Gregory Di Prisco, Head of Business Development at MakerDAO, had recently delivered a presentation titled “Beyond Banks” at the Fluidity 2019 Conference. The presentation highlighted a number of important features, present and upcoming, that are integral to the MakerDAO system.
Here are 3 key takeaways you need to know!
1. Maker Can Unbank Lenders
Unbank the banked, bank the unbanked - these are common terms heard in many cryptocurrency projects. Many are just empty marketing promises that have not even come close to what was expected. MakerDAO is different. They have already created a product that has the potential to bring the bank to the consumer which technically is banking the unbanked.
However, the team at Maker have taken things one step further as they move to unbank lenders. Typically, lenders in the traditional market will use ‘large facilities’ to source their deposits. These warehouse credit facilities are usually managed by banks on behalf of lenders. MakerDAO has a system in place that will allow these lenders to not have to rely on the warehouse credit facilities no more.
2. Anybody Can Access The Dai Protocol
Perhaps one of the most interesting takeaways from the entire presentation was the fact that ANYBODY can use the protocol - even existing lenders. MakerDAO has created a system which requires no need for existing lenders to update their current front-ends allowing them to plug directly into the MakeDAO ecosystem.
Below is a diagram of the tradition lender system. It involves a borrower interacting with the front-end of the lender after analysing data regarding the asset they wish to borrow against (and the credit profile of the borrower). Their front-end system will accept or reject the loan based on the data.
Beneath is another diagram to show how MakerDAO has integrated the ability for lenders to easily access the Maker platform;
This system is the main mechanism that will help to swap out existing banks that provide credit with the Dai protocol. It involves tokenizing the loan that comes into the balance sheet which then goes into a smart contract. In turn, the smart contract communicates with an oracle that provides outside data sources regarding the asset to be collateralized. This entire smart contract is then wrapped in a Special Purpose Vehicle that acts as the entity that has custody of the loan.
From here, an ERC-20 token is issued that represents the claim on the liquidation value of the portfolio. It is this ERC-20 token that then goes into the CDP to create Dai.
3. Zero Under Collateralization During Epic 94% Ethereum Drop
MakerDAO has been running for 16 months, over which period the system has created over $300 million worth of Dai against Ethereum. The system currently has 32,000 unique Dai holders with a total of 2 million Ethereum in their smart contracts acting as collateral (close 2% of the entire Ethereum supply).
The surprising thing is that during 2018/2019 when Ethereum has been plummeting, there have been no under collateralized positions on the MakerDAO platform which is a testament to its robustness. The smart contract that Maker has employed has manged to de-collateralize all positions that did not meet the minimum requirement in a timely manner without fail.