@soonaorlater We haven’t seen a ton change on the ground since Brendan put out the post you’re alluding to — but it seems like the space is starting to get more rigorous and less “fuzzy” in its thinking on the economics of token models, which is great! If token models mature more and a native token seems like it would genuinely add value to our ecosystem, we’d certainly be open to exploring it!

Interesting developments that have caught some steam are TCRs. Also governance tokens are starting to get some more rigorous thought on how they can be priced, which is great! My current working heuristic for which types of tokens “make sense” are those that act as some sort determinant of “canonicality” — i.e. they serve as a signal for the canonical, singular source of truth for “something”. Whereas most MoE tokens can easily be substituted for ETH or a stable coin, if a token signals canonicality it inherently can’t be substituted.

A great example of this is REP — REP signals the canonical source-of-truth of for the Augur oracle system. You couldn’t really substitute something like REP for, say, ETH, because the whole *point* of REP is that it signals the canonical Augur oracle. The same applies for governance tokens IMO.

@soonaorlater @Nadav-Hollander One thing I'd add is that in listening to a recent 0x podcast (I think with Laura Shin), Will discussed ZRX and why they made it the required MoE. He said that this requirement would result in a diverse base of token holders because all of the actors in the system would need to hold some ZRX. For a token where one of the primary uses is governance, it makes sense to try to have a diverse set of token holders, and so I think this intention makes a lot of sense.

That said, while I admire the intention, I remain unconvinced that required MoE is the right way to achieve this end-goal.

@_jillruth Thanks Jill — big fan of this post BTW (https://medium.com/@jillcarlson/pandoras-protocols-2ae674de603e) :)

Decentralized loan pricing is a super tough problem — the sci-fi, long-term solution is that when we have reliable decentralized identities and a debtor’s entire loan history is on-chain (*hopefully* with something like Dharma) and privately tied to their identity, so a debtor would be able to compute a zero-knowledge proof of some sort of creditworthiness metric (i.e. naively, sum of value repaid in loans / sum of value borrowed) and present that to potential creditors as their credit score while maintaining their credit history’s privacy. Note that this is somewhat possible for DAOs today (imagine a DAO issuing bonds, for instance)— less-so for individuals given that decentralized identity hasn’t quite caught yet.

In the short-term — the best mitigation to relying on a singular party is likely having some sort of federated model + staking to make underwriters have more “skin in the game” — i.e. 5 institutions stake their confidence on a creditworthiness prediction for a debtor, and get slashed commensurately if reality doesn’t fall in line with their predictions.

@Nadav-Hollander Love it - this bit about on-chain loan history is an idea I find super compelling. Let's chat sometime.

@_jillruth @_jillruth Please! My email's nadav at dharma.io

@wheatpond Hey Eric! Time estimates are tough 😳 Any particular reason you want to borrow TRX? ;)

A crucial piece of infrastructure for this sort of liquidity are Dharma debt relayers (if you're familiar with 0x's architecture, this is functionally the same concept, but for matching debtor/creditor instead of maker/taker). The first Dharma debt relayer we're aware of is Bloqboard (https://bloqboard.com), but they've yet to launch on main-net. Once relayers hit market, there will be formal marketplaces for this sort of liquidity to collect, so that should be a solid boon for liquidity.

@wheatpond One thing we have on our to-do list is to create creditor-driven open debt orders. Basically, a would-be creditor could create an open debt order along these lines:

"if a borrower offers Z% collateral in A, B, or C token, for a duration less than X, and an interest rater greater than Y, then I will automatically fill that loan”.

We think that'll bring a lot of the whales to the platform and open up the potential to borrower in high quantities

@wheatpond @bpforster24 Ooh, I like that plan a lot. [email protected], no, no reason at all ;) just an example...

@eriktorenberg Great question! Something a lot of people don't realize is that debt agreements in Dharma are actually *settled* on chain -- i.e. when principal payments / repayments are made, they are are routed to/from debtor/creditor on-chain. I think that a lot of people assume that Dharma is a sort of blockchain-based back-office for debt agreements where payments / repayments have to be "reported" to the chain by some sort of trusted party. This sort of model would, IMO, obviate a lot of the benefits of using a blockchain for this.

@calchulus Hey Calvin, this is a cool idea! While we don't have plans to build it ourselves, it'd be rad if someone built this :)

@calchulus @bpforster24 Ditto ^^

@bpforster24 @Nadav-Hollander summer project :)
or maybe next weekend for a blockchain hackathon

@Clarkebar We get this question a lot. We care about compliance and encourage our ecosystem to comply with local regs. That said, we do not view this as a protocol level feature but an application level feature.

