貸 – Bridging the Gap with Traditional Debt and Decentralized Financial Applications

貸, Chinese character, translates 'to lend or provide capital for a loan', which the name 'Dai' is derived from. The Dai Stablecoin is a collateral-pledged Cryptocurrency, which value is stable relative to the USD. Most Cryptocurrencies, such as Bitcoin (BTC) and Ether (ETH), are too volatile to be used as everyday currency or for payments. The value of a Bitcoin often experiences large fluctuations, rising or falling by as much as 25% in a single day and 300% in a month. 

Using DAI to create a Tokenized Asset Portfolio

Maker is a smart-contract platform on Ethereum that backs, creates and stabilizes Dai. 

On the platform, anyone can leverage from their Ethereum assets to create their Dai. Once created, Dai can be used in the same manner as any other Cryptocurrency; fast transaction, at low costs, globally, instantly, secure to others, or used as payments for goods and services. 

A Multi-Collateral Dai (MCD) will allow more than only Ethereum to be used as collateral. Based on the multi-asset collaterals model, tokenizing real-world assets and pledging them as collateral in decentralized financial (DeFi) applications will create a Tokenized Asset Portfolio (TAP). This model helps to bridge the gap between traditional debt capital markets and DeFi. Further, the TAP will allow industry participants to access credit from a fully open and permissionless financial system run by smart-contracts. The Tokenized Asset Portfolio model can combine a Special Purpose Vehicle (SPV) or New-Co that holds a portfolio of assets, into a token, reflecting the real-time value of that portfolio. Therefore, the value of the token should always equal the value of the asset portfolio.

For more information on DeFi: https://moonwhale.io/defi-the-new-buzzword-in-blockchain/
Pledging tokenized asset portfolios in the multi collateral dai system

Advantages:

  1. Low Cost due to incorporation of risk-free assets like Treasuries into MCD. Hence the cost to borrow against these assets will be favorable vs. legacy options. Therefore, the TAP model can potentially become an attractive funding source for various participants that regularly borrow in secured lending markets like securities lending, amongst others.
  2. Novel Transaction Structures. MCD credit facilities have certain unique structural features that will enable financing structures that are less common (and often harder to obtain) for most borrowers in existing markets. For example, interest on capital sourced from an MCD credit facility is only payable upon the closing out of the facility. While instruments like zero-coupon bonds exist today, they are typically reserved for borrowers at the very top end of the credit spectrum (like large banks). With proper risk modeling, a Sponsor could leverage the MCD system (or other new DeFi credit facilities) to leverage zero-coupon structures and create a wider variety of securities which can appeal to a broad base of institutional borrowers.
  3. Accessibility to financial products to a much broader subset of potential users than is currently possible. For example small and medium-sized enterprises (SMEs) who could benefit from an alternative credit system that does not require relationships with the largest investment banks in order to gain access.

Addressable Market:

  1. Financial Markets: Hedging, Derivatives, permissionless leveraged trading, stable and reliable collateral in custom derivative smart contracts (options or CFD)
  2. Merchant receipts, Cross-border transactions, remittances
  3. Transparent accounting systems for Charities, NGO’s and Governments
  4. Prediction Markets, Gambling Applications

Sources: Fluidity, Maker Dao, Moonwhale


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With LTO Network, Moonwhale Ventures provides full services to identify and implement Distributed Ledger Technology solutions in Value Chains of SMEs and Corporations. We also provide STO solutions, helping businesses with our STO Financing service or tokenizing real estate. Based in the USA and Singapore, Moonwhale will assist you in One-Stop-Shop solution for your security token offering:

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About The Author:

Danny Christ is the CEO & Co-Founder of Moonwhale Blockchain Ventures Inc.

Based in Kuala Lumpur, Danny has over 20 years of IT, Operations and Supply Chain experience across Germany (home), US, Singapore, Indonesia, Thailand, Malaysia, Vietnam, and the Philippines. He managed IT projects (ERP, CRM, POS, BI) and regional expansion (franchise, M&A) for various SMEs in the Consumer Industry. His career rose to Vice President of a 3500 employees organization.

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