Technology is a bright spot for British economy

Robert Allen, an economic historian, argues the country’s liberal market economy is better placed to adopt new technologies than it was for the …

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Investors of Ethereum-based Programmatic Lending Protocol MakerDAO Are Uneasy with Latest …

One of the most popular decentralized finance (DeFi) projects in the crypto market, MakerDAO, seems to be leaving users without a positive …
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One of the most popular decentralized finance (DeFi) projects in the crypto market, MakerDAO, seems to be leaving users without a positive experience. MakerDAO allows users to take out loans that are called collateralized debt positions (CDPs), and everything is regulated with code. Although the company has expanded, the service does not seem to be at the expected level for many others.

MakerDAO Receives Critics From Users

It is not easy to create a decentralized finance protocol without issues. MakerDAO’s users explained that the fees for borrowing in the market have risen rapidly in ties. This is something that is affecting users that decided to take loans to make consumer purchases rather than crypto investments.

The costs of the fees have moved from 0.5 percent to 19.5 percent since February 2019 and it could keep growing in the future. These fees reflect the interest on debt lent out against cryptocurrency collateral. The interest was very low and it started to increase as time passed.

The cost that users have to pay is known as the stability fee, that can be translated as the interest users have to pay for the loans.

In a conversation with CoinDesk, Walter, a borrower using MakerDAO, explained:

“I believe that MakerDAO was aware that in order to defend the stability of their coin the interest rates would have to vary wildly and as such it would be impossible for them to support real use cases. It was their responsibility to warn users that their loans are NOT suited for real-world use cases, and they might end up trapping users in the rates we see now.”

He went on saying that he took 58,500 in DAI to pay off an auto loan and fund a personal event as well. However, he took this loan when rates were at their lowest point. Borrowing money using Ethereum (ETH) was a good solution to save his money and retain ownership of his ETH, but there was no information about how things could move and how high rates could later grow.

Thus, there is a possibility for his ETH to be liquidated in the near future as the price of the digital asset sometimes experiences sudden drops in price. This would eliminate his debt but it would cost him a much higher interest payment and the liquidation penalty close to 13 percent.

Another user that talked with CoinDesk mentioned that he took around $20,000 in DAI in order to travel around Eastern Europe. He compared how much he would have to pay with a traditional consumer loan and with MakerDAO. A traditional credit could have cost him between 10 to 15 percent. Although he expected interest rates to go up on MakerDAO, he never supposed that fees could grow as much as 40 times.

Thus, these are just two examples of individuals that trusted decentralized finance and that expected MakerDAO to offer a solution rather than offering a problem.

Currently, Maker is being traded around $550 and it has a market capitalization of $550 million. The digital currency is currently the 20th largest.

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Self-driving car company Cruise raises $1.15bn

… into US-based start-ups working on driverless technologies from $282m in 2015 to $4.5bn in 2018, according to researchers at CB Insights.

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Uber IPO, South Africa elections, US-China trade talks

The corporate world takes centre stage this week with Uber’s eagerly awaited initial public offering. Uber has been the defining tech start-up among a …

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Spruce Finance Gets Second Act as Owner and Operator of Home Solar Assets

The acquisition did away with previous equity backers including Google Ventures, Dominion Resources and Duke Energy. Spruce’s servicing …

Spruce Finance, now a residential solar owner and operator, left the solar loan and origination market last year. Instead, the company said it’s been focused on growing its mergers and acquisitions platform.

On Wednesday the company announced $208 million in debt financing for its residential solar assets with Silicon Valley Bank and ING acting as lead arrangers. Key Bank and three other undisclosed lenders participated in the deal, according to Spruce.

Tim Distler, the company’s vice president of corporate development, said the money allows Spruce to continue pursuing opportunities to acquire “seasoned residential portfolios.”

“We see this financing as an opportunity not only to optimize our capital structure but also to leverage its existence to further grow Spruce through acquisitions,” said Distler. He added that the company is investigating acquisitions in adjacent solar sectors and confirmed that could mean commercial or community solar projects.

The financing announcement follows skepticism about Spruce’s financial position.

In November, debt fund HPS Investment Partners, a spinoff of JP Morgan Asset Management, acquired the company after providing $25 million in “strategic funding” the previous year. The acquisition did away with previous equity backers including Google Ventures, Dominion Resources and Duke Energy.

Spruce’s servicing subsidiary, Energy Service Experts, continues to operate under the company and service Spruce projects as well as third-party assets.

Allison Mond, a senior solar analyst at Wood Mackenzie Power & Renewables, said the financing deal announced this week again demonstrates that more investors are interested in solar as an asset class.

“[Spruce’s] ability to secure this sort of financing is just one of many examples of investors and banks being increasingly comfortable with residential solar assets and wanting a stake in the game,” said Mond. “It fits within the larger trend that financing is not the biggest hurdle anymore in residential solar.”

But for providers, the residential solar finance market remains competitive, with slim margins. According to data from Wood Mackenzie Power & Renewables, Spruce’s share of the third-party solar financing provider market shrank from 7 percent in 2016 to 1 percent in 2018.

Moving away from the tricky origination space toward asset management, ownership and servicing could be a less risky pivot. Spruce joins other third-party solar financing companies in making such a move.

“The residential solar market is a continuously growing space. The assets need to be serviced and managed by someone and a lot of the companies that originate them don’t do that, particularly if it’s a smaller installer with loan financing,” said Mond. “There’s certainly opportunity for a company like Spruce to acquire and manage more assets.”

In any case, this week’s announcement confirms Spruce is still around — and looking to grow.

“That’s my task now that our financing is behind us, is to continue growing the company through M&A,” said Distler. “My hope is we’ll have more investment [announcements] to come later this year.”

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