🌐Maker Protocol: An Investigation into the $3 Billion TVL DAO, 💻 Deploy Nodes with Ease: SuperNoderz Simplifies Node Management ,🔍 Web3 Domains Are Now Directly Searchable on Google 🕵️♂️
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In today’s edition:
Deep Dive into Maker Protocol
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Total Read Time: 9 Min 25 Seconds
🔎 Deep Dive
Maker Protocol: An Investigation into the $3 Billion TVL DAO & Stablecoin's True Motives
Welcome to our Deep Dive section, where we examine the cutting-edge technology behind Web3 infrastructure. Today, we'll delve into one of the most popular and widely used decentralized finance (DeFi) protocols - MakerDAO. With over $3 billion in total value locked, MakerDAO stands tall among its peers, offering a unique solution for creating stablecoins and managing risk.
But what sets MakerDAO apart, and how does it work under the hood? In this deep dive, we'll explore the inner workings of MakerDAO, discuss its advantages and challenges, and examine the latest developments and proposals to improve the platform's functionality and sustainability.
So buckle up and join us on this journey as we dive deeply into the intriguing world of MakerDAO!
Here is How Everything Started. (History & Founders)
MakerDao was founded by the visionary entrepreneur Rune Christensen, who launched the smart contract associated with DAI in the Ethereum blockchain in December 2017. Despite Ether being the only cryptocurrency valid as collateral and losing 80% of its value during the first year, DAI remained stable. MakerDAO's success was further cemented with a $15m investment from the prestigious venture capital firm Andreessen Horowitz, which bought 6% of the total MKR Tokens back then.
In 2018, the Maker Foundation was established in Copenhagen with the sole purpose of maintaining the project. However, an internal dispute arose the year after when Christensen proposed using goods other than cryptocurrencies as collateral, which would integrate Maker with the traditional financial system. This conflict of interests led to the resignation of Andy Milenius, the CTO of MakerDAO at that time.
By the end of 2019, the MakerDAO platform allowed using other cryptocurrencies as collateral besides Ether. However, in March 2020, numerous cryptocurrencies were significantly devalued, leading to a surge in transactional activity on the Ethereum blockchain and causing network congestion and a massive spike in gas prices. As a result, the Oracle failed to refresh correctly, and several vaults were liquidated. There was a scarcity of keepers to participate in the liquidity auctions, leading to unchallenged auctions selling ETH for nearly nothing. To avoid a larger loss of collateral, people sought DAIs to close those vaults, and the demand for stablecoins surged. For a brief moment, the price of Dai increased to $1.20 USD.
To rectify the situation, new MKR tokens were issued and auctioned to obtain sufficient DAI to clear the debt of the affected vaults, and USDC was added as collateral.
The last significant event occurred in 2021 when it was announced that the Maker Foundation had dissolved, making MakerDAO entirely decentralized. This decision was made because Christiansen believes that the DAO is self-sufficient and the global community is accountable for every protocol aspect.
Here's how MakerDAO works🤔
MakerDAO’s operation initially centered on ether, allowing users to deposit ETH to generate the DAI stablecoin. As the protocol expanded, it broadened its scope to accept various ERC-20 tokens for obtaining the DAI.
DeFi users need to lock up a different cryptocurrency as collateral to access crypto-backed loans. Each crypto loan is repaid in DAI, and the entire process is overseen through a Collateralized Debt Position (CDP) mechanism.
A CDP is a loan agreement between the user and the decentralized application (dApp). It is usually ratified using smart contracts – bits of computer codes that carry out preset commands.
The CDPs are tasked with creating (minting) new DAI tokens once a preset amount of another digital asset has been deposited as collateral.
The digital assets are locked as CDPs in MakerDAO’s Vaults until the debt is resolved. Once the original loan amount is paid back, the initial digital asset is repaid to the user’s crypto wallet.
CDPs are easily accessible, and anyone can create one. Upon establishment, the received DAI can be used for trading, hedging, purchasing other cryptocurrencies, or earning yields on other DeFi-supported protocols.
In the event of DAI loss and non-repayment, the CDP faces liquidation, prompting the protocol to sell the deposited collateral to cover the outstanding debt.
What is DAI, and how does it work?
DAI is a stablecoin that employs a hybrid mechanism to maintain its peg to the USD. Underlying assets, automated mechanisms, and external actors back it. Every DAI token in circulation is backed by an equivalent amount of ETH held in MakerDAO smart contracts, also known as collateralized debt positions (CDPs). However, it is important to note that the value of ETH in the CDPs must always be greater than the DAI being released to ensure over-collateralization. The amount of DAI tokens released depends on the CDP's collateral-to-debt ratio. Users can borrow Dai up to 66% of the collateral's value, which equals a collateralization ratio of 150%.
