Report: The Current Status of MakerDAO's Ecosystem and Potential Variables

Written by: Jake Pahor

Compiled by: Frank, Foresight News

MakerDAO is a revenue-generating machine that continuously prints money to create wealth, regardless of market conditions.

This article is the latest research report on MKR from October 2023.

The Maker protocol allows users to obtain loans by using their crypto assets as collateral, and it works as follows:

1. Users deposit collateral (approved ERC tokens);
2. Mint stablecoin DAI according to the collateralization ratio;

DAI is currently the largest decentralized stablecoin, pegged to the US dollar.

Use cases for DAI include:

• Decentralized assurance of financial independence;
• Users can generate currency autonomously;
• Automatic savings rate (DSR);
• Fast, low-cost remittances;
• Maintaining stability in volatile markets;

Additionally, DAI can be used in certain scenarios to pay for gas fees in the Ethereum ecosystem, improving the onboarding experience for new Web3 users.

Currently, MakerDAO's TVL is $4.5 billion, the lowest level since January 2021, down 78% from the all-time high set in December 2021.

Although this downward trend is concerning, MakerDAO still ranks fourth among all DeFi protocols (total TVL).

In the past 30 days, MKR generated $10.7 million in revenue. When annualized, this figure reaches $130.7 million, ranking it seventh among all protocols.

MakerDAO's fees and revenue primarily come from the interest paid by borrowers on the platform.

The MKR token has two main uses:

• Governance;
• Capital restructuring resources;

In addition to its governance role, MKR can also be used for system capital restructuring.

This means that if the Maker system's debt exceeds its surplus, the supply of MKR tokens may be expanded through debt auctions.

Thus, this risk encourages MKR holders to self-regulate and responsibly manage the MakerDAO ecosystem to mitigate excessive risk-taking.

This also means that the supply of MKR may fluctuate based on debt capitalization.

Here are the current supply statistics:

• Circulating supply = 901,000 MKR;
• Total supply = 977,000 MKR;
• Maximum supply = 1,000,000 MKR;
• Market cap = $1.27 billion;
• FDV = $1.4 billion;
• Market cap / FDV = 0.9;

The crypto assets in the MakerDAO treasury include:

• $49.61 million in stablecoins;
• $800,000 in BTC and ETH;
• $122.38 million in native token MKR;

This means the MakerDAO treasury holds a total of $172.39 million (including native token MKR), which ranks 11th among all protocols according to DefiLlama data.

At the community governance level, anyone can submit proposals for voting in MakerDAO, but only MKR holders have the right to vote on changes to the Maker protocol.

The process consists of two phases:

• Proposal voting
• Execution voting

These two steps ensure that MakerDAO carefully considers decisions before the final vote.

In 2014, MakerDAO launched on the Ethereum blockchain and has since become one of the largest DeFi applications, co-founded by Rune Christensen and Nikolai Mushegian.

DAI is now also one of the most widely used stablecoins.

In multiple token sales, Maker raised a total of approximately $54.5 million:

• On December 16, 2017, raised $12 million, with participation from Andreessen Horowitz and Polychain Capital;
• On April 23, 2019, raised $15 million, funded by a16z Crypto;
• In April 2019, raised $27.5 million, with participation from Paradigm and Dragonfly Capital;

MakerDAO has become a clear market leader in the category of collateralized debt positions (CDP), although it now faces competition from emerging protocols like Liquity and Lybra Finance.

Meanwhile, in the stablecoin competition, other established DeFi players, such as Curve and AAVE, have also launched stablecoins like crvUSD and GHO.

In terms of security audits of the protocol, Maker has completed security reviews by several well-known auditing firms, including:

• Trail of Bits (security review of smart contracts);
• PeckShield (traditional audit);
• Runtime Verification (model for verifying system logic);

Overall, I am very optimistic about the MakerDAO and DAI ecosystem, and here are some upcoming positive factors:

1. Launch of Sub DAOs;
2. Spark Protocol;
3. RWA narrative;
4. 5% annual interest rate on DSR;
5. Token split;
6. Rebranding;