The battle over interest rates among mortgage lending platforms
Editor's Note: This article is from:DeBankView (ID: DeBankView)Editor's Note: This article is from:
DeBankView (ID: DeBankView)
, Author: Jorge S, reproduced by Odaily with authorization.
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MakerDAO's decision may not be to attract users from other lending platforms, but just a response to loose market liquidity, but the result has caused a large number of user migration. From the perspective of market competition, interest rate is still the most effective means of competition in the mortgage lending business. Regarding the topic that the launch of DSR (DAI deposit rate) will bring MakerDAO a competitive advantage, we
Algorithmic Moderation vs Governance Moderation
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For platforms such as Compound and dYdX, the deposit and loan interest rates are directly determined by the relationship between supply and demand. The interest rate is a function of the utilization rate of funds in the loan pool: when a large amount of funds in the fund pool are lent out and the utilization rate of funds increases, the interest rate will rise accordingly, thereby suppressing loan demand and attracting users to deposit to replenish the fund pool; on the contrary, when funds As the utilization rate decreases, in order to stimulate demand and encourage users to borrow money, the interest rate will also be reduced accordingly. The process of interest rate adjustment is automatically completed by the algorithm. Although some parameters can be modified manually, we can still think that the interest rate of these platforms is determined by the algorithm, and the shape of the interest rate curve is very fixed, and it is not easy for human intervention.
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As can be seen from the figure above, the interest rate curves of different companies are not the same. Under the same capital utilization rate, there are many differences in interest rates, and these differences will inevitably affect user behavior and change the structure of the mortgage lending market. When users switch to other platforms, the project party itself cannot reverse the situation by artificially adjusting the interest rate.
Before DSR went live, MakerDAO did not provide DAI deposit income, and the loan interest rate was regulated by MKR holders through governance actions. After the launch of DSR, MakerDAO also began to absorb deposits, which made it more competitive with other mortgage lending platforms. And its deposit interest rate is still adjusted through governance, so it has very high flexibility in interest rate adjustment. In other words, it is difficult for other lending platforms to use interest rate adjustment as a means of competition, but MakerDAO can. In the case of rapidly changing market conditions, this flexibility undoubtedly brings great advantages.
deposit rate ceilingThe income provided by platforms such as Compound to depositors comes from the interest paid by borrowers, and the loan funds come from deposits, so the total amount of loans cannot be greater than the total amount of deposits. Even if Compound distributes all the interest received to depositors, the deposit rate It is also impossible to exceed the loan interest rate.In MakerDAO, things are just the opposite. The ultimate source of DAI deposited by users must be issued through mortgage lending, so for MakerDAO, the scale of loans must be greater than the scale of deposits. Then in theory, as long as MKR holders agree, MakerDAO can pay deposit users higher interest than the loan interest rate!
Of course, it is impossible for MakerDAO to adjust the interest rate at will, otherwise it will have a very large negative impact on the price stability of DAI. After all, DSR was first proposed as a price stabilization mechanism for DAI. As for whether the governance process of MakerDAO is sufficiently decentralized, we are also
in the previous article
