TL;DR
MakerDAO plans to supercharge DeFi in a major way, with the help of its 5-phase endgame upgrade. Looking to turn DeFi summers into a year-round event. As one of the largest crypto treasuries in the blockchain, MakerDAO is a massive protocol. But, to make things even more interesting, Maker announced last month that it will soon begin tokenizing $1.2 billion in U.S. Treasury offerings issued through the Blackrock BUIDL program, Ondo, and Superstate. What does this mean for the future of MakerDAO and RWAs? Let’s find out!
For starters, this isn’t the beginning of MakerDAO gobbling up US Treasury Bonds and other RWAs to back its DAI Stablecoin.
This new offering will be in addition to the $1.2 billion it currently holds after adding $700 Million in bonds last year, something that has helped the MKR token reach an 85% increase in value so far this year and surpassing the returns ETH holders received in the same period.
But, MakerDAO has over $6 billion on the sidelines waiting to get in. So by the time this next billion makes its way on-chain, the dry powder will likely increase.
What is MakerDAO?
Starting all the way back in 2014, MakerDAO released its Stablecoin DAI as one of the first experiments with a Decentralized Autonomous Organization.
The way it works is simple and still considered today as the standard way for operating a lending protocol. Users deposit ETH into the DAI contract to back the MakerDAO Stablecoin in exchange for MKR tokens. This is done in a way that overcollateralizes the loans a user can access on MakerDAO.
So if you wanted to access the protocol for a $1,000 loan, you’d need to provide at least $1,500 in ETH to do so.
Interest rates for these loans are constantly rebalanced for the health of the DAI stablecoin.
If there’s more DAI available than the current demand, interest rates go up as a way to encourage users to pay back these loans and close their line of credit with the DAO.
When there’s more demand than supply, interest rates are lowered to encourage more users to take out loans using DAI and rebalance the system. This makes MakerDAO very different from other Stablecoins currently available in the marketplace.
That’s because when a user pays back their loan contract they do so using DAI. This DAI is then burned and the collateral is returned to the user. Unlike USDT or USDC tokens where the token is placed back into the stablecoin contract and held by the project.
The interest accrued from these loans is paid back in MKR, not DAI. Only the principal on the loan is repaid In DAI. However, both the MKR and DAI tokens used to repay these loans are burned just the same. Creating a deflationary effect on the MKR token as more users acquire loans on MakerDAO.
This heavily encourages the usage of the MKR token and drives the price up as more people repay their loans. A system that has operated without fail since it launched and is considered an OG in the Decentralized Finance sector.
What is the MakerDAO 5-Phase Plan?
MakerDAO is stepping up its preparations to welcome new customers into the blockchain ecosystem. Anticipating the needs of Decentralized Finance for the next decade. MakerDAO has a 5-step proposal known as “Endgame” that will supercharge the project into more than just a stablecoin. This will effectively create…
Head of Research Jesse is a passionate seeker of truth who enjoys educating others about Bitcoin. As a free thinker and 2nd amendment advocate, Jesse believes each individual has the right to monetary freedom. “The swarm is headed towards us” -Satoshi Nakamoto
