Another DeFi project has joined the great yield farming experiment of 2020.
DeFi Money Market (DMM) announced today the introduction of yield farming-style rewards in addition to the 6.25% yields it already provides on stablecoin deposits. Yield farming allows users that provide liquidity to a DeFi protocol to earn interest on deposited assets. That means DMM users can soon stake the stablecoin-pegged tokens they receive for being liquidity providers to other decentralized exchanges, such as Uniswap. By doing so, they can receive rewards from DMM in the form of its governance token, DMG.
Got all that?
As total liquidity in DeFi continues to grow from less than $2 billion at the beginning of July to more than $7 billion today, according to DeFi Pulse, more and more projects are taking advantage of governance token distributions to bootstrap liquidity in their tokens and gin up interest in their platforms.
DeFi Money Market, which takes the concept of the short-term mutual fund investment and applies it to digital assets, launched in March 2020. It provides users with 6.25% annual yields on stablecoin deposits made to the platform. Users can deposit, DAI, USDC, or USDT.
Depositors don’t just get interest. They also DMM versions of the stablecoin tokens. Their DAI becomes mDAI, USDC becomes mUSDC, and USDT becomes mUSDT. Users can trade these like the originally deposited stablecoins.
These pegged tokens are used to unlock the original stablecoin’s liquidity if users want to cash out, but can also be traded on exchanges as a synthetic stablecoin asset. Or, users can stake ETH to receive mETH and associated interest. But who wants all that volatility, right?
Some of the assets backing DeFi Money Market returns include car equity credit and aviation assets. So, if you know how car credit works, you might be able to figure out the various financial instruments at play with DMM.
“The loan servicer for the initial batch of assets has worked in car equity lines of credit for over 10 years,” DMM Foundation founder and CEO Greg Keough told Decrypt. “In the case of a default on a payment on any loan in the ecosystem, the loan servicer will repossess and liquidate the asset.”
As the platform evolves, others can introduce their own assets by receiving a thumbs-up via community vote.
DeFi Money Market raised $6.5 million in a token sale earlier this year. Supporting partners include Chainlink and the Draper Venture Network.