As stablecoins play a crucial role in the broader cryptocurrency and financial landscape, we can expect ongoing innovation, partnerships and adaptation to market dynamics.

From payments to DeFi: A closer look at the evolving stablecoin ecosystem

MVRV ratio fell, implying that most holders were not profitable. MakerDAO [MKR] showed immense resilience over the past few months despite market volatility. However, in spite of the growth seen by the protocol, some investors were losing faith in its ...

MKR sees large sell-offs; will traders stay put in the face of this adversity?

MakerDAO’s Smart Burn Engine (SBE) aims to reduce MKR supply, holding potential for MKR’s future. Revenue surges, but development activity slows. MakerDAO[MKR], despite losing its top ranking in terms of TVL in 2023, has continued to make progress ...

What you need to know about MakerDAO’s “Smart Burn” mechanism

The opportunity is offered “through the collaboration of Cicada Partners, a pioneering on-chain credit risk management company, and Monetalis, an appointed Arranger for MakerDAO.” In recent months, on-chain allocators “have tapped into attractive ...

Real-World Assets: Actively Managed Credit Portfolio Launches On-Chain with Monetalis, Cicada Partners

In the long term, analysts believe the launch of the Soroban mainnet will see Stellar (XLM) soar to $0.3900 by December 2025. This forecast makes Stellar (XLM) a good crypto to buy alongside Maker (MKR). Finally, let’s see if VC Spectra (SPCT) competes.

Maker, VC Spectra, and Stellar: The Go-To Cryptos for Investment Right Now

Maker Protocol, a leading stablecoin issuer on the Ethereum platform, reported a record annualized revenue of $203 million on October 19. This significant

Maker Protocol hits record revenue and deposits, powered by RWA and U.S. Treasury yields

Wu Blockchain revealed that Maker Protocol’s annual revenue soared to an all-time high this past Thursday. According to the post, the supply of DAI also reached a new annual high of $5.6 billion. Despite the recent milestones,

Maker Protocol’s Annualized Revenues Soar to All-Time High

MakerDAO’s RWA deposits have soared past $3 billion, making up 42.7% of the protocol's total deposits of $7.54 billion, per DeFiLlama data. Sébastien Derivaux, MakerDAO’s former real-world finance lead and co-founder of Steakhouse Financial ...

Maker Annualized Revenue Soars Past $200M to New All-Time High

October 2023 will be remembered for the fake BlackRock spot ETF approval news that pumped and dumped the market. But that doesn’t mean investments have stopped. Behind the scenes, investors are scooping the best coins to invest in.

Aptos vs. VC Spectra vs. Maker: The Leading Coin in October 2023

VC Spectra (SPCT) is a soon-to-be-launched decentralized venture capital fund seeking top returns in blockchain and tech startups. It's also an ESG-focused or sustainable platform, ensuring a healthier society and environment.

Path to Becoming a Cryptocurrency Millionaire: Unearth Early Investment Opportunities, Recommends ChatGPT

MakerDAO

makerdao

The Rise of Decentralized Finance: A Collaborative Effort by Top DeFi Projects A group of over 30 leading decentralized financial protocols have come together to demonstrate the benefits of DeFi for 24 hours. The participating projects, which include , , , , , , and ,, are showcasing the interoperable nature of Web3 by sharing tweets from other protocols and highlighting the trustless nature of DeFi. Balancer Labs, Aura Finance Euler Yearn Element SushiSwap Aave MakerDAO This effort is a celebration of how DeFi can thrive when protocols can work together and create better user experiences. DeFi differs from traditional finance as it is open, permissionless, and composable. The recent crashes in centralized finance have further highlighted the advantages of DeFi, which is governed by smart contracts and open-source code. collaborative Building the Future of DeFi Together “The campaign highlights the difference between DeFi and traditional finance systems and serves as a reminder of DeFi's strengths,” Yearn CMO Draper said. Mamun Rashid, CMO of GrowthCU at Maker, added that “the campaign demonstrates the inclusiveness and collaboration within the DeFi community and the shared belief in making a positive change through decentralized finance.” https://twitter.com/Balancer/status/1622611178534109184?cxt=HHwWgIDUkaOR1oQtAAAA&embedable=true Jared Grey, Head Chef at Sushi, emphasized the importance of replacing the traditional financial framework with DeFi and the need for the industry to remain true to its mission of serving everyone. Fernando Martinelli, CEO of Balancer Labs, highlighted that social change is key to driving DeFi into the mainstream and that no project can complete this mission alone. : Vested Interest Disclosure The author is an independent contributor publishing via our . Be it through direct compensation, media partnerships, or networking. The author has a vested interest in the company/ies mentioned in this story. HackerNoon has reviewed the report for quality, but the claims herein belong to the author. #DYOR brand-as-author program Don’t forget to like and share the story! Image credits: . Shubham's Web3

