Money markets seem to be the ever-expanding niche of decentralized finance, especially after the uprise of Compound and Aave Protocol as the leading yield-focused platforms for crypto investors. Unfortunately, over time crypto assets tend to get stagnant locked within users’ funds, not producing any profit or yield. And that is where DeFi Money Market (DMM) wants to change the way investors deal with their digital assets.
Promising a 6.25% interest rate on ETH, DAI, and USDC, DMM permits borrowers to lend fiat, by using real-world assets as collateral, while users have access to steady yield over time.
How Does DeFi Money Market Works?
DMM, an acronym for DeFi Money Market, aims to be a unique decentralized protocol where users can accrue interest over Ethereum-based assets such as ETH, DAI and USDC, by lending crypto using real-world assets as collateral.
Real-world assets here can be understood as valuable physical assets capable of generating income, such as vehicles (either cars, boats, or even planes), real-estate, and others. All these assets backing the loans are viewable on-chain, which brings more transparency and trust in the process.
Want to learn how DeFi looks in 2020? Check out our ultimate guide on DeFi in 2020 and arm yourself with valuable knowledge.
So, investors lock their crypto funds into DMM’s protocol, and DMM begin lending it to borrowers, who have a wide range of assets to use as collateral. The resulting profit throughout the process will be shared among investors.
As the blockchain ecosystem is isolated from the real-world, DMM needs an oracle to securely provide external data. The platform uses Chainlink as its’ oracle network of choice, to bring useful data from the outside into the blockchain.
DMM allows users to find stability amid an utterly volatile scenario because unlike most loans, the assets used by the platform do not suffer heavy fluctuation regarding interest rates. Hence, users earn stable interest returns, despite spreads, APY-related issues, or whatever.
Let us say a user wants to deposit USDC to earn interest using DMM, for example.
As the chosen USDC amount is deposited into the platform, it mints mUSDC, which means it becomes an underlying asset throughout the process (notice the small m letter as the prefix).
All deposited funds are converted into fiat currency (US dollar), and then lent for borrowers. These borrowers use their real-world assets to collateralize the value they took, and as the loan gets repaid, the resulting interest is deposited back into the protocol.
In the end, all these funds return to the mUSDC initial form, and the initial depositor can convert this value into USDC, all summed up by interest.
Governance Structure
The initial DMM’s governance model is more centralized, so the team is behind all lending operations and also has access to fiat currency funds throughout the process.
To prevent potential concerns (and possible criticism) in this regard, DMM is creating their native DAO (Decentralized Autonomous Organization), which will permit the decision of crucial parameters for the protocol via community voting.
DMM will mint DMG, an ERC20 governance token, through which the whole community will be able to govern and help to develop the ecosystem.
DMG holders will have the right to decide crucial questions of the protocol such as the introduction of new assets (asset type, location, etc.), also having the possibility to claim possible excess revenue generated from the ecosystem.
What Is the Impact of the Platform?
The project is still in its early stage, but many specialists and investors amid the crypto scene have already seen great potential on it.
Trying to bring real-world assets into blockchain-based financial transactions can be quite hard, but DMM assumed an essential role to overcome this issue, by strategically structuring the idea around a good plan, experienced personnel, and strong partnerships.
Have ‘too many’ Bitcoins in your wallet? Learn how to make money by lending your Bitcoins.
DMM endeavor is a unique opportunity to bring decentralized finance and cryptocurrencies to the masses, allowing even novice traders to onboard on the profitable interest market without over-exposition to risk and volatility.
Who is Behind the Idea?
Backed by industry-leading players such as Chainlink, Coinbase, Trust Wallet, Totle, and Huobi (just to name a few), the company is the result of years of experience in the financial market.
The founder, Gregory Keough, is a veteran in the FinTech industry. With 25 years of experience, Keough is a pioneer of financial portals and loan interfaces (especially for mortgage markets) back when the internet was just starting.
He also served as CEO for the MasterCard/Telefonica joint venture for global Mobile Financial Services, also is the founder and CEO of several venture-backed companies throughout the years.
Final Words
Aiming to be the definitive bridge between the crypto world and real-world assets, DMM (DeFi Money Market) is an Ethereum-based lending market project empowered by a unique collateralization system, where both yielders and borrowers will be remarkably benefited.
DMM is still in the pre-launch stage. The platform’s team opted for an IDO (Initial DEX Offer), and token sales officially started one month ago (June 22), ending up raising $6.5 million in the process. Right now, potential investors expect big announcements as the project’s popularity increases every day.