Operation Dharma, Code Name Grow Decentralized Finance, Opens Up USDC for P2P Lending

As part of its efforts to attract mainstream investors, cryptocurrency lending platform Dharma is adding support for USDC in addition to Dai, an Ether-backed stablecoin.

This is in a bid to increase investors’ confidence, since a U.S Dollar-backed stablecoin like USDC will be more easily trusted than Dai which is backed by a cryptocurrency.

“Some customers like to be above board and regulated, so then USDC kind of fits that,”

Dharma Business Development Manager Max Bronstein told The Block.

Apart from attracting mainstream investors which may not be as successful as expected, Dharma is also looking to increase its liquidity through USDC as it is a relatively popular stablecoin with $123 million worth of daily trading volume.

Stablecoins are cryptocurrencies that have more stable and less volatile values than just conventional cryptocurrencies. Their values may be pegged on fiat currency like USDC which is pegged against the U.S Dollar, or some substance of value such as oil or gold. Dai is an example of a stablecoin pegged on another cryptocurrency, the Ether.

The choice of USDC is so that Dharma users can safely use a cryptocurrency without the fear of volatile prices that characterize the cryptocurrency market. However, the choice of USDC may not be as wise as it seems according to a market observer who said borrowers on Dharma use their borrowed funds on exchanges where Dai is more liquid than USDC and so the chance of succeeding in increasing liquid may not be very successful.

Having provided crypto loans adding up to over $10 million, in over 3000 issued loans, the platform is looking to add more stablecoins with USD-pegged Pax TUSD in future. Borrowers who are interested in USDC (with 150% of requested amount) can still lend others and earn up to 8% interest from it while Dai borrowers can earn up to 14% interest on loans they give out.

While the success of USDC as a liquidity increase instrument is being questioned, Bronstein believes USDC will be attractive to users who would like to earn interests in USD rather than volatile cryptocurrencies and this will potentially bring liquidity to the Decentralized Finance (DeFi) ecosystem.

“You don’t want to undersell the idea of people being able to earn interest in dollars. So it’s almost like economic empowerment we think. I think that’s pretty powerful,”

he said.