Using the DAI savings rate - Assignment

Defi 101 Course
#131

Hi all,

This is my go at the assignment. I read through the whole thread, so @scottnik8 I hope this helps, sorry about lack of screenshots but I hope the links and description work the same way.

  1. Decided to perform this task in Kovan Testnet.

Started with the daily 1 KETH balance.

  1. Open a maker CDP and Mint some DAI tokens.

Opened CDP through Oasis, since the CDP Portal will not grant you Multi-Collateral Dai. MCD is only generated through Vaults and SCD will be shutdown https://blog.makerdao.com/introducing-oasis-borrow-and-save/.

I opened the vault with 0.5 ETH, and minted 30 DAI. This ending up with a Collateralization ratio of 220.12% given a testnet rate of 132.08 USD/ETH. Minimum ratio to not get liquidated = 150.00%.

Transaction for opening vault:

https://kovan.etherscan.io/tx/0x8f689d36b8bb9c38b712715d67ff8486063fc09a2945df472387bd24922dc622

This vault will incurr in a stability fee of 4.00%, meaning that after a year of having this DAI available, to unlock my ETH I will need to give back 104% of the minted DAI.

  1. Let’s park these DAI tokens into Compound, Chai or Oasis.

ETH supply rate seems attactive atm (20% APY) so I will lock a few KETH there generating interest Tx. Not too much tho, just in case I need to lock more KETH to avoid liquidation on Oasis.

I will supply my DAI as well. This would theoretically reduce my DAI Vault debt interest to (4.00% - 3.62% = 0.38%) assuming Compound supply rate stays around 3.62%.

There an additional transaction involved to enable the use of my DAI in Compound as collateral. Let’s use the supplied ETH as collateral as well - Why not.

  1. Borrow on a different protocol perhaps?.

For this part of the homework I will borrow right here on Compound. USDC borrow rate is attractive on Testnet(0.08%)! Check the Tx at https://kovan.etherscan.io/tx/0x401147da8adbf5a5c7abe8148533f1e6afcfed49fab06731f3f43dc792ea988d

I now have borrowed $10 USDC!

  • When locking Etherum in a Maker DAO CDP and then borrowing you collateral to another protocol do you see any interesting market opportunities?

Definitely, it’s worth giving a look to the different supply and borrow rates across different platforms and see where can we find an arbitrage opportunity.

From my example, I could go and swap the USD for DAI in Kyber and pay back 10 to the Oasis vault. Now I would only owe 20 DAI to vault and 10 USDT to Compound. The difference is that interest rate on USDC loan is only 0.08% APY vs 0.38% on the DAI. Theoretically 1 DAI being equal to 1 USD, I would be generating 0.3%(big asterisks here) over time just by borrowing on USDC and paying on minted/purchased DAI that’s generating higher interest than what I have to pay.

Do you have any cool ideas of new building blocks that we can build together?

Idea above works great - as long as all rates stay the same. This doesn’t happen with a high probability in real life (Plus the transaction fees for each interaction!!! Breaks any good deal with small quantities of money).

It would be cool if we could create a building block that acts as insurance or risk cover on these rate changes.

Let me know what you think @amadeobrands and forum!

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#132

DeFi 201 I’am working on right now will go deeper into yield hacking :slight_smile:
Be sure to already check out: https://yieldhero.app/

5 Likes
#133

Hey there, this class has been very interesting to me, i cant wait for DeFi 201 to drop soon. These are the step that i took to complete the homework.

  1. I decided to use the kovan test network (https://faucet.kovan.network/), sent the daily use KETH to my MetaMask.

  2. I then used the oasis borrow function (https://oasis.app/borrow) to open a vault. I put 0.9 KETH in and took out 80 Dai to make my Collateralization ratio around 234%.

  3. Instead of using Oasis again to generate interest on my Dai I’ve decide to use Compound (https://app.compound.finance/) to give my self an estimated 19% APY on the supplied Dia.

Tx:https://kovan.etherscan.io/tx/0xe8ce0b1c3ff757d7cb555b7c5cdccdd1dbc7a24e61c00f0b4ba64f6f8e701ee2

I just want to thank you again for this amazing class, I’ve already gained almost 2 US Dollars, i am really excited to actually start investing in this new decentralized ecosystem.

3 Likes
#134

This was amazing and also appreciated learning about how to interact with the smart contract directly. I also use the tron blockchain and seeing a lot of defi activity starting to launch on that blockchain and the concept of liquidity providers and such starting to launch such as bankroll.network swap and voiddefi.io exchange. One interesting idea is to find a way to do a concept like pooltogether but across different blockchains. Any thoughts??

2 Likes
#135

I am unable to receive KETH on the test network I signed into Github and switched my account to the Kovan test net. Should my Eth address be the same for Kovan as the regular network? Because its not changing.

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#136

How actually is it possible to offer these very high savings rates? The way in which the locked-up money is used must be extremely profitable, given these extremely high rates. What kinds of investments are here involved? Such investments might be interesting to look into as well.

1 Like
#137

@amadeobrands Again, great course so far.

On main-net:

I Deposited some ETH in Compound, and borrowed some DAI. Was surprised at the huge difference in rates! At the time I did this, the interest rate on the ETH I deposited was 0.01% (per annum) and the rate on the DAI I borrowed was 1.5% (per annum)

I then went to OASIS and bought some DAI and deposited same - interest rate for OASIS saving account is 0.0% :frowning:

I repaid the DAI I borrowed then deposited some DAI in Curve.fi and something unexpected happened. I deselected all of the choice boxes on the deposit form and tried to deposit 10 DAI. Once the transaction completed my STATs showed I had 3.87 DAI deposited and 6.14 USDC deposited (I did not have any USDC in the connected wallet).