20 DeFi Projects, including Balancer, Aave, and MakerDAO, Lead The Charge for Decentralized Finance

What is MakerDAO? MakerDAO is a behind the stable coin DAI — a that maintains a 1:1 peg to the USD. Think of 1 DAI as $1. What makes it unique is each DAI is backed by Ether instead of a 3rd party claiming to have the required collateral. Since Ether is volatile this poses some interesting challenges to maintain the peg. protocol cryptocurrency The project was started in 2015 and did not conduct an ICO, instead choosing to privately sell MKR tokens to fund development over time. Maker’s DAI stable coin launched at the start of 2018 and has experienced significant traction since then. Why do we need DAI? Dealing with crypto’s volatility is a problem. As many in the blockchain space know, DAI is not the first stable coin in the space. Predecessors include Tether, TrueUSD and a few others. However the risk of all of these projects is that the custodial party holding the real US dollars will refuse redemption of the stable coin for any regulatory reasons. This goes against the ethos of crypto being permissionless. Furthermore, we have to trust that the custodial solution actually has the correct amount of US dollars and not creating artificial inflation. Who’s using it? DAI is arguably the most successful project built on Ethereum at this point in time. It currently holds 2% of all Ether inside its smart contracts and has issued over $77 MM in DAI (debt) in its system. In addition, Maker continues to see perpetual 20% month-on-month growth in terms of the DAI issued with 71% of users spending their DAI as soon as they acquire it. This signals a shift of usage rather than speculation. Source: https://medium.com/makerdao/dai-in-numbers-2710d8a5633a How does it work? The basics of the system, work like this: You deposit/send Ether to Maker’s smart contract, creating a Collateralised Debt Position (CDP). Say you deposited 1 ETH (worth $100), this will allow you to take up to 40 DAI (assuming a 150% collateralisation rate $100/1.50) against your $100. However, if the price of Ether drops below $100 your CDP will be forcefully closed. To stop this from happening you need to put in more Ether or take out less DAI in the first place. This is to ensure there’s always enough capital locked against the amount of money being taken out. If you want your Ether back, you need to pay back the amount you took out with the addition of a minor fee. It can be a bit overwhelming. Here’s a of how the lifecycle of a CDP might play out assuming the price of Ethereum is $150 and you deposit 1 ETH at this price: few simple examples You decide to take out which means your CDP is collateralised . As long as the price of Ethereum doesn’t drop below (50 * 150%) your position will be safe. After one year, you decide to pay back the and retrieve your Ether locked up. Upon closing the position or other interactions with your CDP, you’ll pay the annual stability fee (set at 3**.5%** as of March 2019). 50 DAI 300% $75 50 DAI You decide to take out which means your CDP is collateralise at just . The price of Ethereum drops to which means your CDP is under-collateralised by ($100*1.5 = $150 < $100). A 3rd party will realise that you don’t have enough collateral and liquidate your CDP on your behalf. This results in your position being liquidated by 3rd parties with a penalty. These 3rd parties have various ways to profit from your position being liquidated. 100 DAI 150% $100 $50 You decide to take out which means your CDP is collateralised at . The price of Ethereum rises to due to the bull market starting. Your CDP is now collateralised at . Since you’re an ETH bull and you think the price won’t go down, you decide to draw an extra putting your CDP ratio at . 75 DAI 200% $300 400% 100 extra DAI 175% Who Controls the System? Inside the MakerDAO ecosystem, their native MKR token allows token holders to influence certain aspects of the protocol such as: What should the be the annual borrowing fee be ( )? stability fee How much collateral should be backing each CDP ( )? collateralisation ratio Shutting down the protocol in the case of a flash crash of the price of Ether or any other unforeseen situation ( )? emergency shutdown One important piece of information I haven’t mentioned so far is the fact that when the stability fee is paid, a is purchased off the market to pay the stability fee. This means that MKR is actually a . dollar equivalent amount of MKR deflationary currency At its core, MakerDAO is like a that issues loans with a certain interest rate. If the interest rate (stability fee) is low, people are encouraged to borrow more (lock up more ETH). If the interest rate is high, the cost of capital is high making it less attractive to borrow (close out CDPs). Recently, DAI has been consistently been . A big reason for this is because there is significant pressure from DAI holders to sell. DAI can only be generated via the opening of CDPs. To bring the peg back to its correct target price, MKR holders voted to the stability fee in hopes that it reduces the incentive to open CDP (and close existing CDPs) to . In the future the Maker team plans to introduce the Dai Savings Rate, which will allow DAI holders to lock up their DAI and earn interest. The interest paid to holders is financed from the stability fee that currently goes to purchase and burn MKR. credit facility trading on exchanges below $1 increase from 1% to 3.5% increase the buy pressure Now in the case that the MakerDAO system contains less collateral than it’s supposed to (flash crash of Ether), additional MKR is issued and sold on the open market to pay back ETH and DAI holders. It is for this reason that MKR holders don’t want to set the collateralisation ratio too low as they’re the buyers of last resort. However, they don’t want to set it too high as the cost to borrow increases. Positive ETH Feedback Loop A type of behaviour that we can’t confirm but can speculate happens is CDP holders doubling down on their positions (or going “long” on ETH). Essentially it goes a little like this: with a 200% collateralisation ratio Open a CDP for the price of Ethereum to appreciate Wait from your CDP (because you can without decreasing your collateralisation ratio) Draw more DAI with your newly minted DAI Purchase more ETH to over collateralise your CDP to safeguard against any market down turns Add ETH to your CDP While it sounds quite harmless, tomorrow if ETH appreciates to $500 from its current $150 price, the current 250% collateralisation ratio (average) would increase to 75900%. Based on current numbers it means 150M dai could be minted which could cause significant buy pressure on Ether causing a positive feedback loop. The current 100M debt ceiling limits this from happening but will most likely be increase with the introduction of multi-collateral DAI. Multi-Collateral DAI So far the MakerDAO experiment seems to be a success amongst the community and is growing every month. However a big limitation is you can only use Ether to collateralise your CDPs. With the introduction of multi-collateral DAI you could use any ERC20 token to collateralise your CDP. You could actually use your wrapped Bitcoin to collateralise your CDP! While it all sounds good there’s two implications which Maker fans should be aware of: Using custodial assets such as wrapped Bitcoin (backed by BitGo) could result in undercollateralised CDPs if issuers are forced to freeze assets. An example of this is authorities telling BitGo they’d like to blacklist wrapped Bitcoin from MakerDAO’s addresses. This means that the value of the Bitcoin backing the CDP is worthless. Since Ethereum isn’t the only asset inside the collateral, it means that any positive feedback loops from the ETH price can’t be realised as there’s less ETH to actually contribute. I don’t see this necessarily being a bad thing but it’s worth being aware of. Final Remarks Thing such as the positive ETH feedback loop and Dai Saving Rate are going to be really exciting to see come to life as we’ve never seen anything like it at scale. Coupled with all the other open finance projects, this experiment is going to be exciting to see play out! I personally think Maker is the third most successful experiment after Bitcoin and Ethereum. The team has stayed true to the values of crypto, engages with the community and has shipped a meaningful contribution to the entire space. They also throw amazing parties but that’s for another time. References: https://hackernoon.com/an-overview-of-makerdao-21e9f34aa1f3 https://medium.com/makerdao/dai-in-numbers-2710d8a5633a https://medium.com/pov-crypto/evaluating-mkr-def6d36092bd https://medium.com/pov-crypto/could-makerdao-trigger-a-positive-feedback-loop-of-increasing-eth-price-fce80b27119 https://medium.com/makerdao/raise-the-stability-fee-to-3-5-f0d6731b1041 https://medium.com/@visionhill_/a-makerdao-case-study-47a31d858be5 https://www.reddit.com/r/MakerDAO/comments/asb9n6/a_couple_questions_concerns_about_maker_and_mkr/ https://medium.com/makerdao/dai-reward-rate-earn-a-reward-from-holding-dai-10a07f52f3cf

What’s MakerDAO and what’s going on with it? Explained with pictures.

