Coinbase has thrown a wrench into MakerDAO’s plans to lessen its reliance on USD Coin collateral, and it may force the DeFi stalwart to change major elements of its strategic growth plan.
On Wednesday, Coinbase proposed that MakerDAO deposit 1.6B USDC in its institutional platform, called Prime, in exchange for an annual yield of 1.5%. If passed, the deal would provide Maker with an additional $24M in yearly revenue.
MakerDAO is a collateralized debt protocol that allows users to mint its DAI stablecoin against collateral assets deposited into the protocol. It initially exclusively supported ETH as collateral, but has since expanded to support more than a dozen different assets.
USDC currently comprises more than a third of its $9.3B total value locked, according to Daistats.
The proposal comes amid a big push by Rune Christensen, the founder of MakerDAO, to retool the protocol’s model and adapt to a number of challenges, including the U.S. government’s sanction of Tornado Cash and fears more sanctions in the industry could sink stablecoin providers like MakerDAO.
Coinbase’s plan to split USDC yields with Maker could undermine Christensen’s plan by making the protocol reliant on the centralized stablecoin for revenues.
Christensen, who remains an influential voice even though he no longer has an executive role at Maker, called on it to float DAI against the dollar and minimize its reliance on USDC and real-world asset collateral over the coming years.
Christensen hopes the move will protect Maker after Centre, the consortium behind USDC, blacklisted 38 wallets holding 75,000 USDC after Tornado was sanctioned.
“Three years is the longest we can go before we have to be ready to accept seizure of all centralized collateral,” Christensen said on Maker’s Discord channel. He advocated for the project to float DAI and cap its exposure to real-world assets at 25% by 2026.
“We need people to leave who value 1:1 peg more than decentralization because it is not safe for users like that to stick with DAI long [term],” he continued. “They should hold USDC, because then they aren’t at risk of blanket blacklist, which we now know means losing your money with no real chance of recovery… We can’t wait forever [to depeg] now that the precedent of illegally using sanctions has been set.”
Coinbase’s proposal has already divided MakerDAO’s members, with some suggesting Christensen’s strategy should be ignored in light of the juicy yield on offer.
One wing liked it. Adcv of Maker’s strategic finance core unit threw their support behind the proposal, stating that Maker’s balance is currently highly underinvested to the detriment of “the protocol’s ability to take risks and its attractiveness as a stablecoin.”
Stop the Chatter
“With this [proposal], the puzzle pieces start to fall into place,” they said.
Psychonaut of Immunefi, a bug bounty platform, also expressed support for the proposal, posting “can we stop all this chatter about offboarding and belt-tightening already?”
Tosh9.0, a community member, took aim at Christensen’s roadmap to unwind its exposure to USDC. “There are many of us who think Rune’s efforts to be the DAO CEO are misguided and are tired of the senseless drama he creates,” Tosh9.0 said.
Yet another wing pilloried the Coinbase proposal.
Doo_Nam, a MakerDAO delegate, warned that accepting the offer could be “short-sighted” and highlighted that protocol revenue “should benefit the MKR holders first as they are also the ones that take up the loss if the system malfunctions.”
Chris Blec, an outspoken delegate, slammed the proposal, asserting that Maker’s USDC poses “an existential threat to DAI… that needs to be eliminated ASAP.”
“Moving the USDC to Coinbase will add yet another regulatory attack vector that the DAO needs to worry about,” he continued. “A vote for this proposal is a vote to place the entire fate of DAI and MKR in the hands of Coinbase, a publicly-traded corporation that does not have aligned interests with the not-so-decentralized MakerDAO.”
Mint, Burn or Withdraw
Other forum-goers requested further details regarding the proposed legal structure for the deal.
Maker’s Core Growth Unit negotiated the proposal with Coinbase. Maker would not have to pay any custody fees on the USDC. The capital would not be locked up, with Maker able to mint, burn, or withdraw USDC in less than six minutes at any time.
The proposal comes roughly one week after a preliminary governance vote closed in support of Maker reducing fees on its ETH, WBTC, RenBTC, WstETH, MANA, and CRVV1ETHstETH vaults to promote increased DAI minting backed by its least centralized collateral assets. An executive vote is still required to implement the changes.
Real World Assets
MakerDAO also continues to expand its backing from real-world assets despite Christensen’s calls to limit such. On Sep. 5, Huntingdon Valley Bank, a 151-year-old Pennsylvania bank, drew down 25M DAI from its 100M DAI vault, which Maker governance approved in July.
On the same day, the project launched Maker Teleport on Optimism and Arbtirum, which allows users to mint DAI on the Layer 2 chains. The deployments each have an initial debt ceiling of 1M DAI.