MakerDAO, the largest DeFi lender by total value locked, could soon allow another Ether derivative as collateral on its network.
As a decentralized autonomous organization, or DAO, the proposal to add rETH was put to a vote among holders of MakerDAO’s governance token, MKR. People holding almost 41,000 MKR voted in favor of the proposal, while those holding 22,000 MKR voted in opposition.
The next and final step is a so-called “executive vote.” If the proposal passes the executive vote, rETH will be added as collateral in the MakerDAO network.
When it was originally proposed, in March of last year, rETH was in testnet, according to AmethystWizard, who authored the proposal on the MakerDAO governance forum. It went live on mainnet in November, and quickly became the second-largest liquid staking provider for Ethereum as measured by total value locked.
“Now it is live and so people are hoping to use it in DeFi as collateral,” they wrote in December.
MakerDAO accepting a token as collateral instantly adds utility to the digital asset by enabling holders to take out loans against it. For MakerDAO, it means it is able to diversify the pool of assets backing DAI, as well as expand the potential market cap of the stablecoin.
Rocket Pool is a liquid staking protocol, offering customers an opportunity to stake their Ether and secure the Ethereum network in exchange for its rETH token. Each rETH token represents one ETH, and can be redeemed for ETH after the network completes its transition to the proof-of-stake consensus mechanism.
In the meantime, rETH (just like the embattled stETH) can be used as if it were ETH in DeFi protocols to generate a yield greater than what users can expect from staking alone.
The vote came amid concerns over a competing liquid staking solution, Lido, and its stETH token. Lido’s stETH recently started trading below Ether, and on Friday was at 93 cents to every dollar of ETH. Some market observers have said there’s little to fear from the stETH de-peg, assuming Ethereum’s transition to proof-of-stake is successful; others are worried of collateral damage in the markets should stETH continue its slide relative to ETH.
rETH would be the 11th collateral type accepted in MakerDAO. USDC accounts for the largest chunk of deposits, followed by wrapped Bitcoin and Ether. MakerDAO holds $7.8B in its smart contracts, according to data from Defi Llama.
Supporters and opponents referenced stETH when making their case after voting on the proposal opened earlier this week.
Feedblack Loops LLC was the single most powerful entity to vote for rETH’s addition, with more than 12,000 MKR and almost 20% of the voting power. They argued in favor of the proposal in the MakerDAO governance forum, saying it would help diversify MakerDAO’s collateral.
“With stETH causing a panic recently, we need to onboard different staked ETH derivatives,” they wrote. “rETh also seems more in line with decentralization and have been growing to hit the minimum line for the 5 mil. Would love to see a team pledge of a larger rETH vault to solidify growth of this asset type.”
ACREinvest, the fifth-most powerful voter, with more than 6,000 MKR and almost 10% of the voting power, said it was an inappropriate time to add rETH as collateral.
“ACREinvest cannot support adding to the backlog at this time with increased exposure to a staked ETH product in the current environment,” they wrote in the governance forum. “Also cautious due to the current specter of contagion from failure/insolvency of large forced sellers across the ecosystem.
Rocket Pool celebrated the news on Twitter Friday.
“This is a massive milestone for $rETH and @Rocket_Pool!” it tweeted. “We would just like to thank $MKR holders for their dedication to the future of @MakerDAO and Ethereum.”