Find more helpful resources on building and running a successful crypto community on the Chainfuel blog , as well as their free e-book: The 7 Pillars of Crypto Community Management . MakerDAO are the makers of DAI, which is a stablecoin on the Ethereum network. DAI is a completely decentralized stablecoin that exists purely on the blockchain. What’s your background? How did you get started in crypto, and then involved with Makerdao? I studied rhetoric at UC Berkeley and minored in political economy. I heard about crypto for the first time when I was 19, so that would have been in 2012. I thought the concept of a trustless, transnational digital currency like Bitcoin really fascinating but didn’t follow through to create a career path for myself. After college, I went to graduate school on a Rotary scholarship to study a degree at the University of Cambridge Institute of Criminology. The program was was not about forensics but a cross domain course of study that includes sociology, anthropology, psychology, ethical philosophy, statistical analysis and other academic disciplines. Some taboos are universal and there are also a few crime statistics that are universal-such as the declining tendency to commit crime as one gets older and a very large male to female predominance for violent crime. On the other hand, criminal enforcement and punishment varies considerably in different parts of the world. So studying criminology is really a study of human motivation and human-to-human (i.e. socio-cultural) interaction. After getting my MPhil, I was working at the United Nations Crime and Research Institute in Turin and I attended a conference curated by one of my Cambridge criminology colleagues from that was focused on Big Data-and its potential abuses as well as its uses to detect and prevent crime. There was some small intro into crypto there, sort of conversations along the side. I got a bit more interested once again, and decided to start doing some of my own research and reading. My little brother is a very active Redditor and crypto-enthusiast, and he talked me up quite a bit and peaked my interest. It led me to getting a job first with a project called BlockV, which was in Santa Monica. The project focused on putting digital goods on the which is a really cool marketing innovation but I most was intrigued with the idea of creating a successful stablecoin which I believe is necessary to bring the real vision and use case of crypto to fruition. So the opportunity to work for was really the fulfilment of my wildest hopes and dreams. So here I am and I’m loving it everyday. blockchain MakerDAO What was the rationale for not doing an ICO in Makerdao, and how has this impacted community building? Initially MKR were sold via private sales to friends and family, as well as investors like Andreessen Horowitz and Polychain. The process was and has been way more personal that what you see with a typical ICO. The goal was to create an ownership community that is cohesive and committed to long term success and not just short term gain. The goal of MKR is that its holders be responsible for governance and fiscal decisions. Basically, it is a risk sharing model-the owners of Maker share in profits but also share in potential losses. In order to achieve the dream of the DAO, (MakerDAO’s decentralized autonomous organization) there needs to be responsible token holders or MKR holders that make up the DAO. The goal of having responsible “owner/operators” is part of the reason Maker never had a wild and crazy ICO. Given the level of quality interactions that I see between our community members today, I can confidently say that the roll out of Maker tokens was handled wisely. What do you do in your day to day as a community manager? What are your responsibilities? I’m not the only community manager, but when I started I was. Before, it was more time online, but now I specialise more so in the events side of community, more physical spaces. So I look at what are the different opportunities and places for that to happen and that to flourish while the brilliant Rich Brown manages the technical community. It is important to remember t that not all crypto communities happen purely online. There are loads of community members I actually meet at events and tell me how they’re excited about the project and have been passionate about Maker for awhile. The interesting thing is that a lot of these folks don’t always participate in the online chats, thought they do follow the discussions. It’s been cool to see how different community members flourish in different spaces: some prefer being online, and some prefer being offline. My job is to ensure there is space for all of them to participate. Another thing that I do is curate video meetings that are open to community members who are are seeking more information about the project. Right now there’s a lot of focus on governance as we’re moving quickly toward being an operating DAO. MakerDAO’s governance is pretty ambitious, so making sure that community members have the opportunity to get their questions answered and moderating the video call conversations is a really cool and fulfilling way to engage with the community. It’s great to see the bridge between community members and people like our CEO Rune, or our developers that have the opportunity to come on and speak a bit about what they’re doing. Ina public company, shareholders are proportional owners of the corporation. But how often do Google shareholders, for example, get a chance to talk to the CEO, to other key executives or to developers and other technical experts? Those sort of interpersonal non-hierarchical interactions happen regularly at Maker and I am really thrilled to play a small part in enabling those interactions. ( ) Source How does community management fit within the larger organizational structure? What role does it play in the long term vision for the project? We’re moving towards that true vision of decentralization, somewhat slowly but surely. In some ways that requires that we get a lot of information out there, to make sure that our community members are as educated as possible to make responsible and agreeable governing decisions. I’d say that community management has an important role in our plans for expansion. A successful stablecoin has to achieve critical mass and then its use will increase exponentially. We have seen that with other great inventions like air travel, email, the internet-you start with something good and then you build adoption and aim for a network effect. MakerDAO’s success is built upon the development of cohesive, connected community. We are an international project, not just because of our employees and the MKR holders that live in many different countries but because our goal is to create a relatively stable digital currency for the entire world. We’re hiring and we have hired some truly incredible community leads across our planet. I’m in the United States but I just got off a call with Lenka Hudakova, our amazing community lead in Europe. This is great as the opportunity for community building is global and our community lead team is operating globally. I’m so thankful to work with a team of community building super rockstars including Lenka in Europe, Mariano Di Pietrantoni in Latin America, Chao Pan in China, and Jocelyn Chang in Singapore! For any organization it’s important to remember why the organization exists. I’d say in many ways MakerDAO truly exists for the community. We build infrastructure for other organizations or other communities to then go ahead and use. Some of that infrastructure being the stablecoin, Dai, or the permissionless lending that occurs through the CDPs. The way to optimize what Maker is doing is making sure that the community continues to feel passionate and engaged, continues to feel that their needs or questions can really be addressed, and that they have an opportunity to engage with us. So in terms of fulfilling the overall vision of most crypto projects — I’d say communities are centric to that. Can you provide some numbers for your community? What growth strategies you implemented to get there? Our strategy with community right now hasn’t been to expand it so much as it’s been to tend to it. Multi-collateral Dai hasn’t been launched yet, but it will be launched soon. So the community that has joined so far is already excited about single collateral Dai using specifically ethereum. I’d say our goal has been to maintain the excitement and the enthusiasm, which is rightfully there, up until the larger launch of what Dai is truly meant to be, which encompasses multiple collateral types. The growth strategy has been about creating deeper relationships with the community members that already exist, especially the developing community that already would be happy to use MakerDAO infrastructure. Once Multi-collateral Dai is launched the strategy will put more emphasis towards scaling. I guess you could say that we want to do it right before we do it bigger. We hope and expect that growth will accelerate as we continue to reach our milestones. How do you engage with the broader community? We do a community meeting each week on Tuesdays. There is also an opportunity for people to come in and engage or watch the recap. We go over all the news and the development that’s happened that week. Really keeping up to date with great content that comes out on our medium, which we then go ahead and tweet or post to Reddit or use within our own Rocketchat. One of the things I like about our community strategy is that we’re not on too many platforms. For instance, we confine a lot of what we do to on Rocketchat, which is cool as opposed to attending tons of communities across a lot of different channels. That’s not to say that won’t happen in the future, but as of now a lot of the information is dispersed through Twitter, in which we have a big presence, and Reddit and then our Rocketchat. So the maintenance of those communities is streamlined and I’d say that’s helpful. chat.MakerDAO.com How would you define a successful crypto community? What metrics would you use to define success? It depends on the goals of the crypto community. I would define success as an engagement but in a positive way. So not having people come on and ask “When is this going to moon?” could serve as a definition of success for some people. A lot of it just has to do with a qualitative evaluation which can be somewhat difficult to define in a succinct metric. What are Makerdao’s goals for the community? Keeping the community equipped to take on the big things that are happening somewhat soon on our roadmap — that being decentralized governance. Making sure that the community is educated to a level that they feel is necessary for them to make good voting decisions. We also want to maintain the passion and enthusiasm that already exists, and make sure that we can continue that momentum moving forward. If you can go back in time, what would you do differently? What do you wish you knew early on? If I could go back in time, I would have thought more about some of the hybrid that happens between community building and business development. Community is such an expansive and ethereal term. When you think about the community, it really encompasses everybody. One of the things that I’m trying to do now, in becoming a more successful community manager, is honing in on our business development strategies and processes. That way when I interact with people and projects within the Maker community, I can understand our alignment of interests and optimize the spread Maker infrastructure in as many positive ways as I can . How do you approach expanding internationally? I’ve actually approached it through events. So ETH Buenos Aires was great for us in terms of growing out to Latin America, not just community presence but essentially the project presence of MakerDAO. I met two truly amazing individuals there. Including Mariano Di Petrantonio who is now our community lead in Latin America as well as the incredible Nadia Alvarez who is now our business development associate in South America. In terms of building out an international presence from a recruiting perspective, it can be really helpful to meet and engage with the people that are going to be a part of that. If projects have the opportunity to go to a large event or an event that seems like an alignment with the kind of community building that they want to do in a specific area, then they should definitely take advantage of that opportunity. We’ve seen a lot of positive things come out of that. ( ) Source Is there anything else you want to say about community management for new projects starting out and trying to build up their communities? I’ve been fortunate coming into the Maker project because the community already existed and already had this beautiful harmony to it, which was the seed that maintained and continues to flourish. So in terms of building out a community for something that does not yet have a strong following: maintain a pure ethos about what it is that your project is doing, incorporating that roadmap into whatever community that you’re trying to attain and preach what those benefits are in order to bring on new community members. This is something that could lead to some enthusiasm and positivity, as opposed to really aggressive marketing tactics. Maybe attending more events with projects you respect or have some synergy to what you’re trying to do, and then interacting with communities there could be an interesting way to go about building a community. Identifying what already works and then seeing if you can maybe feed off of some of that positive energy. Where can people get in touch with you? They can get in touch with me on , which is a part of our Rocketchat. Also on our Reddit, which is , or if they want to send me a message to , and I’d be really happy to talk more. chat.MakerDAO.com r/MakerDAO u/jesssalomon-MakerDAO Alan VanToai is one of the Co-Founders of Chainfuel — an agency providing community management and design services for crypto startups. You can find more helpful resources on building and running a successful crypto community on their blog , as well as their free e-book: The 7 Pillars of Crypto Community Management .

