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The magic of DEFI
#1
Quote:The magic of DAI

Since a while a have been following and analysing this new DEFI system. It took lots of research, reading and interviewing to see the picture. And to be honest I believe I don’t see the whole picture yet.
But what I figured out till now is amazing.

We are talking about DAI.
This token is a product from Maker (makerdao,com). It is made esspecially for DEFI.
DEFI goes from simple loans to insurances and much more. I am not going into detail about all DEFI can be.
Let’s just talk about the lending system in this great DEFI system.
DAI is set to $1 per token: so 1DAI = $1. Sometimes this can fluctuate 1% above or 1% below $1. This due to some latency of governors (MKR node holders) on the blockchain and a few other factors.

The mechanism of this systsem is great.
What can you do with DAI?
You can borrow (about 9% interest), you can make it a savings account with 8% interest, you can use it just to keep your assets safe when you expect bearish seasons, ….

Let’s do some math.
Therefor we should go back in history assuming DEFI and DAI was already there.
Let’s go back to december 2017. BTC hit $20000.
Great! But a few months later it was a bloodbath. It fell down to $3000.

Let’s assume in december you had 1BTC worth $20000. Probably you would have kept it, hoping BTC would shoot in higher spheres. Unfortunately this didn’t happen. At a certain moment when it went down to $15000, you realize it would be a bearish season for quite some time.
So you decide to sell them at that point and buy 15000DAI because DAI stays stable. Wether the market goes down or up… DAI stays at $1.
So you could keep your $15000 safe without making further losses.
But you could do better.
Via oasis.app you could put these DAI into a savings account with 8% interest*. The market was down for almost 2 years so it would have made you about $2500 of profit. You would have had $17500. If you would have bought back BTC (at the moment it was about $3000) with your money from your savings account (in DAI) you could have 5.8 BTC instead of 1BTC in december 2017. Today it would be worth about $68000.

Ok you could have sold your BTC to exchange it to fiat, but therefor you need a bankaccount, because leaving it on the exchange is a bad idea.
But exchanging it to DAI results in the same but you can leave it in your crypto wallet, completely decentralized.

Borrowing:
Suppose you can afford to invest $15000 in crypto.
You could buy some BTC for instance and wait till the market goes up. It certainly will. At this very moment crypto are in sales. So today you could buy 1.92 BTC for it. Suppose you do this and decide to sell your BTC when the value of 1BTC is $25000 (let’s say after 1 year). You would make yourself a nice profit of (1.92x25000= 48000) $33000. Nice isn’t it.

Maybe we can do better. And borrow. Especially now the market is low and crypto will go back to higher spheres again. That’s for sure.
You buy yourself some ETH worth $15000. It would be around 75 ETH.
These ETH will be the collateral to borrow 10000DAI. At 9% interest.
With these borrowed DAI you could buy 1.82BTC. If after exactly 1 year BTC hits $25000, you could sell exactly $10900 worth of BTC exchanged for 10900DAI) to pay back your loan + interest.
So after 1 year your BTC would be worth $45500 minus $10900 to pay back your loan. When your loan is payed back your 75 ETH are back in your position. And you can be sure when BTC hits $25000, ETH would be above $500. So your ETH would be $37500.
$37500+ $34600= $72100

So we started with $15000.
In situation 1 we just bought some BTC to make it $48000.
In situation 2 we used the $15000 to borrow DAI and invest the DAI, to make it $72100.

Can you see the magic of DAI and DEFI?




* I did the test with the savings account. I put some DAI in it and you see the interest grow every second.
What is this thing that builds our dreams, yet slips away from us?

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#2
It is interesting. Following.
Adapting the future, while it unfolds - Junior
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#3
Very interesting.
What is this thing that builds our dreams, yet slips away from us?

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#4
Today I started an experiment.
I collaterised 3 ETH (131USD/ETH) to borrow some DAI.
With the generated DAI I purchased 1 ETH.
So at this moment I have 4 ETH.
So when the market goes up I can repay my debt to end with 4 ETH + some extra.
I will keep you posted about the evolution.
What is this thing that builds our dreams, yet slips away from us?

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#5
(2020-03-14, 09:22 AM)Hugues Wrote: Today I started an experiment.
I collaterised 3 ETH (131USD/ETH) to borrow some DAI.
With the generated DAI I purchased 1 ETH.
So at this moment I have 4 ETH.
So when the market goes up I can repay my debt to end with 4 ETH + some extra.
I will keep you posted about the evolution.

