Is MakerDAO, the No. 1 DeFi protocol, about to be broken up?
That’s what is at stake in a flurry of votes taking place this week in the collateralized debt platform. Its members are deciding whether to spin off a number of operating units, including the Real-World Finance Core Unit, which directs its strategy of soliciting lending business from TradFi partners.
So far, members are overwhelmingly voting for the creation of new, separate units called MetaDAOs. Voting has been underway for one week, and will close after another seven days.
This is a big moment. The wholesale restructuring of a venture as influential as MakerDAO does not come lightly. Yet the protocol, which boasts a TVL of $7.4B, is wrestling with one of the most challenging problems in DeFi — how do you efficiently run and grow a cooperative organization that lives on a blockchain?
And right now, the community is making a big call on how to strike a balance between the imperatives of business and the values of DeFi. Other ventures are watching MakerDAO’s experience quite closely.
Rune Christensen, MakerDAO’s co-founder and the former CEO of the Maker Foundation, is driving these potential changes. He laid out much of his plan in Endgame, a roadmap published in May.
Christensen criticized the decentralized governance that underpinned MakerDAO since its foundation was dissolved in July 2021. Christensen said voter apathy and competing interests hinder Maker’s ability to manage complex financial agreements.
To remedy the situation, Christensen proposed spinning out several of Maker’s core units into MetaDAOs. Each MetaDAO would launch its own token and be overseen by voting committees that operate independent of Maker’s broader DAO-based governance process.
Adopting the MetaDAO structure would enable Maker’s core units to develop and pursue their own growth strategies without being hindered by competing factional interests within the vast MakerDAO community.
In particular, Christensen asserted decentralized governance is holding Maker back from forging more integrations with institutions and businesses operating with real-world assets. “The governance processes and political dynamics that have developed in Maker fundamentally aren’t compatible with the reality of effectively processing complicated real-world financial deals,” he said.
A poll proposing to hive off Maker’s Real-World Finance Core Unit has attracted near unanimous support, with more than 99.9% of votes supporting the move. If passed, the Real-World Finance unit would be overhauled into a MetaDAO, separating its activities from the DAO that governs Maker.
Members are also weighing two other proposals to offload Maker’s Events Core Unit and Strategic Happiness Core Unit, with both polls attracting 90% support on Monday.
The Events Core Unit is tasked with organizing MakerDAO-branded events and ensuring the project has a physical presence in crypto conferences. The Happiness Core Unit is responsible for promoting community engagement through memes, merchandise, and online content creation.
MakerDAO is a collateralized debt protocol that permits users to mint its stablecoin, DAI, against deposits. The project recently expanded its revenue streams by partnering with projects and institutions dealing with real-world assets such as corporate debt.
Although Christensen previously praised Maker as “the best developed real-world asset pipeline in the industry,” he now fears that excessive RWA exposure could leave the project vulnerable to regulatory attacks following the U.S. Treasury Department’s crackdown on Tornado Cash.
The sanctions resulted in Centre, the consortium behind the centralized stablecoin USD Coin, blacklisting 38 wallets associated with Tornado Cash that held 75,000 USDC. With USDC representing more than a third of Maker’s total value locked, Christensen urged Maker to scale down its exposure to centralized assets and make plans to float DAI against the dollar.
But while Christensen’s reactionary plan attracted support from many in the MakerDAO community, the project has since resumed heading down a path of greater interdependence with centralized assets.
A poll proposing Maker deposit 1.6B USDC on Coinbase Prime to earn an annual yield of 1.5% currently has 80% support. The community is also showing early backing for a proposal from Gemini offering to pay a 1.25% yield to Maker provided the protocol holds more than $100M worth of the GUSD stablecoin. Maker’s Strategic Finance and Growth core units were instrumental in negotiating the proposals.
Maker also began making moves towards investing $500M into U.S. treasuries and corporate bonds earlier this month, and approved a $100M DAI vault for Huntingdon Valley Bank, a 151-year-old financial institution, in July.
While Christensen’s position on real-world assets appears to be inflaming functional divides within the Maker community, a MakerDAO representative told The Defiant Maker’s co-founder is now a community member like any other and that his proposals are subject to the usual governance process.
“Although he was the founder in his previous role, Rune is a community member like any other member of the DAO,” they said. “His comments in social channels are not official statements or plans of action. They have to be put through a lengthy proposal and governance process (like any other suggestion) to be a possibility.”
However, with the current proposals to spin several of Maker’s core units into MetaDAOs attracting community support, it appears likely that much of Christensen’s vision for restructuring the project could shape MakerDAO moving forward.