The lion’s share of MakerDAO’s stablecoin is backed by centralized stablecoins and real-world property.
MakerDAO, the issuer of the DAI stablecoin, is making strides at decreasing its reliance on USDC, however that doesn’t imply it’s decentralized.
DAI is now 24% collateralized by USDC, down from 40% one month in the past and above 50% for a lot of the 12 months, in line with Daistats. USDC, a stablecoin issued by a consortium between Circle and Coinbase, is backed by US {dollars} and US dollar-based liquid property custodied in monetary establishments.
Decentralization advocates have known as for DAI to cut back reliance on USDC. Nonetheless, the protocol now holds greater than $1B value of US Treasury payments and different bonds from its Monetalis Clydesdale technique, the place Maker makes use of the USDC it acquires to spend money on bonds. Monetalis Clydesdale now accounts for 22.5% of DAI’s backing, whereas different centralized stablecoins account for over 20%.
In March, Messari estimated Maker had earned $3.8M in three months of holding treasury payments.
Declining USDC Dominance
Customers mint DAI in opposition to collateral property deposited to the MakerDAO protocol. They have to repay the DAI to regain entry to their collateral, destroying the DAI within the course of.
The declining dominance of USDC comes as MakerDAO is present process its controversial “Endgame” roadmap, which goals to make the venture immune to regulation, reorganize the protocol right into a sequence of specialised subDAOs, and pivot away from centralized collateral.
However regardless of Maker’s decreased reliance on USDC, the lion’s share of DAI’s backing stays centralized property — 55% of that are stablecoins, and 1 / 4 of that are real-world property.
‘Wrapped USDC’
Critics have lengthy described DAI as “wrapped USDC” as a result of USD Coin representing a good portion of the property backing DAI since MakerDAO first launched help for USDC in March 2020.
Warnings that Maker’s reliance on USDC and centralized property might be its undoing seemed to be coming to fruition in March when DAI briefly depegged as a result of its publicity to USDC. Each stablecoins crashed under $0.90 after Circle disclosed a part of USDC collateral was held in collapsed Silvergate and Signature banks.
Maker responded with emergency governance measures meant to restrict its reliance on USDC, which accounted for 40% of the property backing DAI on the time. Nonetheless, Maker is unlikely to cast off USDC fully any time quickly, with the protocol receiving an annual return of 1.5% on 1.6B of the USDC it holds from Coinbase.
Gemini & Paxos
The decline in DAI’s USDC backing additionally coincides with elevated collateral within the type of GUSD and USDP, the centralized stablecoins issued by Gemini and Paxos respectively. Every stablecoin accounts for 10.4% of DAI’s collateral basketIn January, Paxos proposed to pay Maker curiosity equating to 45% of the Fed Funding Fee — which at the moment sits at 5.08% — in change for the protocol holding $1.5B value of the USDP stablecoin in its Peg Stability Module (PSM). The PSM facilitates one-to-one swaps between DAI and different stablecoins.
Maker was initially hesitant concerning the deal as a result of New York Division of Monetary Providers ordering Paxos to cease issuing the Binance USD stablecoin in February. However its emergency measures meant to restrict USDC publicity, additionally elevated the debt ceiling for its USDP vault from 450M to 1B.Gemini, the cryptocurrency change based by the Winklevoss twins, supplied Maker a 1.25% rate of interest on GUSD holding above $100M in September.Ether accounts for 11.5% of DAI’s backing, alongside stETH at 8.5%.
