MakerDAO Co-founder Outlined A Plan To Save DAI From Attack
Rune Christensen has announced his plan to convert the MakerDAO’s DAI stablecoin into a free-floating asset if the protocol cannot achieve a 75% decentralized collateral level within three years.
According to Rune Christensen, DAI cannot stay a stablecoin indefinitely. On Tuesday, he made a fresh post on the protocol’s governance forums, describing his new scheme that might eventually see the DAI stablecoin become a free-floating asset.
The proposal, titled “Endgame Plan timetable to free floating Dai,” focuses on lending DAI against real-world assets (RWAs) to boost the protocol’s profitability. It proposes utilizing loan proceeds to acquire more ETH as collateral to back DAI.
According to Christensen’s strategy, the amount of ETH that MakerDAO successfully gathers over the next three years will determine whether it should explore allowing DAI to deviate from its dollar peg and become a free-floating asset.
In the post, Christensen made the following points:
- Dai will remain 1:1 with USD for at least 3 years.
- The timeline for free floating away from 1:1 with USD would be delayed if there is no immediate authoritarian threat.
- The 1:1 peg with USD would remain indefinitely if the protocol can reach and maintain 75% decentralized collateral.
- During the initial 3 years, the protocol will actually double down on RWA in order to accumulate as much ETH as possible, increasing the ratio of decentralized collateral.
The plan comprises three distinct collateral tactics, Pigeon Stance, Eagle Stance, and Phoenix Stance, ranging from high RWA exposure to none. As Christensen puts it, increased RWA exposure allows the MakerDAO protocol to expand faster but at the expense of less robustness.
MakerDAO’s default position would be Pigeon Stance, the most tolerant of the three tactics. With limitless exposure to RWA loans, it prioritizes maximum development. By restricting Maker’s RWA exposure to 25% of all loans, Eagle Stance strikes a balance between growth and resilience. The Phoenix Stance is the most conservative, requiring that the procedure have no significant exposure to RWAs.
Christensen’s strategy begins with putting MakerDAO in Pigeon Stance for three years. In this case, the protocol would try to gather as much ETH collateral as possible to make DAI resistant to “authoritarian threats.”
Threats could include government pressure to comply with severe regulations or punishments requiring centralized stablecoin issuers like Circle to freeze USDC money held in MakerDAO’s vaults for noncompliance.
Christensen previously expressed concern about MakerDAO’s reliance on USDC after the stablecoin issuer halted payments placed into privacy protocol Tornado Cash earlier this month.
“If the protocol reaches 75% decentralized collateral organically from the accumulation of ETH during Pigeon Stance, then it can switch to Eagle Stance without resulting in Dai going free floating,” the post read.
However, if MakerDAO cannot meet the 75% decentralized collateral level, it may be prudent to allow DAI to deviate from its one-to-one peg with the dollar. According to Christensen’s plan, DAI will remain fixed to the dollar for at least the next three years. If there is no “immediate authoritarian threat,” the deadline for converting DAI into a free-floating asset may be pushed back.
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