Crypto
MakerDAO: Changes Are Coming (Cryptocurrency:MKR-USD)
It has been said by some within the crypto ecosystem that crypto’s “killer app” is actually stablecoins. Stablecoins are essentially fiat-denominated tokens that live on public blockchain network rails. The two largest stablecoins in the crypto market are Circle’s USD Coin (USDC-USD) and Tether (USDT-USD). There are many ways that stablecoins can be utilized within the crypto ecosystem. When interests rates were zero, market participants could utilize stablecoins for lending and yield generation. Elsewhere, stablecoins are used for payments.
As we saw in March when the banking sector was stressed, stablecoins were not immune from counterparty risk in the world of traditional finance. Several stables, including USDC, lost their dollar pegs as collateral backing those stablecoins was held with some of the regional banks that were impacted by depositor outflow problems. However, there are stablecoins in the market that aim to be decentralized and crypto-collateralized rather than fiat-backed. One such coin is DAI (DAI-USD). With a $4.7 billion market cap, DAI is the largest crypto-collateralized stablecoin by far. DAI is managed by the MakerDAO (MKR-USD) protocol.
In this article, we’ll dive into the token-economics of MKR, the key metrics concerning DAI, Maker’s proposed “Endgame,” and highlight some concerns.
MKR Tokenomics
Maker was launched in 2015 by Rune Christensen. The protocol is the engine that drives DAI. The MKR token plays an important role in the DAI ecosystem. MKR is both the governance token of the protocol and token holders take the fees that are paid by borrowers of DAI. MKR’s token supply is just over 1 million coins and those coins are all in circulation according to CoinMarketCap:
- Total Token Supply: 1,005,577
- Circulating Supply: 977,631 (97%)
- Token Price: $730
- Market capitalization: $714 million
- Circulating Market Cap Rank: 60
Unlike many other coins in the cryptocurrency market, MKR never had an ICO or public token offering. That said, the MakerDAO protocol has received roughly $55 million in venture capital funding through the years from entitles like a16z and Polychain Capital among others.
There is a very high level of token concentration with MKR and we’ll explore that more in the concerns section. Purely from a supply standpoint, Maker does have a token burn mechanism when a user creates a loan. This means MKR is theoretically a deflationary token that should ultimately move higher in price provided the protocol is generating fees. And therein lies the problem:
Over the last year, fees in the Maker protocol have declined by 74%. Though I will admit that fees in June will end at the highest level in the last 12 months. This fee spike is due in part to a recent change to the savings rate of DAI.
DAI Collateral & Key Metrics
As a concept, I really like DAI. However, in reality, DAI has struggled with truly being censorship resistant. Fiat-backed stablecoins are freezable by the contract owner. This theoretically isn’t a problem for stablecoins that are sufficiently decentralized, but DAI has historically been highly reliant on fiat-backed stablecoins like USDC:
As recently as mid-March, over 68% of MakerDAO collateral was held in stablecoins. That figure is now closer to 30%. Over the last several months, there has been a clear shift in prioritizing RWA, or real world assets, as collateral backing.
About $167 million of those assets are held through BlockTower and Huntingdon Valley Bank. However, the largest RWA bucket by far is over $1 billion held in US Treasuries (reflected by MIP65). As I alluded above, June has been a strong month for fees for the Maker protocol.
A big driver of that fee spike has been a recent proposal to raise the “DAI Savings Rate,” or DSR, from 1% to 3.49%. As a result of that proposal, funds in DSR have increased from $100.7 million at the start of June to over $173 million as of article submission on June 23rd. The payout funds from the DSR would come from the RWA revenue held as collateral.
Centralization Concerns
Maker has a whale problem. Despite being one of the largest and most important protocols in all of DeFi, there is very little interest in holding MKR from retail. Just 18 whale addresses hold 57.6% of the MKR in circulation and 88 investor addresses control 27.4%.
This is problematic because it means an entity that is supposed to be a “decentralized autonomous organization” is closer to a centralized entity that it would probably like. Maker is currently experiencing one of the problems that many DAOs experience: participation. Most DAOs in the crypto ecosystem don’t have active communities voting on every proposal. I touched on this briefly in a Uniswap (UNI-USD) article in mid-June. Only 17% of the MKR is staked in the governance contract. And this is actually down from roughly 22% in April. Basically, MKR holders aren’t voting and decisions are being determined by just a few people.
The Endgame Plan
In May, Rune Christensen proposed the “5 phases of Endgame” plan in the MakerDAO forum. It is a long, but interesting read that I will try to briefly summarize before providing my thoughts.
- Phase 1: Rebrand and new token launch.