How MakerDAO Created An Engaged, Cohesive Community Without An ICO

Reserve’s Analysis of the MakerDAO Protocol

I will reintroduce the idea of - Volatility insurance If a merchant can’t take the risk of large daily margins in a cryptocurrency value, he could pay a financial entity a commission for ensuring him the same rate over the day or determined period of time, so that he will not suffer the currency volatility while he’s serving as an intermediary between his suppliers and customers. Thus, this issue can be solved not by manipulating the currency as a whole but rather as a proprietary service offered by third parties to users of the currency. The thing with volatility it can have an upturn and a downturn. Merchants don’t want to be suspectible to these changes, because it messes and disrupts their trade. Insurance companies though, with the use of statistics, by spreading the volatility risk between many players and having a large financial backing can withstand and make profit out of these fluctuations, assuming they can predict the overall behavior of the currency — whether it’s going up or down, and at what rate to set commissions paid by the merchants. Volatility insurance in a smart contract Say I am a merchant who received 10K$ worth of ETH, and I want to ensure that in the next period of time of commerce they will be pegged to the value of the USD. I will need to choose from the following parameters: How much volatility am I protecting against. Is it the price of ETH going down x2, x3, x4. How much fee am I willing to pay as a percent of the insured value. What period of time should this insurance apply to This can be standardized. On the other side of the bargain, someone who wants to go LONG the value of ETH or believes some fee is sufficient for the risk, would supply me with the needed collateral for this insurance. Say the parameters chosen are x3, 0.1% fee and 1 day of insurance, and the current price of ETH is 1000$. The merchant will send 10.01 ETH to the smart contract. The insurer will send 20 ETH as the collateral. The 0.01 ETH fee will go immediately to the insurer, and the funds will be held in the smart contract for 1 day. After 1 day, say the price of ETH has dropped to 500$. The merchant has done a good deal in this case. He will receive his 10K$ worth of ETH — now being 20 ETH. The insurer will get back the rest, which is 10 ETH. After 1 day, say the price of ETH stayed the same at 1000$. The merchant gets back his 10 ETH, the insurer gets back his 20 ETH. After 1 day, say the price of ETH went up to 2000$. The merchant gets 5 ETH, the insurer gets 25 ETH — This means that from 20K$ he got 50K$, so he was going LONG with x1.5 leverage. Before the day ends, say the price of ETH drops at some point to 333$. This requires liquidation of the insurance, as the collateral is just enough to supply the merchant with his original worth of 10K$. He will get all the ETH in the smart contract, and will need to re-establish a volatility insurance if he wants to keep on pegging his ETH to USD. Note that the merchant should be able to withdraw his worth of 10K$ at any point. He will then lose the protection of the insurance. The insurer can’t do that as he already received the fee he required. This is meant so that merchants will not be locked out of their coins in case they need them for commerce, and is consistent with the way shorting works in general. It goes without saying but still important to note that this smart contract will require a system of oracles for knowing USD/ETH prices. Volatility insurance vs MakerDAO I think MakerDAO are almost there — look at this quote from their whitepaper: Alice and Bob collaborate using an Ethereum OTC contract to issue 100 USD worth of Dai backed by ETH. Alice contributes 50 USD worth of ETH, while Bob contributes 100 USD worth. The OTC contract takes the funds and creates a CDP, thus generating 100 USD worth of Dai. The newly generated Dai are automatically sent to Bob. From Bob’s point of view, he is buying 100 USD worth of Dai by paying the equivalent value in ETH. The contract then transfers ownership of the CDP to Alice. She ends up with 100 USD worth of debt (denominated in Dai) and 150 USD worth of collateral (denominated in ETH). Since she started with only 50 USD worth of ETH, she is now 3x leveraged long ETH/USD. Example 3 : This is extremely similar, but has quite a few downturns compared to the volatility insurance smart contract described above. The thing with MakerDAO is, Free markets are about voting with your feet, not about getting a vote to how the financial system will work like MakerDAO offers with the MKR token. In a free market, you can choose your own ‘stability fee’, and your own requirements for the size of the collateral in a CDP you’re committed to, not only have a vote in their governance. In the MakerDAO system, it’s either you accept the ‘rules of the game’, or you’re out. You can’t find a match who accept the same terms as you do and go with them. This also allows flexibility when the markets turn whatever way. Because there are many different contracts with different settings, there isn’t a moment in time where everything is liquidated together, causing huge chaos. Also, in these cases in MakerDAO, all the biddings need to happen at the moment of crisis, when time is most important. In Volatility insurance as described, the bidding happens at the start, and from there on the mechanics is clear. Generally in MakerDAO, the mechanics of the platform are so unnecessarily complex, with at least 3 different proprietary coins involved at the moment (PETH, DAI and MKR). The white paper hints at the architecture of the coin but doesn’t put forward the specifics, which are probably still being tested and changed, so an exact analysis can’t be made. In the Volatility Insurance, you know exactly what you get. There is a kind of dualism to markets that enables us to understand them better. There are buyers and sellers. When you see someone shorting an asset, then you have the other side of the bargain who’s gaining a fee for the loan. You can believe both of them are rational, only with different estimations regarding the future. In MakerDAO, there is no clear ‘other side of the bargain’. It’s like Bob would bet against himself, short and long the DAI at the same time. We ask him to add a collateral, and pay a fee. Volatility insurance contracts are USD on the blockchain A Last thing to notice - Once a merchant closes his funds in a Volatility insurance with given risk parameters, he can transfer this asset to anyone he wishes. This can be encoded within the smart contract. And what would you pay for 10K$ worth of ETH with x10 volatility insurance and the fees already paid for 1 year ? Probably just about 10K$. So they can be circulated around the blockchain as the actual asset they’re pegged to, and this was achieved without any central entity such as Tether, and without generating many different coins in many names. Of course there’s no reason to limit yourself to USD, this can be any outside asset whose price can be oracled into the smart contract.

