MakerDAO, the governance community of the popular DeFi lending platform Maker, has decided to keep using USD coin (USDC) as the primary reserve asset for the DAI stablecoin. 

Although USDC experienced a temporary depeg earlier this month, an overwhelming majority of the MakerDAO have chosen to retain their faith in the world’s second-largest stablecoin, dismissing any other viable options. 

USDC Depegged Following SVB’s Collapse 

On March 10, news broke out about the collapse of the Silicon Valley Bank (SVB), one of America’s largest banks and a major banking partner of Circle, the issuing company of the USDC stablecoin. 

The following day, Circle released a statement saying that about $3.3 billion of the USDC reserves were stuck with SVB, leading to much panic among investors.

Although Circle provided much assurance that the company would cover all potential shortfalls using personal resources, it was not enough to neutralize the negative sentiment around USDC, causing the stablecoin to depeg from its $1 mark. While USDC soon regained its peg, its value initially fell as low as $0.87, causing much concern for other stablecoins and DeFi protocols, including Maker. 

MakerDAO Rejects Plan To Diversify From USDC

In response to the depegging event, the MakerDAO was forced to review its DAI reserves which were all stored in USDC. This is because the  DAI token is considered vital to the multi-collateral lending operation of the Maker. In addition, DAI also serves as the native stablecoin of the protocol. 

To protect investors’ assets from similar depegging debacles in the future, the Risk Core Unit of the Maker protocol proposed on March 17 that the DAI reserves be diversified into other stablecoins, nominating the Gemini Dollar (GUSD) and Paxos Dollar (USDP) as viable alternatives with lower market risks. 

In a poll on March 20, the MakerDAO strongly rejected the proposal, with 79.02% voting to “Maintain USDC as the Primary Reserve” as against the mere 20% that voted in favor of diversification. These poll results are highly welcomed, especially during a time when many investors’ confidence in USDC is shaken.

The Maker protocol remains the second largest DeFi platform in the market, with a TVL of $7.65 billion. It was launched back in 2017 and is widely regarded as the first-ever successful DeFi project. 

State Of The Crypto Market 

Currently, the general crypto market appears to be bearish, with most assets recording an overall loss in the last week. For example, data from Coingecko shows that Ethereum (ETH), Binance Coin (BNB), and Polygon (MATIC) have all suffered losses to the tune of 1.8%, 4.0% and 9.9% in the last seven days. Meanwhile, Bitcoin has managed to stay afloat, gaining by only 0.9% in the same period.

However, some tokens have been able to pull off a remarkable uptrend in the last few days. For example, Ripple (XRP) has recorded an overall profit of 18.0% in the last week as optimism concerning the Ripple vs. SEC court case continues to grow, with a ruling expected in the first half of 2023.

#makerdao #Fed #koinmilyoner #GPT-4 #ExchangeWithKindness

Maker’s governance community has initially voted in favor of increasing U.S. Treasury bond holdings to $1.25 billion, according to a Twitter thread on March 15.

Preliminary vote approves Treasury bond purchases

The proposal, if it is fully approved at a later date, will see Maker more than double its current $500 million of Treasury bond holdings to $1.25 billion.

Maker initially began to invest in U.S. Treasury bonds in October 2022 through an improvement proposal called MIP65. The latest proposal increases the debt ceiling for those investments and thereby raises the amount that Maker can invest in liquid bonds.

Maker says that the $750 million made available through the proposal will be spent on U.S. Treasuries with maturities equally split over six months. This approach will ensure that the Treasuries mature on a bi-weekly basis, $62.5 million at a time.

The proposal to raise the debt limit was passed with 77.13% of votes (76,936 MKR) in favor of the change and 22.86% of votes (22,799 MKR) against the change. A small number of votes (12 MKR) abstained from voting either way on the matter.

Notable voters included the crypto product company GFX Labs, the London Business School Blockchain, the analytics firm Flipside Crypto, and ConsenSys.

Maker governance must still approve the change in a separate executive vote at a later date. The update will then be directly deployed to Maker Protocol

Recovering from Maker’s DAI depeg

Maker’s decision to invest in Treasury bonds is related to its attempts to become more resilient after its decentralized stablecoin, DAI, briefly lost parity with the dollar.