As you know, we currently do not have any sort of KYC/AML at the protocol level. This is intentional. Dharma Protocol is a generic protocol, meaning that we want to support any type of lending agreement, anywhere in the world. Building KYC/AML into the protocol would either mean that 1) we are limited to only certain jurisdictions, or 2) that we have to build new KYC/AML solutions for each new jurisdiction that an ecosystem project wants to build in. That's not tractable. Leaving KYL/AML to ecosystem projects means that we can scale as fast as they can have great ideas.

One thing we may consider though is collaborating with one of the compliance protocols to put out an example of a terms contract with KYC/AML built in. This would help ecosystem projects have a starting point for their compliance.

@Clarkebar @bpforster24 Well thought out. Thanks

@jonathanmarcus Hopefully in the long term! A crucial prerequisite to this is being able to reliably represent things like home titles as tokens on public blockchains -- some great projects working on this problem, though.

@jonathanmarcus Thanks Jonathan! While I'm not familiar with the details of HELOCs, we are very excited for loans for meat-world assets to be moved onto Dharma. Mortgages, for instance, just require tokenized real estate to be used as collateral in a Dharma debt order.

We think there are a few barriers to this type of loan:

1) legal jurisprudence -- it's not a huge technical challenge to represent a title to a house as a token. What is a big issue is whether courts will recognize transfer of the token to actually be transfer of the house. This may be solved soon though -- we have some friends who are trying to establish legal jurisprudence for their real estate tokenization by suing each other (in a friendly, deliberate way). One of them bought a piece of land and tokenized it. He then sold it to the other person. The original land purchaser then sued the second person saying the transfer shouldn't be valid. We'll see if the court recognizes teh transfer as valid.

2) Trustworthy, battletested stablecoins.

@bpforster24 Thanks for such a thoughtful answer! Exactly what I was looking to understand.

@rasnhop This is an excellent question. It's important to know that the primary determinant of a debt agreement's terms is *both* the `termsContract` and `termsContractParameters` -- the terms of the loan aren't defined exclusively in the 32 byte parameter slot. The `termsContract` is an arbitrary smart contract that has to adhere to an interface of standard methods that allow any actor to query the contract for its expected repayments at any given time. Given that the terms contract is a smart contract, it can define arbitrarily complex logic for when and how repayments need to be made. The `termsContractParameters` strings serves to parametrize that terms contract -- i.e. so that you wouldn't have to deploy a new terms contract for every debt agreement that has, say, a different interest rate, but identical terms otherwise.

@danheld Yes, absolutely! We have an experimental trusted-underwriter feature in this initial release that could facilitate this sort of action.

@michaelbrne Not sure we understand the question. Could you rephrase?

@michaelbrne @bpforster24 when building crypto to fiat liquidity via stable coin loans, was there any model it was based on? If not, how will it work on Dharma?

@NeilDeramchi UX, UX, UX -- using a browser-extension wallet is a horribly confusing experience for non-crypto denizens, at no fault of their own. We have huge strides to make on this front.

@NeilDeramchi @Nadav-Hollander +10000000 Before I got crypto-obsessed I didn't even trust Chrome extensions to send emails. Now I'm supposed to trust them with my money?!?!?!?! It's crazy that we've even gotten this far.

@NeilDeramchi We have bounties out on bounties.network for a crowdfunding contract and collateralized collectibles (e.g., use your cryptokitty to get a loan).

I mentioned to Eric above creditor-driven open debt orders.

But the wackiest idea that I've had that I am irrationally excited about is to finance a restaurant using Dharma -- BUUUUUT, I want the restaurant to pay interest in a native token that represents credit at their restaurant. Example:

Brendan's Burgers is a successful restaurant in NYC. They want to open a second location, and want to finance the project with debt. They use Dharma to borrow 250K USD, payable over 2 years. Each holder of a share of the debt gets paid interest in BrendanBurgerTokens -- 2 BrendanBurgerTokens per month. Each BrendanBurgerToken is redeemable for a Burger & Fries.

@NeilDeramchi @bpforster24 *starts lending to every restaurant in the area and eats all of the things*

@Andrew-Phillips There are no technical barriers to achieving this, so in a certain sense, yes, this is entirely foreseeable.

But on the other hand, by the time the US federal government is willing to put t-bills on-chain, it's somewhat questionable whether people will believe in fiat currency enough to fund those debts.

We think other government debts (e.g., muni bonds) are much more likely candidates for tokenization.

@ChristianKaz_ So Compound is a platform for money markets. Basically, Compound acts as a kind of Fed, analyzing supply and demand to set the overnight interest rate in various assets. And they are the intermediary in any transaction -- you lend to Compound to earn interest, and borrow from Compound and pay them interest. There are lots of technical differences too.

In contrast, Dharma is an open debt system for any kind of loan, we are not an intermediary in the process, and basically every parameter is flexible (duration, asset, interest rate, etc.).

At the end of the day, money markets and open debt markets are only very obliquely competitors. There are many, many more ways in which we will collaborate vs. compete.