Volatility Insurance and the MakerDAO platform

In the presentation below, Niklas Kunkel, Oracle Core Unit Facilitator at MakerDAO, talks about the role that oracles play in bridging real world assets on-chain. https://youtu.be/rFv4FWMtlRE?embedable=true Below are further explanations of key points highlighted during his talk. Introduction to MakerDAO & Stablecoins MakerDAO is a decentralized autonomous organization (DAO) that guides the development of the Maker protocol. The Maker protocol is built on Ethereum and makes use of smart contracts to generate and maintain their stablecoin, Dai. Stablecoins are cryptocurrencies that maintain a stable value by being pegged to other stable assets or by using algorithms. Stablecoins generally fall into the following categories; Stablecoins that are backed 1:1 by one or more currencies such as the US dollar and Euro. Oneexample of a fiat-backed stablecoin is . Fiat-backed: USDT Stablecoins that are backed by other cryptocurrencies like Ether (ETH). Since cryptocurrencies are more volatile than fiat currency, crypto-backed stablecoins are usually overcollateralized. This means that instead of being backed 1:1, the amount in reserves would be higher than the value of the stablecoins in circulation. Crypto-backed stablecoins are issued on-chain using smart contracts. is an example of a crypto-backed stablecoin. Crypto-backed: Dai Stablecoins that are backed 1:1 by physical commodities such as gold. is an example of a commodity-backed stablecoin. Commodity-backed: Paxos Gold Stablecoins that make use of algorithms to manage the circulating supply based on market prices. is one example of an algorithmic stablecoin. Algorithmic: Ampleforth According to Niklas, the Maker team developed one of the first oracles on Ethereum. Back in 2014 when they were developing the protocol, there were no oracle solutions available that suited their needs. The team decided to build their own oracle with the intention of switching to another service later on. However, nothing suitable was ever developed and MakerDAO still uses their own oracle today. Niklas is currently responsible for leading the oracle unit of the Maker protocol. DeFi, DEXs & CEXs Decentralized Finance (DeFi) has faced unprecedented growth over the last 2 years. As a result, Decentralized Exchanges (DEXs) have also seen a surge in the amount of usage, with volumes now with centralized exchanges (CEXs) like Coinbase. competing DEXs are peer-to-peer marketplaces built on chain that enable the permissionless trading of assets. This is done by creating liquidity pools and incentivizing users to deposit assets to these pools through a process called yield farming. refers to the process where users deposit cryptocurrency assets into liquidity pools in exchange for trading fees. Assets are automatically swapped between traders and liquidity pools using smart contracts. While CEXs have Order Books that match bids to asks, Automated Market Makers, AMMs, are essential to  DEXs like Uniswap or Curve, acting as the mechanism that sets the price of tokens in a liquidity pool. Yield farming Hyperreflexivity of DeFi In his presentation, Niklas describes DeFi as being “hyperreflexive” in nature. He illustrates this point by describing the following scenario; During bull markets, as the price of popular cryptocurrency tokens like Bitcoin and Ethereum go up, the demand for also increases. As a result, the yield that can be earned for lending also goes up in order to incentivize users to provide liquidity for this leverage. This leads to a large amount of capital flowing into DeFi protocols. leverage As more and more users start , the Total Value Locked ( ) on AMMs like and go up. This ends up serving as a positive feedback loop – a higher TVL attracts more and more users to put their capital into the protocol. The inherent problem with this hyperreflexivity is that when asset prices drop, all the feedback loops explained previously that help DeFi thrive go in reverse, and capital flows out just as quickly as it flowed in. yield farming TVL Uniswap Curve Connecting DeFi to the Real World According to Niklas, in order for DeFi to grow beyond this hyperreflexive bubble, it must be connected to the real world. There are over 100 trillion dollars worth of assets in the traditional financial (TradFi) system versus approximately 100 billion dollars worth in DeFi. Even in a bear market, there is a chance that DeFi can continue to grow by absorbing these Real World Assets (RWAs). The growth from that can outscale any negative macroeconomic pressures. Absorbing RWAs into the DeFi ecosystem would also lower overhead costs in traditional markets by minimizing the need for middlemen typically required in traditional finance. According to Niklas, DAI could be a benefactor of this as the most time and stress tested decentralized stablecoin. One problem with connecting RWAs to DeFi is that the majority of these assets are highly illiquid, meaning they are not actively traded on markets. It is also difficult to derive fair market values for these assets. Financial information pertaining to these assets are heavily censored, with limited information available about the relevant counterparties. If the asset originators are the only source of the data, there is a moral hazard involved as they would be incentivized to report market data that benefits themselves. Implementing RWA oracles In the framework prescribed by Niklas, in order to implement RWA oracles, 3 main players are required – The asset originator, an auditor and the data consumer, who is the ultimate end user consuming the oracle data. Asset originators should submit underlying data on the asset, and not the price. They should not be setting the price of an asset themselves. Rather, they should be submitting data that can be utilized to derive a fair price.  Asset originators are incentivized to provide valid data because an auditor is going to check that this data is correct. If the auditor concludes otherwise, the asset originator can get their credit ratings slashed. Nevertheless, asset originators are assumed to be adversarial and will try to obtain an edge where possible. The role of an auditor is to validate that the data supplied by the asset originator is legitimate. The data consumer will define a data model for how prices should be derived. Auditors then validate the data inputs provided by the asset originator, and plug these inputs into the aforementioned data model. In this model, it is important to note that it is the data consumer who is paying the auditor for their services. The auditor and the asset originator cannot be morally aligned, or aligned in any business sense. A good counterexample would be this from ‘The Big Short’, where the ‘asset originator’ is the one giving business to the ‘auditor’, incentivizing the auditor to fake the validity of the data inputs. scene MakerDAO & RWA Maker has begun the absorption of RWAs into the DeFi ecosystem through a series of partnerships stated below: – MakerDAO is helping to provide short term mortgages for people who want to buy and sell homes quickly for a profit. New silver – Credit tenant lease financing. MakerDAO provides capital, so 6S Capital can finance the construction of buildings when they have guaranteed tenants. 6S Capital – A financier which allows MakerDAO to divert USDC on their balance sheet into US treasuries. US treasuries are extremely liquid, resulting in higher yields with lower risks involved. Monetalis – Covered bonds backed by home loans. Forge wants to 40 million Euros worth of bonds, proposing a 30 million DAI debt facility. Societe Generale (Forge) finance In the current crypto market, there are many who believe that there is a lot of value to be extracted from traditional markets which could help offset some of the revenue lost from crypto. While embracing RWAs could help protocols like Maker maintain its position as a leading DeFi protocol despite market conditions, there is still some concern over the centralized aspect of traditional assets. In his interview with , manager of Real World Assets at MakerDAO, TJ Ragsdale, explained that “the goal is really to take advantage of all the value that lives out there in the real world, and as Maker — with our unique position in the market, build in transparency and determinism that we all love about crypto into those traditional systems.” Blockworks The Blockchain Oracle Summit was the world’s first conference to fully focus on the importance of oracles and the potential value they bring to DeFi and beyond. Leading oracle experts from around the world gathered in Berlin to take deep-dives into their work. Find out more about MakerDAO: MakerDAO Documentation MakerDAO Twitter MakerDAO Discord MakerDAO Youtube Niklas Kunkel Twitter Niklas Kunkel Github

