This may be one of the most compelling business adjustments ever made in the DeFi (Decentralized Finance) field.
Dharma P2P lending platform Dharma said it is phasing out existing products and turning to a new platform connected to Compound.
Dharma's choice to build a platform based on Compound is a bit unbelievable, because Dharma and Compound are competitors in the decentralized lending sector, both of which are competing for loan volume and liquidity, somewhat similar to Prosper's closure to build products on LendingClub (both Is a lending platform).
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A few months ago, Dharma platform loan growth slowed. According to Loanscan, the platform loan was reduced from $6.9 million in April 2019 to $1 million in June. Despite strong growth in July, the San Francisco-based company announced on August 7 that it would suspend new deposits and loans on its platform. In contrast, funding on the Compound platform increased from $12 million in May to $43 million in July.
Earlier this month, more news revealed that Dharma's lock-in assets plummeted, users were difficult to raise coins, and the team was suspected of running . And now it turns out to be Dharma's business transformation.
Seeking business transformation, Dharma eliminated the first version of the product
“Dharma is the most convenient place to save in the world.”
Brendan Forster, co-founder and chief operating officer of Dharma Labs, described the new mission of the DeFi platform Dharma. The Dharma protocol was created by Dharma Labs.
On Thursday, Dharma Labs announced that it will relaunch a closed beta service starting with a new savings product.
“Users can save with stable coins. The function of the new product is to instantly deposit stable coins and earn interest from them instantly.”
Dharma Labs raised $7 million in February 2019 and launched its first product in the Ethereum blockchain in April. At the time, Dharma's business was P2P lending, and it was possible to borrow cryptocurrencies for a fixed period of time at a fixed rate.
Now, by leveraging the existing liquidity of the Compound platform, Dharma V2 (Second Edition) has shifted from fixed interest rates and loan maturities to variable interest rates and loan maturities, which can be dynamically changed without requiring users to lock in funds. The company has given a new interest rate of 11.2%.
Forster believes that the importance of this business transformation lies in "ease of use." Dharma users have wanted more flexibility despite the success of Dharma in the first few weeks, which was not available with the original Dharma protocol.
“Dharma is a success, but the feedback we get from users is limited. They want savings products rather than direct borrowing. So we conducted a month-long investigation and we started at Dharma V1 (first edition) built our savings products, but ultimately decided… to build Dharma V2 using the Compound protocol."
In addition, Dharma's investor Arianna Simpson said:
"Using Compound allows Dharma to focus on the parts of the business that they do best, that is, design, product and user experience, not part of the outsourced technology stack. This is a natural step for the industry to mature."
Compound founder and CEO Robert Leshner also expressed his views on Dharma's next development:
“The Dharma team is building a very friendly interface that has the opportunity to attract 100,000 new users to DeFi. Compound is excited about the emergence of the new entrance.”
Dharma wants to be a bank without borders
Starting today, all Dharma users will be involved in the closed testing of this new product. In addition, new cryptocurrency deposits are no longer accepted on the original Dharma V1 platform. Dharma V1 will continue to operate until all existing loans are liquidated.
Forster said that the process of phasing out Dharma V1 actually started in July. As the existing Dharma loan is gradually expiring and no new loans are generated, the total value of cryptocurrencies locked in Dharma has decreased from the peak of $30 million to the current less than $10 million.
Forster said that in the view of DeFi field observers, this may be an abnormal drop in platform value, but it is actually a normal result of its business adjustment.
In the coming months, Dharma Labs will add Dharma V2 services, including lending services, unmanaged smart wallets and legal currency access. Forster's goal is to make Dharma one of the most popular DeFi applications in the Ethereum ecosystem.
“It takes us a few months to get back to the top. To be honest, our goal is much higher. In short, we want to create a bank without borders.”
Simpson believes that Dharma will not only have a major impact on the Ethereum ecosystem, but will also have an impact on the entire cryptocurrency world.
“Dharma has played an important role in the DeFi ecosystem, which will introduce a new consumer community. Prior to this, early adopters were the only group with technical capabilities to use blockchain products and services, and now appear This new consumer group is superior in number to early adopters."
“By providing a better user experience, Dharma has increased the number of users in the DeFi and cryptocurrency sectors, and the types of users are becoming more diverse.”