With the increasing demand for cryptocurrencies, the number of people interested continues to grow, including those who are completely new to digital finances. And as such, a variety of systems that make cryptocurrency usage much easier have come forward.
Dharma — a convenient system for automated crypto orders owned by Dharma Labs Inc., has enabled new and non-technical users to get started with crypto. From what it is, to the benefits and drawbacks of Dharma, everything you need to know is right below.
What is Dharma crypto?
Based in San Francisco, California and predominantly aimed at allowing users to easily involve in DeFi lending markets, Dharma crypto has made it much more convenient for US users to earn interest on stablecoins such as Dai, i.e. cryptocurrencies with a value tied to an external reference, such as US Dollars, in order to stabilize prices.
The DeFi ecosystem, a trusted resource that grants decentralized finance, requires ample knowledge revolving the world of cryptocurrencies and their exchange, which may prove to be difficult for users new to the crypto system. But with Dharma DeFi, it is now possible for those with little knowledge to participate in stablecoin lending right away.
Directly connected to the popular lending protocol, The Compound Finance, Dharma is backed by Coinbase (Leading platform for secure buying, selling, transfer and storage of cryptocurrencies), and powered by the well-known decentralized exchange protocol, Uniswap (automated liquidity provision in the Ethereum blockchain).
What is Dharma wallet?
The Dharma wallet is a noncustodial, “smart” wallet, which enables users to own their private key with complete control over their funds, and no third parties involved.
Utilizing dTokens (derived from Compound Finance’s cTokens), this user-controlled system is secure from data breach, and ensures individuals are in full possession of their crypto coins. With Dharma wallet, withdrawals and crypto exchanges become safer, better, and organized.
Who created Dharma crypto?
Initially proposed in late 2017, this user-friendly crypto lender was founded by Brendan Forster and Nadav Hollander (CEO) respectively.
Developed in 2018, the first Dharma product, namely Dharma Lever, hit a successful initial growth, surpassing a million US Dollars in liquidity within just a day.
Announced in a Dharma Crypto reddit forum, Dharma was first launched in April 2019 exclusively on Ethereum, to support the lending and borrowing of ETH (Ether) on the platform. However, it later pivoted and launched a newer version on the Compound protocol.
Who are the investors in Dharma crypto?
As the best place for tokenized debt agreements, Dharma Labs is backed up by a set of intellectual crypto-based Venture Capitalists, in addition to Coinbase Ventures; Polychain Capital, Y Combinator, Green Visor Capital (Venture Capital) and Paycheck Protection Program from the US Government. The firm raised funds equivalent to over $7 million in order to create a safe space for crypto transactions.
How does Dharma crypto work?
With its easy-to-use features directed at beginners, Dharma provides an alternative route to the otherwise long process of acquiring dApp tokens.
In just a few steps, users can immediately start earning with Dharma, and it starts with downloading the official Dharma application on your mobile device. Next, create an account to login. Once connected to your US Bank Account, you will be able to purchase or lend assets and earn from the interest rewarded when your borrowed asset is put to use.
Although the idea of borrowing cryptocoins from this open-source platform seems fairly easy, Dharma does not essentially loan users any money.
In reality, the Dharma protocol facilitates the borrowing and lending of cryptocurrencies, which is in fact represented by Dharma tokens based on Ethereum’s ERC-20. Loans in the Dharma crypto exchange network are administered by a smart contract on the Ethereum platform.
Dharma requests that a borrower must collateralize 150% of their loan value, and matches borrowers to lenders in a peer-to-peer system. Once a borrower and a lender are paired, it is possible to borrow ETH or DAI(stablecoin cryptocurrency).
Dharma crypto review
Accounting to its success and popularity amongst users, Dharma is packed with different qualities. Some of the key features the crypto lender Dharma showcases are outlined below.
First and foremost, an outstanding plus point of Dharma is its easy-to-comprehend design and usability, right from the beginning. The simple steps required to be followed to open an account is as easy as creating just another social media account.
A fiat gateway is like a portal into the cryptocurrency ecosystem — essentially, fiat money refers to currency that is unlike other cryptocurrencies, it is easier to attain and holds no intrinsic value.
Fiat gateways enable users to trade fiat for cryptocoins, allowing them to experience digital money without a bank account. In such manner, a decentralised technique to trade crypto for fiat and vice versa is brought about.
Dharma crypto exchange included fiat gateways; US customers are given the opportunity to deposit or withdraw fiat currency into their Dharma wallets conveniently and as desired.
In addition to being a user-friendly interface, Dharma has its community members well supported by a team of professionals via chat support – The Dharma Team – who users can turn to for inquiries.
The Dharma Team offers assistance to those who are unable to access their Dharma accounts due to reasons like forgotten passwords or lost devices. Moreover, a well-detailed FAQ is available on the website.
