What Is Dharma Protocol?

Dharma Protocol is a permissionless lending platform that allows users to generate debt agreements without the need for an intermediary.

Debt markets have historically been one of the most important financial platforms in the world. From mortgages to corporate bonds, they are the backbone of any financial system.

But today, most debt markets are dominated by established financial institutions with high fees and inefficient systems. That's where Dharma Protocol comes in: it is a decentralized blockchain-based protocol that allows anyone to easily create their own digital lending products by tokenizing debt.

A debt market is simply a place where borrowers and lenders come together to lend money at some agreed-upon interest rate. A mortgage is an example of a lending product: when you take out a mortgage from your bank, both you and your bank agree to certain terms of repayment, including how much you pay back each month, how long your loan term will be, and what interest rate you'll pay for borrowing the money.

The protocol enables a variety of different types of debt products, including order-book style exchangeable bonds, margin lending products, over-collateralized loans, and interest-bearing stablecoins.

The Dharma protocol is structured in such a way so as to facilitate maximum composability between different classes of financial products and across other protocols in the decentralized finance ecosystem.

While there are many iterations of DeFi being explored in the crypto space today, we believe that the most important class of financial instruments are those that aim to move the capital from savers to borrowers.

In order to facilitate this movement of capital, there needs to be a robust set of primitives that can be combined together to build more complex financial instruments. This is precisely what the Dharma protocol aims to provide.

Dharma leverages the security and immutability of the blockchain to create trustless lending and borrowing, without requiring a centralized intermediary. By building all of its functionality into a single API, it dramatically simplifies the process of issuing credit for both individuals and businesses.

Although Dharma is built for credit applications, it can also be used for any type of agreement that requires a balance between rigidity and flexibility. Its flexible modules are designed to ensure that anyone – from a first-time developer to a Fortune 500 company – can issue tokenized debt in minutes.

Currently, there are many blockchain projects focused on decentralized exchanges. However, only a few are trying to solve the problem of decentralized borrowing or lending. Because lending is fundamental to commerce and financial markets, it is one of the first use cases that Dharma has chosen to tackle.