
Show HN: Collateralized Debt Agreements Using Smart Contracts and Virtual Cats - nahollander
https://dharma.io/tutorial
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kang
I have looking deeply into lending smart contract protocols - dharma, ethlend,
salt, paypie, etc. My biggest complaint is all of them are so-called
'blockchain' products but not only can they be done better without blockchain,
but that despite their product being all about decentralization, none of these
projects are decentralised!

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arcticfox
Every time blockchain has had a hype cycle over the years I start thinking of
ideas to build on it. Then I realize all of my ideas would just be simpler,
better, and more monetizable (minus Ponzi hype) if I just built them on
traditional technologies.

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unabridged
Blockchain is not going to make some traditional company rich. Its going to be
used to build things like a decentralized, public web of trust that can be
used for open, public uber & airbnb clones.

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arcticfox
> Its going to be used to build things like a decentralized, public web of
> trust that can be used for open, public uber & airbnb clones.

It's already trivial to build those clones without blockchain if users give up
a small amount of trust, and that amount of trust is basically irrelevant to
the overhelming majority of users. And the advantages of non-blockchain
development, in return, are huge.

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nahollander
Hey HN! We're the team behind Dharma protocol, building the infrastructure for
the tokenized debt agreements on the Ethereum blockchain. In this code school,
we teach you how to build a loan collateralized by a CryptoKitty. We hope you
enjoy! If you're interested in learning more visit us at dharma.io or join our
chat.

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SkyMarshal
This is a clever idea. I've long been skeptical of debt on blockchains b/c
there aren't good means of enforcing repayment without resorting to trusted
irl/off-chain components, and then why bother doing it on chain in the first
place.

But collateralizing with digital assets created on-chain is a really
interesting approach, obvious in hindsight, but perhaps requiring the
prerequisite of real implementation of unique collectible digital assets that
retain value. Collateral can be cryptographically locked up and payment
enforced in the event of default, all trustlessly. Are you guys the first to
do this or are there any others doing this too?

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stanleydrew
Couldn't you just collateralize with blockchain tokens themselves? Why do you
need on-chain "unique collectible digital assets that retain value"?

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foota
Probably because collateralizing with the thing your borrowing is kind of
pointless, yeah?

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arcticfox
I agree, but isn't the point of borrowing against collateral that you have
some utility from the collateral (e.g. a car you drive, a house you live in,
part of a business you own) while you carry the loan?

If these crypto "assets" like Kitties are rather unfungible for crypto
"coins", then I suppose it would make sense, but then I'd be confused why the
lender would accept the collateral.

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SkyMarshal
_> but isn't the point of borrowing against collateral that you have some
utility from the collateral (e.g. a car you drive, a house you live in, part
of a business you own) while you carry the loan?_

Close, you can abstract "utility" one layer higher to "demand", or more
accurately demand relative to supply. The thing you collateralize needs to be
in demand by enough people to ensure it remains valuable over at least the
life of the loan, but realistically much longer (so the lender is assured it
will always be perceived by the market to have current and future value over
any period during which the lender may need to reposses and resell the
collateral). Utility gives things value which gives them demand, but it's
really the demand that matters. There must always be a ready buyer for the
collateral. Scarcity, like with Cryptokitties, gives things value too
(rationally or not, but welcome to the human race).

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evbots
I found this project the other day after doing a deep dive into the 0x
project. This is a cool project and I am impressed with the level of thought
and detail gone into planning this protocol. I have a question about
governance. The 0x project essentially plans to set up a DAO that will
promote/depricate old/new versions of their protocol, and stakeholders will
have a say using the 0x protocol token. How do you plan to implement
governance? Through some sort of token model similar to 0x? Thanks!

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JumpCrisscross
Whitepaper
[https://whitepaper.dharma.io/#faq](https://whitepaper.dharma.io/#faq)

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foota
Maybe PoS will accept crypto kitties

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elmar
next step a stable coin based on collateralized cats.

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elmar
People will buy kitty's, borrow against them and use funds to buy more kitty's
building a leverage position on Kitty's.

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jnordwick
Too bad nobody I their right mind would borrow or lend such an obscenely
volatile and deflationary instrument (unless they were going to scam it
somehow).

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bpforster24
I work at Dharma with Nadav and am happy to shed some light here.

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).

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runeks
> 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.

Why on earth would someone borrow $50k if they have $150k on hand?

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manibatra
I am guessing if the person borrowing believes that the asset that is being
used as collateral ( ETH in this case ) will appreciate in value.

