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Investing in stablecoins? Loaning cryptocurrencies? Making (MKR) it possible.

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Stablecoins were, probably, the most hyped cryptocurrency class of the year. Potentially, they can increase cryptos market usability, serve as a cryptographic and more secure alternative to fiat money and are already basically unanimous in every exchange as middlecurrencies.

Currencies tend to lose their value over time. Investing in a stablecoin pegged to the USD would be pretty similar, thus, to invest in the dollar, which is generally a bad investment, except if you manage to trade them with a small premium instead of a small discount over their par, the latter being much more usual (and you’ll rarely be able to buy a significant amount of them when they are below their par value). There’s also the general mistrust about whether their claimed collateral reserves are true or not. If they cannot prove they possess enough collateral to back their circulation, then they’re not far from a Ponzi scheme which can eventually cause some trouble for their users. Well, in the case of Tether (USDT), there has already been a copious amount of trouble. They still didn’t provide us with a third-party audit for their reserves and, on top of that, there is enough evidence to affirm it was used to manipulate Bitcoin’s price causing its value to skyrocket and then fall at the same pace. Paxos (PAX) and TrueUSD (TUSDT) are two dollar-backed exceptions, providing regular and legitimate audits consistently.

Besides being useful currencies for their given purposes, there are some concerns surrounding the fact that they only work because they rely on regulation. Some worry that these regulations are subjected to the authorities’ scrutiny, which can change at any time, others simply don’t like the idea of mixing cryptocurrencies with the government.

The Maker Platform is an algorithmic stablecoin, not a fiat-backed one, making it an answer to all these issues.

First of all, Maker is one of those “dual token” platforms. The tokens have very different functions but brilliantly complement each other. There is DAI, the stablecoin, kept at $1. Differently from other cryptos that do the same, DAI is not backed by a regulated asset and still, it won’t ever significantly fluctuate even under extreme circumstances, which they have a special mechanism for. It’s back by Ether (ETH). DAIs can be borrowed using Ether as a collateral. Maker issues Collateralized Debt Positions (CDPs), allowing users to lock a certain amount of Ether to loan DAIs. The loan can be paid at any time, unlocking the user’s Ethers and burning the DAIs.

The amount of DAI borrowed is equivalent to the current ETH market price, as 1 DAI is expected to be equal to 1 USD. If the price of Ether happens to appreciate, the user doesn’t need to pay any more than what they borrowed to unlock their ETH. That’s the magic of CDPs: if the price of ETH happens to appreciate, you can settle your loan paying less than the current ETH’s price.
In case the Ether price goes down making the collateral of the CDP to go below a certain threshold, the CDPs are automatically liquidated before there’s insufficient Ether to back for the DAIs. Maker then sells the collateralized Ether to buy enough DAI to pay for the loan. At this point, the borrower wouldn’t have lost anything more than what he would if he just held the Ether (except, well, a liquidation fee and the CDP fee).

Considering the Ether price can crash too fast reaching a value which isn’t enough to back for the CDPs’ DAI, MKR comes into play. In this case, more MKR is issued and sold in the open market to raise the necessary funds to back for DAI. MKR holders are responsible for the governance of the Maker ecosystem, setting parameters such as collateralization rate and liquidation threshold.

They receive the CDP fees in return. As more MKR is created and sold, it’s natural that the token’s price will drop, incentivizing the voters to intelligently regulate the system.

Maker presents a last resource process that basically resets the system, called the “global settlement”. A select number of governors can trigger the global settlement, allowing DAI holders to claim ETH at par value. Although it sounds a harsh movement, it’s Maker’s solution to extreme theoretical situations in which its vulnerability can be exploited.

DAI and MKR’s current market status

Dai
As we can see by this graph, Dai tends to fluctuate by no more than 0.05%, with some rare slips of up to 5%, which doesn’t make it less of a stablecoin, albeit revealing a volatility higher than other common stablecoins’, like Tether and TrueUSD.


source: coinmarketcap.com

MKR


source: coinmarketcap.com

Maker is a solid cryptocurrency, ranked as 24th in market capitalization. Its price tends to be comparatively unpredictable, as it’s not only determined by demand, but by bad governance from the holders. But trading is not the only way to profit from MKR. Taking part in Maker’s regulation is also a way of earning income from it, and it only requires you to hold a few tokens to vote and receive a share of CDPs’ fees.

