For many of us who have been following the MakerDAO project closely over the past few months, the imminent launch of Multi-Collateral Dai has been one that we’ve long waited for. Thankfully, Ethereum’s annual DevCon conference being held in Osaka set the perfect stage for Rune Christensen, founder and CEO of MakerDAO, to announce that MCD will be going live on November 18th.
For those unfamiliar with MakerDAO and what Multi-Collateral Dai is, we encourage you to take the time to read our overview on the project here.
In short, MCD marks a gigantic milestone for the project as the decentralized stablecoin DAI will now be collateralized by a multitude of digital (and perhaps even physical) assets. Furthermore, this announcement marks a design rebrand and a new wave of UX to make onboarding for consumers even that much easier.
Why Does this Matter?
As it stands today, new Dai can currently only be created by using ether (ETH) as collateral. With the upcoming launch of MCD, the system will be diversifying its risk by accepting other forms of Ethereum-based assets as collateral. Not only does this expand the realm of possibilities for different communities to engage with Maker, but it also opens the gates for a new wave of permissionless lending.
During his talk at DevCon, Rune teased the possibility of being able to tokenize your house and using that asset as collateral to mint Dai. This entire process *could* be handled without any interactions with a third party in an entirely permissionless manner.
What to Expect
The first new asset to be supported in MCD is Basic Attention Token (BAT). In the past two months a number of different voting polls went live to signal interest in various digital assets to be used as collateral. In particular, Augur Reputation (REP) and 0x Network Token (ZRX) were the other two assets that received significantly high support (Over 95% “yes” votes for each). As it relates to the upcoming release, Maker will soon be releasing a BAT Risk Report to discuss stability fees related to this specific asset.
Collateral type aside, there are a number of other important features being introduced with the launch of MCD. First and foremost, the upgrade marks the launch of the Dai Savings Rate (DSR), a passive mechanism for Dai holders to earn annual interest by vesting their newly created Dai within a Maker-based smart contract.
“The DSR will not only allow users to earn on Dai held, but will also immediately create an entirely new dimension for innovative Maker protocol integration on the backend of DeFi dapps.”
In DeFi today, Dai is often transferred to a different service such as Compound, dYdX or Nuo when borrowers are looking to lend out their newly minted Dai for interest. Thanks to the DSR, this savings process will be handled in-house, meaning that CDP owners can earn a passive income simply by holding Dai in their wallet. More information on how this process is expected to work was recently posted here.
The Future of Maker
As we reported in a recent article, Maker’s core community seems to be somewhat divided over the future of MCD. In particular, the issue over whether or not to introduce centralized collateral types such as tokenized bonds or stablecoins such as USDC or USDT has been a particular point of contention.
With this being said, Rune’s presentation at DevCon very openly stated that Maker is focused on trying to allow their services to reach as many people as possible. With this in mind, it’s highly likely that Maker will soon expand beyond ERC tokens to assets with much larger capital pools. As such, we can expect the outstanding supply of Dai to drastically increase in the coming years.
For those of us who have watched Maker grow over the past few years, this announcement marks a major checkpoint for Decentralized Autonomous Organizations (DAOs). Whereas this formation has commonly received backlash for the inability to execute on goals and reach milestones on time, it seems that Maker has hit its stride.
Over the next few weeks, users should be on the lookout for additional MCD announcements through MCD-related blog posts. To learn more about MakerDAO, we encourage you to pop in on the Maker Forum to hear where the most recent conversations are being had.
Cooper is a long-time blockchain enthusiast currently working as the managing director for Fitzner Blockchain Consulting. Starting his career in the industry as a project and community manager, Cooper has since expanded his skillset as a CFA Level 1 candidate and recent graduate of Draper’s Hero Training in San Mateo, California. His favorite DeFi projects include Set Protocol and Ren Project with a strong interest in The Block Crypto and Messari.