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- 1 Maker has proposed a $500 million investment strategy to purchase US Treasury bonds.
- 2 MakerDAO allocated $500 million to US Treasury securities as the first step.
The DAI stablecoin is issued by MakerDAO, a decentralized autonomous organization that has elected to increase the amount of money invested in US Treasury securities.
By increasing exposure to tangible assets, the rise in government treasury bond investments is an attempt to diversify DAI’s stablecoin liquid backing (Risk Weighted Assets).
Purchases of Treasury Bonds Approved
If the idea is completely authorized at a later time, Maker’s existing $500 million in Treasury bond holdings will more than double to $1.25 billion.
In October 2022, Maker started buying Treasury bonds as part of a MIP65 enhancement initiative. With the most recent plan, Maker’s ability to invest in liquid bonds is increased along with the debt ceiling for those investments.
The $750 million made available through the proposal, according to Maker, will be used to purchase U.S. Treasury bonds with maturities evenly distributed over six months. This strategy will guarantee that the Treasury bonds mature at a rate of $62.5 million every two weeks.
With 77.13% of the votes in favor and 22.86% voting against the adjustment, the proposal to raise the debt ceiling was approved. Few votes (12 MKR) were cast in abstention, regardless of the outcome.
This final vote is simply an initial count. There will be an executive vote among DAO delegates on the issue. If approved, it will be implemented as a component of a subsequent governance package.
Last year, MakerDAO allocated $500 million to U.S. Treasury securities as the first step in its RWA investment strategy. This was a change from the protocol’s original crypto-native lending strategy. 70% of Maker’s gross revenue in December 2022 came from RWA-based investments, according to the financial statement published earlier in the year.
Cryptocurrency Financing About to Collapse?
The switch of MakerDAO to RWAs coincides with the upcoming boom in crypto-native lending in 2022. This occurred during a one-year bear market in which numerous players filed for bankruptcy and failed on significant debt obligations.
Earlier, Voyager and Celsius, two Centralized Finance (CeFi) lenders, declared bankruptcy. They are not, however, the only ones going through this turbulence; numerous Solana-based crypto lenders also shut down their frontend platforms, raising concerns that the Solana DeFi ecosystem may be doomed.
Both Compound and Aave have made multi-chain modifications to their lending systems available. As soon as staked ether withdrawals are enabled with the completion of Ethereum’s Shanghai upgrade, these platforms are anticipated to play a big role in the liquid staking derivatives market.
Summary
The Treasury bonds will be guaranteed to mature at a rate of $62.5 million every two weeks under this strategy. The motion to increase the debt ceiling was approved with 77.13% of the vote to 22.86% against the change.
A later governance package will include MakerDAO as a technical implementation. As the first step in its RWA investment strategy, it allocated $500 million to U.S. Treasury securities in the previous year. Concerns have been raised about the future of the Solana DeFi ecosystem due to the bankruptcy of two CeFi lenders and the closure of many frontend platforms by Solana-based crypto lenders.
These sites are projected to have a significant impact on the liquid staking derivatives market as soon as staked ether withdrawals are made possible with the completion of Ethereum’s Shanghai upgrade.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
