Double-Digit Rates in DeFi Not So Far Anymore

Also, Set Protocol launched a more meaningful way to follow DeFi Twitter stars, and Rocket is the latest undercollateralized loans experiment

Hello defiers! Here’s what’s going on in decentralized finance,

  • Dai deposit rate is likely increasing to 7.75 percent from 6 percent
  • Set Protocol launched Social Trading, where anyone can automatically copy individual investors’ strategies
  • DeFi and NFTs are merging in a new undercollateralized loan experiments

and more :)

You’re receiving this email because you’re a subscriber (thank you!). You’re getting a complete version of today’s Defiant, while free signups will get an abbreviated version of it. Enjoy!


MakerDAO is Getting Close to Double-Digit Deposit Rates

Holding Dai tokens, which are pegged at one-to-one to the dollar, might soon get you as high as 7.75 percent of interest — that’s about four times more what you can get for dollars in a U.S. bank account.

Holders of MakerDAO’s MKR token are in the process of voting for new interest rates, which will determine the Dai Savings Rate, or the rate Dai holders pay for keeping their stablecoins in a MakerDAO smart contract.


Image source: MakerDAO Governance Dashboard

Unlike past votes where token holders decided on the DSR directly, this time they’ll vote on the Dai Stability Fee (equivalent to Dai borrowing costs) and the Dai Savings Rate Spread, or the difference between the Stability Fee and the Savings Rate.

The change was voted on recently to make sure that MakerDAO’s deposit and lending rates are always tied, with DSR always lower than the Stability Fee. So now the formula is: Dai Savings Rate = Dai Stability Fee - Dai Savings Rate Spread.


Image source: MakerDAO Blog

What’s being voted on right now is a stability fee in the range of 10 percent to 2 percent, and a spread to DSR in the range of 4 percent to 0.25 percent. If the highest stability fee and lowest spread gets approved, then DeFi users would get a Dai deposit rate of 9.75 percent but what’s attracting most votes right now is 8 percent stability fee (62.45% of MKR) and 0.25 percent spread with DSR (99.46%). That means DSR will likely increase to 7.75 percent from 6 percent currently

A rate increase is due as Dai supply is increasing, breaching the 100 million mark yesterday, and that’s causing the peg to slide below $1.

If the highest DSR is approved, we wouldn’t be so far from double-digit savings rates in DeFi. And with MakerDAO acting as the DeFI central bank, rates in other lending platforms would follow.

The Follow Button is Being Supercharged With Money

Set Protocol allows users to automatically invest according to popular strategies like daily moving averages and relative strength indexes. Now it will let traders follow individual people’s investments strategies

It works like a mutual fund, where you’re letting investment managers get the most yield out of your funds. The differences with Set lie mainly in the levels of control and and transparency. There are no minimum investments or withdrawal limits. All investors are ranked in a dashboard, and their AUM and investments can be verified in real time. Also, anyone can invest and there are no KYC requirements.


Image source: Set Protocol

Investing in one of these Sets, or strategies, results in buying a toke linked to it. The token’s value will rebalance with the fund’s performance. Users can put their your money to work in a couple of minutes.

I was surprised to see fees weren’t much lower, compared with traditional fund managers, and in some cases a lot higher. Actively managed funds charge between 0.5 percent and 1 percent, and typically goes no higher than 2.5%. Some Set managers charged as high as 5 percent.

The most popular Set right now is ETH Moonshot X Set by Aaron Kruger, with 158 holders and $224,629 of market capitalization (market cap is used instead AUM as what’s being calculated is the amount of Sets tokens outstanding). Not bad for being on the market less than a week.

Crypto already lives in social media; this is a good way of making it profitable.


Here’s What Happens When DeFi Devs Build a Rocket

Undercollateralized lending experiments are blowing up this year. The latest one is Rocket, a project led by Ales Masmejean.

In this lending platform, now in Ethereum’s Ropsten testnet, loans are issued against non-fungible tokens which borrowers deposit as collateral. The value of the NFTs deposited is meant to be lower than the value of the loan.

💡Non-fungible tokens, or NFTs, are digital assets meant to be unique and not interchangeable. They’re meant to represent “things” rather than money, but in this new world of DeFi, things work as money too. The NFT token standard is called ERC721, and unlike ERC20 tokens, they’re tied to distinctive characteristics.

These are some examples, provided by Rocket:


Image source: Rocket

Potential borrowers lock NFTs, proposing them as collaterals to Rocket, and can fill out a form with details on their NFTs’ value, how predictable their income is, and how they plan to repay. The lending pool, locked in a smart contract, is now worth around $10,0000 in ETH, with which the team wants to issue around $4,000 in loans.

The project doesn’t remove trust, as the Rocket team will determine whether NFTs deposited meet the standards to back a loan. But if successful, it would offer greater alternatives for DeFi borrowers, who now need to back most loans with digital assets worth more than the value of the loan itself. It would add value and use cases to both the DeFi and NFTs ecosystems, proving that in this internet of value, the definition of money is becoming more and more fluid.


Introducing the bZx DAO: Kyle Kistner

Lending protocol bZx is decentralizing governance. Co-founder Kyle Kistner dives into how it will work. “As with most systems of governance in the real world, the DAO has three main branches: the legislative, the executive, and the judicial.”

The Year in Ethereum 2019: Josh Stark & Evan Van Ness

Inspiring overview of the major developments in the Ethereum ecosystem. “2019 was the year Ethereum grew more confident. The technical roadmap gained clarity as difficult engineering problems were solved, and the largest developer community in crypto is building applications that people actually pay to use.”

The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.