Dharma relaunches platform, offering fixed rates on the Compound protocol

Quick Take

  • Dharma, the Ethereum-based peer-to-peer lending platform, told The Block it is sunsetting the first version of its product and building a new platform connected to Compound
  • The new platform will offer fixed interest rates on the variable rate-based Compound protocol

Count this among the most notable business recalibrations of the decentralized finance space to date. 

Dharma, the Ethereum-based peer-to-peer lending platform, told The Block it is sunsetting its existing product, and will instead focus efforts on building a new platform connected to Compound. Building on Compound is striking since Dharma and Compound were ostensibly competitors in the decentralized lending space, both competing for volumes and liquidity, somewhat akin to Prosper shutting down and then building products on LendingClub. 

The pivot comes after months of slowing growth on Dharma. Loan origination fell from $6.9 million in April 2019 to $1.0 million in June, according to data from Loanscan. And despite a solid uptick in July, on August 7 the San Francisco based entity announced it would pause new deposits and loans on its platform. Meanwhile, Compound has seen originations on its platform increase from $12 million in May to $43 million in July. 

Fixing the delay problem

Similar to version 1, Dharma “Version 2” will also enable borrowing and lending at fixed interest rates, although to start, it will only offer lending. However, rather than offering a platform built on its own proprietary smart contracts, Dharma users will tap into Compound’s liquidity pool. This enables “instant matching”, with lenders earning interest immediately on deposit. 

Indeed, the lack of instant matching has been a major complaint among Dharma v1 users as lenders have often faced long wait times before being matched due to a lack of borrower demand, missing out on interest accrual. With lending rates for stablecoins currently hovering around double-digit APRs, this delay leaves money on the table for users. 

Here come the swaps

Still, Dharma v2 is not as simple as users engaging with Compound's liquidity pool through an intuitive interface. Since Compound issues variable loans, Dharma wi