In extreme market volatility, the Target Rate Feedback Mechanism (TRFM) dampens the volatility and provides liquidity during demand constraints. The MakerDAO protocol emulates what is traditionally referred to as monetary policy done by central banks.
The Maker protocol is designed to ensure enough collateral to back all the DAI tokens in circulation. Should a user wish to withdraw locked collateral, the user has to repay the Dai owed in the CDP, including the accrued stability fee associated with the debt. The required Dai and MKR tokens must be sent to the CDP to cover the debt and stability fee (in MKR tokens) and retrieve the collateral.
The MakerDAO system has key external actors elected by the MKR token holders responsible for debt and collateral auctions, feeding accurate price data, and acting as liquidators if the Dai system meets catastrophic failure. These external actors include keepers, oracles, global settlers (emergency oracles), and Maker community members. Keepers carry out liquidations of undercollateralized debt positions and benefit from the economic incentives offered by the protocol. Oracles and global settlers are external actors who provide oracle services, while Maker community members provide ecosystem services like community management.
The Current Project Update of Maker Protocol
The latest Executive Vote has been approved. MKR holders and delegates use their voting power to deploy the changes if they support them. As a result, the changes detailed below have been implemented within the Maker Protocol on March 29th, 2024, at 14:00 UTC.
Stability Fee (SF) Changes
Decrease the ETH-A SF from 15.25% to 13.25%.
Decrease the ETH-B SF from 15.75% to 13.75%.
Decrease the ETH-C SF from 15% to 13.00%.
Decrease the WSTETH-A SF from 16.25% to 14.25%.
Decrease the WSTETH-B SF from 16% to 14.00%.
Decrease the WBTC-A SF from 16.75% to 14.75%.
Decrease the WBTC-B SF from 17.25% to 15.25%.
Decrease the WBTC-C SF from 16.50% to 14.50%.
SparkLend D3M Update • Increase the SparkLend D3M Maximum Debt Ceiling by 1.0 billion DAI from 1.5 billion DAI to 2.5 billion DAI.
D3M to Spark DAI Morpho Vault (DIRECT-SPARK-MORPHO-DAI) Deploy the Spark DAI Morpho Vault with the following parameters:
D3M DC-IAM Parameters
Maximum Debt Ceiling (line): 100 million DAI
Target Available Debt (gap): 100 million DAI
Ceiling Increase Cooldown (ttl): 24 hours
Debt Write-off Timelock (tau) (Defines the time to elapse before debt can be written off after a D3M has been caged): 7 days
D3M Addresses
oracle: 0xA5AA14DEE8c8204e424A55776E53bfff413b02Af
plan: 0x374b5f915aaED790CBdd341E6f406910d648fD39
pool: 0x9C259F14E5d9F35A0434cD3C4abbbcaA2f1f7f7E
operator: 0x298b375f24CeDb45e936D7e21d6Eb05e344adFb5
Additional actions: The DIRECT_MOM Breaker will be extended to include the Morpho D3M, enabling governance to deactivate vault functionality through an executive spell without waiting for the GSM Pause Delay.
Dai Savings Rate (DSR) Change • Decrease the DSR by 2% from 15% to 13%
Smart Burn Engine (SBE) Parameter Updates • The hop (frequency) parameter will be decreased by 7,884 seconds from 19,710 seconds to 11,826 seconds • The bump (lot size) parameter will be increased by 25,000 DAI, from 50,000 DAI to 75,000 DAI
Approve HVBank (RWA009-A) Dao Resolution • HVBank (RWA009-A) Dao Resolution with IPFS hash QmStrc9kMCmgzh2EVunjJkPsJLhsVRYyrNFBXBbJAJMrrf will be approved.
The current market of MakerDAO (MKR)
MakerDAO's crypto, MKR, serves multiple purposes within the MakerDAO ecosystem:
Governance Token: MKR is MakerDAO's governance token, allowing token holders to participate in the platform's decision-making process. This includes voting on protocol updates, changes to the collateral ratio, and the types of assets that can be used as collateral for minting DAI.
Stability Mechanism: In times of market panic or when the system is under-collateralized, MKR tokens can be minted to increase the collateral value backing DAI temporarily. This mechanism helps maintain the DAI's stability by ensuring enough collateral to cover the minted DAI, even in volatile market conditions.
Partial Ownership of MakerDAO: MKR tokens represent partial ownership of the entire DAO, which is crucial for community governance and decision-making. This ownership stake gives MKR holders a say in the future direction of MakerDAO and its policies.
As of 30 March 2024, the live MKR price is $3,741.39, with a 24-hour trading volume of $145,566,644 USD. We update our MKR to USD price in real time. Maker is up 6.01% in the last 24 hours.
