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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, w

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.

meri_dian 9y ago
Hi, let's say someone wanted to work at dharma.io. What sort of Ethereum skills would you look for?
- SkyMarshal 9y ago
  https://dharma-labs.workable.com/ https://dharma-labs.workable.com/
SkyMarshal 9y ago
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?
- stanleydrew 9y ago
  Couldn't you just collateralize with blockchain tokens themselves? Why do you need on-chain "unique collectible digital assets that retain value"?
  - foota 9y ago
    Probably because collateralizing with the thing your borrowing is kind of pointless, yeah?
    - arcticfox 9y ago
      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.
      - hathathat 9y ago
        Borrowing against collateral means the lender has something to seize if you fail to pay them back. The more valuable the collateral, the more money the lender will recover when they repossess and sell the collateral. This likelihood of recovery (if you default!) may make them willing to lend you more money, or give you a better interest rate.
      - SkyMarshal 9y ago
        >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).
    - stanleydrew 9y ago
- bpforster24 9y ago
  Your first point is well taken - without some sort of identity layer on the blockchain to create either social or reputational accountability, unsecured loans probably will not flourish. Regarding you second comment, what's cool is that we can collateralize not just collectibles, but any ERC20 token as well, which makes the protocol substantially more attractive.
- mbrock 9y ago
  The MakerDAO system (which I contribute to) issues a token called dai against Ethereum token collateral. The dai token is meant to have low volatility measured against fiat money. There's roughly 9 million USD worth of outstanding dai tokens at the moment, all representing a form of debt to the MakerDAO system with ETH as collateral. The first version uses only ETH as collateral, with a high degree of overcollateralization. The next version is supposed to use different collateral types. One interesting type of collateral is tokenized gold, as will be issued by the Digix project.
mempko 9y ago
In fiat money systems, banks create new money when they make a loan. If you take a loan from a non bank entity, they clearly can't make new fiat money, so money supply stays fixed. My question is, should these loans be interest free? Because if they are not, there is an obvious systemic issue of economic musical chairs... Or is the idea these contracts live within the broader fiat systems? I suppose you can use a crypto currency with a growing money supply.
thisisit 9y ago
I have question on this tutorial - How are you ensuring the value part of the equation. Lets say I own one of the cryptokitties worth $100k: https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-digital-beanie-babies-selling-for-100k.html https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-d... What happens if the cryptokitty loses 10% of its value? And how does the contract know this loss in value?

meri_dian 9y ago

Hi, let's say someone wanted to work at dharma.io. What sort of Ethereum skills would you look for?

SkyMarshal 9y ago
https://dharma-labs.workable.com/ https://dharma-labs.workable.com/

SkyMarshal 9y ago

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?

stanleydrew 9y ago
Couldn't you just collateralize with blockchain tokens themselves? Why do you need on-chain "unique collectible digital assets that retain value"?
- foota 9y ago
  Probably because collateralizing with the thing your borrowing is kind of pointless, yeah?
  - arcticfox 9y ago
    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.
    - hathathat 9y ago
      Borrowing against collateral means the lender has something to seize if you fail to pay them back. The more valuable the collateral, the more money the lender will recover when they repossess and sell the collateral. This likelihood of recovery (if you default!) may make them willing to lend you more money, or give you a better interest rate.
    - SkyMarshal 9y ago
      >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).
  - stanleydrew 9y ago
bpforster24 9y ago
Your first point is well taken - without some sort of identity layer on the blockchain to create either social or reputational accountability, unsecured loans probably will not flourish. Regarding you second comment, what's cool is that we can collateralize not just collectibles, but any ERC20 token as well, which makes the protocol substantially more attractive.
mbrock 9y ago
The MakerDAO system (which I contribute to) issues a token called dai against Ethereum token collateral. The dai token is meant to have low volatility measured against fiat money. There's roughly 9 million USD worth of outstanding dai tokens at the moment, all representing a form of debt to the MakerDAO system with ETH as collateral. The first version uses only ETH as collateral, with a high degree of overcollateralization. The next version is supposed to use different collateral types. One interesting type of collateral is tokenized gold, as will be issued by the Digix project.

mempko 9y ago

In fiat money systems, banks create new money when they make a loan. If you take a loan from a non bank entity, they clearly can't make new fiat money, so money supply stays fixed. My question is, should these loans be interest free? Because if they are not, there is an obvious systemic issue of economic musical chairs... Or is the idea these contracts live within the broader fiat systems? I suppose you can use a crypto currency with a growing money supply.

thisisit 9y ago

I have question on this tutorial - How are you ensuring the value part of the equation. Lets say I own one of the cryptokitties worth $100k: https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-digital-beanie-babies-selling-for-100k.html https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-d... What happens if the cryptokitty loses 10% of its value? And how does the contract know this loss in value?