DAI fell as low as $0.89 on March 11 before recovering to $1.00 on March 13. That depeg was caused by the collapse of Silicon Valley Bank, which primarily affected Circle’s USDC stablecoin but also impacted other major stablecoins. DAI was specifically affected due to the fact that it uses DAI-USDC swaps in its Peg-Stability Module (PSM).

In order to diversify from USDC, the project will invest a portion of the USDC in its PSM to acquire the $750 million of Treasury bonds slated for purchase.

#makerdao #DAO #BTC #BNB #koinmilyoner

I want to kick off 2024 with an educational post about the Maker/DAI ecosystem. Memes have a strong influence in crypto and can persist even when no longer accurate. I’ll address the state of some of the larger ones.

1. “DAI is just wrapped USDC”

This hasn’t been true for about a year now. Most of the USDC has been replaced by direct investment into treasury bills. The small remainder is used for maintaining peg liquidity and will just swap to tbills as needed to maximize overall return.

Combined with the crypto-loans the balance sheet looks more like a 55/45 split between RWAs and crypto-native vaults these days. This means that even if you are maximally skeptical of the RWA portion, there is still 45c from every $1 backing your DAI.

Furthermore, the demand for crypto-leverage has been increasing recently with Spark capturing most of the new leverage. The more leverage activated via Spark, the more decentralized the backing of DAI.

Looking at Ethereum, Maker & Spark account for 57% of the ETH TVL (incl. LSTs) between all lending markets. There are other decentralized assets, but ETH is the vast majority of the market share, so it’s a good representation.

2. “Revenue will go down when RWA yields go down”

It is true that IF we are both in a bear market and TradFi yields drop, then revenue for Maker will go down; however, this will be the case for all DeFi protocols. Maker has been a top earner since it started and should continue to be a relative top performer within the space regardless of market conditions.

Historically, Maker has earned ATH revenues from the previous bull market in May 2021. Even now with the bull market just starting, Maker is earning most of its income from crypto vaults again.

Maker will earn in both high and low interest rate environments.

3. “MKR performs badly in bull markets (Maker is a bad meme)”

This one is probably the most valid criticism. MKR currently has a P/E of around 16, and in a rapidly growing ecosystem this makes me wonder what is going on here.

I think the answer is a combination of things that can be summarized as “bad meme-ability”. Low supply means MKR is priced “high”, and Maker is considered part of “Boomer DeFi”. Compounding with that is that the marketing hasn’t been too great historically, so you get poor performance compared to other DeFi 1.0 projects.

This will likely change in 2024 with the rollout of the completely new brand and a token share split of MKR to the new branded governance token codenamed New Governance Token (NGT). The ratio will be 1:24,000 MKR:NGT, and as superficial as this seems, this is how retail thinks.

Combined with the rebrand which will link MKR and DAI tokens to their newly branded versions and the yield farms for the new tokens, this will kick off an explosion of new interest as new token tickers suddenly sit near the top of the market cap coin lists and token ownership is farmed out to a new generation.

Another component of this is that Maker is currently using its massive revenues to buy back the MKR token at 100m / year (to be lowered to 60m / year as the bull starts). Price is king for the focus of retail, so having MKR underpriced for so long means that the protocol has been able to buy out all the capitulators freeing the explosive upside for the next wave of fans.

