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

important point

  • Following the Treasury Department’s move to sanction Tornado Cash earlier this month, MakerDAO co-founder Rune Christensen has proposed an “endgame plan” to save DAI from regulatory capture.
  • The plan aims to have MakerDAO lend DAI against real-world assets, accumulate ETH, and eventually turn stablecoins into free-floating assets.
  • The proposal has received support and pushback from members of the MakerDAO community.

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The proposal addresses authoritarian risks to the MakerDAO Protocol and Rune Christensen’s previous concerns about the amount of USDC backing the DAI.

“End Game Plan”

According to Rune Christensen, one of DAI’s co-creators, DAI cannot remain a stablecoin forever.

Shared by MakerDAO co-founder new post At the Protocol Governance Forum on Tuesday, he outlined his thoughts on new plans for the DAI stablecoin to potentially become a free-floating asset in the future.

Proposal titled “Endgame Plan Timeline to Unleash Floating Dai” focuses on lending DAI against real-world assets (RWA) to enhance protocol revenues . It proposes to use the profits from the loan issuance to acquire more ETH and use it as collateral to back DAI. In Christensen’s plans, the degree to which MakerDAO will be successful in accumulating his ETH over the next three years will determine whether DAI should be considered from a dollar peg to a free-floating asset.

The plan includes three different collateral strategies called Pigeon Stance, Eagle Stance and Phoenix Stance, with or without high RWA exposure. As Christensen says, more RWA exposure will help the MakerDAO protocol grow, but it will make it less resilient.

The most generous pigeon stance of the three strategies is MakerDAO’s default stance. Prioritize maximum growth with unlimited exposure to RWA loans. Eagle Stance balances growth and resilience by limiting Maker’s RWA exposure to 25% of all loans. Phoenix Stance is the most conservative, stipulating that protocol will not have a significant impact on his RWA.

Christensen’s plan begins with putting MakerDAO on Pigeon Stance for three years. Here, the protocol seeks to collect as much ETH collateral as possible to make DAI resilient to “authoritarian threats.”

Such threats may include pressure to comply with strict regulations and sanctions from government agencies. This will force centralized stablecoin issuers like Circle to freeze USDC funds held in MakerDAO vaults for non-compliance.Christensen had previously commented MakerDAO’s reliance on USDC could pose a serious threat after the stablecoin issuer froze funds deposited into Privacy Protocol Tornado Cash earlier this month. , if you systematically reach 75% of your decentralized collateral from accumulating ETH while in Pigeon Stance, you can switch to Eagle Stance without Dai becoming free floating.”

However, if MakerDAO fails to hit the 75% decentralized collateral threshold, it might make sense to deviate the DAI from its 1:1 peg to the dollar. No matter what happens, Christensen’s plan stipulates that the DAI will remain pegged to the dollar for at least the next three years. After that, barring an “imminent threat of authoritarianism,” the timeline for turning DAI into a free-floating asset may also be delayed.

MakerDAO and Regulation

the endgame plan wider discussion On the MakerDAO forums, we discuss whether DAI will be forced to abandon the dollar peg in favor of decentralization. Christensen argues that financial regulation is moving toward a “you are for us or you are against us” paradigm, and combined with DAI’s inherent censorship resistance, stablecoins are inevitable. means that it will have to break the peg with the dollar to avoid regulatory scrutiny. It becomes impossible to correspond.

Christensen’s proposal received some backlash. “I disagree that free-floating DAI would help a lot. Why do we still undermine the government’s control over the monetary system when we allow even stable base crypto assets?” I asked MakerDAO member monet-supply. “Tornado Cash has very little exposure to his RWA and is highly decentralized, yet has not been sanctioned. I don’t know if it can be prevented,” he wrote in CodeKnight.

But other MakerDAO members were more in agreement. Christensen’s view. “I am very pleased that MKR’s strong voting power has finally allowed this. said his brianmcmichael. Ultimately, as user SebVentures explained, much of the discussion boils down to business decisions that MKR holders need to make. “On the one hand, we reduce the value of the product (DAI) to increase the odds.[sic] of survival. Conversely, you may take higher regulatory risks to growl,” he said.

Many DeFi users have come to expect DAI to be pegged to the dollar, so moving away from this paradigm, even if necessary, can come at a significant cost. With strong support both for and against letting DAI drift off its peg, the debate over how MakerDAO should prepare for an uncertain future could still continue for some time.

Disclosure: At the time of writing this article, the author owned ETH and several other cryptocurrencies.

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