So far I am not seeing the point of using these apps (I do see the point of writing something similar). However I am receiving much better interest rates at my bank (almost 1% on savings) which I had thought was a horribly unfairly low amount.

What am I missing here?

2 Likes
#138

They say there are no stupid question or ideas, this just may be one, lol.

Is there a dAPP that ties a given address in your wallet to a dAPP like Compound?

For example in MEW I create an account called ‘Comp-ETH’ and this wallet address is automatically tied to dAPP Compound. Now everytime I deposit or spend from this MEW account, the proposed dAPP automatically terminates and executes a new Compound dAPP smart contract.

Essentially this MEW account is a combined saving/checking account…the proposed dAPP is the engine that makes it so. All I do is deposit and spend from it and only need to set up the Compound agreement once.

Would this not increase liquidity natively?

does this exist already?

A digital money market checking account I guess

1 Like
#139

@amadeobrands - Looking into Oasis it looks like Dai has a 0.0% interest rate and on Compound it’s at .55%. Can you explain why the interest rate is so low right now? I’ve seen some articles lately saying Dai and Maker is doing good, so I am not sure why.

Thanks!

1 Like
#140

Hi xactant,

I believe the idea of Curve.fi was to take your deposit and convert it to the coins which have a better interest rate to give you an optimal setup. At least that is how I understood it from Amadeo’s video.

Dustin

2 Likes
#141

For my limited defi understanding, I don’t believe this is a wise thing to do, especially in current volatile market conditions. You can be liquidated quite easily, during 1 day of March 12th you would have lost your entire annual savings. This is because:

“For every 1 DAI, there is at least $1.50 worth of Ether (ETH) locked into a Maker CDP as collateral. And if your collateral value falls, you must lock in more ETH, pay back some of your debt, or risk having their CDP liquidated. When a CDP is liquidated, the ETH held as collateral is automatically sold to pay back the debts in addition to a penalty fee for failing to keep your collateral ratio above 150%.” what-is-a-cdp

On top of this, if you want to ensure your investment and gains, you need to deduct about 50% of your earnings via e.g. the Nexus insurance dApp. Even then, you are about 70% certain to receive your lost funds as this is a community which decides your insurance claim.

Or perhaps I am completely misunderstanding defi and @amadeobrands 101 course.

2 Likes
#142

Hello, Amadeo,
I’ve been trying to do as you asked about Kovan testnet. But I’ve been a bit to far, ended up setting up a GitHub account, installing and try and set npm, parity, pm2, and i think that’s where I stop on Truffle and yet, I might turning out be ready to run a node. Have I gone to far ?

First, I minted 1 Keth in my Metamask - going on oasis kovan. deposit 0.5 KEth - minting 40 DAI - … very nice.

not all dapps are available on testnet ?

Thank you.

1 Like
#143

Hi Christian (and @amadeobrands )
How did you manage to turn your KETH into DAI via your Metamask on the Oasis app?
I only receive this error message on Oasis and am unable to proceed (via Brave Browser):

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2 Likes
#144

Please check this: https://www.reddit.com/r/MakerDAO/comments/f2msfr/question_how_to_get_some_kovan_dai_from_oasis/

:slight_smile: Should be straigt forward if you still have issues please let me know.
Thank you.

1 Like
#145

Thanks Amadeo, that worked.

Back to the assignment, I have now via the Kovan Test network:

  • Requested a mint of 3 KETH via Gitter,
  • Minted 250 DAI via Oasis at a Collateralization ratio of 195%
  • I have locked in 200 DAI in Compound with a current APY of 11%.
  • Via Compound I have also borrowed max safe amount (0.013) of wBTC at an APY of 4.7%.

If I understand this correct, this means that I am earning APY from both positions at compound. If this is the case, this is certainly interesting if I earn accruing interest twice from the same position.

2 Likes
#147

I found out a while back that Compound has been integrated into the Exodus wallet, so I put some Dai in there:

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Not liking the DSR… but it is variable, so I have observed the rate go up and down.

2 Likes
#148

Hi @amadeobrands,

I need your help on the very last assessment (DAI giveaway). I managed to use the Kovan network, got my virtual ETH, deposit the ETH and then borrowed it to get some DAI. So far so good.

Now I can’t get the DSR demo running. I have downloaded the drs-demo-master folder but I don’t know where to run “npm install”. I don’t know where to put the folder from github or what I have to do with it. I have spend hours trying stuff on makerdao, downloaded node.js and some other stuff. Can’t get ist running. You have mentioned in one of the videos that you could help on how this step in done in more detail. I would need that help, I guess.

Thanks already for your help and the course overall. A lot to learn and explore.

Best
Alex

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#149

You need to run npm install in the directory where package.json lives.

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#150

I think a user-friendly application that combines Maker Dao, Oasis, Compound, Etherscan and any other major protocols in Defi would tremendously help with its adoption. Currently process is cumbersome and needs to be simplified. I see a lot of opportunity for developers in this space.

Such future application could have some sort of a widget “seal of approval” constantly checking the preservation/security of each smart contract, so user isn’t required to research each prior. Also any conversion, purchase, or loan could be conducted from one single page. I think the design of this could really propel its usage forward.

1 Like
#151

how do I run npm install? where do I have to type that command? in which program? or is this supposed to be a file? there is no file called npm install.

Sorry for my stupid questions

1 Like