I want to kick off 2024 with an educational post about the Maker/DAI ecosystem. Memes have a strong influence in crypto and can persist even when no longer accurate. I’ll address the state of some of the larger ones.

1. “DAI is just wrapped USDC”

This hasn’t been true for about a year now. Most of the USDC has been replaced by direct investment into treasury bills. The small remainder is used for maintaining peg liquidity and will just swap to tbills as needed to maximize overall return.

Combined with the crypto-loans the balance sheet looks more like a 55/45 split between RWAs and crypto-native vaults these days. This means that even if you are maximally skeptical of the RWA portion, there is still 45c from every $1 backing your DAI.

Furthermore, the demand for crypto-leverage has been increasing recently with Spark capturing most of the new leverage. The more leverage activated via Spark, the more decentralized the backing of DAI.

Looking at Ethereum, Maker & Spark account for 57% of the ETH TVL (incl. LSTs) between all lending markets. There are other decentralized assets, but ETH is the vast majority of the market share, so it’s a good representation.

2. “Revenue will go down when RWA yields go down”

It is true that IF we are both in a bear market and TradFi yields drop, then revenue for Maker will go down; however, this will be the case for all DeFi protocols. Maker has been a top earner since it started and should continue to be a relative top performer within the space regardless of market conditions.

Historically, Maker has earned ATH revenues from the previous bull market in May 2021. Even now with the bull market just starting, Maker is earning most of its income from crypto vaults again.

Maker will earn in both high and low interest rate environments.

3. “MKR performs badly in bull markets (Maker is a bad meme)”

This one is probably the most valid criticism. MKR currently has a P/E of around 16, and in a rapidly growing ecosystem this makes me wonder what is going on here.

I think the answer is a combination of things that can be summarized as “bad meme-ability”. Low supply means MKR is priced “high”, and Maker is considered part of “Boomer DeFi”. Compounding with that is that the marketing hasn’t been too great historically, so you get poor performance compared to other DeFi 1.0 projects.

This will likely change in 2024 with the rollout of the completely new brand and a token share split of MKR to the new branded governance token codenamed New Governance Token (NGT). The ratio will be 1:24,000 MKR:NGT, and as superficial as this seems, this is how retail thinks.

Combined with the rebrand which will link MKR and DAI tokens to their newly branded versions and the yield farms for the new tokens, this will kick off an explosion of new interest as new token tickers suddenly sit near the top of the market cap coin lists and token ownership is farmed out to a new generation.

Another component of this is that Maker is currently using its massive revenues to buy back the MKR token at 100m / year (to be lowered to 60m / year as the bull starts). Price is king for the focus of retail, so having MKR underpriced for so long means that the protocol has been able to buy out all the capitulators freeing the explosive upside for the next wave of fans.

TLDR; Maker is poised for a breakout year in 2024!
#makerdao $MKR 🚀📈