- FutureToken.sol : 0xd50BF42433D67B0cc5b3403b0d67a85BE92c8603
Inspiration for Daj
DeFi loan pools are great: deposit Dai and watch the interest accumulate. But they have several limitations:
- interest rates are variable, so I have no visibility on how much interest I will make in the future. It might be 8% today, but just 1% tomorrow.
- I have to wait until my interest compounds
Daj fixes both these problems: a fixed interest that I get right now, without having to wait!
What it does
Let's say that Alice wants to lock in an interest rate, and get her money right now: she can simply lock 100 Dai into the Daj smart contract for a period of time that she chooses, and in exchange she'll get 1) her full interest for that period and 100 fDai that she'll be able to exchange for actual Dai at maturity.
Why would Alice do this? Let's take a simple example:
Alice wants to create a bounty on Gitcoin, but she doesn't want to lose the opportunity to make interest on her money. So instead of putting Dai into the Gitcoin escrow contract, she puts fDai. This means that by the time Bob delivers the bounty, he'll receive fDai and can exchange it for the same amount of Dai, while Alice has pocketed the interest.
How we built it
The Daj mechanic is simple. When Alice deposits her Dai, she specifies the time period for which she wants to receive interest. The Daj contract checks what the current interest rate on Aave and calculates how much to return to Alice as immediate interest. The rest is put in the Aave liquidity pool where it will compound. Alice also receives fDai, which is a claim on the Dai that was put in Aave. She can freely transfer this fDai to a third party, who will then have the ability to retrieve the Dai on Aave at maturity.
Challenges we ran into
There is an obvious challenge in our current implementation: what happens if the Aave rate changes. In the best case, the Dai in the liquidity pool will compound faster, and Alice can redeem her fDai sooner. In the worst case, the Aave rate drops and it takes longer for Alice to redeem her fDai.
Our future plan is therefore to create a mechanism to hedge the difference between the fixed rate given to Alice upfront, and the variable rate provided by the Aave pool. We are currently working on a whitepaper that will specify the mechanism.
What we learned
We learnt that Daj (pronounced "Dadge") means interest in Klingon. Which makes us think that there may be Star Trek fans at MakerDAO - it's just too big of a coincidence.
We plan to continue building Daj, which will be managed by a hedge DAO who's job will be to match the fixed and variable interest rates.