Dharma: Crypto Lending and Borrowing on Ethereum

What is Dharma?

San Francisco-based Dharma Labs is a peer-to-peer crypto lending platform built on Ethereum. Dharma serves the market for short-term (90-day) fixed-rate loans. Users can lend and borrow in ETH and DAI, a decentralized stablecoin built on Ethereum. Lenders can earn interest on the crypto they supply.

Dharma plans to introduce more cryptocurrencies in the future. The company does not take custody of cryptocurrencies – it simply helps match lenders with borrowers.

A relative newcomer to the decentralized finance space, Dharma launched in April 2019. According to Dharmalytics, Dharma has already brokered over $10 million in crypto loans to date across over 2,900 unique loans.

Dharma does not have a native token and raised $7 million in investment from Green Visor, Coinbase Ventures and Polychain, among others.

How Does Dharma Work?

Dharma has pivoted significantly since its early days. It was initially meant to be a platform where third parties could underwrite loans and help identify borrowers. Now, it operates more as a peer-to-peer lending service that matches borrowers and lenders while acting as the sole underwriter for loans. However, the user experience – for lenders and borrowers – is mostly unchanged.

Borrowing and Lending

Users can currently borrow and lend ETH and DAI, though Dharma may support USDC and Bitcoin in the future. Since there is greater demand to lend crypto, borrowers are matched with lenders fairly quickly.

Once matched, borrowers can receive their loan in less than 30 seconds, which illustrates the speed benefits of decentralized finance compared to traditional lending institutions such as banks. Funds for borrowing or lending can be transferred from any crypto wallet, including Coinbase.

As of now, Dharma only supports fixed-term and fixed-interest loans. All loans have 90-day durations with a fixed rate of interest. In the future, Dharma plans to provide more flexibility over loan terms.

A key differentiator for Dharma is that it offers fixed interest rates for lenders and borrowers unlike other crypto lending platforms such as Compound, BlockFi, or Celsius Network. Fixed rates offer lenders predictability and stability, and make sense given the relatively short loan duration of 90 days.

A key point to note is that borrowers have to pay interest on the loan for the full 90-day loan term even if they pay down the loan early.

Collateral Requirements and Risks

Borrowers currently need to post collateral in DAI or ETH equal to 150% of the principal loan amount. This collateral may be liquidated in the case of a default, or when the value of collateral drops to 125% of the principal loan amount.

Borrowers need to be aware of this price volatility risk. If the price of the token posted as collateral falls unexpectedly, the borrower can face a margin call or even default on the loan. Therefore, borrowers can consider using a relatively less volatile token as collateral, or over-collateralizing their position in excess of 150%.

User Interface and Experience

Dharma’s loan user interface

We tried out Dharma for ourselves by taking out a small DAI loan. We found that the user interface looked great, the loan process was fast, and the entire experience was easy and seamless. Dharma even sent us warning notifications when our collateral ratio fell below 150%, well above the 125% level where loans are liquidated.

Further Decentralization and Attracting Borrowers

Dharma currently controls factors such as margin calls, liquidity reserves, interest rates, and overall platform administration. However, Dharma recently revealed plans to introduce a governance system similar to that of MakerDAO, which can make Dharma more decentralized.

At present, there are far more people wanting to lend their crypto and earn interest than there are people wanting to borrow crypto. One reason for this is that the largest use case for borrowing crypto is for trading purposes and not all crypto holders are interested in active trading.

Dharma is trying to attract more borrowers by promoting new use cases for borrowed funds and partnering with other companies to source borrowers. For instance, Dharma is partnering with hedge funds to source borrowers. It also predicts that large ICO startups with sizeable ETH balances may have staff that are willing to be paid in DAI instead of fiat currencies. This use case is looking more realistic now that DAI has started to track the US dollar more closely of late.

In the short term, however, there will be more lenders than borrowers. To attract borrowers and grow their market share, Dharma, along with their competitors, is offering lower rates for borrowing compared to lending. At the time of writing, ETH borrowers only pay 0.1% interest while ETH lenders are paid 2.5%, according to the Dharma website.

Founding Team

Nadav Hollander
Co-Founder and Chief Executive Officer
LinkedIn | Twitter

Prior to co-founding Dharma, Hollander interned at Google and graduated from Stanford University with a degree in Computer Science.

Brendan Forster
Co-Founder and Chief Operating Officer
LinkedIn | Twitter

Prior to co-founding Dharma, Forster worked at Uber and Microsoft. He graduated from the Wharton School at the University of Pennsylvania.



MakerDAO is a Decentralized Autonomous Organization (DAO) that manages its stablecoin, DAI. It allows people to collateralize their Ethereum to obtain DAI loans through a system called Collateralized Debt Positions (CDPs). So far, MakerDAO only supports collateralization of ETH but is planning to expand into a multi-collateral system for other crypto assets in the near future. You can read our Deep Dive on MakerDAO here.


Compound is a decentralized open-source protocol built on Ethereum that functions as a crypto money market. Compound enables companies and individuals to earn interest on their crypto holdings. Users can supply crypto to Compound and earn interest income or can take out crypto loans.

SALT Lending

SALT Lending offers cash loans to individuals with the feature of collateralizing crypto assets. Through SALT, users can also leverage their assets on the blockchain without having to give them up. It accepts BTC and ETH as collateral.


ETHLend is a decentralized application on the Ethereum blockchain aiming to offer secure, peer-to-peer loans for ERC20 tokens. Through the platform, borrowers can create loan requests and have lenders decide how they can meet them on their terms. Users do not have to find their own intermediary to settle transactions.

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