High security Dharma wallet
With individual users being granted their very own private wallet, Dharma provides high security in the form of a ‘security backstop’: confirmation and approval of withdrawals required to ensure users are safe from unexpected loss of funds.
This upgradeable smart wallet used for earning interest on stablecoins (like Dai or USDC) allows users to retain custody of their funds.
Dharma wallet fees
Not only is Dharma easy to use, it also provides users with a chance to access blockchains at a fee of only about 1.5% for token purchases.
Dharma initially offered users a zero gas fee promo at its launch, later stating that they “still intend to pay for users’ gas” once the promo ends.
When dTokens were later introduced, it was informed that about 10 percent of the total interest earned by a user is taken as Dharma’s profit.
Pros and cons of Dharma crypto
As with many other protocols, the Dharma finance system comes with both positives and setbacks.
- Simple app, quality user experience – Making it the best go-to for crypto lending and borrowing, Dharma is the easiest platform where users can have a pleasant experience.
- Incredibly efficient to save money and invest in competitive interest rates.
- Secure transactions – Noncustodial wallets minimise financial breaches and ensures safety of an individual’s assets or funds.
- Easy on(/off)ramp of fiat money.
Expectedly, Dharma is not free of risks. Attached to the aforementioned advantageous traits are the following negatives:
- Volatility risk – Users encounter such risk when the value of collateral drops below 125%; this results in their collateral being liquidated by the smart contract.
- Lack of built in support – Other than the chat support available to users, there is no built in support on the network.
- Limited currencies supported – Currently, only DAI and ETH are supported by Dharma.
- Technical risk – As Dharma crypto is still relatively new, there is an increased risk for smart contract errors, protocol bugs or security issues.
What features make Dharma unique?
In the sea of crypto exchange platforms, Dharma already stands unique as it is.
But as a cherry on top, a brand new feature was introduced in mid 2020 — the peer-to-peer protocol launched ‘social payments’, an all-new system that enables users to send US dollars from their Dharma account to any Twitter handle of their choice, regardless of whether the recipient owns a Dharma account themselves.
In stark contrast to typical platforms in the market, Dharma offers fixed-term loans with fixed rates.
How do you use the Dharma app?
Unlike other platforms, Dharma DeFi does not require more than just basic sign-up information. No existing wallets or additional browser extension tools are needed, making it all the more simple to get started with. The app’s minimalistic design and features further make it preferable.
- Download the Dharma app on your device.
- Register by inputting your name, country, email address. Set a strong password.
- Connect your US bank account and deposit cryptocurrency.
- Earn interest immediately.
When a user has successfully created their Dharma account, they can begin earning interest in just a few clicks — select ‘Make a Deposit’ and choose a preferred currency (fiat via debit card, or cryptocurrency from an existing wallet).
Does Dharma require KYC?
Know Your Customer(/Client), abbreviated as KYC, is a critical element in banking to fight off money laundering and related crimes. This customer identification check is meant to verify the identity of clients in compliance with legal rules and regulations.
Dharma collects basic KYC information from debtors to decide if the borrower is capable of or likely to pay the defined loan. However, as mentioned on their official Twitter, KYC is mandatory only when using the fiat gateways.
How does Dharma make money?
To startup, Dharma was funded by top level investors. Now making money only when users do so, Dharma does not monetize transactions, and basically earns a profit only when users earn money first; 10% of the interest on user deposits into Compound is taken as a revenue for Dharma.
What are dTokens?
Launched as the official new smart contract system, dTokens are native protocol tokens that primarily aid Dharma to make money as users earn.
Simply put, a dToken is an upgradeable ERC-20 token, derived after Compound’s very own cToken. This infers that Dharma crypto issues dTokens to its users rather than storing their actual crypto assets in their respective smart wallets while retaining a tenth of the interest earned by the user as Dharma revenue.
dTokens are automated, so users do not have to concern themselves with it.
Which tokens do Dharma support?
In late 2020, it was announced on the official Twitter that every token listed in the Uniswap Protocol is now supported by Dharma – Users can buy these directly from a bank account (Up to $25k per week).
Key takeaways — Dharma crypto review
- The development of Dharma crypto has made it much easier for beginners to be introduced to cryptocurrencies.
- Dharma works as a layer atop Compound Finance, directly connecting users to the large platform.
- With just a registration process to create an account in the Dharma app, users are ready to earn interest as soon as funds are deposited.
For those looking to get started with cryptocurrencies, Dharma is unequivocally a highly recommended option. Although it inherently comes with a few risks, the benefits outweigh the little drawbacks and Dharma DeFi is sure to provide the best quality user experience with crypto, coins exchange, more specifically to those unfamiliar with the cryptocurrency world.
I am a data analyst by profession who loves to crunch numbers at daytime and come home wondering how my passive income numbers for the day look like. I believe in being rich rather than looking rich. Follow me for Cryptocurrency, FIRE, Personal Finance, Credit Cards and Digital Nomad updates