Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Crypto loan platforms are booming as ether holders look to mitigate portfolio losses endured during 2018's bear market.

Among these decentralized finance (DeFi) applications, San Francisco-based startup Dharma Labs is emerging as one of the industry leaders by facilitating more than $6.4 million worth for crypto loans since its peer-to-peer lending platform launched on April 8.

For comparison, Dharma has more than $10 million worth of ethereum in its system while the industry incumbent BlockFi garnered roughly $18 million in both bitcoin and ethereum deposits over the past month.

Dharma Labs COO Brendan Forster told CoinDesk that, based on the noncustodial mobile app’s user accounts, roughly 650 people have acted as either a borrower or lender so far.

He said these relatively short-term, fixed-rate loans allow borrowers to lock up ether and borrow the dollar-pegged stablecoin DAI, or vice versa, with lenders earning roughly 2.7 percent interest over a 90-day period.

These Dharma loans are becoming a core part of the DAI ecosystem. Polychain Capital, which in part helps guide the Maker Foundation that governs DAI through its voting power, is also an investor in Dharma Labs. Coinbase Ventures was also involved in Dharma's $7 million funding round earlier this year.

The rising DAI fees also increase Dharma interest rates, Forster said. Both loan platforms rely on the same smart contract, most often associated with MakerDAO, to determine the price feed that defines the collateral’s liquidation rate. If the price of ethereum drops too low, users on either platform could lose their deposits.

As such, the Dharma and Maker communities rely on each other for stability and arbitrage opportunities.

“As DAI slips under a dollar, trading at like $0.97, people can actually go buy DAI and lend it on Dharma for 11 percent annual [interest] rate,” Dharma Labs business development manager Max Bronstein told CoinDesk.

He added:

“With Dharma, we’re actually helping push the [DAI] price back up to a dollar. We’re helping to create [demand] there and filling this gap. Right now DAI holders really don’t have a way to earn interest.”

Indeed, Dharma investor and Autonomous Partners founder Arianna Simpson told CoinDesk some borrowers are using the crypto loans to “lever up on ETH or refinance their [loans] on Maker.”

Growth model

For the time being, Forster said his startup is “subsidizing the market” to encourage growth, with lenders “earning a little bit more than borrowers are paying.”

Although Dharma Labs currently avoids fees of any kind, he said the business model eventually assumes modest fees will replace subsidization. “We will be a very standard revenue-generating business,” Bronstein told CoinDesk earlier this month. “A normal company, making revenue off of good software.”

“They’re becoming the easiest place to earn a yield on your crypto or borrow cryptocurrency,” Simpson said of Dharma.

In the meantime, the goal is for Dharma Labs to add support for bitcoin and more dollar-pegged stablecoins like PAX.

Also, since the Dharma app uses a password and four-digit pin rather than complex crypto wallet keys, Simpson said the startup offers easier onboarding into the broader crypto ecosystem.

Dharma loans can transact directly with any self-custodied ethereum wallet, to send or receive money, rather than requiring direct integration with a specific wallet like the ConsenSys-owned browser app MetaMask.

“Having a product that doesn't require you to use MetaMask and just works is pretty awesome,” Simpson said, adding:

“They’re really focused on how people interact with these products, so I think that’s going to be a key driver for bringing people into the crypto fold.”

Dharma team image courtesy of the company


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.