DeFi

Maker Wishes To Enable MKR Collateral To Be Used To Borrow Stablecoin DAI

The crypto community on Twitter is buzzing over Maker’s plans to allow MKR collateral to be used to borrow stablecoin DAI.

The developers propose to introduce a new application for MKR as collateral for DAI loans in documents developed for Maker‘s “Endgame Plan,” the DeFi protocol that administers the stablecoin DAI. The “Endgame Plan” is a plan for a total revamp of Maker that was announced in mid-2022 and adopted by the MakerDAO community in October, with the most significant change being the partition of the protocol into sub-DAOs with tasks. Produce the matching token individually. Endgame was launched by the Maker team, lead by creator Rune Christensen, to identify a new path for the project after a lengthy period of confronting several issues that threatened the project’s survival and stability. DAI is both a maker and a stablecoin.

Another significant shift is the possibility of DAI becoming a truly decentralized stablecoin, with its value floating and no longer dependent on the $1 threshold. Someone did note out, however, that under the new tokenomics section for MKR, Maker has announced its desire to introduce a new purpose for the currency, which is as collateral to borrow DAI. So far, MKR has been running smoothly on Maker as a governance token and an asset for dealing with bad debts. Furthermore, a portion of the transaction fees received by DAI Vaults will be utilized to purchase and burn MKR tokens.

The crypto community on Twitter reacted negatively to the new feature almost immediately after the aforesaid information was published. Most think that Maker should not do this if he does not want to increase the volatility of DAI’s stablecoin. According to their logic, because MKR is a governance token, using it as collateral and subsequently borrowing DAI would increase the danger of liquidation during market fluctuations, leaving MKR sensitive to purchases. Cheap admission, followed by governance suggestions that undermine the protocol.

Someone even went as far as to accuse Maker of purposefully establishing a means for investors who have a lot of MKR to convert MKR to DAI “quietly” without having to immediately release it to the market, encased in the pretense of “helping to boost the supply of DAI and increase the use of MKR”. Some have even compared MKR’s new tokenomics to the “end of the road” of the notorious LUNA-UST model.

Despite of the cryptocurrency market’s early 2023 resurgence, MKR has witnessed minimal positive volatility, owing in part to the coin’s poor usefulness and low total supply to 1 million MKR), although it has a large market capitalization (725 million USD).

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

   

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