finance (DeFi) space, some borrowers don’t feel like they’re getting much out of the deal.
secondary title
Rising and stable rates
In fact, the cost of borrowing on MakerDAO has risen rapidly recently, making it especially painful for those borrowing for consumption (as opposed to making leveraged crypto investments).
Since early February, DAI’s stable fee rate (aka “interest”) has gone from 0.5% annualized to. And it may continue to rise.A borrower named Walter believes that this interest rate was too low at the beginning and then rose too high to meet the needs of consumers. He wrote in an email:
"I believe MakerDao realizes that in order to guarantee the stability of the token, the interest rate has to change significantly, so it is impossible for them to support real-world scenarios. It is their responsibility to warn users that their loans are not suitable for real-world scenarios, and they may end up with us now. See the rates that trap users.”
The question isn't that MakerDAO's rate changed, but how quickly it happened.
Walter has borrowed from MakerDAO since 2017. In January of this year, he saw
A post about a MakerDAO user
, the user uses CDP to refinance $50,000 of his mortgage, reducing the interest rate on this debt from 4% to 0.5%.
“Borrowing with my ETH looked like a safe solution to save money and keep my ETH ownership, but there was no clear sign, no warning or alert as to how fast rates were going to increase.”
The loan was in constant danger of being liquidated due to frequent drops in ETH price, which would clear his debt, but he would also have to pay higher interest and a liquidation penalty (13% of his principal).
Now, those low interest rates look like a way for projects to gain early adopters. Walter doesn't see this increase as malicious, but it doesn't matter. "The important thing is, in the end, you're going to be in a state of usury," he said.Another borrower, Josh, said that if he borrows from a bank for consumption, he will need to pay about 10%-15% interest. In this case, MakerDAO became a natural choice."My expectation: maybe a little bit up, but maybe 40 times (now). I don't think anyone thinks that."
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Why rates keep going up
publish an articlearticleExplain the reason: the purpose of raising interest rates is to maintain the price of DAI and the US dollar anchor. He pointed out that since February of this year, MakerDAO has gained large-scale attention and application, and the number of DAI issued has jumped from 50 million US dollars to 90 million US dollars. With the expectation of ETH growth and the pressure of fiat currency withdrawal, the price of DAI has deviated slightly below $1.
He pointed out: For those who borrow DAI, they need to consider the current cost of borrowing DAI (annualized 19.5%) to decide whether to repay DAI and close the CDP; for ordinary DAI holders, no additional operations are required. From the perspective of income, DAI can be deposited in a stable lending system to obtain deposit interest.
In the latest announcement on adjusting the stabilization rate to 19.5%
article
It is mentioned that as of now, about 335 million US dollars worth of ETH has been mortgaged in the Maker system, and the circulation of DAI has exceeded 90 million US dollars, accounting for more than 83% of the market share of DeFi decentralized financial applications.Regarding the rate adjustment, Pan Chao responded that the rate adjustment will take about 2 weeks from the proposal to the official effective period, and during this period, if the user returns it, the previous rate will still be used, and it is not a direct adjustment process.
secondary titleWhat is legal protection?The question now is, are there any protections for borrowers paying interest on the agreement? If protected, what kind of protection?
National Consumer Law Center's
Senior advisor Margot Saunders told CoinDesk. “There’s no question it’s a loan.” In the U.S., the reason for the loan dictates which laws apply, and laws that protect consumers tend to be more restrictive than those that protect leveraged investors, Saunders explained.
The Truth in Loans Act
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