Here are some additional statistics:
Market Cap: $3,459,189,146 USD
Trading Volume in the last 24 hours: $137,191,488 USD
CoinMarketCap ranking: #40
Circulating Supply: 924,494 MKR
Total Supply: 977,631 MKR
Max Supply: 1,005,577 MKR
Fully Diluted Market Cap: $3,763,213,121
The Highest Price: $6,292.31 - May 03, 2021 (almost 3 years)
The Lowest Price: $168.36 - Mar 16, 2020 (about 4 years)
Total Staked & Delegated MKR
Current Vote Weights for all users
Total value locked (TVL) in DeFi, March 2024. Source
According to ambcrypto:
In 2024, MKR's price is expected to range between $3161.67 and $4742.50, with an average of $3952.08.
The price is predicted to be around $3044.81 in 2025, with a range from $2435.85 to $3653.77.
The price for 2026 is expected to be $4202.06, ranging from $3361.65 to $5042.47.
By 2027, MKR's price is anticipated to be $5799.14, ranging from $4639.32 to $6958.97.
These are just predictions and should never be considered financial advice. Always do your due diligence before investing in cryptocurrencies. Various factors, including market trends, technological advancements, and the regulatory environment, can influence the future value of MKR.
MakerDAO: The Unstable Stablecoin Platform?
MakerDAO offers several advantages and unique features that set it apart from other platforms:
Decentralized Stablecoin: MakerDAO introduced Dai, a decentralized stablecoin that is not issued or administered by any centralized actor. This makes Dai unbiased and borderless, accessible to anyone, anywhere 1.
Multi-Collateral System: The Maker Protocol supports multiple collateral types, allowing users to generate Dai using various Ethereum-based assets approved by MKR holders. This flexibility enhances the system's resilience and adaptability.
Governance by MKR Token: MKR holders govern the Maker Protocol through a system of scientific governance, involving Executive Voting and Governance Polling. This ensures the protocol's stability, transparency, and efficiency.
Reliable Oracles: MakerDAO was the first project to run reliable Oracles on the Ethereum blockchain, providing up-to-date price data for decentralized applications. This has led to increased trust and adoption of MakerDAO's Oracles.
Economic Empowerment: MakerDAO aims to deliver on the promise of economic empowerment by unlocking the power of the blockchain. It has become a key player in the DeFi movement, with hundreds of partnerships and a strong developer community.
Transparency and Security: All Dai is backed by a surplus of collateral escrowed in audited and publicly viewable Ethereum smart contracts. This transparency allows anyone to monitor the health of the system at any time.
Global Accessibility: Dai can be used by anyone, anywhere, without restrictions or personal-information requirements. This global accessibility is a significant advantage for users worldwide.
Collateralized Debt Positions (CDPs): The original system allowed users to generate Dai using Ethereum (ETH) as collateral through CDPs. This innovative approach to collateralization was a precursor to the multi-collateral system.
MKR Token: The MKR token plays a crucial role in MakerDAO's governance, with voting power proportional to the amount of MKR staked. This mechanism ensures that the protocol is managed by its users.
DAO Teams: MakerDAO employs DAO teams, consisting of independent market actors, to provide specific services to the ecosystem. This flexible governance model allows the community to adapt to real-world performance and emerging challenges.
Like any other project, the MakerDAO has its disadvantages and challenges that users may face. Here are some of the main ones:
Reliance on Ethereum Blockchain and Centralized Assets: MakerDAO's reliance on the Ethereum blockchain and centralized assets like USDC introduces risks. The volatility of Ethereum's transaction fees and potential for congestion can affect the performance and usability of the protocol. Additionally, regulatory changes could impact the stability and legal status of MKR tokens, posing a risk to the protocol's operation.
Complex Governance and Risk Management: The decentralized governance model of MakerDAO, where MKR token holders can propose changes and participate in governance, is powerful but also complex. It requires active engagement and understanding of the protocol's mechanisms, including liquidations and risk management strategies. This complexity can be a barrier for new users and those not familiar with DeFi concepts.
Dependence on Centralized Collateral: The use of centralized collateral, such as USDC, introduces another layer of complexity and vulnerability. If regulatory winds change, the stability of the entire MakerDAO system could be at risk. This dependence on external assets for collateralization can also affect the protocol's resilience and security.
Market Volatility and Dai's Stability: MakerDAO has faced challenges with Dai's value not tracking the U.S. dollar exactly, especially during periods of extreme market volatility. This indicates that the protocol's mechanisms for maintaining Dai's stability are not always perfectly functioning. While MakerDAO has implemented systems to minimize future risk, these instances highlight the ongoing challenges in maintaining Dai's peg to the U.S. dollar.
Composability and Liquidity: While MakerDAO's composability and integration into other projects are strengths, they also present challenges. The open-source nature of the protocol allows for rapid development and integration, but it also means that the protocol must constantly adapt to changes and updates in the DeFi ecosystem. Additionally, while Dai's integration into other projects has increased its liquidity, ensuring liquidity remains a challenge for any DeFi project.