Conclusion

Although there are already many stablecoins in the market, Maker achieves stability in a different and smart way.

DAI loans are allowing people to buy things they need at the moment without selling an asset they see the potential to grow in the future, and with CDPs, there’s nothing really to lose except a small tax.

There’s certainly a place for a stablecoin like DAI alongside fiat-backed ones that provide sufficient evidence of their reserves to match Maker’s algorithm that dispenses it from audits.

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

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Altcoins

Cryptocurrency Collateralized Debt Positions Are Growing in Popularity

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While Bitcoin (BTC) continues to hover around the magical 10,000 price level, altcoins continue to fight an uphill battle.  Simply put, hopes of a future bull run continue to diminish as Bitcoin maintains its dominance.  One school of thought is that a few altcoins will survive and flourish, but which ones are anyone’s guess.  That being said, it’s hard to go wrong picking against the top coins like Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and EOS.  These projects have managed to find a foothold in the market and have a better chance than most of staying there.  While traders wait for their positions to increase in value, one opportunity that may be worth looking at is initiating a collateralized debt position.

What is a Cryptocurrency CDP?

In traditional terms, a CDP is essentially putting up collateral in order to receive a loan against the deposited amount.  There are several examples of this in our day to day lives.  Auto title loans from large companies like TitleMax are extremely popular with consumers.  Consumers are essentially able to use their car as collateral in exchange for a cash payment which can then be used for whatever needs the consumer has.  The consumer can continue using their car as long as debt payments are made.

The same concept applies to cryptocurrency CDPs.  Consumers are able to put up crypto tokens, such as…

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Altcoins

Hodium Presents a Compelling Opportunity for Outsized Investment Returns

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I’m sure all of us remember the cryptocurrency glory days of 2017 and early 2018.  It was one of the biggest bull runs in history and created incredibly wealth for quite a few early entrants.  Unfortunately, for most of us, those gains have most likely been wiped out during the altcoin apocalypse.  The truth is that traders probably thought a bit too highly of their trading abilities when the reality was that anyone could have thrown a dart at a board and ended up making money.

As markets mature (and the crypto market is definitely maturing) it becomes more and more difficult to generate alpha.  In that regard, it’s similar to traditional financial markets.  I can remember trading during my high school days.  It was the late 90s and right in the middle of the dot.com boom.  Eventually, however, the euphoria fades away and reality hits hard.  Now, it’s become rather difficult to actually trade profitably which has given way to the rise of hedge funds.

Hedge funds are investment funds that pool capital from accredited and/or institutional investors and invest in a variety of assets, often with extremely complex portfolio-construction and risk management techniques.  The professionals employed by hedge funds are the best of the best and have spent years honing their craft.  That is why they’re able to make the millions of dollars that they normally…

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KaratGold Proves Its Business Model By Providing Official Documents

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There has been a lot of renewed enthusiasm in the cryptocurrency market thanks mainly to Bitcoin’s strong move about 10,000.  Although Bitcoin continues to show its dominance, the altcoin market has yet to benefit from that rally.  A few of the largest altcoins remain popular but the rest of the market continues to lag behind.  In 2018, there was a lot of talk regarding a possible altcoin apocalypse where only the strong would survive.  That prediction appears to be playing out as expected.  Going forward, only the best projects that have a real world need will survive.  Crypto traders will have to spend a lot of their time doing proper research in order to find the best opportunities, just like in all financial markets.  One promising project that appears to have the makings of a future winner is KaratGold Coin.

KaratGold Background

KaratGold Coin is a cryptocurrency developed by the reputable German company Karatbars International, which maintains a leading position in the market of small gold items and investments. The project is part of a larger ecosystem, which involves several blockchain solutions that can be used for transactions, communication, investing and other tasks. During the past few weeks, however, the KaratGold ecosystem has been a target of unsavory scam allegations.  

Karatbars International and GSB Gold Standard Banking Corporation…

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