bpforster24
We will also investigate token models to see if there is a way to make the underwriting process less trustful, and this token model may be a revenue generator as well.
Happy to discuss more, but that's a good start
Re. MakerDao, they offer one type of loan, the Collateralized Debt Position, in which a borrower collateralizes ETH and the principal is denominated in DAI. And they have built in many automated mechanisms to keep DAI stable against the value of a US Dollar.
Dharma can support a similar use-case (getting liquidity on crypto-assets without selling them) -- you would collateralize any currency and borrow in DAI. That way you can get fiat liquidity today, but if you pay back your loan on time you can still benefit from appreciation of the asset you collateralized.
In addition, Dharma is capable of supporting other lending use cases: short selling, speculative leverage, venture debt, corporate bonds, muni bonds, etc. etc. We are a platform for any kind of debt agreement and for companies that want to issue these debts.
We also support unsecured loans (i.e., loans that are not fully collateralized). We consider these pretty experimental and lenders should do a lot of diligence before investing.
For unsecured loans, counterparties can agree to any kind of default deterrence that they want. Could be off-chain legal agreement, could be a reputation scheme, etc.
Dharma Protocol is a suite of developer tools that enables entrepreneurs to create apps like Ethlend or SALT easily and securely. It's open source and entirely free to use.
Bottom line: we don't think the monetary policy of crypto-assets will have much of an impact on default rates in the short term.
Regarding your parenthetical questions: 1) yes, you'd pay interest on this. you'd negotiate this interest rate with the person lending you the magic bean coins 2) yes, there are a couple scenarios where you'd forfeit your collateral: a) if you were wrong, and the price of magic bean coins appreciated beyond the value of your collateral; b) if even if you were right and the price depreciates you forget to pay back the loan 3) that's correct, Dharma is just the protocol for the creation of the loans, so the terms of the loan would be determined by the constituent parties (the borrower, lender, and underwriter)
Your point is well-taken and definitely a risk. What lenders plan to do, for loans collateralized by crypto, is overcollateralize substantially.
So, for instance, in order to take out a 50k USD loan, you may need to put up 2.5-3x of the value in ETH, say 150K USD worth of ETH. This protects against some of the volatility (though definitely not completely).
So we think a really interesting use case in the short term is margin lending of crypto assets. Say you have 10 ETH and want to short-sell a different ERC20 token. You could lock up your ETH as collateral in a loan denominated in the other token, and then sell those tokens. If those tokens depreciate in value vs. ETH, when you buy back the tokens you'll have made a profit.
Regarding you second comment, what's cool is that we can collateralize not just collectibles, but any ERC20 token as well, which makes the protocol substantially more attractive.