MakerDAO – the lending protocol behind the popular DeFi stablecoin, Dai – is hosting an executive poll to add wBTC as a collateral type, lower the USDC stability fee to 0%, and introduce a suite of Maker Improvement Proposals (MIPs) to further distribute governance.
The Maker Foundation Interim Governance Facilitator has placed an Executive Vote proposal into the voting system to:
🟡Add WBTC as a Collateral Type
⬇️Lower the USDC Stability Fee from 6% to 0%
☑️Officially ratify the initial 13 MIPs and 2 Subproposals
More info below 👇
— Maker (@MakerDAO) May 1, 2020
With the introduction of Multi-Collateral Dai back in November 2019, we’ve seen a handful of new collateral types beyond ETH supported by the protocol. This includes BAT which was added with the inaugural launch of MCD, USDC which was added in an effort to stabilize the Maker system following the events of Black Thursday in March of 2020, and likey next, wBTC. For those unfamiliar, wBTC is a wrapped version of Bitcoin on Ethereum backed 1:1 by a reserve of BTC. WBTC leverages a consortium model for custody of Bitcoin, relying on a handful of prominent DeFi projects like Kyber Network, Ren Protocol, and BitGo to name a few to hold, mint, and burn the underlying assets.
The likely addition of wBTC into the Maker ecosystem reinforces the emerging trend of BTC and DeFi. In the past few months, we’re seeing more and more options for bringing BTC over to DeFi and vice versa. Most notably, we saw the launch of tBTC this week which enables a trustless mechanism for porting over BTC to Ethereum (check out our interview with Founder Matt Luongo). The launch of tBTC is seen by many as an improvement over wBTC as tBTC is a trust-minimized design that aligns with the core ethos of DeFi and crypto at large. What’s interesting here is seeing the Maker ecosystem elect to support the consortium version of BTC the same week that a version of trustless Bitcoin is coming to Ethereum.
With that said, it’s widely known among the Maker community that the protocol will soon vote to support tBTC. For now, the protocol behind Dai will wait for the model to be battle-hardened over the next few months as tBTC garners some initial liquidity and traction. The broader trend here is Maker’s push to diversify the pool of assets collateralizing DAI. Given the recent events of Black Thursday and Dai sitting idle above its peg of $1, MakerDAO has been quick to diversify the risk of Dai’s asset pool to other uncorrelated assets. This is most apparent with the introduction of USDC. By introducing USDC into Maker, there’s a rather interesting dynamic with the assets collateralizing Dai. On one hand, there’s ETH which represents a trustless asset with significant volatility. The other major collateralized asset is USDC – a trusted asset with significant stability. These two assets represent a perfect balance on each side of the trust and volatility spectrum, bringing much-needed uncorrelation to Maker’s stability protocol. Feel free to listen to this POV Podcast with Founder Rune Christiansen on the importance of diversifying Dai’s asset pool.
USDC + MIPs
In addition to adding WBTC as a collateral type, Maker governance is also voting on a few other changes with the proposal. Most notably, Maker is considering dropping the USDC stability fee from 6% down to 0% – putting it in line with the other assets supported by the protocol. This change is meant to encourage the creation of more Dai by lowering the barriers to entries for USDC token holders. While USDC is slowly becoming more vibrant in DeFi, Dai continues to have a lead in terms of its composability, giving users an easy way to access Dai leverage by holding USDC in a Vault.
Lastly, MKR holders are also voting to officially ratify the first 13 MIP proposals. As part of Maker’s transition towards self-sustainability, the Maker Foundation has implemented 13 proposals to facilitate this process and ensure the longevity of the protocol at large. These MIPs essentially set the foundation for the community to take control of important decisions like listing new assets and handling emergency shutdowns among other important parameters.
For those interested in learning more about what these 13 proposals include, feel free to reference the governance poll here.
Bitcoin in DeFi
The addition of BTC into the protocol represents another effort to diversify the risk of the Dai collateral. While having BTC as a collateral type on Maker should help with risk diversification as well as increasing economic bandwidth, there’s currently less than $10M in outstanding wBTC in circulation. At the current minimum collateralization ratio of 150%, this represents a maximum of $6.4M in new DAI available to hit the markets if all wBTC is locked in Maker (Roughly ~5% of the DAI in circulation).
While the likely addition of wBTC presents a new collateral type for Maker, the implications may be minimal as the economic bandwidth available from wBTC is rather limited relative to the value locked in Maker today. However, we’ll be keen on reporting how the community responds to the new collateral type in the coming future.
In the meantime, stay up on all things Maker via their official Twitter.
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Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.