Stagnation in Adoption: Despite efforts to expand DAI's use cases, it struggles to compete with established stablecoins like USDT, leading to a limited momentum for growth.
Challenges in SubDAO Program: Developing viable subDAO projects that align with market demands while adding value to DAI and MKR tokens is complex. Existing projects like Spark struggle to achieve significant Total Value Locked (TVL).
Low Stablecoin Reserves for Purchasing RWA: MakerDAO faces challenges in acquiring yield-generating assets due to low stablecoin reserves. This limits its ability to invest in US Treasuries and exposes it to potential losses if forced to offload assets to meet DAI redemptions.
Sustainability of Costs and Governance Issues: The decentralization efforts outlined in the Endgame Plan lead to increased complexity in governance and higher operational costs. Centralized governance issues, exemplified by significant voting control from Maker's founder Rune Christensen, raise concerns about fund distribution and transparency.
Fee Increase: MakerDAO has voted to approve a proposal to increase the stability fee for collateral assets such as ETH and WBTC, with the adjusted fee ranging from 15% to 17.25%. Also, increases in DAI stability fees deter users from borrowing and lending through MakerDAO, potentially hindering DAI's scale and adoption.
Conclusion
In conclusion, MakerDAO is a pioneering force in decentralized finance (DeFi), offering innovative solutions to challenges faced by traditional financial systems. Its advantages include the creation of Dai, a decentralized stablecoin, the flexibility of a multi-collateral system, transparent governance via the MKR token, and a commitment to economic empowerment and global accessibility.
However, MakerDAO is not without its challenges. Reliance on the Ethereum blockchain and centralized assets, complex governance structures, and occasional volatility in Dai's stability are among the hurdles it must navigate. Additionally, issues such as market stagnation, liquidity concerns, and sustainability of costs and governance pose ongoing considerations for users.
In the competitive landscape, MakerDAO faces rivals such as Angle, QiDao, Overnight USD+, Davos Protocol, Ramp, etc. Each project has unique strengths and focuses, making the storage industry dynamic and highly competitive.
Ultimately, the choice to engage with MakerDAO rests with individual users. They must weigh the advantages and disadvantages, considering their risk tolerance, investment goals, and belief in the project's long-term viability. MakerDAO's commitment to transparency, community governance, and continuous improvement provides a foundation for users to make informed decisions about their involvement in the ecosystem.
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Web3 Domains Are Now Directly Searchable on Google
Summarized: Google has added Ethereum Name Service (ENS) data to its search results, thanks to a partnership with Etherscan, allowing users to easily find information about ENS addresses and their associated wallet balances. It has also expanded its crypto-related features, including a countdown to the Ethereum Merge event and the inclusion of cryptocurrency coin trusts in its advertising policy.
Google, the tech giant, has now included Ethereum Name Service (ENS) data in its search results with the help of data from Etherscan. Brantly Millegan, a former member of the ENS core team, discovered this update and shared the news.
Cointelegraph verified the feature by testing it with ENS addresses, including Vitalik. eth, which belongs to Vitalik Buterin, the co-founder of the Ethereum blockchain network.
The displayed result showed the address particulars, such as Ether balance and the time of the latest transaction. The data was collected from the Ethereum block explorer Etherscan.
Ethereum Name Service allows complex wallet addresses on the internet to be used in the exact way domains are used.
For example, instead of complex numbers, you get an ENS address like yourname.eth, which you can easily share. This is similar to quickly accessing websites directly through domains instead of IP addresses.
Initially, users could search for a specific public address and view the wallet balance directly in the search results. This functionality has now been expanded to ENS domains.
In 2022, Google integrated a crypto feature enabling some Ethereum wallet addresses to have their Ether balances tracked by the Google search engine, saving the need to make the trip to Etherscan.
The feature was first made public by a principal at Google Ventures, Han Hua, in an Oct. 11, 2022 post.
In addition, the firm also initiated a countdown to the Ethereum Merge event in 2022 by featuring animated pandas moving in sync. In 2023, Google revised its crypto advertising policy to include “Cryptocurrency Coin Trusts.” These products enable investors to trade shares in trusts holding digital assets.
Consequently, Bitcoin exchange-traded fund (ETF) products from notable asset managers like BlackRock now appear in search results for queries like “Bitcoin ETF.”
On Feb. 5, ENS announced a partnership with domain registrar GoDaddy, which allows the Web3 community to link their .eth names (domains) to traditional Web2 domains at no extra cost.
The GoDaddy-ENS partnership eliminates the barrier of high gas fees that previously dissuaded users from bringing domain names over to ENS. ENS enabled the cost-free transition by deploying new smart contracts for resolution.
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