DeFi Money Market: Governance (DMM) Overview
The world of cryptocurrencies is expanding rapidly.
Amidst the ever-increasing popularity and growth of the crypto-universe, many other alternatives to Bitcoin have managed to capture their own market. Although Bitcoin was the pioneer of cryptocurrencies that build a legacy of its own and launched the whole blockchain industry, it was very limited in its application and practical implementation. Then came Ethereum, which kicked open the locked doors to the old finance and banking sector, and unleashed the true potential of “Programmable Money.”
As the blockchain technologies mature and start to prosper, crypto communities buzz with excitement for another one of blockchain’s uses – Decentralized Finance (DeFi). DeFi is a movement that supports the concept of open, widely accessible decentralized finance services. It is an expression of confidence from the crypto community that the traditional centralized finance system is ultimately broken and cannot be relied upon for long. Especially now, as the world’s economy is already in shambles. The time to switch is now.
The concept of DeFi points to the collection of blockchain-based, decentralized solutions that are taking upon the challenge of reshaping the banking and lending industries, along with other financial services. Though not very widespread, its implementation has already garnered very encouraging results. The most exciting part about DeFi is that its code is “law.” There cannot be any corruption. Its performance is always transparent – predetermined smart contracts are responsible for the results.
It would not be an exaggeration to say that the support for the DeFi movement is currently picking up massive momentum, and its space is growing by leaps and bounds.
The DMM Platform
One platform that is advancing the ambitions of the DeFi movement and deserves a mention is the DeFi Money Market (DMM). It’s a lending platform, slowly gaining traction over the last few months on the Ethereum blockchain. So far, it has managed to attract around $3 million in mTokens circulating in its service.
DeFi Money Market aims to build a decentralized protocol that allows users to earn interest on their money that is loaned out for loans collateralized with real-world assets. In short, investors can lock their funds (ETH, DAI, USDC) in the protocol, and the platform lends those funds to other entities, using real-world assets as collateral. The profit generated from the business is distributed to the investors.
Defi Money Market promises an annual yield of 6.25 percent for its investors. Being backed by real-world assets also means that DMM can offer its users a much more stable and reliable Return on Investment (ROI). Contrary to many other on-chain finance services, that offer variable interest rates driven by cryptocurrency leverages. As far as we know, this is the first DeFi project implementing tokenized real-world assets. Let us dig a little deeper into it and understand what it is and how it works.
The native token on the DeFi Money Market (DMM) is the DMG token. It is the primary tool through which the DMM community governs the network and powers the whole underlying protocol. The ownership of the DMG tokens gives you the right to have a part in its governance. The DeFi Money Market will have a total supply of 250 million DMG Governance Tokens. The distribution of the DMG supply have been allocated as follows:
- 30% is released in Public Token Sales.
- 30% is reserved for incentives to the ecosystem developers and the integration of other partnerships in the decentralized system.
- The last 40% is allocated to the DMM Foundation for continued development.
60% of the total supply remain in time-locked smart contracts with varying vesting periods. You can find out more about the distribution here.
How It Works
Coming back to the dynamics of the DMM and its network, it would be worthwhile to understand the underlying mechanism of the system. The workflow is quite straightforward.
An investor deposits his crypto-tokens in the form of ETH, DAI, or USDC. This deposit is locked into Chainlink’s smart contracts. In return, the network will provide the investor with DMM: mTokens according to the current exchange rate. Now, the DMM network will have a combined source of funds. The network governors (owners of the DMG tokens) can then decide to use portions of the deposited funds to give out loans. The deposited funds will be converted back into USD and given out as loans in exchange for tokenized real-world assets as collateral. Just like any other loan, these loans will be repaid with interests. The principal amount together with interest payment will be deposited back into the DMM Smart Contracts. The investors who were given DMM: mTokens will then be able to get back their original USDC, DAI, or ETH tokens, along with any interest accrued. The DMM Foundation boasts an annual interest rate of 6.25%. The following image summarizes the mechanism of the DeFi Money Market.
In essence, DMM uses the deposited assets in the form of ETH, DAI, and USDC to provide loans backed by real-world income-generating assets. The decentralization allows for transparency and also permits its users to carry out analysis about any asset.
The revolution that DeFi Money Market (DMM) brings about is that now anyone, from anywhere, will be able to earn a stable yield on their savings, backed by real assets in a decentralized market. As DMM uses Ethereum, it will be helping the Ethereum’s DeFi ecosystem grow as a whole. The value of oracles in the DeFi ecosystem is of equal importance. Without going into the nitty-gritty of how the oracles work, we can define them as a communication layer between the real world and the smart contracts that “live on the blockchains.”
Chainlink is, without a doubt, the leader in the decentralized oracles. DMM has diligently partnered with Chainlink to create a solution that will allow DMM smart contracts to calculate the value of real-world collaterals deposited in the system.
DMM has quite a few advantages over the other DeFi lending platforms:
Number one is the stability it offers. The current cryptocurrency space is plagued with extreme volatility, and huge fluctuations on the charts scare the potential investors. Now, when DMM links its tokens with real-world assets, it brings a significant amount of stability to the cryptocurrency space. Stability means safety. Investors will be drawing their predictions based on a more informed market situation.
Second, the DMM network allows its users a very flexible entry and exit mechanism. It will not bound any investor for any predetermined time.
Third, it empowers the decentralized cryptocurrency space to a greater deal, as its application is directly related to the real-world. The income generated by the collateral assets will usually exceed the projected annual yields. That means over-collateralization, which is yet another attractive feature.
The Team, Investors and Partners
The DeFi Money Market project is being looked after by the DMM Foundation. It boasts a seasoned team comprising individuals from the blockchain, academia, legal, Fintech, and DeFi space. The DMM project investors also include several well-known and experienced venture capital investors, such as Tim Draper and Josef Holm. That highlights the fact that DMM is a project worth paying attention to.
During the past two years, the DeFi movement has grown exponentially, and DMM has managed to attract a decent user-base. Despite being a small and still quite obscure platform, it has acquired many partnerships, including industry giants like Huobi, Coinbase, Chainlink, Trust Wallet, Portis, and so on.
To conclude, the DeFi movement is here to stay, and we will see a rise in its usage, for good. The DMM project is likely to come out as one of the top ones in decentralized lending space if they play their cards right. The potential that DMM carries is exceptional, and it could be only a matter of time before it’s unleashed into the cryptocurrency markets.
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