To boost the protocol’s low-risk extra return, $500 million of the money now used to collateralize the Dai stablecoin will be transferred to corporate and U.S. Treasury bonds.
What is the present situation?
In DAI’s $9 billion collateralization pool, USD Coin (1), a stablecoin backed by cash and short-dated U.S. securities, makes up most of the collateral. Additionally, with a ratio of 134.87%, DAI (2) is now over-collateralized. Although fixed-income investments have a low rate of return, because of their consistent income stream and the fact that they are compensated before equity shareholders in the event of bankruptcy, they have historically been regarded as a haven for traditional investors during bear markets. Yesterday’s announcement steers DAI away from recent remarks made by MakerDAO co-founder Rune Christensen on August 27, who suggested de-pegging DAI from USDC and converting it into a fully decentralized coin out of concern for governmental crackdowns.
What is going to happen?
The Maker Protocol’s regulatory body, MakerDAO, has started converting $500 million of its collateral reserves for the crypto Dai into short-term U.S. Treasury and corporate bonds. With $160 million going to the U.S. Treasury iShares ETF (IB01) and $240 million going to the U.S. Treasury iShares ETF from BlackRock, 80% of the $500 million will be invested in short-term U.S. Treasuries. Following an executive vote by Maker token holders, the decentralized autonomous organization decided on October 6 to authorize a pilot transaction of $1 million. The remaining money will shortly be transferred after community approval.
What about MKR holders ?
The MKR (3) holders chose the asset allocation, with 68,250 MKR representing 57.67% of the voting pool choosing the 80-20 split. MakerDAO has pushed the proposal to diversify the holdings currently used as collateral for DAI while enabling the DAO to deploy unspent money and give the Protocol more income without putting the DAI peg or MakerDAO’s solvency in unnecessary danger.MakerDAO uses the stablecoin DAI to enable the decentralized finance protocol to lend money to users so that the repayable amount may be protected from the volatility frequently observed in cryptocurrency markets.
