Introducing the dToken

TL;DR

1. In February, we will deploy a new system of smart contracts, called dTokens, which are a wrapper around Compound cTokens

2. No action is required from Dharma users, this is a backend change that only affects the interest rate that users earn going forward — nothing is changing about the ability to deposit or withdraw Dai/USDC/Dollars, or how users interact with Dharma

3. Users will keep their full balance and all interest earned prior to the migration. Going forward, dTokens will retain one tenth of the interest earned in Dharma as a surplus that can be pulled by Dharma

4. Wrapping all deposits in dTokens is an important prerequisite to various features on our roadmap, including scalability solutions for payments and privacy enhancements


One of the most frequently asked questions we get at Dharma is “how do you make money?” Today, we are pleased to announce the dToken, which enables Dharma to make money alongside our users, and which forms the technical foundation for bleeding edge features we will be shipping in the coming months.

What are dTokens?

dTokens are wrapper tokens, similar to rDAI, around Compound cTokens. In short, dTokens are interest-bearing stablecoins denominated in Dai or USD Coin that are backed by their respective cTokens on Compound. 

Users will keep all interest earned prior to the migration

Once the new dToken architecture is deployed, users’ Dharma Smart Wallets will hold only dTokens, currently dDAI and dUSDC. The underlying cTokens will be held in the dToken contract.

Users will keep all interest earned prior to the migration, and user balances after the migration will be exactly the same as they were before. The only way this affects users is that, going forward, the interest rate on Dharma will be slightly lower than that on Compound.

Check out the dToken upgradeable smart contracts and smart wallet implementation here.

How do dTokens enable Dharma to make money?

dTokens allocate 90% of the interest earned by the underlying cTokens to dToken holders, and retain one tenth of that interest as a “surplus” that can be pulled by Dharma. As an example, if the interest rate is 5% APY on Compound, Dharma will collect 0.5%, while users will earn 4.5% APY.

This is our business model, and this revenue stream will sustain our business, enabling us to continue to build innovative features that bring DeFi to the mainstream.

Why have you chosen this monetization model?

Over the past decade, many fintech businesses have chosen to monetize their services in ways that put them in conflict with their users. In contrast, we have chosen a revenue model that keeps Dharma’s interest tightly aligned with those of our users.

Dharma only makes money when our users do as well

We do not sell user data. We do not monetize user transactions. Instead, we have chosen a skin-in-the-game business model, wherein Dharma only makes money when our users do as well.

When will dTokens be deployed?

The dToken smart contracts were deployed on Tuesday, February 4th. Within the next week, Dharma will kick off a timelock to upgrade the Dharma Smart Wallet. After the 7 day upgrade timelock period, Dharma will upgrade all user smart wallets and perform the migration that converts all cTokens held by Dharma users into dTokens.

After the migration, when Dharma users look at public block explorers like Etherscan, they will see dTokens in their smart wallets, instead of cTokens. Don’t worry, you will be able to deposit and withdraw as easily as before, and your balance will not be affected by the upgrade.

If you wish to opt out of the dToken implementation, you can withdraw your funds from Dharma before or during the upgrade.


All of our dToken smart contract code is open source. We’d love for you to review the code and ask questions in our Discord.

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