Review on Compound Dai by Yenkelys Barcenas
Compound DAI. A market for loans and investments.
Compound Dai, is an open source protocol that works as a loan service for crypto assets and works in the Ethereum blockchaon, allowing interest to be gained on the crypto assets that the user offers, by placing them in a liquidity pool (liquidity pool ), as well as borrowing funds from other participants. It has been conceived as an algorithmic and autonomous interest rate protocol created for developers to unlock a universe of open financial applications, therefore it has been considered as an integral piece of the DeFi ecosystem. In simple terms it is a protocol that is established on the basis of smart contracts that allow users to borrow and lend tokens, and through this process earn interest over time, a process analogous to fiat banking, however unlike From traditional banks, your interest starts to increase the moment you deposit in the Compound smart contract with a much higher interest rate as we are required by third parties or intermediaries in the process.
This platform creates the cTokens that represent the unit of account within Compound that work under the ERC-20 standard, which is why they are tokens that can be stored in wallets and even exchanged without problems. One of the assets offered is the DAI, from which the cDAI token is created which, when deposited, is already earning passive income in decentralized finance every 12 seconds, according to experts. You earn by lending your money and at the same time you have the opportunity to become a lender and earn money from the interest generated by your loan, this is quite interesting, in any case you must be an active participant, first you must become a lender and have offered liquidity to any market within the platform to request a loan, the processes are quite simple and are subject to the prices of the currencies that are offered, that the 1.5: 1 ratio can be maintained when it comes to loans already the interest rate that is managed in the day, which is why it is ideal for those who do not want to stagnate their money.
Pros
- The tokens generated on compound are ERC-20 type that can be stored and exchanged without any inconvenience.
- It allows you to save cryptocurrencies (holder) in the long term, you can earn an interest on your assets.
- Users can enter and exit positions always seeking to take the assets that have the best rates.
- Users have the freedom to borrow tokens whose value they consider may increase in the short or medium term, in a way that compensates the rate they are paying.
- Users can request a loan equivalent to the amount of cryptocurrency they need, as long as they can maintain the 1.5: 1 ratio.
Cons
- The risk of total or partial loss of the deposit if the 1.5: 1 ratio required in the operation is not maintained.
- The constant fluctuations in the prices of cryptocurrencies generate uncertainty in decision-making when investing in loans.
