Crypto adoption and its penetration into the mainstream market got a major boost today with Chainlink and DeFi Money Market (DMM) announcing launch of a high yield money market, which will be backed by tokenized real world assets. This platform will act as a bridge between digital and real world assets.
Welcome @DMMDAO to the Chainlink ecosystem! DMM is a blockchain-based money market backed by real-world assets & trusted off-chain data from Chainlink oracles. DMM currently has $10M USD in tokenized car loans backing the launch of its initial money market https://t.co/bPlUs0Wmez— Chainlink – Official Channel (@chainlink) March 2, 2020
Before, only crypto-assets could be held as collateral for on-chain loans (for instance Compound). This decentralized money market changes that by allowing borrowers to hold real world assets on-chain (in a tokenized form) as collateral for cryptocurrency loans, which can be lent by cryptocurrency investors for passive interest income.
The DeFi Money Market Ecosystem (DMME)
The DeFi Money Market Ecosystem (DMME) system has several components to generate consistent income backed by real world assets, being represented on-chain by Ethereum digital assets.
DeFi Money Market Wrapper (DMMW)
The DeFi Money Market Wrapper (DMMW) is basically an Ethereum smart contract wrapper, which can convert any Ethereum digital token to a compliant standard form, usable on the platform.
DeFi Money Market Account (DMMA)
The DeFi Money Market Accounts (DMMA) are specific market accounts representing different Ethereum digital asset classes (backed by real world assets) which have been converted to and are compliant with the platform’s standard. They will allow investors to remain in markets best suited to their needs, while simultaneously gaining exposure to money market yields.
The DeFi Money Market Accounts (DMMA) are created, when any digital asset is converted to DeFi Money Market Ecosystem (DMME) equivalent, through the DeFi Money Market Wrapper (DMMW). They are represented by “m” letter before their ticker code such as mDAI, mUSDC or mETH (mAssets class) through a smart contract which has a specified Annual Percentage Yield (APY).
Characteristics Of DeFi Money Market Accounts (DMMA)
1. Be decentralized (permissionless) and transparent (verifiable).
2. Earn consistent interest income.
3. Be backed by income generating real world assets.
4. Be over-collaterized fulfilling two conditions. The real world assets backing is greater than mAssets issued on their behalf. The income generated by these real world asset is greater than Annual Percentage Yield (APY) owed to the DeFi Money Making Accounts (DMMA).
How Does Chainlink Figure In The Equation?
Chainlink powers the whole decentralized system through its data oracles, which provide the blockchain-based platform with accurate and tamper resistant off-chain data, about market events and real world conditions. It is essentially a secure data delivery mechanism, which sources data, using multiple oracle nodes, which in turn source data from multiple sources. This ensures no single point of failure, making it extremely hard to game the system. Thus providing security and reliability to the underlying DeFi Money Market Ecosystem (DMME) infrastructure.
Chainlink oracles will source data and information reliably and securely about the assets in the DeFi Money Making Ecosystem (DMME) and make it known on-chain. This can include information about active loans and their current valuation, resulting in provision of invaluable information necessary to determine the collateralization of each asset and the health of the system.
Chainlink will be involved with two processes: 1) tracking the conversion of cryptocurrency loans to fiat currency; 2) documenting on-chain how that fiat is allocated to real-world assets to produce income.Official Press Release
Asset Backing Principle
The earlier mentioned real world assets can include vehicles, property, cars, arts and other hard assets, which are income generating. These asset serve as collateral, being secured through a first lien senior secured position. In case the income produced is insufficient and not enough to meet liabilities (interest payment owed plus the cost of backed digital asset issued on its behalf), these assets can be sold to recover capital and thus add money back to the system. Since if withdrawn by a user, the wrapped digital assets (mAssets) have to be converted back to the digital assets, they were derived from and clear the interest payment owed.
DeFi Money Market (DMM) Governance Token DMG
The native DMG token will be used to govern the ecosystem, by granting holders the right to vote on the DeFi Money Market (DMM) Decentralized Autonomous Organization (DAO), which will have control over all smart contract and assets on the platform. It will ensure broader participation and eliminate risk of centralized control. It can also be used to claim “excess revenue” from over collaterized DeFi Money Market Ecosystem (DMME) assets serving the native DAO.
What Will DeFi Money Making Ecosystem (DMME) Disrupt?
The DeFi Money Market Ecosystem (DMME) plans to disrupt the finance industry and utilize the $ 17T interest bearing money, currently idle, earning zero to negative interest and not being put to use. The team hopes that the secure, robust, transparent, real world assets backed and consistently interest yielding system will motivate people to utilize the platform, make use of their money to earn interest and tremendously help the Decentralized Finance (DeFi) and in the larger scheme of things – the growth of the Ethereum blockchain.
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