What is Dharma?
Dharma is a cryptobank, we do everything your bank does, but we’re not a bank. We don’t even take possession of your money!
Instead, we harness the power of blockchain technology to deliver a superior money management experience. Deposit to Dharma directly from your debit card, and you’ll start earning a super high interest rate instantly! There are no lockups on Dharma funds, so you earn interest from the second your money hits your account until the second you withdraw.
Under the Hood
Under the hood, Dharma is powered by three novel blockchain technologies.
First, the Dharma Smart Wallet, a non-custodial wallet that gives you unprecedented control over your savings. Non-custodial means that only you have the power to move your funds. No one else, not even Dharma, can move your money without your consent.
Second, stablecoins, cryptocurrencies that keep their value pegged 1:1 to the US Dollar. Stablecoins are blockchain-native dollars, protecting you from the extreme volatility of other cryptocurrencies like Ether and Bitcoin. But because stablecoins live on the blockchain, you can use them to earn a great interest rate using innovative blockchain-based financial services.
Third, liquidity pools, which generate interest for users via over-collateralized lending. All deposits to Dharma are immediately deposited into Compound, an open liquidity pool on the Ethereum blockchain. On Compound, your funds earn interest in real time, and your entire balance, including all of your accrued interest, is withdrawable at any time.
Super High Interest Rates
You may be wondering how it’s possible that Dharma’s interest rates are so high.
It’s actually quite simple: there are millions of cryptocurrency holders who don’t want to sell their crypto but want dollars in order to pay daily expenses or increase their exposure to cryptocurrencies. These borrowers are willing to pay a high interest rate in order to borrow from Compound, which enables them to borrow against their crypto without having to sell (it’s like a securities backed loan or a mortgage for cryptocurrency).
To keep lenders safe, all Compound borrowers have to over-collateralize their loans, meaning they have to post more value as collateral than they are allowed to borrow (for every 100 USD borrowed, at least 150 USD worth of collateral). This over-collateralization means that even if a borrower runs away with the money they borrowed, their collateral can always be sold for dollars to prevent savers from losing money.
Risks to Using Dharma
There are three primary risks associated with using Dharma.
- Technical risk — you are using experimental software built by two companies, Dharma and Compound. While this software has been extensively tested, it is still relatively new and could have bugs or security vulnerabilities.
- Borrower Default risk — when you save on Dharma, you are funding a liquidity pool from which users can borrow. In order to borrow from the liquidity pool, borrowers must post collateral, the value of which is greater than the value they are borrowing (i.e. borrowers are “over-collateralized”). Nevertheless, if the value of the collateral that borrowers have posted rapidly falls, there may be insufficient collateral value left over to repay the loans these borrowers have taken, and you may lose some or all of your investment.
- Interest Rate risk — interest rates on Compound are variable, meaning they can fluctuate even after you have deposited money or taken out a loan. This means that as a depositor you may earn less than the interest rate you saw at the time you deposited, or that as a borrower you will be responsible for paying a much higher interest rate than you saw when you first borrowed money. Dharma is not responsible for these interest rate fluctuations, which are based on a preset formula that managed by the Compound protocol team.
Getting Started on Dharma
You can get yourself set up on Dharma in minutes.
Step 2: Create an account
Step 3: Deposit to your Dharma account using a debit card.
What are you waiting for? Try Dharma today!