Sunday, April 15, 2018

Guide: How to Self Leverage with MakerDAO's Dai

Background Context: I wrote this post and drafted it out a while ago, didn't have time to proof read it until now. Not sure if anyone is still interested, but here you go anyway. As mentioned in the last post, I went leveraged long on ETH at $377, and this is how I did it trustlessly.

I'd say that I'm not an expert and I opened up my first leverage position today.

The beauty of the Maker system is that you can decide how much to leverage and when.

Anyway, it was a rather confusing and complicated process, but a learning journey all the same. This is highly NOT recommended for anyone that is not familiar with making on-chain transactions and have a low risk tolerance.

Opening up a CDP
1) Have ETH in your Metamask account
2) Go to
3) Enable all the token allowances on the right (each is 1 transaction)
4) Wrap ETH to WETH
5) Convert WETH to PETH
6) Open a CDP
7) "Lock" PETH into CDP

Boom, now you have deposited collateral into the Maker system, and this allows you to draw out the Dai stablecoin.

Leveraging up
8) "Draw" out Dai
9) Trade Dai for WETH

That's it. Boom, you're leveraged.

- use the Gas Station to figure out how much gas you should be using. I recommend "Standard" setting
- trade Dai for the best rate by comparing Oasis and Radar Relay
- remember to set Dai trading allowance on Oasis or Token trading permission on Radar Relay
- at 150% collateralization ratio, your leverage determines your max drawdown before you get liquidated
- 10% leverage affords you a 85% drawdown
- 20% leverage affords you a 70% drawdown
- 30% leverage affords you a 55% drawdown
- in my humble opinion, 30% leverage is already risky and above that, you're just asking for it

Closing your position
10) Trade WETH for enough Dai to close your position
11) Buy some MKR to pay the governance fee
12) "Wipe" will clear off Dai debt position and pay the MKR fees
13) "Shut" will close off the CDP
14) Excess / Deficit of WETH or DAI will be the profit / loss of this entire process.

*Back to 15 Apr*

The process of self-leveraging with Maker is pretty complicated and I can see massive hurdles from them scaling up and increasing supply in the future since the demand for Dai stablecoin creation is the by-product of self-leveraging. However, their partnerships and first mover advantage cannot be overlooked. With both Havven's Nomins and DigixDAO's Digix Gold going live, 2018 may very well be the start of the stablecoin revolution!

Anyway, price of ETH is already 30% above my entry price, things are looking good for my position. In my humble opinion, I think the worst is over and the markets have formed a pretty decent bottom.

I'm waiting for ETH to recover back over $800 and then I will begin my obnoxious gloating, please stay tuned for that. Probably by July.


  1. Heh heh ... those in stocks will also hope for ETH1K by July. Coz crypto world & stocks are joined at the hip by risk on / risk off sentimentality.

    In fact cryptos may soon be a reliable leading indicator for stocks.

    1. "In fact cryptos may soon be a reliable leading indicator for stocks."

      the day 'whales' don't control an entire market then yes that may happen.... and that's just scratching the tip of the iceberg.

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