An ethereum protocol for programmatic lending, MakerDAO emerged as a clear market leader in part for its rock-bottom interest rates of 0.5 percent.
The code behind MakerDAO requires interest rates to do more than extract business from borrowers, it's a technological necessity for keeping its DAI stablecoin worth $1. With interest rates rising to 19.5 percent, and DAI still worth below $1, some early borrowers are angry, feeling as though they were misled.
The leader in the latter category is undoubtedly MakerDAO, a years-in-the-making protocol built on ethereum that programmatically enables borrowers to take out loans, called collateralized debt positions, with code.
While investors and developers love to tout MakerDAO as perhaps the best-working example in the evolving field of decentralized finance, some borrowers don't feel as if they've gotten as good of a deal.
The cost of borrowing on MakerDAO has risen rapidly recently and this has been especially painful for those who took out loans in order to make consumer purchases.
Walter borrowed on MakerDAO as a crypto believer since 2017.
With ETH prices frequently dropping, the loan is constantly in danger of being liquidated, which would eliminate his debt but also cost him what has become a much higher interest payment plus the liquidation penalty.
"What matters is, in the end, you end up in a loan shark situation," he said.
The way laws around lending tend to work in the U.S., Saunders explained, is that the reason for the loan indicates which laws apply, and laws protecting consumers tend to be more restrictive than laws protecting people leveraging investments.
Which may explain why one borrower was able to cheerfully take out a loan late last year despite not being 18 years old yet.
'A Loan Shark Situation': MakerDAO Is Leaving Crypto Borrowers With Rising Bills
gepubliceerd op May 8, 2019
by Coindesk | gepubliceerd op Coinage
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