FinTech Collective portfolio company Dharma Protocol believes smart contract based overcollateralized lending has become the "hello world" of programmable money. The report addresses some of the alternatives to create standard borrowing rates for the market to coalesce on, allowing participants to price risk and opportunity cost of their assets.
A big benefit of having an interest rate index that lives squarely within the decentralized finance realm is that all of the underlying data is transparent and auditable on-chain. With DeFi, scandals like the one that took down LIBOR in 2012 are impossible because there’s no centralized party in charge of reporting interest rates. A prototype of Dai DIPOR is already live on LoanScan — it provides a rolling 24 hr volume weight average borrow rate based on Compound and MakerDAO.