- Phase 2: Launch of 6 “SubDAO” entities.
- Phase 3: AI governance tools
- Phase 4: Governance participation incentive.
- Phase 5: New chain launch.
Christensen from the post:
The new brand, the new websites and the names of the new tokens are being developed by the Accessibility governance process, and will be revealed before Phase 1: Beta Launch. The goal will be to simplify the brand towards the basic stablecoin product and highlight its unique value proposition: The ability to farm tokens of DAOs powered by AI Governance.
There is a lot to digest from all of this. I’m not even going to touch on the “AI” component but I’m not surprised we’re seeing it show up in crypto roadmaps and I’ll just leave it at that. It’s important to note that even after Phase 5 is theoretically finalized, DAI and MKR will continue to function as currently designed and can be used to redeem the new tokens from Phase 1. In listening to interviews with Christensen through various media outlets, he appears to be concerned with branding and centralization in my view. For me, the launch of “SubDAO” groups is a bit of a head-scratcher since the participation in the current DAO structure is already so low.
I think incentives for participation, or paying people to vote, is a dangerous avenue to go down and doesn’t necessarily prioritize good outcomes over simply creating outcomes. But I think the biggest problem from all of this is that Maker is so dependent on a small amount of people. I suspect shifting the attention of those people so dramatically to another coin, chain, and DAO structure will not be good for Maker long term.
Summary
Currently, the investment case for MKR is that holders can govern the platform and generate revenue from protocol fees. As I see it, those fees are becoming increasingly linked to yield from US Treasuries. One then would have to wonder why the user can’t simply buy the debt direct and keep all of the yield. From where I sit, MakerDAO is at a crossroads and I suspect Rune Christensen knows it.
The optics here aren’t great, in my opinion. We’ve seen cryptocurrency projects rebrand in the past. Polygon (MATIC-USD) and Elrond/MultiversX (EGLD-USD) are two examples. Despite their rebrands, they kept using the same tokens. In a lot of ways, the MakerDAO Endgame plan feels like a bit of a Hail Mary pass. DeFi worked wonderfully when the US 2-year was at the floor. Times are different now and I think that’s why we’re seeing MakerDAO proposing and implementing drastic changes. I don’t think it’s going to end well.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
Crypto
Is The Bitcoin Price Correction Over? Here’s The Support Level To Watch
The Bitcoin price suffered significant bearish pressure over the past week, dragging down alongside it a large portion of the general crypto market. The premier cryptocurrency tumbled as low as $59,500 at some point in the week — its lowest in nearly two months.
While investors will be hoping that the worst is over, it is difficult to determine whether BTC is ready to resume its bullish run. In any case, a prominent crypto intelligence firm has identified a price level critical to the future trajectory of the Bitcoin price.
$56,000 The Ultimate Support Level For Bitcoin: CryptoQuant
In a recent report, the blockchain analytics platform CryptoQuant put forward an interesting prognosis for the price of Bitcoin over the coming days. According to the firm, the $56,000 price level is an important level to the future performance of the premier cryptocurrency.
The relevant indicator here is Metcalfe price valuation bands, which pinpointed resistance levels and tops in the previous cycle. However, as shown in the chart below, these bands (the red line) acted as a critical support area in May.
For context, the Metcalfe Law states that the value of a network is proportional to the square of the number of its users. Basically, this law suggests that the value of the cryptocurrency (Bitcoin) is intrinsically linked to the size and activity of its network.
The Metcalfe price valuation bands are derived from this principle, providing a valuation framework associated with the network effect. These bands create a range of price levels that evaluate where Bitcoin should theoretically trade based on the network fundamentals.
Historically, these bands have acted as both reliable resistance and support levels in different market cycles. In recent months, the $56,000 level has been a pivot point for the indicator, providing a strong support for the Bitcoin price in May.
According to CryptoQuant’s report, the price level might prove to be vital should the premier cryptocurrency face additional downward pressure. However, if the Bitcoin price dips below this level, the market leader could experience a major correction.
Bitcoin Price At A Glance
As of this writing, the Bitcoin price has returned to around the $60,700 mark, reflecting a 2% decline in the last 24 hours. The coin’s performance on the weekly timeframe is deeper in the red.
According to data from CoinGecko, BTC is down by more than 6% in the past week. Nevertheless, the cryptocurrency ranks as the largest asset in the sector, with a market capitalization of over $1.18 trillion.
Crypto
Earning Cryptocurrency with Minimal Investment: A Comprehensive Guide
1. Harnessing the Power of Referral Programs
Let’s kick things off with a strategy that leverages your network: referral programs. Cryptocurrency exchanges and platforms often offer lucrative rewards for bringing new users on board.