How Oracles Act a Catalyst in Bridging Real World Assets On-Chain

This is the official HackerNoon wiki for Maker. As part of our , this living wiki displays on . If you’d like to suggest edits to our official Maker wiki, please submit them in the comment field below, a real human editor will read and review your suggestions for accuracy and publication. coin price pages Maker crypto price page Maker is short for Maker DAO. Maker is a decentralized autonomous organization smart contract platform. It created the MKR token which is the governance token of the Maker platform and funds MakerDAO. The platform also created the DAI stablecoin. The DAI stablecoin offers a safer option that is unaffected by the current cryptocurrency market for MakerDAO users. The Maker token is backed by Ether by Ethereum and not traditional currency. Maker DAO is operated by the maker foundation. History MakerDAO was created by Rune Christensen. In 2017 and 2018, MAKER DAO received venture capital worth $27 million. The first venture round had eight investors, the largest being Anderseen Horowitz who invested $15 million into the platform. The DAI stablecoin was launched in December 2017 and became among the top fifty top traded cryptocurrencies within a year according to Coin Market cap. In 2019, two venture capital firms, Paradigm and Dragonfly Capital, bought 5.5% of the global supply of DAI for $27 million. Biggest Claims to Fame The entire token system controlled by Maker is fully on blockchain platforms. It is a trully and completely decentralized token system which is one of the main tenets of cryptocurrency. This has encouraged true believers of cryptocurrency and the cryptocurrency vision to invest in Maker over any of the competitors of Maker. The Maker tokens stayed steady in value during the 2018 cryptocurrency market which was at an all-time low. Despite the value of Ethereum dropping and staying low for most of the year, the value of Maker tokens MKR and DAI stayed at a relatively steady value. This encouraged people and gave them hope the tokens could last for a long time. Makers transparency has put it above its competitors, especially in the stablecoin market. All of their transactions are transparent and their developments are advertised well before they are implemented. They make recordings of meetings they have available for anyone who wishes to watch, whether users or skeptics. Over 400 decentralized finance applications and cryptocurrency exchanges use DAI, one of the MakerDAO cryptocurrencies. Its exposure to several diverse markets has increased its visibility to the crypto market. The constant circulation is also good in increasing the value of the DAI and, in turn, Maker DAI is among the leading decentralized, permissionless, and trustless stablecoins on Ethereum’s decentralized finance platform. There is DAI worth nearly $8 billion in circulation on the Ethereum blockchain. This makes it the better choice for most of the users of the Ethereum platform who need to make use of a stablecoin. By using Ethereum to back it, Maker DAO avoids many of the issues other cryptocurrencies face of having backers make demands and try to censor information. The decentralization gives Maker the opportunity to be truly independent of traditional financial institutions that would make demands Maker may not want to meet. Biggest Criticism Though the decentralization of finance was one of the main principles behind cryptocurrency, Maker having all its backing finances in cryptocurrency form is considered risky by skeptics. In case the value of Ethereum ever falls drastically, many of the people who have money in Maker will find themselves without any. In order to reduce its dependence on Ethereum, the platform began to accept different forms of collateral such as other stablecoins and assets. The introduction of different assets may give way to the centralized stablecoins and assets entering the market which could increase the level of censorship and could lead to users trying to centralize the platform. Ethereum has a very publicly known issue with scaling the platform. As the backer of MakerDAO, this has caused many problems for Maker, since people assume these issues may affect the growth in value of MKR. This has caused the price of MKR to reduce in value and market price. The value of DAI is very often not exactly $1. It fluctuates by a few cents in either direction. This price fluctuation could happen within seconds. It has put off those who would like to put their money in a stablecoin from putting their money in DAI because it is unsure whether the fluctuations will always be just a few cents all the time. Team Maker DAO was created by Rune Christensen. He currently acts as the CEO of the platform. Christensen studied Biochemistry at the University of Copenhagen and proceeded to study international business at Copenhagen business school. He cofounded Try China, a company that served as an international recruitment platform before going on to create Maker DAO. In Conclusion MakerDAO has held up to time, becoming one of the most decentralized and stable cryptocurrencies in the market today. Though it is stabilized by Ethereum, the platform has a series of checks and balances that have ensured the value of its stablecoin is steady, despite the value of Ethereum rising and falling. This is the official HackerNoon wiki for Maker. As part of our , this living wiki displays on . If you’d like to suggest edits to our official Maker wiki, please submit them in the comment field below, a real human editor will read and review your suggestions for accuracy and publication. coin price pages Maker crypto price page

