What is the status of MakerDAO after the Spark protocol was launched more than a month ago?

Author: LD Capital Research

MakerDAO is a decentralized stablecoin lending protocol based on Ethereum. The core is to issue the stablecoin DAI anchored 1:1 to the US dollar with the endorsement of over-collateralized encrypted assets. Governance regulates the stable interest rate of issuing DAI, allowing the market to stabilize the price of DAI through arbitrage.

**MakerDAO is a decentralized stablecoin lending protocol based on Ethereum. The core is to issue the stablecoin DAI anchored 1:1 to the US dollar with the endorsement of over-collateralized encrypted assets. Governance regulates the stable interest rate of issuing DAI, allowing the market to stabilize the price of DAI through arbitrage. **

LD once published a research report "LD Capital: MakerDAO where all things grow, the spark has been ignited" before the Spark protocol went live in March this year. The article looked forward to the current situation and future of MakerDAO. At present, the Spark protocol has been online for more than a month. On this occasion, let’s review the recent changes of MakerDAO.

1. Current status of Spark Protocol

MakerDAO’s general-purpose lending protocol, Spark Protocol, was officially launched on May 9.** This protocol is mainly used to lend DAI-focused encrypted assets. The first product on it is Spark Lend, which allows users to save at a set Dai savings rate (DSR) to borrow DAI, the current interest rate is 3.49%. **

Currently, the assets supported by the Spark lending market include DAI, wstETH (wrapped version of stETH), WETH, rETH, GNO, and sDAI (wrapped version of DSR’s DAI).

Source: blockanalitica.com TVL currently reaches USD 29.69 million, and the assets with the largest supply are DAI and wstETH. As can be seen from the asset supply curve in the figure below, since Maker announced the increase in the DSR interest rate, the asset supply has increased by more than 110%, but the loan scale is only about 6 million US dollars, and the utilization rate is 17%.

Source: blockanalitica.com** As a new protocol, although it is endorsed by MakerDAO, the initial asset attractiveness is not strong, and the TVL surges only after the DSR adjustment. **According to the data of defillama.com, Spark is currently ranked 11th in the Ethereum lending agreement, and its TVL has increased by 20% in the past 7 days, and its current TVL is only 0.2% of Aave.

Source: defillama.com2. DSR rate adjustment

The DSR interest rate refers to the deposit rate of DAI. MakerDAO provides a savings contract, and users only need to deposit the DAI they hold into the contract to obtain passive income. When users borrow DAI with assets such as ETH or WBTC as collateral, they must pay a stability fee, which is also the source of income for DSR. Therefore, the DSR interest rate adjustment will affect the stability fee for borrowing DAI.

On June 16, the Maker community passed a proposal to increase the Dai Savings Rate (DSR) from 1% to 3.49%. The measure came into effect on June 19, and the DAI scale in DSR rose from 110 million to 130 million within one day. As can be seen from the growth curve of DAI in DSR in the figure below, although the growth rate of DAI has slowed down, it is still growing. In the past week, the supply of DAI has increased by about 68 million, and the current total supply has reached 186 million.

Source: makerburn.com In Maker's monetary policy, the DSR is a key monetary policy adjustment tool that helps balance the supply and demand of DAI by incentivizing or discouraging users from locking DAI. By adjusting the DSR, it is possible to respond to short-term changes in the Dai economic market. Therefore, **With the increase of the Dai savings rate, Dai ecological participants may choose to withdraw from other lending platforms and deposit into the DSR contract, or users will exchange other stablecoins in their hands for DAI, which will lead to a rise in interest in DAI This change will also lead to the interest rate of borrowing DAI in the external DeFi agreement. The Maker platform will be able to provide a more competitive interest rate than other agreements and recycle DAI into the Maker system. **

3. Mortgage assets to "USDC"

The currently locked assets (TVL) in MakerDAO are as high as 7.7 billion US dollars, and the vaults with the largest types of mortgage assets are ETH-A and stETH-A.

Source: makerburn.com If we look back at the data in March 2023, we can find that the TVL scale reached about US$8.4 billion at that time, of which the funds in the PSM-USDC pool reached about US$2.1 billion, accounting for 25%.

