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Tokenizing interest in DeFi using cTokens and RDai

The DeFi revolution is beginning to spawn new some interesting use cases, such as seamless lending and borrowing, decentralized derivatives and trading.

MakerDAO remains the cornerstone for the DeFi revolution with its fully decentralized platform for borrowing DAI against ETH. Decentralized crypto lending protocol Compound added a new layer of use cases by introducing cTokens. cTokens are normal ERC20 tokens that are wrapped in a Compound smart contract. The interest is accrued in cTokens and those cTokens can be swapped for the underlying parent tokens based on the prevailing market rate. With cTokens, Compound has opened up a whole new world of functionality and liquidity. All the assets that used to stay locked away within Compound are now free to move about the ecosystem, ready to be utilized for other purposes.

You can transfer, trade, or send cTokens to cold storage, just like any other token on Ethereum. In fact, you can even integrate them into other protocols that involve staking tokens as collateral. Think of cTokens as collateral that can seamlessly move between various DeFi apps. This would allow you to earn interest on top of the benefits the protocol already gives you. Crypto lending platforms are the closest you can get to continuous compounding as interest is accrued with every new block (50-60s). 

Source: redeem.money

Inspired by Compound’s cTokens, the team at redeem.money came up with a new idea where the interest accrued can be donated for charitable purposes such as community funds, charity organizations or can be spent in any other DApp. The principal remains the same and the interest earned can be spent wherever the user wants to. This opens up a plethora of use cases for automated payments where say the subscription costs for a decentralized Netflix or Spotify can be skimmed off the interest account without having to touch the underlying collateral ever.

Source: Twitter

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