MakerDAO’s Christensen Pushes “Endgame Plan” to Save DAI From Attack
Key Takeaways
- Following the Treasury Division’s transfer to sanction Twister Money earlier this month, MakerDAO co-founder Rune Christensen has proposed an “Endgame Plan” to save lots of DAI from regulatory seize.
- The plan would see MakerDAO lend out DAI towards real-world belongings to build up ETH, with the eventual purpose of turning the stablecoin right into a free-floating asset.
- The proposal has acquired assist and pushback from members of the MakerDAO neighborhood.
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The proposal addresses Rune Christensen’s earlier issues about authoritarian dangers to MakerDAO protocol and the quantity of USDC backing DAI.
The “Endgame Plan”
DAI can’t stay a stablecoin without end, in accordance with one among its co-creators, Rune Christensen.
The MakerDAO co-founder shared a new post on the topic on the protocol’s governance boards Tuesday, outlining his thought for a brand new plan that might see the DAI stablecoin develop into a free-floating asset sooner or later.
Titled “Endgame Plan timeline to free floating Dai,” the proposition focuses on lending DAI towards real-world belongings (RWAs) to bolster the protocol’s income. It suggests utilizing the income generated from issuing loans to amass extra ETH to make use of as collateral to again DAI. Beneath Christensen’s plan, the diploma to which MakerDAO is profitable in accumulating ETH over the subsequent three years will decide whether or not or not it ought to take into account letting DAI drift from its greenback peg to develop into a free-floating asset.
The plan consists of three completely different collateral methods—dubbed Pigeon Stance, Eagle Stance, and Phoenix Stance—that lie on a spectrum between excessive RWA publicity and none. As Christensen places it, extra RWA publicity allows greater development for the MakerDAO protocol, however at the price of decreased resilience.
Pigeon Stance, probably the most lenient of the three methods, could be MakerDAO’s default stance. It prioritizes most development with limitless publicity to RWA loans. Eagle Stance finds a stability between development and resilience by limiting Maker’s RWA publicity to 25% of all loans. Phoenix Stance is probably the most conservative, stipulating that the protocol takes on no sizable publicity to RWAs.
Christensen’s plan begins by placing MakerDAO into Pigeon Stance for 3 years. Right here, the protocol would try to amass as a lot ETH collateral as attainable to make DAI resilient to “authoritarian threats.”
Such threats may embrace stress from authorities businesses to adjust to stringent rules or sanctions that pressure centralized stablecoin issuers like Circle to freeze USDC funds held in MakerDAO’s vaults for non-compliance. Christensen had beforehand commented on how MakerDAO’s reliance on USDC may pose a critical menace after the stablecoin issuer froze funds deposited into privateness protocol Twister Money earlier this month. “If the protocol reaches 75% decentralized collateral organically from the buildup of ETH throughout Pigeon Stance, then it might swap to Eagle Stance with out leading to Dai going free floating,” Christensen’s publish learn.
Nonetheless, if MakerDAO can’t hit the 75% decentralized collateral threshold, it would make sense to let DAI drift from its one-to-one peg with the greenback. No matter what occurs, Christensen’s plan specifies that DAI will stay pegged to the greenback for not less than the subsequent three years. After then, the timeline for turning DAI right into a free-floating asset may be delayed if there isn’t any “fast authoritarian menace.”
MakerDAO and Regulation
The Endgame Plan is a part of a wider discussion on the MakerDAO boards addressing whether or not DAI could also be pressured to surrender its greenback peg to prioritize decentralization. Christensen has argued that monetary regulation trending towards a paradigm of “both you’re with us otherwise you’re towards us,” mixed with DAI’s inherent censorship resistance means the stablecoin will inevitably want to interrupt its peg with the greenback to keep away from regulatory oversight that it is going to be unable to adjust to.
Christensen’s proposal has acquired some pushback. “I disagree that free floating DAI might be of a lot assist. Why would an authoritarian authorities disallow fiat pegged steady belongings, however allow free floating steady belongings (and even risky base crypto belongings for that matter) once they nonetheless undermine authorities management over the financial system?” requested MakerDAO member monet-supply. “Twister Money had extraordinarily little publicity to RWA and is very decentralized, however that didn’t cease it from being sanctioned. I don’t see how free floating Dai would forestall Maker from experiencing the identical destiny,” CodeKnight wrote.
Nonetheless, different MakerDAO members agreed extra with Christensen’s outlook. “It’s so good to lastly see this acknowledged by weighty MKR voting energy. I’ve been within the minority warning about this precise danger for years,” mentioned consumer brianmcmichael. In the end, as consumer SebVentures, defined, a lot of the dialogue boils all the way down to a enterprise determination that MKR holders must make. “On one aspect, you lower the worth of the product (DAI) to extend the odd[sic] of survival. On the opposite aspect, you’re taking a attainable greater regulatory danger to growl,” he mentioned.
Since many DeFi customers have come to anticipate DAI will preserve its peg to the greenback, transferring away from this paradigm, even when obligatory, may come at a major value. With stable assist each for and towards letting DAI drift from its peg, the talk over how MakerDAO ought to put together itself for an unsure future will probably proceed for a while but.
Disclosure: On the time of penning this piece, the writer owned ETH and several other different cryptocurrencies.