- KuCoin Affiliate Program: Earn up to 60% of trading fees from referrals.
- Trezor Affiliate Program: Earn up to 15% in commission for each referral.
- Koinly Affiliate Program: Earn up to 40% in commission for each referral.
2. Searching for Crypto: The Presearch Revolution
Enter Presearch, a decentralized search engine that rewards users with its native token, PST.
- Earn 0.25 PST per search
- Daily cap of 8 PST
- At the time of writing, 1 PST is valued at $0.02
3. Putting Pen to Paper (or Fingers to Keyboard)
If you’ve got a way with words, platforms like Publish0x offer an intriguing opportunity.
- Write blog posts on various topics
- Earn crypto tips from readers
- Even readers can earn a slice of the advertising revenue
4. Shop ‘Til You Drop (and Earn Crypto)
Turn your retail therapy into a crypto-earning opportunity with platforms like:
- Lolli: Earn up to 30% back in cash or Bitcoin at over 1,000 stores
- StormX: Provides Crypto Cashback ranging from 0.5% to 87.5% at various online retailers
5. Learn and Earn: Education Pays Off
Platforms offering “Learn and Earn” programs:
- Coinbase: Earn up to $200 worth of free crypto
- Binance
- Phemex
- CoinMarketCap
6. Engage with Crypto Communities
- Forecaster: Create content and interact with others, earning crypto tips and rewards
- BountyCaster: Post and redeem bounties for completing specific tasks or achievements
7. Sign-Up Bonuses: Free Crypto for Joining
- CoinSmart: Get 15 CAD worth of Bitcoin for signing up and verifying your account
- Crypto.com: $25 bonus when you stake at least $400 worth of CRO
8. Crypto Betting Bonuses
In the realm of cryptocurrency, even online betting platforms are getting in on the action. “Crypto betting bonuses explained” is a term you might come across when exploring this niche. These bonuses are incentives offered by crypto-friendly betting sites to attract new users or retain existing ones.
Types of Crypto Betting Bonuses
- Welcome Bonuses: Often a match of your first deposit in cryptocurrency.
- No Deposit Bonuses: Free crypto to bet with, no deposit required.
- Reload Bonuses: Rewards for subsequent deposits.
- Cashback: A percentage of losses returned as crypto.
When diving into crypto betting bonuses explained, it’s important to note that these offers often come with terms and conditions, such as wagering requirements or time limits. Always read the fine print and gamble responsibly.
Important Considerations
- Bonuses should not be the sole reason for engaging in online betting.
- Prioritize responsible gambling practices.
- Be aware of the risks involved in both cryptocurrency and online betting.
- Terms and conditions may vary significantly between platforms.
Remember, while crypto betting bonuses can seem attractive, they are ultimately marketing tools designed to encourage betting. Always approach such offers with caution and a clear understanding of the associated risks and requirements.
Crypto
21Shares files for permission to offer ETF linked to cryptocurrency Solana
By Suzanne McGee
(Reuters) – Digital assets investment management firm 21Shares filed Friday for permission from U.S. regulators to launch an exchange-traded fund tied to the spot price of crypto token Solana.
It was the second such filing in as many days, following a similar move Thursday by VanEck. The Securities & Exchange Commission approved spot bitcoin ETFs offered by both firms, among others, in January after a long battle. Both VanEck and 21Shares are among the asset managers awaiting SEC approval to launch spot ETFs tied to the price of ethereum, the second-largest cryptocurrency.
The CBOE, the exchange on which both asset managers plan to list Solana ETFs if approved, must still request regulatory approval to change its rules and allow these new products to trade. People involved in the Solana discussions, who declined to be identified because of the confidentiality of the process, said that filing could come within days or weeks. A spokeswoman for CBOE declined to comment.
A third asset manager, Canada’s 3iQ, filed earlier in June for permission from Ontario regulators to list a similar Solana-based product on the Toronto Stock Exchange. Solana is the fifth-largest cryptocurrency measured by market capitalization, according to CoinGecko.
The three filings have combined to drive the price of Solana 9.4% higher in the last seven days, even as the prices of bitcoin and ether dropped 4.6% and 2.8% respectively, according to CoinGecko.
So far, however, no futures contracts on Solana trade on the CME, in contrast to the pattern with both bitcoin and ether. The SEC approved futures-based ETFs tied to both tokens before considering the spot products.
The existence of futures contracts, however, “should not be the sole criterion for ETF eligibility,” said Andrew Jacobson, head of legal at 21Shares.
(Reporting by Suzanne McGee; Editing by Cynthia Osterman)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibilty for its content.
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