Investors of Ethereum-based Programmatic Lending Protocol MakerDAO Are Uneasy with Latest News

One of the most popular decentralized finance (DeFi) projects in the crypto market, MakerDAO, seems to be leaving users without a positive experience. MakerDAO allows users to take out loans that are called collateralized debt positions (CDPs), and everything is regulated with code. Although the company has expanded, the service does not seem to be at the expected level for many others.

MakerDAO Receives Critics From Users

It is not easy to create a decentralized finance protocol without issues. MakerDAO’s users explained that the fees for borrowing in the market have risen rapidly in ties. This is something that is affecting users that decided to take loans to make consumer purchases rather than crypto investments.

The costs of the fees have moved from 0.5 percent to 19.5 percent since February 2019 and it could keep growing in the future. These fees reflect the interest on debt lent out against cryptocurrency collateral. The interest was very low and it started to increase as time passed.

The cost that users have to pay is known as the stability fee, that can be translated as the interest users have to pay for the loans.

In a conversation with CoinDesk, Walter, a borrower using MakerDAO, explained:

“I believe that MakerDAO was aware that in order to defend the stability of their coin the interest rates would have to vary wildly and as such it would be impossible for them to support real use cases. It was their responsibility to warn users that their loans are NOT suited for real-world use cases, and they might end up trapping users in the rates we see now.”

He went on saying that he took 58,500 in DAI to pay off an auto loan and fund a personal event as well. However, he took this loan when rates were at their lowest point. Borrowing money using Ethereum (ETH) was a good solution to save his money and retain ownership of his ETH, but there was no information about how things could move and how high rates could later grow.

Thus, there is a possibility for his ETH to be liquidated in the near future as the price of the digital asset sometimes experiences sudden drops in price. This would eliminate his debt but it would cost him a much higher interest payment and the liquidation penalty close to 13 percent.

Another user that talked with CoinDesk mentioned that he took around $20,000 in DAI in order to travel around Eastern Europe. He compared how much he would have to pay with a traditional consumer loan and with MakerDAO. A traditional credit could have cost him between 10 to 15 percent. Although he expected interest rates to go up on MakerDAO, he never supposed that fees could grow as much as 40 times.

Thus, these are just two examples of individuals that trusted decentralized finance and that expected MakerDAO to offer a solution rather than offering a problem.

Currently, Maker is being traded around $550 and it has a market capitalization of $550 million. The digital currency is currently the 20th largest.

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