Blockchain Decentralized Finance (DeFi) seeks to find a sustainable economic model that will result in prosperity for the majority. Unlike centralised vintage financial institutions in which clients hand over control of their finances with little or no reward; the concept of DeFi is rich and sustainable rewards coupled with censorship resistant decentralisation. Over the last several months of 2020 DeFi has grown exponentially, with a current total locked value (TVL) of $10.46 Billion. Defipulse lists 42 out of the top 43 protocols as Ethereum blockchain projects.

Even though DeFi has risen in popularity and success, it can be extremely dangerous when farming with volatile assets. Many seasoned cryptocurrency experts have suffered major losses while participating in the new financial products. This trend has led to the use of stable coins as a way to profitably yield tokens while not running the risk of liquidation. Additionally, stable coins can be incentivised by firstly, lending or supplying and secondly, by borrowing a percentage of the supplied amount. For, example, EasyFi which is a fork of Compound, will provide a borrow limit of 75% of stable coin liquidity provided. In other words, the rewards, Easy Tokens (10 million total Supply), are earned for not only supplying, but also borrowing on the same asset. Although, 75% is available to borrow - to be safe only borrow 80% of the 75%. Farm safely without any risk of liquidation. Other protocols such as MahaDAO offer two tokens as rewards for yield farming, as well as additional incentives which will be discussed below (staking of rewards for more rewards).

Another Issue with regard to DeFi that has arisen is the cost of gas which has increased approximately 100 X as a result of the high throughput resulting in increased scalability problems. Due to the existing dilemma of Eth gas fees on the Ethereum blockchain the DeFi boom threatens the viability of smart contracts. For this reason, a few DeFi protocols have launched on Matic Network which offers high scalability - 7200 transactions per second, and low fees - over 1000 X less than on Ethereum. For example, EasyFi (Yield farming underway), MahaDAO (Yield farming soon) and StakeHound.

The economic foundations of DeFi are stable coins. Most simple stable coins are all pegged to the dollar or another fiat currency. However, fiat currencies are volatile and inflationary. The US debt currently stands at $26.7 trillion due to borrowing and printing currency. The result is that all  world currencies are depreciatory due to the position of the dollar internationally. A new stable coin is needed that is non-depreciating - this has been done by MahaDAO. MahaDAO has introduced the world's first non-depreciating currency. The protocol has two tokens Maha (Governance token) and Arth (the value coin which maintains its value).  According to the article "What is MahaDAO", the reponsibility of all MAHA token holders is to ensure the stability of the ARTH value coin. Yield farmers will be rewarded with both ARTH and MAHA, and ARTH can, in turn, be staked to earn more ARTH (more details in the next section).

We’ve reengineered the reserve vault introduced by MakerDAO, with some key changes to create a valuecoin that maintains buying power rather than a stablecoin pegged to a depreciating currency. The vault acts as a regulator, managing the underlying collaterals locked in, used to generate and back the ARTH token.

MahaDAO Protocol - Yield Farming Information

In a conversation with the founder Steve Enamakel the following information was shared:

Yield farming assets - initially USD stable coins and wrapped Bitcoin (WBTC)

Rewards: The value coin (ARTH) is mined and the governance coin (MAHA) is rewarded. Earn two tokens for providing liquidity.

Staking: The value token once mined can be staked for an annual percentage return (APR).

MahaDAO is a fork of MakerDAO and in the same way that DAI is earned by providing liquidity, ARTH is earned by providing liquidity. However, to further incentivise farmers MAHA tokens are also rewarded. MahaDAO is an innovative Development of MakerDAO built on the Matic Network to ensure high throughput and low fees. In the case of MahaDAO - the website states,

"with meta-transactions, MahaDAO has eliminated gas fees for you. You can use ARTH coins without any coverages, overheads or hidden transaction fees."

In response to the question, what happens if all world currencies fail? Steven explained that the asset is hedged by 50% gold and 50% USD as an example, this is if the USD falls gold will rise and ARTH will be unaffected. The economic model is explained in more detail in the article, "What is MahaDAO".  

Conclusion

In conclusion, although DeFi has had a huge impact, there are some inherent problems with the existing economic models which are, in many instances, unstable and unsustainable for the average investor seeking stable investment opportunities. The first generation protocols have also been negatively affected by the high gas fees and scalability issues currently dominant on the Ethereum blockchain. As a consequence, several second-generation protocols are building on Matic Network which offers a solution to these dilemmas. DeFi Protocols such as MahaDAO have gone even further and have now introduced the world's first value coin (non-depreciating currency). Yield farming, which will shortly begin, on MahaDAO has the promise of being lucrative as well as sustainable. 

Contact a Matic Team Member to Integrate Your Project for Layer 2 Scaling, lower fees, full security and decentralization

For those interested in building / integrating with the Ethereum / Matic network you can contact a member of the team at https://matic.network/about/ where individual team members contact information can be found, or at [email protected]