TLDR; Maker is poised for a breakout year in 2024!
#makerdao $MKR 🚀📈

Introduction
Decentralized Finance, or DeFi, is the cornerstone of the blockchain revolution, aiming to democratize finance by removing traditional intermediaries. As we approach 2023, the DeFi landscape is more vibrant than ever, with innovations and developments that promise to redefine the financial sector.
1. Historical Context
The journey of DeFi began with the inception of Bitcoin, a decentralized currency that aimed to challenge traditional financial systems. Ethereum, with its smart contract capabilities, further paved the way for complex financial operations without intermediaries. Over the years, the DeFi ecosystem has expanded exponentially, with a plethora of platforms offering diverse financial services.
2. The Core Principles of DeFi
Decentralization: The essence of DeFi lies in its decentralized nature. Unlike traditional systems, DeFi operates on peer-to-peer networks, ensuring that no single entity has control.Transparency: Being primarily built on public blockchains, all transactions in the DeFi space are transparent and can be audited by anyone.Interoperability: DeFi protocols are designed to be compatible with each other, allowing seamless interactions and integrations.Accessibility: DeFi platforms are open to anyone with an internet connection, ensuring financial inclusion.
3. The DeFi Ecosystem
The DeFi landscape is vast and diverse, encompassing various platforms and services:
Lending & Borrowing: Platforms like Aave, Compound, and MakerDAO have revolutionized the lending and borrowing sector. Users can earn interest on their deposits or take out loans by providing crypto as collateral.Decentralized Exchanges (DEXs): DEXs like Uniswap, SushiSwap, and PancakeSwap have transformed the trading landscape. They offer peer-to-peer trading, ensuring that users have full control over their funds.Stablecoins: Cryptocurrencies like USDT, USDC, and DAI are pegged to stable assets like the US dollar. They provide stability in the otherwise volatile crypto market.Derivatives: Platforms like Synthetix and dYdX allow users to trade derivatives in a decentralized environment.Insurance: As the DeFi sector grows, so does the need for insurance solutions. Platforms like Nexus Mutual offer coverage against smart contract failures.
4. Case Studies
MakerDAO: A pioneer in the DeFi space, MakerDAO offers DAI, a stablecoin pegged to the US dollar. However, it faced challenges during the March 2020 market crash, leading to significant system debt.Yearn.finance: This platform, founded by Andre Cronje, is a yield aggregator that finds the best returns for its depositors. Its native token, YFI, saw a meteoric rise in value in 2020.Compound: As one of the leading lending platforms, Compound has introduced an algorithmic interest rate model, setting it apart from its competitors.
5. Regulatory Landscape
The rapid growth of DeFi has not gone unnoticed by regulators. Countries like the US, UK, and members of the European Union are closely monitoring DeFi platforms. The challenge lies in striking a balance between ensuring consumer protection and fostering innovation.
6. Challenges Facing DeFi
Scalability: As more users join the DeFi bandwagon, platforms face challenges in handling the increased volume, leading to high transaction fees.Security: Despite the decentralized nature, DeFi platforms are not immune to hacks. Over the years, several platforms have been compromised, leading to significant losses.Usability: For DeFi to achieve mass adoption, platforms need to be user-friendly. The current user experience on many platforms is complex, especially for those new to the crypto space.
7. The Future of DeFi
Integration with Traditional Finance: As DeFi matures, we can expect to see more collaborations between DeFi platforms and traditional financial institutions.Rise of Layer 2 Solutions: Scalability issues are being addressed by Layer 2 solutions like zk-Rollups and Optimistic Rollups.Cross-chain Interoperability: With the rise of multiple blockchains, interoperability solutions will play a crucial role in the next phase of DeFi's evolution.
8. Data-Driven Insights
Total Value Locked (TVL): The TVL in DeFi protocols has seen a consistent upward trend, indicating growing user trust and adoption.User Adoption: The number of DeFi users has grown exponentially, with platforms reporting a surge in active wallets.Transaction Volume: DEXs have reported record-breaking transaction volumes, rivaling those of centralized exchanges.
9. Market Growth and Predictions
According to a report from Statista, revenue in the DeFi market is projected to reach US$16,960.0m in 2023, with an expected annual growth rate (CAGR 2023-2027) of 19.60%. Another report from Yahoo Finance suggests that the global DeFi market will be worth a staggering $231.19 billion by 2030, growing at a CAGR of 46%.
10. Expert Opinions and Predictions
Prominent figures in the crypto space have shared their insights on the future of DeFi:
Vitalik Buterin: The co-founder of Ethereum believes that DeFi needs to focus on sustainability and avoid the excessive greed seen in some sectors.Andre Cronje: The founder of Yearn.finance has been a vocal advocate for innovation in DeFi, even if it means taking calculated risks.
11. Conclusion
DeFi is more than just a buzzword; it's a movement that's redefining the very fabric of the financial system. As we look ahead, the fusion of technology, innovation, and finance promises a future where financial systems are more inclusive, transparent, and user-centric.
Diagrams & Visuals
DeFi Ecosystem OverviewGrowth of DeFi TVL Over TimeComparison of Traditional Finance vs. DeFi
Hashtags: #DeFiChallenge #DeFi #trading #finance #makerdao