MakerDAO ($MKR) has raised many eyebrows recently, sparking both curiosity and controversy within the crypto community.
This revered DeFi protocol, known for producing the first decentralized stablecoin that has stood the test of time, might be thinking about leaving Ethereum, its native blockchain.
In the context of its ambitious transformation project aptly called Endgame, MakerDAO is planning on moving all its backend logic to an entirely new blockchain. What’s even more surprising is that this new blockchain will be a fork off Solana, Ethereum’s main competitor that has cumulated its fair share of controversies.
The decision, revealed by MakerDAO’s founder Rune Christensen in a blog post dated September 1, has stirred the crypto community. Ethereum supporters were particularly annoyed, and the blockchain founder Vitalik Buterin publicly expressed regret that the protocol was “torpedoing itself in weird directions”.
He marked the point by selling the remainder of his $MKR tokens, amounting to over $580,000.
MakerDAO is embarking on a new path, offering us a good opportunity to see how some of the finest minds in decentralized finance envision its future.
What is MakerDAO?
MakerDAO is a decentralized lending-borrowing protocol, which allows users to mint the dollar-pegged stablecoin $DAI by depositing a larger amount of $ETH as collateral. The stability of DAI is achieved by over-collateralization and the in-built system of stability fees and automatic liquidations triggered when the collateral price abruptly falls.
As a DAO, or decentralized autonomous organization, the protocol’s decisions are taken collectively via a token-weighted system. However, like many of its fellow DeFi DApps, MakerDAO does grapple with concerns regarding the founder’s influence that some deem excessive.
Launched in 2017, MakerDAO stands as one of the oldest DeFi protocols and the biggest decentralized stablecoin with a $3.8 billion market cap.
Rune Christensen presented the first layout of the Endgame project last year.
In the short term, his ambitions include increasing the DAI supply to over 100 billion.
In the long term, the plan is expected to further develop MakerDAO’s ecosystem, improve governance, and increase scalability and security.
The 5 stages of Endgame include:
- In early 2024, transitioning from Maker and DAI to a unified brand and introducing new tokens
- Launching the first 6 subDAOs to reduce MakerDAO’s workload and decentralize the governance even further
- Introducing governance AI tools and a Purpose Fund that will focus on public AI developments
- Launching governance Participation Incentive using newly issued tokens
- Deploying a new blockchain that will house all backend logic for SubDAO tokenomics and MakerDAO governance security.
To make the transition user-friendly, the ecosystem focus of MakerDAO and its SubDAOs will continue to be Ethereum and its layer-2s, as well as any alternative blockchains that have sufficient markets and user bases. This means that user-facing products and systems will remain on Ethereum and other chains, connected to the new blockchain through "advanced bridges".
The $DAI and $MKR tokens will remain on Ethereum too, at least until the newly issued coins will take over.
Rune’s decision to depart from Ethereum and fork a new blockchain off Solana is likely to be a sensible loss for the former and a reputational win for the latter.
Indeed, Solana’s many outages and its close relations with the defunct exchange FTX have marked public opinion in the past, but Mr. Christensen's praise of its codebase could change the narrative.
So, why Solana? According to the MakerDAO founder, the Ethereum Virtual Machine was not “ideal” for Maker’s specific needs, and Solana’s technical base, which he holds in high regard, appeared more suitable. He added that the Solana ecosystem has “proven its resilience by having gone through the FTX blowup” and that there are existing instances where the forked Solana codebase has been successfully adapted to act as appchains.
Ethereum is still the undisputable king of smart contract platforms, and a point can be made that MakerDAO user base has primarily more allegiance to this blockchain. What’s more, Vitalik’s attitude and his recent attention to the DeFi protocol Reflexer Finance could only precipitate user outflow.
This young competitor of MakerDAO has recently seen Vitalik paying a visit to its Discord channel and encouraging the community to adopt Ethereum staking derivatives (such as stETH) as collateral.
Despite controversies, however, the prospect of reimplementing the protocol on a new stand-alone blockchain could allow MakerDAO to grow and exploit its potential to the fullest.
Written by D.Center