Maker $MKR Wiki: Coin History, Techstack, and Crypto News

Last month the social media space was hit with a wave of news that Facebook and the rest of its services had temporarily gone down. The overall effects of that incident and those before it continue to shift our general curiosity about and approval of incentives to switch to decentralized technology. I argue that our society needs more innovative solutions for privacy, interoperability, and decision-making. Blockchain is a part of a trustless digital solution. There are multiple sources and solutions to decentralize existing projects or build a DApp from scratch. Moreover, I observe a notion of building projects under open governance where communities make all the decisions. Another term for it is DAO governance. Below, you can find out more about what it is, how it works, and the solutions for building trustless projects operated by DAO. Why DAO? First, let’s examine why traditional governance doesn’t work anymore. In innovative business, there is no place for bureaucracy, and decision-making is lightning fast. If you are late, a competitor comes along and steals the show - I mean, money. Hence, traditional forms of governance usually assume numerous layers of management for the coordination and enforcement of processes. This comes with a drawback: many operations can become a bottleneck or a source of corruption. DAO ( ) is open-source or completely transparent and, in theory, uncorrupt. It has no board of directors or managers, only entrepreneurs whose authority is generally nominal. decentralized autonomous organization The community, or each member of DAO, reviews, records, and maintains all the tasks, proposals, and updates using a blockchain. However, some experts believe that one can’t achieve fully decentralized governance. While DAOs may be architecturally decentralized (independent parties run different nodes) and geographically distributed,  they might also be logically centralized (by the protocol rules). Cautionary Tale: Examples of DAO Governance Gone Wrong The history of using DAOs for blockchain projects dates back to 2016. It was the year when The DAO (Genesis DAO) was hacked. A minor bug in an application on Ethereum led to the loss of 3.6 million ETH (the equivalent of $70 million at the time). The Ethereum community reacted quickly and regained control: it presented multiple proposals to deal with the exploit. As a result, they froze the tokens leaving the hacker unable to finish his gateway. Moreover, major crypto exchanges started to delist DAO Genesis to comply with the US SEC’s restrictions. Nonetheless, it didn’t stop the DAO idea from spreading. The Genesis story showcased a faulty scenario of launching its own DAO. Developers learned to establish secure blockchain solutions and avoid mistakes in their code, often with the help of external audits. Secondly, the SEC’s ban on The DAO has pushed blockchain startups to come up with new ways of avoiding regulation. Open Internet Services Managed by Open Tokenized Governance Systems Many DAOs rely on a simple structure where every member can propose an idea and vote upon it democratically. People use them for charity, investment, governance, and fundraising. One example would be the by DFINITY — a public network that promises a safe and unlimited environment for smart contracts. IC gives an opportunity to build anything, tokenize it on Ethereum, and reduce computing costs by more than a million times(!). Internet Computer (IC) A key feature of this software is the open governance system that controls Internet Computer blockchain — NNS (Network Nervous System). Anyone can participate in the governance by staking its utility token ICP: vote, propose changes, and lock tokens. The second example is , which enables a plug-and-play process of creating and managing decentralized organizations. Communities get a powerful tool to organize themselves around capital assets, currency, or tokens. The latter can increase in value as more people hold and use them to participate in the life of these communities. Aragon protocol Finally, there is , governed by MKR stakeholders. Apart from its on-chain governance, there is also an off-chain discussion for general feedback. It is used before on-chain voting to evaluate the overall sentiment about issues affecting the MakerDAO ecosystem and determine a consensus regarding their resolution. MakerDAO More and more projects are beginning to understand the importance of functioning as a DAO. Prominent projects like , , and have been in the headlines in recent months with innovative DAO updates. Each with its own element that differentiates them from each other, for example Orakuru functions as an off-chain method for data verification and node validation mechanics. ShapeShift Tellor DOS Network Orakuru Key Advantages of Open Tokenized Governance Open tokenized governance gives a lot of opportunities for developers (DApps creators) and users (token holders). DAO assists developers and entrepreneurs with user communication, regular feature updates, and necessary funding. For early adopters, it can be considered as a long-term investment and source of regular rewards. And for the community in general, it gives a clear understanding of the decision-making process. DAO is the future of organizations. It can make them more secure and give their members a voice. Open tokenized organizations could reduce corruption since all decisions are made by the community, open for review by anyone, and can’t be altered by third parties. What do you think about DAO and how can it change our reality? Additional sources: What is Distributed Governance? Latest research about DAOs

Why DAO? : The Problem With Traditional Governance

Decentralized Finance (DeFi) can be rightfully considered a third revolution in the crypto space. If you wonder what the first two are, these are the invention of blockchain itself along with the technology’s firstborn, Bitcoin, and the inception of the smart contract technology. Just like blockchain provides the basis for smart contracts, the latter give rise to DeFi. It is often said that smart contracts are poised to revolutionize the ways both humans and organizations interact in their contractual relationships. In this sense, DeFi is the stage where these relationships are set to emerge and develop. With a bigger picture in mind, it is the world that the blockchain technology lays the foundation for, while smart contracts help to build it. Why we need DeFi, how it is possible, what makes it tick and click are the main themes of this article. But seriously, why do we need it? Since most financial services in existence today are provided by or involve third parties, for example, banks, exchanges, investment companies, insurance agencies etc, DeFi is an attempt to build an alternative environment, an ecosystem of applications offering the same set of services but now powered by public blockchain networks in a decentralized, transparent and permissionless way. By and large, the basic idea that guides DeFi is essentially the same ethos that drives innovation with crypto as such, but at an entirely different level. Just like cryptocurrencies try to wrest the state supremacy over money from the hands of rogue governments and central banks, DeFi takes it further and aims higher. With DeFi, it is no longer a matter of creating a coin in an effort to replace fiat money, which mostly doesn’t work anyway. However, building a whole new domain of financial services available fairly and squarely to anyone, with full control over the assets but without corrupt governments and greedy intermediaries sticking around, may pan out better after all. So, answering the question posed at the beginning of this section, we need DeFi for basically the same reasons we need cryptocurrencies. Or, put differently, if we need cryptocurrencies, an assumption that has been proved indisputable, it is inevitable as well that we will sooner or later become interested in decentralized financial services powered by these cryptocurrencies through smart contract blockchains. We can’t just create Bitcoin and say that’ll do. It is a natural development, a Maslow’s hierarchy of needs, in a sense. How is it even possible? As mentioned in the introduction, DeFi emerges thanks to smart contract tech and decentralized applications (or simply dApps) running them. So how does it work in practice? To better understand the idea, let’s take a closer look at a relatively simple example of a decentralized crypto-backed stablecoin which can be created through a smart contract. Stablecoins are coins whose value is pegged to a stable asset such as a commodity like gold or a fiat currency like the US dollar. There are a few different types of stablecoins that exist in the wild. For the purpose of this exposition, we are interested in crypto-backed stablecoins. Like stablecoins collateralized by fiat, these stablecoins use cryptocurrencies as collateral. However, the key difference is that a fiat-based stablecoin is pegged to the fiat currency which is backing it up. Kinda obvious. A crypto-backed stablecoin, on the other hand, is pegged to one asset, say, the American dollar, but backed up by a completely different one, for example, Ether. Things get tricky. A crypto-collateralized stablecoin is possible through the magic and the beauty of the smart contract governing it. If the price of such a stablecoin rises above its peg or parity, you can create more stablecoins and sell them at a premium. If the price of the stablecoin falls below parity, you can buy stablecoins and liquidate them at a discount. If the collateral itself crashes, undercollateralized stablecoins will be liquidated with their collateral now backing up fewer stablecoins. As a result, the price always gets pushed back to parity. And all this rather complicated stuff is done on the blockchain in a decentralized and automatic fashion with no banks or other third parties involved. Consequently, more services are easily possible too. And quite a few at that. Okay, what decentralized financial services are available? Well, one such service we have just described above. Cryptocurrencies are infamous for being extremely volatile, and stablecoins are designed to deal with this issue. There are many stablecoins out there like Tether, TrueUSD, or Gemini Coin, but they are all based on trusting the third parties. Easily one of the best known crypto-backed stablecoins is ’s DAI, which is pegged against the US dollar with a basket of crypto-assets as collateral in a truly decentralized and trustless way, that is, a blockchain way. MakerDAO Crypto-based stablecoins can be used on their own by offering a hedge against the price volatility of such popular cryptocurrencies as Ether or Bitcoin. Aside from that, they are also instrumental in other DeFi services, for example, in decentralized exchanges like or . IDEX BiKi.com With stablecoins, it becomes possible to create fiat trading pairs in addition to crypto ones in entirely decentralized, non-custodial trading environments as opposed to centralized exchanges like Bitfinex or Binance, which are vulnerable to high-profile hacks and personal data leaks. Unlike MakerDAO, doesn’t strive to create a rock-solid stablecoin. Instead, it comes up with the notion of “adaptive money built on sound economics”, with its mission stretching out as far as to marry “the scarcity of Bitcoin with the elasticity of fiat”. Ampleforth It tries to go beyond the relatively simple concept of a stablecoin and brings forth the idea of elastic money supply that can expand and contract depending on market demands, as well as allow the creation of a valid form of collateral for DeFi based on that idea. Obviously, DeFi is not just about stablecoins or the financial services using them. Blockchain-based borrowing and lending is another important DeFi arena. With platforms like , , , you can deposit your crypto assets to either earn interest on them or use these assets as collateral for borrowing. Compound dYdX Dharma Smart contracts automatically match borrowers and lenders, offering dynamic interest rates based on supply and demand. And with tools like , you can also easily shop around for the best interest rates on the block. LoanScan These examples are far from exhaustive, of course, as space is rapidly expanding and evolving. However, there are some fundamental issues that put grit into the wheels of the DeFi war machine. So where’s the catch? There are many advantages of DeFi, but to be of any practical use, it needs up-to-date information that would be reliable and authentic. Smart contracts that DeFi is based on are hopelessly on-chain, but the data they need for processing is mostly off-chain. Without a bridge to close this gap between a smart contract and its source of external information, smart contracts are entrapped in closed-off dungeons of their blockchains. To be sure, no crypto-based stablecoin is going to work correctly without a real-time price feed for the assets taken as its collateral and used for maintaining the peg. To get around this roadblock, a concept of blockchain oracles has been suggested. But as the chain cannot be stronger than its weakest link, blockchain oracles seem to be that weak link in the field of DeFi and beyond as obtaining information in a verifiable way can be an intimidating task. What approaches dApps are taking to procure and verify sources of truth in the external world is the topic of our upcoming article about blockchain oracles. Stay with us and stay tuned! The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision. Follow us to get the latest news about the crypto world. Previously published at https://stealthex.io/blog/2020/08/04/decentralized-finance-defi/

