MakerDAO Dai Borrowing Cost Increase May be Good News for MKR Holders
Also, Snapshot governance tool gets boost, Set Protocol launches Index Coop, while PieDAO releases DeFi+L index.
|Oct 7, 2020||3|
Hello Defiers! Here’s what’s going on in DeFi:
MakerDAO raises stability fees
DeFi’s favorite governance tool gets a boost
Traders are about to get an explosion of DeFi index baskets to choose from
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MakerDAO has casually reintroduced stability fees for the ~$900M worth of DAI now in circulation.
Maker’s MKR holders voted to raise the protocol’s stability fee —similar to interest rates for Dai borrowers— to 2% for ETH collateral from 0%, the highest since January.
The reintroduction of stability fees sets Maker on track to capture roughly $27M in annualized earnings, according to research firm Messari.
Image Source: Ryan Watkins, analyst at Messari
In Maker, stability fees are paid in MKR (or DAI then used to buy MKR) and then burned. This pseudo-buy back mechanism was designed to stimulate demand for MKR as the supply of DAI grows.
However, despite DAI growing from 100M DAI to nearly 900M DAI over the span of the past 6 months, no stability fees were captured as the protocol sought to incentivize Dai borrowing as it recovered from Black Thursday.
MKR performance reacted accordingly, with the token price hovering around $400 as other major DeFi tokens like SNX, LEND and UMA showcased over 1000% returns over the same time period.
2% to 50% Fees
Stability fees for Maker’s thirteen supported assets range from 2% on ETH to 12% on MANA. USDC-B, a secondary bucket for USDC-collateralized DAI for when USDC-A hits its debt ceiling, has a stability fee of 50%.
More Flexible Approach
The reintroduction of stability fees also comes with a more aggressive stance to move faster in line with changing market demand, including an executive proposal to take a more flexible approach to collateral onboarding.
Taking a quick glance at the Maker governance dashboard, the cadence of projects looking to be listed as collateral has never been higher.
Despite a cool off in the wider DeFi yield farming rush, it appears that DAI is continuing its trajectory as the space’s defacto stablecoin, a fantastic sign for DeFi’s poster child project.
Off-chain voting solution Snapshot got a stimulus boost thanks to $200k in funding from Aragon and Balancer yesterday afternoon.
Both teams have pledged $100k in their native tokens, ANT and BAL, into a 50/50 Balancer pool to be used by Snapshot for future funding.
Aragon 🦅 @AragonProjectToday, we are announcing that @BalancerLabs and Aragon will be working together on taking @SnapshotLabs to the next level ⚡️ Our shared long-term vision for it: a governance standard for tokenholder voting, and a common good for the community 🗳 https://t.co/e9kdRwRw3d
At a time when an increasing number of DeFi teams are aiming to give up control to their communities, Snapshot has turned into the most used solution for minimum viable governance, leveraged by projects from Yearn Finance to social tokens like COIN. It allows users to signal their vote on proposals using token weight without paying gas fees.
Aragon and Balancer are also teaming up to enable on-chain voting to Snapshot, giving teams the ability to ratify off-chain decisions formally.
“On-chain settlement is one of the most anticipated features for Snapshot” Snapshot founder Fabien told the Defiant. “Until now we've seen many projects rely on a multi-sig to execute a proposal on-chain. With Aragon Agreement plugin it will be possible to bind a proposal from Snapshot to real on-chain consequences without trusted parties.”
Aragon, a platform to create DAOs, is working to integrate Aragon Agreements into Snapshot, providing an easy way to ratify votes for Aragon-based projects on-chain. Balancer, an on-chain liquidity and asset management protocol, was the first to utilize the MVP of Snapshot.
The intent is to create “a governance standard for tokenholder voting, and a common good for the community,” stated the announcement post, the likes of which are still being iterated on. Still, this announcement signals that Snapshot has struck a chord with the DeFi community, one that many projects are likely to follow in the coming months.
Set Protocol is doubling down on the success of the DeFi Pulse index by launching a new project - the Index Coop - focused on creating accessible crypto indexes.
Tokensets, a platform for users to purchase sophisticated trading strategies in the form of ERC20 tokens called Sets, recently deployed the DeFi Pulse Index (DPI), a basket of top DeFi assets. The token’s market cap has grown to $2.5M since its September 14th launch, making it the top Social Trading Set on the platform.
Now, Set Protocol will continue its relationship with DeFi Pulse to incubate the Index Coop, “a global cooperative to launch and maintain the worlds best crypto index vehicles,” according to a Medium post.
The project features a native governance token, INDEX, 1% of which was retroactively airdropped to DPI holders. INDEX governance will include adding new indexes, managing a community treasury, updating fee configurations and enhancing indice performance, according to the post.
As new indexes are gradually rolled out, the Index Coop will funnel the 70% community allocation of INDEX through a DPI liquidity mining campaign which started today for DPI/ETH liquidity. Here’s a look at the full breakdown of the token supply.
Set Protocol’s Index Coop comes just as PieDAO launches its own DeFi token basket, DeFi+L. The index includes the seven largest DeFi tokens, COMP, AAVE, UNI, LINK, MKR, SNX and YFI, which are weighed by market cap. The protocol automatically rebalances as prices fluctuate and there’s a maximum cap of 25% per token.
Despite both being slightly different in nature, we’re now seeing a strong push towards accessible indexes as a means of giving new users more passive access to different sectors in one easy to purchase asset.
The Graph, an indexing protocol for querying blockchains, today announced it is creating a foundation to further decentralize governance. The Graph Foundation, led by Eva Beylin, will help coordinate and support thousands of indexers, curators, delegators, and developers in the project’s ecosystem.
Ethereum wallet Dharma yesterday announced it is implementing limit orders, which allows users to specify the price at which they want to execute a trade. The feature supports any ERC20 pair on Uniswap, or around 4 million pairs.
Covalent, a blockchain data querying service, said it raised $3.1M in funding co-led by investors Woodstock Fund, 1kx Capital and Mechanism Capital. Other investors include AU21, Brilliance, TRGC, Alameda and CoinGecko. New funding will be used to advance product and market development to cement, Covalent said in a blog post today.
Mika Honkasalo of The Block has a great compilation of DeFi-related charts.
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About the founder: Camila Russo is the author of The Infinite Machine, the first book on the history of Ethereum, and was previously a Bloomberg News markets reporter based in New York, Madrid and Buenos Aires. She has extensively covered crypto and finance, and now is diving into DeFi, the intersection of the two.