Tell us how you did that?
Cardano is the most promising 3 gen. crypto right now.


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#6
(2020-03-14, 10:59 AM)Carsten Wrote:
(2020-03-14, 09:22 AM)Hugues Wrote: Today I started an experiment.
I collaterised 3 ETH (131USD/ETH) to borrow some DAI.
With the generated DAI I purchased 1 ETH.
So at this moment I have 4 ETH.
So when the market goes up I can repay my debt to end with 4 ETH + some extra.
I will keep you posted about the evolution.

Tell us how you did that?

I collaterized 3 ETH in oasis.app. This generated some DAI. In less than a minute these DAI where visible in my wallet. With a part of these DAI I purchased 1 ETH. Now I just have to wait till ETH goes up. Once I decide I made enough profit I will resell a part of the extra ETH. Just enough to pay back my loan. The rest will remain my property. So the 3 ETH I collaterized will be back in my control + the rest of the extra ETH.

Once you have borrowed you can follow online. As long as your lone does not become undercollaterized (collateralization must stay above 150%) your loan will not be suspended. If it goes below 150% your loan will be sold and the remaining ETH are back yours.
What is this thing that builds our dreams, yet slips away from us?

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#7
(2020-03-14, 03:33 PM)Hugues Wrote:
(2020-03-14, 10:59 AM)Carsten Wrote:
(2020-03-14, 09:22 AM)Hugues Wrote: Today I started an experiment.
I collaterised 3 ETH (131USD/ETH) to borrow some DAI.
With the generated DAI I purchased 1 ETH.
So at this moment I have 4 ETH.
So when the market goes up I can repay my debt to end with 4 ETH + some extra.
I will keep you posted about the evolution.

Tell us how you did that?

I collaterized 3 ETH in oasis.app. This generated some DAI. In less than a minute these DAI where visible in my wallet. With a part of these DAI I purchased 1 ETH. Now I just have to wait till ETH goes up. Once I decide I made enough profit I will resell a part of the extra ETH. Just enough to pay back my loan. The rest will remain my property. So the 3 ETH I collaterized will be back in my control + the rest of the extra ETH.

Once you have borrowed you can follow online. As long as your lone does not become undercollaterized (collateralization must stay above 150%) your loan will not be suspended. If it goes below 150% your loan will be sold and the remaining ETH are back yours.

Isn't it gambling?
Cardano is the most promising 3 gen. crypto right now.


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#8
(2020-03-15, 09:16 AM)Carsten Wrote:
(2020-03-14, 03:33 PM)Hugues Wrote:
(2020-03-14, 10:59 AM)Carsten Wrote:
(2020-03-14, 09:22 AM)Hugues Wrote: Today I started an experiment.
I collaterised 3 ETH (131USD/ETH) to borrow some DAI.
With the generated DAI I purchased 1 ETH.
So at this moment I have 4 ETH.
So when the market goes up I can repay my debt to end with 4 ETH + some extra.
I will keep you posted about the evolution.

Tell us how you did that?

I collaterized 3 ETH in oasis.app. This generated some DAI. In less than a minute these DAI where visible in my wallet. With a part of these DAI I purchased 1 ETH. Now I just have to wait till ETH goes up. Once I decide I made enough profit I will resell a part of the extra ETH. Just enough to pay back my loan. The rest will remain my property. So the 3 ETH I collaterized will be back in my control + the rest of the extra ETH.

Once you have borrowed you can follow online. As long as your lone does not become undercollaterized (collateralization must stay above 150%) your loan will not be suspended. If it goes below 150% your loan will be sold and the remaining ETH are back yours.

Isn't it gambling?
Not realy. Markets are low. At this moment we are in an exceptional situation (a black swan event). They will recover for sure. When? We don't know.
As long as you keep an eye on it you can easily control it. The system is build that way so you can check on every moment. In my specific situation it is like this:
As long as ETH is not going below 89.01USD my loan will not be liquidated. When I see price is coming to close to this minimum I can get out to reduce my loss.
Everything in crypto is always a risk, but you can control some things.
What is this thing that builds our dreams, yet slips away from us?

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#9
okay. It still sounds like gambling to me
Cardano is the most promising 3 gen. crypto right now.


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#10
(2020-03-15, 11:38 AM)Carsten Wrote: okay. It still sounds like gambling to me

Just doing a test. To see if it works and how it works.
That's why I only used a small portion.
What is this thing that builds our dreams, yet slips away from us?

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