Gemini has submitted a proposal on the MakerDAO forum to boost the adoption of the Gemini dollar (GUSD) stablecoin in the latter’s ecosystem by paying a fixed yield on the GUSD balance in MakerDAO’s vaults.
Gemini co-founder Tyler Winklevoss submitted the proposal on Thursday, detailing a three-month marketing incentive plan.
The proposal seeks to grow the volume of the GUSD balance in the MakerDAO PSM, which is currently at about $24 million based on this Dune Analytics dashboard. PSM refers to the peg stability module that allows users to mint DAI by swapping any MakerDAO-accepted collateral. The PSM is also useful for maintaining DAI’s peg to the U.S. dollar.
As part of the scheme, the proposal states that Gemini will pay a fixed annual interest of 1.25% on the total GUSD in the PSM vault. The annualized fixed rate will be evaluated and paid on a monthly basis. A condition of the payment is that the average GUSD balance in the vault is more than $100 million on the last day of the month. The GUSD volume in the vault rising to $100 million means that users are depositing GUSD to mint DAI.
The proposal stated that Gemini will credit MakerDAO in GUSD once every month for a three-month period. This incentive will require Maker to create a new entity that will be issued an account with Gemini to receive the payments. The Maker entity will also have to go through know-your-customer verification processes. MakerDAO’s governance can also choose to move the funds from this entity to its treasury.
This incentive scheme will not, however, alter the administration of the GUSD-PSM vault. As such, Gemini will not move custody of the GUSD from the PSM vault to its own platform. “
We recognize the importance of the PSM in securing Dai redemptions and we believe keeping it on-chain is the best way to fulfill that task,” the proposal stated.
The Winklevoss proposal described the scheme as an experiment. Gemini says it will review the results of the process and decide if it wants to renew the partnership.
The Maker governance system will have to conduct a vote to accept or reject Gemini’s initial proposal. If the DAO approves the proposal, it would create an opportunity for Maker to earn yield on its balance sheet.
Issues regarding revenue generation for Maker have been brought to the forefront in recent times. Pseudonymous community member adcv, a member of Maker’s strategic finance core unit. hailed the proposal, stating: “For the level of liquidity that a GUSD PSM leaves for Dai redemptions, Gemini is offering a very compelling incentive to hold as much of the PSM in GUSD as we can.”