Endgame Plan limits RWAs in favor of crypto collateral for DAI
MakerDAO on Monday passed a governance proposal that ratifies a “Constitution” which proponents argue will make the second-biggest DeFi protocol and issuer of the Dai stablecoin more resilient against censorship.
The proposal, which passed with 76% support, includes measures for MakerDAO to increasingly decentralize DAI collateral, allow the stablecoin to free-float relative to the dollar, and improve the protocol’s governance. MakerDAO co-founder Rune Christensen laid out the measures last year in an overhaul called the “Endgame Plan.”
The approved plan is a significant strategy shift for one of DeFi’s largest and longest-standing protocols. While in the past years the lender had prioritized the incorporation of real-world assets and fiat-backed stablecoins, the Endgame Plan will bring the protocol closer to its roots – DAI was initially only backed with ETH. A more decentralized collateral base for DAI is even more relevant today, as crypto faces increased regulatory scrutiny.
“The Endgame Era charts a restructuring proposal for the DAO and outlines a path for MakerDAO and DAI to achieve maximum levels of simplicity, decentralization, and resilience,” MakerDAO said in a statement.
The plan will enable MakerDAO to expand its money market investments in the short term and increase protocol revenue.
By utilizing this revenue, MakerDAO aims to implement a mechanism to buy decentralized collateral, such as ETH and staked ETH, to reinforce the DAI backing, ensure its stability and maximize its level of decentralization in the long term, according to MakerDAO.
The plan will limit real-world asset collateral, which results in the need to allow Dai to free float as “excess demand for Dai may not be able to be met with additional supply backed by fully decentralized assets such as ETH,” Rune wrote in an August post.
Maker significantly expanded the complexity of its operations in recent years, partnering with businesses specializing in real-world assets (RWAs) to generate revenue, including from its collateral reserves.
Maker’s $1.45B RWA portfolio now includes $1.25B in treasury and bond holdings, which nets around 4.5% or $56M in annual profits for the protocol.
MakerDAO is an over-collateralized debt protocol allowing users to mint its decentralized stablecoin, DAI, against deposited assets. DAI is the fourth-largest stablecoin with a circulating supply of $5.1B.
SubDAOs and Tokens
The new Maker Constitution also paves the way for MakerDAO to reorganize into multiple subDAOs with distinct governance jurisdictions and their own native tokens.
The Constitution spans 11 “constitutional articles” and 12 “scope frameworks” outlining the core objectives of the Endgame Plan.
While the proposal passed with 76% voting “yes,” participating voters mobilized only 18.4% of MKR’s circulating supply in the poll.
Christensen, who is also the former CEO of the now-dissolved Maker Foundation, is rumored to control at least 10% of MKR’s supply. Christensen has also faced criticism for allegedly allocating his tokens to governance delegates who vote in alignment with his views.
Maker community members previously criticized Endgame’s preliminary governance vote, claiming that Christensen allocated nearly three-quarters of the votes cast to governance delegates supporting the proposal. The proposal passed with 80% support.
0xf6547…da5d, the wallet believed to be controlled by Christensen, allocated 65% of all votes cast in the latest governance proposal across eight different delegates. The delegated MKR represented a whopping 85.5% of votes supporting the Maker Constitution, meaning the proposal would not have passed without Christensen mobilizing his holdings.
Endgame Plan Background
Christensen first proposed the Endgame Plan in May. The proposal sought to address the problems associated with Maker’s increasingly complex operations, such as poor governance participation and competing interests within the protocol’s ecosystem.
In August he updated the plan to protect against the possibility of a regulatory clampdown after the U.S. Treasury Department added crypto mixer Tornado Cash to a list of individuals or entities U.S. nationals can’t transact with. The news sent shockwaves across the MakerDAO ecosystem, with Christensen speculating that American regulators could also move to sanction contracts associated with Maker.
“If we get nuked by the U.S. government, we simply die,” Christensen said.
USDC represented one-third of Maker’s collateral assets at the time, igniting concerns that DAI could become undercollateralized in the event of a broader clampdown on USDC, which is backed by dollars held in bank deposits. That scenario became closer to reality this month when USDC fell below its peg after one of the banks it used to store the stabelcoin’s collateral failed.