ETHBerlin interest rate hackathon projects

Lending continues to be the breakout Open Finance application, with Ethereum-based protocols seeing over $387 million in loan originations year to date. Existing lending platforms have mostly opted for a variable interest and variable term design. In MakerDAO’s case, this variable rate model is a function of stakeholder’s desires to adjust rates for monetary policy purposes, while in Compound and dYdX, this variable model is necessary to operate a “peer-to-contract” architecture, in which borrowers interact with one continuously fluctuating consolidated pool of liquidity.  

Fixed-rate loans offer participants guarantees over the structures of their engagements over a set period of time, affording better financial planning. This is especially relevant for current MakerDAO users, who have seen interest rates soar from 0.5% at the beginning of 2019 to 18.5% today, an increase of 3,700%.