DeFi Dissected: A Brief Comparison of UniLend and Maker
TL;DR
- Our DeFi Dissected article series aims to inform the DeFi community at large of the strengths of UniLend by comparing it with other DeFi protocols. Today we’ll look at Maker DAO.
- Both UniLend and Maker DAO offer lending, borrowing and a community governance mechanism.
- UniLend offers spot trading functionality, which Maker does not.
- Maker only supports very few assets, whereas UniLend offers permissionless listings of any Ethereum-based asset.
- UniLend’s an actual decentralized money market, whereas Maker operates more like a decentralized bank, with a stablecoin, DAI.
DeFi is booming. With this boom several protocols have emerged. Keeping up with all the different DeFi platforms and their protocols can be challenging. Therefore, we at Unilend have decided to create the DeFi Dissected series. This series highlights all the benefits and the value proposition of UniLend, and the surplus it brings to DeFi. Also, as an added value to our community, and everyone else in the DeFi space, we hope to inform you of other platforms in the space and how each distinguishes themselves.
Every platform in the DeFi space has a unique set of services they offer, allowing them to target their niche demographic better. Unilend will be a highly convenient platform with a decentralized exchange, including a money market for any ERC-20 asset. Maker, on the other hand, focuses on creating a platform which enables the existence of a fully decentralized stable coin. This article will clearly highlight how the services of these two platforms make them very distinctive, even if they might seem similar at first glance.
Unilend and Maker Compared
The first thing one sees when they visit the Maker DAO website is the statement “DAI is a decentralized stable coin that does not discriminate.” In comparison, Unilend’s website clarifies, right off the bat, that the platform is meant to be a one-stop-shop for all your cryptocurrency borrowing, trading or lending needs.
True to our intent, Unilend aims to offer a comprehensive exchange, juxtaposed to Maker DAO’s approach. Unilend will provide a decentralized exchange allowing permissionless listings of any ERC-20 asset for trade. Maker DAO has links to the Oasis exchange, which has only a handful of tokens, all paired with DAI.
Perhaps, the biggest difference between Unilend and Maker is how the borrowing and lending side of the platforms function. Unilend’s money market is a free market, where any ERC-20 token can be listed, borrowed and lent out. Maker’s money market almost exclusively revolves around their stablecoin DAI. The only token that can be borrowed and lent out on Maker DAO is DAI.
The main purpose of having a money market on Maker DAO is to regulate the supply of DAI tokens, so that the price of DAI remains soft pegged to the US dollar. New DAI can only be created in the form of debt, when people collateralize ETH. However, if too many people collateralize ETH, they’ll cause too much DAI to be minted, in the form of debt. Therefore, Maker token holders utilize Maker DAO’s governance mechanism to adjust the interest rate of DAI either to incentivize, or disincentivize, the borrowing of DAI. Incentivizing borrowing causes more DAI to be minted and increases the supply of DAI, whereas disincentivizing borrowing leads to people closing debt positions, or borrowing less DAI, which reduces the DAI supply.
Similarities Between Unilend and Maker
It should be clear by now that Unilend and Maker are two very different platforms, each fulfilling very different functions in the DeFi world. However, they do have one thing in common. They both have a community governance mechanism.
Even though the method and the amount of tokens available for borrowing or lending differs greatly between Unilend and Maker, both platforms do allow tokens to be borrowed and lent out. As mentioned above, the reason the borrowing and lending between the platforms tends to differ so much is because each platform has different intentions for utilizing money market protocols.
Conclusion: A Decentralized Future
Our DeFi dissect series started as a way to add value to our community by teaching them more about Unilend and how it differs from other DeFi platforms. This should help our users get the most use out of our platform. However, we realize that this series can also add immense value to everyone in DeFi because it sheds light on every platform in DeFi and how they intend to add value.
A very important part about the DeFi dissect series is to show everyone in the DeFi space that not all decentralized platforms are in constant competition with each other. UniLend is a decentralized exchange and money market, whereas Maker DAO is primarily a stablecoin oriented platform. There’s a high likelihood UniLend and Maker DAO will co-exist, each fulfilling their own unique functions in the space.
To stay in touch, and be one of the first to access these important observations, follow us on our social media outlets and keep an eye out for our future Medium articles.
The UniLend team would like to thank our community for your incredible support. We remain available to you should you have any questions. Don’t hesitate to reach out!
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