MakerDAO co-founder Rune Christensen’s “bold” decision may backfire due to several technicalities. One such concern is raised in a report highlighting the impact of Christensen’s ‘Endgame Plan’ on defi platforms. On 3rd October, 2022, Crypto Risk Assessments released a report pointing out the key potential outcomes of MakerDAO’s changes impacting the famous defi platform of Curve Finance—3pool.
Curve Finance’s 3pool uses three prominent stablecoins across the platform including USDT and USDC along with DAI. The Ethereum based exchange liquidity provider uses these stablecoins and generates opportunities for defi yield. 3pool is among the most popular yielding farms of the platform known for providing efficient trading and arbitrage of stablecoin.
According to the report, a sudden drop in DAI price is likely to bring situations for traders to use 3pool in order to leave their DAI positions. Eventually leading to significant growth of MakerDAO’ stablecoin. However, this would also result in Arbitrage bots reducing the other two stablecoins within the pool and pushing DAI for accumulation.
Endgame Plan to Encourage Regulatory Resilience
In August, 2022, Rune Christnsen came up with a plan to make the network more resilient to the potential pressure from regulations. The hints of regulations were seen in the wake of sanctions against Tornado Cash by the US Treasury Department. Chritensen said such situations only create two ways—one of compliance and other of decentralization.
MakerDAO co-creator is in the support of network choosing resilience and decentralization. However, there are high chances of DAI stablecoin going through a major impact. And this would create a ripple effect across the defi sector given its dependency over the stablecoin.
In a nutshell, the Endgame Plan proposed by Christensen is to turn DAI into a free-floating asset. In its initial phase, the stablecoin will have backing of real-world assets (RWA). Then for the following three years, DAI will be pegged to the US dollar and lastly the stablecoin would move away from its peg to the greenback.
Unwanted Impact on DeFi protocols
Christensen has a pure motive to make the protocol resilient to crypto regulations—if there will be any. The free-floating DAI would have a huge impact over the defi protocols though. For instance, 3pool might need to go through restructuring in case of DAI becoming free-floating. Currently, the liquidity pool holds assets with 861 million USD divided into all the three stablecoins.
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