Upending the ETH->DeFi Path
Before you could buy it on Coinbase, the only way to get Dai – the most foundational element of DeFi – was by depositing ETH in a Collateralized Debt Position (CDP) and minting fresh Dai as a loan. Later, there were decentralized exchanges that offered Dai, but of course, you needed ETH to interact with any DEX.
The ability to borrow in a stable asset against your ETH – as Maker, Compound and other lending protocols have enabled, was the first product-market-fit of DeFi. Lending in a stable asset, however, is the product that many believe can go mainstream.
An interest-bearing account is already a popular product in the world and a digitally native one higher interest rates than bank deposit rates could grow exponentially. If you have $1000 in an online checking account that’s earning 1.9% and you want to convert that to Dai and earn 7.5% on Compound, how do you get there?
Part of Ethereum and Bitcoin’s value comes from the fiat on and off-ramps in jurisdictions around the world. But they are not stable assets. Most DeFi onramps require you to purchase a volatile asset first, not ideal for an interest-bearing stablecoin product.
Coinbase wasn’t the first to offer a fiat-stablecoin on ramp. Bitfinex and Tether, of course, have grown to a 4bn behemoth since launching four years ago. The cross-border payments company, Wyre, has built a sizable business with its fiat on-ramp and began offering Dai early on. They just announced v2 of their platform:
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Wyre V2 is simple, secure, fast, and requires only a few clicks from users. KYC/AML is abstracted from the user by leveraging the information already provided by Apple Pay and Google Pay.
- Up to $250 first time, $1500 lifetime. From there, we will require additional documentation to increase limits.
- Checkout flow is 0–Crypto in < 20s
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Wyre’s CEO Michael Dunworth and Director of Insti. Sales Jack Jia joined the WyreTalks podcast to discuss v2 and the future of payments.
Elsewhere, CZ tweeted that Binance was accepting fiat through Alipay. Alipay corrected his tweet, “No, you cannot.” In traditional finance and fintech, mobile will power the next wave of growth. DeFi is no different.
Industry growth in 2019 has meant new projects, not users. New funds need to flow into the system, either from additional collateral (hello BTC) or fiat banking relationships for stablecoins. Given that payments are going mobile, DeFi fiat on ramps should follow suit.
The move to mobile will help solve one of crypto’s thorniest problems: identity. Apple, Samsung, Google and other hardware manufacturers are amassing a moat in cryptographic-protected biometric data that’s stored locally on the phone. This is not an identity system in itself, but it is surely what a government or self-sovereign identity system would plug into, so it’s a good building block for financial infrastructure.
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Tweet of the Week: BTC as DeFi Collateral
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Number of the week: Synthetix all-time trade volume
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Video of the week: Replicating Uniswap
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- Coinbase Custody offers support for Maker governance votes Link
- Lending Protocol, Nuo, to Launch ‘Neo-Bank’ Offering Interest on USDC Link
- OTC.mx, a tool for trustless, p2p ERC20 options trading, launches on Rinkeby Link
- Aave announces 'Flash Loans', first attempt at non-securitized lending Link
- pTokens aim to bring chain interoperability to DeFi Link
- Hummingbot releases crypto liqduidity report on tokens with least slippage Link
- Aragon announces plans for own PoS chain, Aragon Chain Link
- CFTC: ETH is a commodity Link
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Thoughts and Prognostications
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- Sia Co-founder: trust and blockchain marketplaces [David Vorick]
- DevconV slides and talks [Link]
- Model for Bitcoin security and the declining block subsidy [Hasu/Prestwich]
- Risk profiles in multi-collateral Dai [Cyrus at Maker]
- How to value virtual assets? [Andrew Steinwold]
- DeFi.WTF conference in Osaka full video Link
- The future history of the open internet [Owocki]
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Long read of the week: Prolific Vitalik
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Vitalik felt inspired in Osaka and penned several pieces regarding composability, DeFi and the ETH 1-> ETH 2 transition. The above post is on how sharding would affect DeFi composability. Sassal0x has an overview of Vitalik's recent writings.
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