Why is DAI Interest Rate 10% in DeFi?
DAI interest rate is around 10% in DeFi. Considering the current low yield on most of the investment classes and the upcoming negative interest era,
DeFi – Decentral Finance – refers to the Ethereum based finance ecosystem where the users are controlling their assets.
DeFi is a response to many crypto platforms, which controlled the client assets (from example centralized crypto exchange or centralized crypto lending). These central crypto platforms did not align with the key idea of the blockchain, where the users and only users should control their assets.
Following services are available in Decentral Finance:
Exchange
Lending and borrowing
Margin trading
Money market funds
One of the key issues in Decentral Finance is crypto collateral handling. DeFi systems keep all their business logic on the blockchain, there is no KYC (Know Your Client), there is no Crypto Credit Score. This results in the high collateral ratio in the Decentral Finance crypto lending.
In SmartCredit.io we respect very much the DeFi philosophy. However, we think the right approach is the hybrid solution between centralized crypto solutions and DeFi solutions. It’s about using the blockchain for what is really required on the blockchain and deploying other components (Crypto Credit Score, KYC, Collateral calculations) in the off-chain components.
DAI interest rate is around 10% in DeFi. Considering the current low yield on most of the investment classes and the upcoming negative interest era,