DeFi - The Whys, Whats, Wheres, and Hows of Decentralized Finance

A lot of my recent research has been around cryptocurrency as money - and how stable assets are the core to scaling the industry and building reputation and trust. I believe that creating price stability often through , whether that’s with fiat currencies like the dollar or pound, cryptocurrencies like ethereum or bitcoin, or commodities like gold and oil, will be essential to many web3 innovations in the coming decade. collateralization The same applies to building blockchain - they require some kind of stable priced coupon or credit that can be used to build on and across multiple blockchain networks. Otherwise token interoperability is a big problem as well as volatility. applications Most developers don’t like using volatile assets, let alone big businesses or enterprise. Until now, there was no universal credit that could be used across multiple blockchains or ledgers. If you wanted to build an application on Ethereum for example, you’d have to hold ethereum to pay fees (gas) for transactions and deployments. If you wanted to build on, or be interoperable with multiple blockchain networks, you’d have to hold multiple volatile tokens. Adoption indicators are down since 2019, and we need smart solutions to move the space forward and to encourage a new wave of builders. The team at Outlier Ventures set out to solve this problem, and they came up with ZIP - a standardised credit for use on multiple blockchain networks, which is surprisingly simple. Aptly named, ZIP is multi-network gas station with a minted, stable value credit, collateralized by a managed basket of tokens that correspond to the networks you can build dApps on. For example, you could build on Ethereum today and Fetch tomorrow, or both simultaneously - with the same credit, as long as the basket contained both Ethereum and Fetch. This opens huge opportunities for previously siloed development efforts, it also makes choosing a layer 1 a much easier and less important task, knowing you can move flexibly and build across many networks at the same time, or even later on. Last but not least, of course, this makes deploying blockchain SaaS solutions considerably easier. In some respects, ZIP is similar to MakerDAO’s DAI, or Amazon Web Service (AWS) Credits. You collateralise assets (like Ethereum) in return for a stable credit (Like DAI, or in this case, ZIP). but ZIP is not a traditional stablecoin in that sense, its more for builders than . buyers View it as more of a credit for building on multiple blockchains, ideal for developers building SaaS tools, rather than a DeFi tool for lending, or borrowing dollars. (Decentralised Autonomous Organisation). In this case on Aragon - and it already has a little activity, but I am looking forward to seeing more contributors join. The DAO Is at the heart of how ZIP runs; It’s how the collateral token basket is managed, project finances are handled, and proposals are made to the DAO members and the system is governed. Like Maker, ZIP is also supported by a DAO DAO’s present big opportunities but also challenges, particularly around the collateral asset management and ensuring that there is enough collateral at all times, particularly when holding volatile tokens.  If ZIP scales quickly, it’ll need the collateral to back it. I’ll cover more on this later. They’re used to pay for ellegible services on Amazon Web Services, which is ideal for SaaS solutions because its a very flexible environment with dynamic, standardised, and fair value pricing (through credits). ZIP credits could also be compared to AWS Credits. building For people to take blockchain and web3 networks seriously for deploying SaaS solutions, they’ll also need some stable priced credit to pay their development and deployment costs. This is where ZIP comes in to support all of the networks in its collateral basket. Clearly the long term goal is to offer this kind of scale. See the below visual on collateralisation and redemption of ZIP. ZIP will support the following networks out of the gate: Ocean Oasis Labs Fetch Qtum Arweave Enigma Conflux Foam Chainlink Aragon Cosmos Golem I am confident that there will be very few protocol teams who aren’t interested in ZIP, as it is a very concise approach to solving developer friction and standardised pricing models in blockchain. It’ll also have great network effects to be a part of. On a longer time frame, we’ll hope to see mounting interest from traditional firms who can leverage ZIP to build frictionlessly across multiple networks. Unique Problems Require Unique Solutions The difficulty around ZIP is the collateralization basket. With tokens being highly volatile, the basket must be actively managed. To mint DAI (MakerDAO stable dollars) you have to collateralise a huge 1.5x the amount of ETH that you get back in DAI (dollars) - to account for big sell offs and price moves.  That’s a lot of collateral that’s required, and that’s for Ethereum, which is considerably more liquid than most tokens. This is acknowledged effectively in the whitepaper, but it will certainly require some fluid thinking and asset management through the DAO and wider team to ensure that the collateral remains valuable enough to support all minted ZIP. To summarise, ZIP feels like a great convergence point for distributed ledger technology in the public eye if it can scale quickly enough and get the right people on board. More information on ZIP will become available at Diffusion , a web-event and demo day hosted by Outlier Ventures which takes place on the 28th of May. Until then, you can learn more by reading the website or whitepaper. (Disclaimer: The author does not have any vested interests in ZIP)

Stories, News & Mentions about MAKERDAO

Categories

Trending Topics

Stories, News & Mentions about MAKERDAO

Makerdao’s Stories on HackerNoon

Makerdao's News & Mentions

Categories

Trending Topics