According to data from Token Terminal, MakerDAO’s second quarter of 2024 reached a new high, reaching a staggering $85 million. Since December 2017, MakerDAO has issued and managed the over-collateralized stablecoin DAI, designed to be pegged 1 to 1 to the U.S. dollar. It is currently the fourth largest stablecoin with $5.1 billion in circulation.
MakerDAO’s main business: creating stable currency DAI
MakerDAO is a decentralized autonomous organization that issues DAI (USD stablecoin) running on the Ethereum blockchain. The mechanism of generating DAI stable currency through over-collateralized lending mainly involves the following steps:
Collateral assets: Users deposit crypto assets (such as ETH, WBTC, etc.) into MakerDAO's smart contract as collateral.
Generate DAI: The smart contract allows users to generate a certain amount of DAI based on the value of the collateral and a preset collateralization rate (usually higher than 150%). For example, if a user stakes $150 worth of ETH, only 100 DAI may be generated.
Stability fee: Users pay a stability fee when generating DAI, which will be adjusted based on market conditions and governance votes. Stability fees are one of MakerDAO’s main sources of revenue.
DAI circulation: The generated DAI can be traded on decentralized exchanges, used in DeFi protocols, or directly used for payments.
Repayment and Redemption: Users can repay DAI at any time and pay the corresponding stability fee. When users repay all DAI, they can redeem previously staked crypto assets.
Liquidation: If the value of the collateral drops, causing the collateral ratio to fall below the minimum requirement, the system will automatically trigger liquidation. Upon liquidation, a portion of the collateral will be sold to repay DAI and pay liquidation penalties.
Although DAI only accounts for a small amount of market capitalization in the stablecoin market, it is still the largest decentralized stablecoin. As of July 5, 2024, the top five stablecoins in the cryptocurrency market and their market shares are as follows.
Tether (USDT)： 70.02%
USD Coin (USDC)： 21.13%
DAI： 3.3%
Ethena USDe (USDE)： 2.29%
First Digital USD (FDUSD)： 1.25%
MakerDAO’s revenue sources
Stability Fee: When users generate DAI by staking crypto assets, they need to pay a certain stability fee. This fee will be adjusted based on market conditions and governance votes and is MakerDAO’s main source of income.
DAI Savings Rate (DSR): DAI holders can deposit DAI into the DSR contract and earn interest. The source of interest is the system's stability fee income, and the interest rate of DSR is determined by governance voting.
Liquidation Penalty: When the value of the collateral drops to a certain level, the system will automatically liquidate the collateral to ensure the stability of the value of DAI. When liquidated, the borrower needs to pay a certain penalty, which is also one of MakerDAO’s income.
Investment income: MakerDAO may use part of the funds to invest in low-risk assets, such as U.S. Treasury bonds or other stable coins, to obtain additional income.
Decisive Proposal: MakerDAO Reinvests in U.S. Treasuries and Corporate Bonds
Last year's governance proposal allowed MakerDAO to still reach $85 million in revenue when the market faced a retracement in the second quarter of this year.
Past experience has allowed MakerDAO governance forum The DAO to pass a new proposal last week to invest $500 million worth of the stablecoin DAI in U.S. Treasury and corporate bonds.
The proposal mentioned that 80% of the funds will be allocated to short-term U.S. Treasury bonds and 20% to investment-grade corporate bonds to obtain interest income.
TJ Ragsdale, head of asset management at MakerDAO, said, “Revenue from the real world can offset some of the revenue we lose from cryptocurrencies.”
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This article Good configuration will take you to heaven, MakerDAO reached a record high in 2024 Q2, with revenue exceeding US$85 million. First appeared on Chain News ABMedia.
