A Credit Union called Union

What if we just trust that people will pay us back?

Jacob Shiach
Published in
7 min readSep 25, 2019



In order to access credit, currently you have to deposit between 133% — 150% of the value you intend to borrow. This works fine, if you are already crypto rich, or for speculative use cases like leverage or shorting an asset, but it’s not very capital efficient.

So I propose a design for a credit union on the blockchain. In which members stake funds. Receive token shares on a bonding curve, the Union Contract receives Interest, and that interest is then lent out unsecured or under-collateralized.

Major Components

It consists of:

1) A DAO, let’s call it Union, that is responsible for creating and managing credit vehicles, include setting rates and membership conditions.

2) A Staking Mechanism that takes in DAI or similar asset and then for a period of time deposits it into a yield generating protocol like meta’s maxDAI and deposits the U. In return emits a UnionToken.

3)The Lending pool holds the DAO’s funds to be lent out. It also tracks funds as they are paid back to ensure that the DAO only ever pays a dividend when it’s profitable.

4) Credit vehicles are created by a factory. Each vehicle owns a percent of the Lending Pool, has a max loan size, collateral requirement, collateral type. And is responsible for minting and burning loan NFT’s.

Examples of potential Vehicles:
* [50%]: Fully backed: deposit 100 dai => earn union & borrow 100 dai @ 10% fixed a year.
* [20 %]: Half backed: deposit 100 dai => earn union / borrow 200 dai => 20% a year.
* [10%]: Unbacked: borrow {max loan size} dai @ 30%
* [20%]: Untouched: Ensures the lending pool is always growing.

Membership Process

In order to stake dai or take out credit you must first be a member of the dao. Membership is linked to a single address.

[Note: If an account is compromised it can cause problems and so it will be necessary to explore how the system clears a compromised account, perhaps a