🟢Minting
Last updated
Last updated
Minting here is divided into two things:
Minting/creating new tokens seems to be an easy thing to do nowadays, even within minutes. So if we observe there are a lot of tokens listed on coinmarketcap or coingecko without any utility at all, and without any protocol/project as its underlying. At this point, there is usually a lot of criticism about cryptocurrency because of how easy it is to create a token / cryptocurrency and we agree with it, because a valuable token or coin depends on its use case or utility.
Tokens must have a viable token economy (tokenomic) design and utility that can solve real-world problems. Token developers or issuers have a huge responsibility to create tokens that are sustainable in the long run. Not just pump and dump, or even with bad intentions such as scam or rug pull.
One example of minting stablecoin with crypto asset collateral is minting DAI via maker DAO protocol. However, there are two ways we can get our hands on some DAI
We will walk through how DAI can be minted using a pawnshop analogy.
Let’s assume that one day you are in need of $10,000 cash, but all you have are gold bars worth $15,000 at home. Believing that the price of gold will increase in the future, instead of selling the gold bars for cash, you decide to go to a pawnshop to borrow $10,000 cash by putting your gold bars as collateral for it. The pawnshop agrees to lend you $10,000 with an interest of 8% for the cash loan. Both of you sign a contract agreement to finalize the transaction.
Now let’s change the terminology to get the narrative of DAI:
What happens is that you will mint or ‘borrow’ DAI via the Maker platform by putting your Ether (ETH) as collateral. You will have to repay your ‘loan’ along with the ‘loan interest’ which is the stability fee when you want to redeem your ETH at the end of your loan.
To provide an overview, let’s walk through how you can mint your own DAI.
On the Maker platform (www.oasis.app), you can borrow DAI by putting your ETH into the vault. Assuming ETH is currently worth $150, you can thus lock 1 ETH into the vault and receive a maximum of 100 DAI ($100) with a 150% collateral ratio. There are currently three types of vaults for ETH with different collateral ratios, but for the sake of simplicity, we will assume that the collateral ratio is 150%, which is the ETH-A vault.
You should not draw out the maximum of 100 DAI that you are allowed to but leave some buffer in the event that ETH price decreases. It is advisable to give a wider gap to ensure your collateral ratio always remains above 150%. This ensures that your vault will not be liquidated and charged the 13% liquidation penalty in the event that ETH falls in price and your collateral ratio falls below 150%.
The above method is the way DAI is created. Once DAI is created, you can send it anywhere you want. Some users may send their DAI to cryptocurrency exchanges. You may also buy DAI from these secondary markets without the need to mint them. Buying DAI this way is easier as you do not need to lock up collateral and you do not have to worry about the collateral ratio and stability fee.
Sharia Perspective :
Minting tokens without any halal projects or protocols either being or already built is impermissible from Islamic perspective. Those tokens have no utility or use case at all.
While minting stablecoins with collateral is included in the pawning or rahn chapter, and briefly, minting stablecoins such as DAI involves usurious fees such as stability fees, minting fees, or as similar protocol calls it, repayment fees. Moreover, there will be a liquidation process if the collateral to debt ratio falls below the threshold with a penalty fee.
Thus, in our opinion, it is better to avoid crypto-collaterized stablecoins like DAI since their minting process involves fee addition, which is included as usury. If we have them by minting, obviously it is impermissible. However, we need further investigation from a sharia perspective if someone has them from exchange or even rewarded by someone. Allah knows best.
Referensi Bacaan:
How to DeFi : Beginner, by coingecko research team, 2nd edition 2021
How to DeFi : Advance, by coingecko research team, 1st edition 2021
