MakerDAO Will Free Float DAI?

MakerDAO Will Free Float DAI?

Past August, Tornado Cash received a punishment from the US Department of Treasury , the platform developer was arrested, then the platform, other organizations such as Uniswap, AAVE, Balancer, dYdX and Circle also ban all accounts associated with Tornado Cash. This made alot of controvesy in the whole crypto market.

Worried the same problem can repeat in the future, threatening the stability and decentralization of Maker in general and DAI in particular continues to belong to USDC. Rune Christensen, co-founder of MakerDAO, shared with the information community through the article "The road to compliance and the road to decentralization: Why Maker has no choice but to prepare to free float DAI" posted . on the MakerDAO forum on August 26.

USDC chiếm tới trên 51% tổng khối lượng tài sản thế chấp đảm bảo cho DAI
USDC use to on 51% total block of documented accepts warranties for DAI, source: daistats

Why Maker has no choice but to prepare to free float DAI from USD?

Rune points to two paths that MakerDAO can choose: the path of compliance, which, after a long enough time, turns Maker into a kind of next-generation fintech product/Neobank. Or the decentralization route with strict restrictions and regulatory crackdowns that could derail the protocol. However, he believes that the "compliance path" is not suitable and will choose the "decentralized path" according to the intention and purpose as well as the original design of DAI.

In the blog, Christensen disclosed the MakerDAO's miscalculation of risks associated with risk-weighted assets (RWA).

Physical crackdown against crypto can occur with no advance notice and with no possibility of recovery even for legitimate, innocent users. This violates two core assumption that we used to understand RWA risk, making the authoritarian threat a lot more serious.”

Thereby also mentioning that floating DAI will be a mandatory option to protect the protocol from future attacks and suppression.

“The only choice is then to limit attack surface by reducing RWA exposure to a maximum fixed percentage of the total collateral - this requires free floating away from USD.”

DAI will be floated to create a negative target interest rate, causing the exchange rate of DAI against the USD to fall, thereby reducing demand for DAI and increasing supply as it becomes cheaper to generate using decentralized coins like ETH to deal with supply imbalances and ignore the loss of pegs - which will cause investors to lose confidence in Maker Governance if they persist in holding pegs.

Two tools to help DAI float successfully

MetaDAOs and MetaDAO tokens

“ What’s the only way to get someone to accept a free floating price and decreasing rate that makes them lose value in dollar terms over time? You have to give them something else in return.- Christensen writes in the blog.

The purpose of MetaDAO is to create a decentralized economy run by decentralized businesses that are run by tokens and cannot be controlled by authorities. Thereby providing this benefit to DAI holders with MetaDAO tokens of projects that have a real, profitable, sustainable and completely decentralized business model - but that is only possible. for the existence of a fully decentralized currency, this closes the loop and justifies the existence of a fully floating DAI coin. Yield Farming from MetaDAO can also be used to incentivize the creation of more DAI from fully decentralized collateral like Staked ETH, helping to grow the total supply of DAI and reduce the negative interest rates that DAI holders incur.

Protocol Owned Vault

A strategy that helps Makers accumulate large amounts of Staked ETH on their own with leverage and thereby create a large amount of fully decentralized and oversecured DAI.

This creates two big advantages: First of all, it allows Maker to leverage the interest generated from the natural usage of DAI to generate additional profits. It also helps to put a cap on DAI's target rate when negative rates will actually be exacerbated by the existence of MetaDAO Yield Farming (Which will certainly happen according to what was said in the previous section). above).

So what effect will floating DAI have on the Crypto market?

Hành động giá Crypto vẫn ảnh hưởng nặng theo các chỉ số vĩ mô, nguồn: Messari
Crypto price action still heavily influenced by macro indicators, source: Messari

As mentioned in previous articles, the crypto scene still exhibit a strong relationship with the macroeconomy and that causes negative effects in the context of strong tissue variables such as this time. Depending too much on the Dollar also makes the authorities have a strong influence on young schools. So, floating DAI and making it a fully decentralized coin will be difficult but the song can completely become a big step to promote MakerDAO in particular, the whole system DeFi and the Crypto community in general become more independent in the long development ahead.

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