Even when USDC unanchored on March 8, MakerDAO PSM quickly became a dumping ground for USDC to flee, absorbing nearly $2 billion in USDC, causing the total size of USDC in PSM to reach $40. Fortunately, this unanchoring incident was caused by worries about USDC deposit reserves, and did not cause substantial losses to Maker. After the USDC anchor was restored, the USDC in the PSM module gradually recovered to about 2 billion US dollars.

Source: Dune Analytics After this incident, the fact that the largest collateral asset in Maker is USDC once again ignited the discussion in the community, and it also worried the community. Therefore, **MakerDAO is trying to diversify its balance sheet, downgrading USDC’s market share. At present, the figure has dropped to about 440 million US dollars, a drop of 80%. At the same time, the share of stETH as DAI collateral has risen sharply, from 650 million to 1.1 billion, an increase of nearly 80%. **

In addition, the Maker community passed two proposals one after another. One is to reduce the GUSD debt ceiling from 500 million to 110 million, and the other is to reduce the USDP debt ceiling from 500 million to 0. From this series of measures, you can also It can be seen that the **Maker community aims to reduce the potential threat of centralized stablecoins to the protocol, and is also gradually realizing Maker's "final plan". **

4. The Endgame roadmap update

The purpose of The Endgame is to simplify and parallelize the Maker ecosystem, launching a new brand identity and the first 6 SubDAOs. On May 12, 2023, MakerDAO co-founder Rune Christensen released a major update on The Endgame roadmap on the community forum. This update aims to "improve efficiency, resilience, and participation" and apply artificial intelligence tools to assist in building governance processes. A detailed supplement to the previously proposed The Endgame plan and a clear phased task

The roadmap is divided into five phases:

1. Rebranding: In the next few months, a new identical brand identity and a new governance website will be launched. This website will build resilience and parallel governance through artificial intelligence-assisted processes, and will not affect the DAI and MKR currently held by users. By then Can be directly upgraded to NewStable (new stable currency) and NewGovToken (new governance token), the final name will be announced together with the new brand and website.

2. SubDAO launch: The first batch of 6 Maker SubDAOs and new stable coins will be released for liquidity mining. SubDAO functions as the decentralized specialized arm of MakerDAO, an initiative aimed at removing the cost and complexity associated with day-to-day operations and delegating “much of the complexity and risk.”

3. Release of AI governance tools: The Maker ecosystem will begin to upgrade its AI tools for governance monitoring and improvement, including Alignment Artifacts, Governance AI Tools, Atlas, AVC, Purpose Fund, etc.;

4. Governance incentives launched: Release Sagittarius Lockstake Engine (SLE), governance means mining;

5. Release NewChain and reach the final Endgame state: the chain will be able to use hard forks as a governance mechanism, and it will also have the ability to optimize its "backend as an AI-assisted DAO governance process and AI tool user, including smart contract generation, state leasing and in-protocol MEV capture" functionality.

4. RWA business scale

The current locked asset value of RWA is about 1.6 billion US dollars, and the supply of DAI is 1.4 billion US dollars. Business types include real-world asset-backed lending in cooperation with Centrifuge, U.S. debt, and Coinbase custody. The largest position is U.S. debt held by Monetalis Clydesdale, with a total supply of 1.2 billion, accounting for 76.9%. MakerDAO initially purchased $500 million in bonds in October 2022, and again in June 2023 for over $700 million in bonds.

Source: makerburn.com This data does not include the $500 million USDC provided by MakerDAO to Coinbase Cutoday. Coinbase’s custody division will pay a 2.6% annual rate of return on deposits, and USDC rewards are calculated on a monthly basis. Coinbase does not charge any fees to participate in the rewards program or to host USDC.

**The RWA business scale only accounts for 20.7% of MakerDAO's business, but its revenue is 53 million US dollars, accounting for 45% of MakerDAO's total revenue (118 million US dollars). RWA is the most important source of income for MakerDAO, among which U.S. debt is the largest income, so the MakerDAO community once again increased investment in U.S. debt in order to maximize the income as much as possible. Since our last report (23 million US dollars), the income has increased by 120% %. **

Source: Dune Analytics