Banks are arguably safe places to store wealth, gain access to loans and online payment services, earn interest on savings, and more. But not everyone can enjoy those amenities. Many people in the world, for any number of reasons, do not have access to the beneficial financial services they need to prosper personally or in business. MakerDAO is helping to change that via its decentralized stablecoin Dai, the world’s first unbiased currency. Generated through the Maker Protocol, which is built on the Ethereum blockchain, Dai is designed to help provide the unbanked population in the United States and abroad with the same opportunities banked persons enjoy, but without the third-party involvement.
According to the World Bank’s 2017 Global Findex report, 31% of adults (1.7 billion people) across the globe are classified as unbanked, as they lack a “financial institution” account or access to a “mobile money provider.” Insufficient funds (an inability to satisfy banks’ minimum deposit requirements to open an account) is the most common reason why people remain without a financial account of some kind, notes the report. Most unbanked populations are found in developing economies, with India and China posting significant unbanked numbers due to their massive overall populations.
In the U.S., the unbanked population is larger than one might think. Results of a 2017 Federal Deposit Insurance Company (FDIC) survey (the most current available) reveal that 6.5% of U.S. households are unbanked, and another 18.7% are under-banked. Together, the un- and under-banked populations make up 32.6 million American households.
Americans are, for the most part, un- and under-banked for the same reasons residents of other countries are. In addition to lacking sufficient funds to open and maintain accounts, unbanked Americans sometimes lack proper identification. Some might have excessive debt or some other condition that results in a denial of service. Others choose to avoid financial service institutions for personal reasons or due to geographical challenges.
With the increase in mobile banking over the last decade, a large number of bank branches have shut down in U. S. rural areas, making it difficult for some people living outside of cities to easily access services. While mobile banking should solve the geographic and disappearing branch issue, it's not, for a number of reasons.
Without a bank or financial services account, access to conveniences such as credit cards and other online payment methods becomes extremely limited. Navigating modern life without the ability to enjoy direct deposit, shop online, earn interest on savings, and pay bills automatically online from a checking or savings account is a hassle, and the un-banked struggle through this terrain regularly.
“The word under-banked contains a broad range of variables but, essentially, the underbanked population is not able to enjoy the most important aspects of the banking system—savings and loan vehicles,” says Greg Diprisco, Maker’s Head of Business Development. “The inability to earn on savings or get a loan can mean the difference between working on a farm and owning a farm.”
One of the greatest benefits of cryptocurrency and blockchain technology is financial accessibility, which is the first stop for anyone on a path to success. With Maker’s Dai stablecoin, anyone with an internet connection can gain access to services that help them meet their financial goals. Moreover, Dai holders are in complete control of their assets.
“Because Dai is decentralized, it puts the individual back in control of their funds,” says Diprisco. “Two-thirds of unbanked adults globally own a mobile phone, meaning they have instant access to Dai and can make peer-to-peer, wallet-to-wallet transactions quickly and inexpensively, without third-party intervention.”
Dai has many more benefits, including the following:
Anyone can generate Dai via the Maker Protocol by locking collateral into a Maker Vault. Currently, users can lock-in four types of collateral approved by Maker governance (ETH, BAT, USDC, and WBTC) to get Dai, and reclaim that collateral by paying back the Dai they’ve generated, as well as a stability fee.
Dai allows for easy, fast, stable, and secure value transfer to and from anywhere in the world, without third-party intervention. Direct, peer-to-peer transfers settle quickly and inexpensively.
All Dai transactions are unmodifiable and visible to everyone on a public ledger that’s distributed online. This effectively creates a traceable audit trail. Distributed ledger technology is how projects like MakerDAO embrace decentralized finance (DeFi) to build user trust with blockchain technology.
Dai users can earn on the Dai they hold by locking it into the Dai Savings Rate (DSR). There is no minimum deposit requirement to earn the DSR, and users can withdraw a portion or all of their Dai at any time.
As a trustless, autonomous system, the Maker Protocol helps un- and under-banked populations everywhere access many of the opportunities provided to banked individuals. Dai puts users in full control of their finances while helping to grow the DeFi ecosystem.
To learn more about Dai and the Maker Protocol, get current with the Maker blog and join the conversations in the Maker Forum. When you’re ready to get started with Dai, take a look at Maker’s Oasis exchange hub.