MakerDAO’s Christensen Pushes “Endgame Plan” to Save DAI From Attack


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 from regulatory seize.
The plan would see MakerDAO lend out towards real-world property to build up ETH, with the eventual aim of turning the stablecoin right into a free-floating asset.
The proposal has obtained assist and pushback from members of the MakerDAO group.

MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

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MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

The proposal addresses Rune Christensen’s earlier considerations about authoritarian dangers to MakerDAO protocol and the quantity of USDC backing

MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

The “Endgame Plan”

DAI can’t stay a stablecoin ceaselessly, in response to one in all its co-creators, Rune Christensen.

MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

The MakerDAO co-founder shared a brand new put up 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. 

MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

Titled “Endgame Plan timeline to free floating Dai,” the proposition focuses on lending DAI towards real-world property (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. 

MakerDAO's Christensen Pushes “Endgame Plan” To Save DAI From Attack

The plan contains 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 progress for the MakerDAO protocol, however at the price of diminished resilience. 

Pigeon Stance, essentially the most lenient of the three methods, could be MakerDAO’s default stance. It prioritizes most progress with limitless publicity to RWA loans. Eagle Stance finds a steadiness between progress and resilience by limiting Maker’s RWA publicity to 25% of all loans. Phoenix Stance is essentially 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 potential to make DAI resilient to “authoritarian threats.” 

Such threats might embrace stress from authorities businesses to adjust to stringent laws or sanctions that drive 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 might pose a severe 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 may possibly to Eagle Stance with out leading to Dai going free floating,” Christensen’s put up learn. 

Nonetheless, if MakerDAO can’t hit the 75% decentralized collateral threshold, it’d 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 at the very least the subsequent three years. After then, the timeline for turning DAI right into a free-floating asset may be delayed if there is no such thing as a “quick authoritarian menace.”

MakerDAO and Regulation

The Endgame Plan is a part of a wider dialogue 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 obtained some pushback. “I disagree that free floating DAI shall be of a lot assist. Why would an authoritarian authorities disallow fiat pegged steady property, however allow free floating steady property (and even unstable base crypto property for that matter) after 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 stop 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. Finally, as consumer SebVentures, defined, a lot of the dialogue boils right down to a enterprise choice 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 potential greater regulatory danger to growl,” he mentioned.

Since many DeFi customers have come to anticipate DAI will hold its peg to the greenback, shifting away from this paradigm, even when essential, might come at a big price. With assist each for and towards letting DAI drift from its peg, the controversy over how MakerDAO ought to put together itself for an unsure future will doubtless proceed for a while but. 

Disclosure: On the time of penning this piece, the creator owned ETH and several other different cryptocurrencies. 

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