5 Traditional Finance Problems That MakerDAO Solves

It is no secret that the current financial system has a series of bureaucratic locks and other unnecessary processes that only delay the user for simple functions.

With the arrival of Blockchain, virtual money managed to circumvent a little of this modus operandi, and a protocol that did very well in this role was Maker DAO, so get to know some problems they solve.

Centralized Control

In common finance, it is very common to have rates and interest commanded by governments and/or private groups. As in the USA where interest rates are influenced by the Federal Reserve and access to loan products is controlled by regulation and institutional policies.

Solution

MakerDAO governance page

The platform has as modus operandi the saving rates, budgets, investments from the treasury, fees, and even the code changeable via a decentralized polling system. Where any holder of $MKR token can have a chance to drive the protocol.

Limited Acess

Even if you are a person who pays on time what you owe, you will certainly find it difficult to access loans if you do not have a good reputation among credit providers in your country.

Solution

Some tokens that are accepted as collateral to get DAI

Through Oasis application, the MakerDAO protocol allows any user in the world who has tokens supported by Ethereum ($ETH, $UNI, $BTC, $MATIC) to make a $DAI loan.

Inefficiency

Even if you have credibility among creditors, the traditional system requires yet a lot of bureaucratic and unnecessary processes. So having this credit in your wallet legally still involves time and money costs.

Solution

Borrowing against ETH section on Oasis App

Within a few clicks of the app, you instantly get the loan you want, without any evaluation other than the amount of collateral.

Lack of Interoperability

USD Stablecoins such as USDT and USDC are dangerous for trustless smart contract processes because they are not audited.

Solution

DAI issuance graphic

All DAI created are backed with cryptocurrency through a permissionless protocol, leaving the issuance reliable for any smart contract on the Ethereum network.

Opacity

It's very rare for banks and payment institutions to show you what is backing the credit they give you every month on your card.

Solution

This is one of the most beautiful solutions we have in decentralized finance: money transparency. Vault collateralization rates are visible throughout the ecosystem, available to any user anywhere in the world.

Main statements were taken from Decentralized Finance (DeFi) Deep Dive at Coursera