MakerDAO is a protocol that is quickly gaining traction within the cryptocurrency community, especially as the concept of Decentralized Finance (DeFi) has become somewhat of a hot topic throughout 2019.
Believing that popular digital assets such as Bitcoin and Ether were far too volatile to be used as day-to-day currencies, the team behind MakerDAO created DAI. It is a stablecoin, the value of which is pegged 1:1 to the US dollar. Unlike other stablecoins such as USDT, DAI is completely decentralized.
With a current market cap of around $80 million according to CoinGecko, the cryptocurrency is steadily gaining traction.
During the recent Ethereal conference in Tel Aviv, PlowBitcoin got the chance to discuss Maker’s upcoming developments, as well as the future of Decentralized Finance in general, with Gustav Arentoft, Business Development Representative at MakerDAO.
The State of Stablecoins: What to Expect
According to Arentoft, the majority of stablecoins right now are focused on exchanges. That’s where centralized solutions currently have a bigger foothold.
He also thinks that there’s room for as many stablecoins as people want, as virtually anyone can issue one. However, the question is whether or not a particular stablecoin gains any traction. In order for that to happen, it must overcome a serious challenge: revenue dependency. Arentoft noted:
”A lot of the smaller centralized stablecoins are dependent on the revenue they get for the bank deposit of the currency they issue. They would just have a hard time making revenues. I know some of the smaller ones that already stopped.”
In his opinion, collateralized and centralized stablecoins are “rather generic.” Hence, there’s a need for diversification and differentiation. He pointed to USDC (Circle’s USD-pegged stablecoin) as a project which has done a very good job of providing accessibility through a variety of financial organizations and has managed to create a broad access point for people to get tokens.
Another pressure point in Arentoft’s view is the lack of main net releases:
“What we’ve seen in the decentralized stablecoin space so far is there hasn’t been a lot of main net releases on that front. It’s rather difficult, and we’ve seen some Maker copies or imitations of other blockchains that haven’t gotten any traction. But we’ve also seen some interesting projects like Terra coming out that focuses on e-commerce. […] And, sure, there’s room for a lot of different stablecoins, but they need to be able to differentiate themselves somehow. That’s why I think decentralized stablecoins are different-shaded by default because of the model whereas dollar-backed stable coins are rather generic.“
The Future of Maker and DAI
In a market as dynamic as cryptocurrencies, it was particularly interesting to hear about Maker’s future plans and how it intends to handle future challenges.
First things first: Arentoft noted that DAI in its current form is just a beta version, and the team will be releasing the full version of the protocol – a multi-collateral DAI – later this year. At that point, DAI will also become an interest-bearing stablecoin.
In fact, just today Maker announced that they are ready to launch their Multi-Collateral DAI (MCD) on November 18th. Rune Christensen, CEO of the Maker Foundation asked holders of MakerDAO’s MKR token to cast their votes on November 15th.
USD: Stable or Not?
Arentoft noted that the reason for DAI’s being pegged to the USD is that the latter is the most widely used fiat currency and, arguably, the world’s trade currency of choice. However, Maker is technically capable of being pegged to other currencies.
“We expect to start releasing the first ones of those early next year, probably, and we will do it according to the demand. There will be a governance vote, and we expect the first one to be the euro, the GBP, the Singaporean dollar, and so on.”
He also shared that the team has spent a lot of time on partnerships, protocols, and project integrations. They recently passed 300 integrations, meaning that there are now more than 300 projects, apps, wallets, and DApps that have integrated and use DAI.
Furthermore, once the multi-collateral DAI gets released, the team could peg DAI to a variety of legacy assets, including stocks, bonds, commodities, or even Facebook’s Libra, in a tokenized form. If things go according to plan, DAI could grow its market cap and establish itself as a leader in the field.
Maker is also placing a lot of emphasis on security. Apart from offering very high bounties for those who identify bugs in their smart contracts, the team performs full formal verifications of each smart contract, handled in accordance with the highest security standards within the field of software development. They work with three different security audit firms from different regions, according to Arentoft.
Decentralized Finance (DeFi) and its Role
For anyone following the crypto space closely, it’s clear that DeFi is becoming somewhat of a hot topic.
“We hope to continue to be the market leader and the backbone in the Decentralized Finance market space,” Arentoft states. “We already have some initiatives now oriented to the end consumer, some of the people who don’t necessarily know what a private key is or how to interact with MetaMask. So we hope to be able to break out, and we hope to become one of the most successful financial technology startups, also outside of the crypto space.”
Arentoft noted that in financially and economically-troubled markets such as Argentina, DeFi could provide an alternative, as such situations tend to drive people to be a “little bit desperate.”