MakerDAO, the governance token behind the fourth-largest stablecoin by market capitalization DAI, saw a 37% drop in trading volume and a 3.7% drop in token price over the past 24 hours.

Manufacturer 24 hour volume
(Source: Coin Market Capitalization)

The move follows important changes proposed to Maker’s governance structure.

Following last year’s Tornado Cash sanctions, MakerDAO co-founder Rune Christensen warned of a similar fate for decentralized stablecoin platforms.

In Christensen’s view, government authorities were bound to target MakerDAO sooner or later. A move that prompted the introduction of an endgame plan to bolster censorship resistance.

Makers end game proposal It aims to power a decentralized finance (DeFi) platform running on the Ethereum blockchain, where users are backed by cryptocurrency collateral with stability maintained by platform governance and native tokens (MKR). create and trade stablecoins.

MakerDAO Announces Endgame Tokennomics

The new system proposes splitting the DAO into smaller units called MetaDAOs. Each has a different token and purpose, limits the centralized assets backing DAI to 25%, and introduces negative interest rates to reduce liquidation risk.

MakerDAO Endgame Tokennomics
Launch Overview Source: Maker Endgame Documentation

Criticism of Maker’s plan

But critics of the plan fear it will create a potential algorithmic death spiral for DAI, similar to what happened during the Terra/Luna UST collapse.

MakerDAO’s Endgame Tokenomics Draws Comparisons With Terra’s Segnorage Mechanism

Similar to MakerDAO’s Endgame Tokenomics, the Terra platform employs a seigniorage mechanism to stabilize the stablecoin price. This includes generating and destroying tokens according to market demand. New tokens are created when the value of a stablecoin declines, and are removed when it rises.

Critics, however, were quick to label the mechanism as a potential liquidity exit scam, allowing users to maintain their influence over the protocol’s governance while allowing eco-friendly transactions via DAI without selling MKR tokens. Allowed to leave the system.

Chimes by Vitalik Buterin

Ethereum creator Vitalik Buterin previously said expressed There are concerns about the potential expansion of the DAI protocol’s attack surface as more types of collateral are accepted. The amount of DAI generated related to centralized stablecoins such as USDC currently accounts for 56% of all DAI. Additionally, real-world assets such as real estate loans that are invisible on-chain currently account for 9.6% of all DAI.

Centralizing decentralized governance

Just one MKR wallet holds 12% of all governance tokens, and two unknown wallets collectively hold 44% voting power. Securities and Exchange Commission Chairman Gary Gensler’s decision to declare cryptocurrencies other than Bitcoin as securities has fueled some speculation.

Some downplay the risk based on the market capitalization gap

The above highlights the challenges and risks of maintaining a stablecoin peg, especially in a volatile market environment.

But despite the concerns raised, Frax Finance CEO and creator Sam Kazemian said he was excited to see the outcome of MakerDAO’s exit plan.

“The MakerDAO community is too conservative for their own good. This is a protocol game changer and can be ahead of its time. people forget

By Jules

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