On MakerDAO’s governance forum today, Coinbase proposed transferring 33% of Maker’s $1.6 billion Peg Stability Module (PSM) into a Coinbase Prime custody account, increasing Maker’s revenue by approximately $24 million.
If approved, the proposal would pay Maker a 1.5% annual dividend on $528 million USDC.
Maker’s PSM was created to hard-peg the price of DAI to $1, and it was released after the protocol saw the peg rise above $1 after the Covid crash in 2020. This increased demand for loan liquidations due to ETH plunging more than 40% during the meltdown.
Although PSM has been effective in keeping DAI pegged, one of the key difficulties mentioned on the forum by adcv, a pseudonym used by a Maker’s strategic finance core team, is Maker’s ability to invest its balance sheet effectively.
Maker’s current PSM asset allocation is “highly underinvested,” which “reduces the protocol’s ability to take risk and its attractiveness as a stablecoin,” adcv said.
If the proposal is approved, Maker will pay no custody fees on its PSM allocation to Coinbase and can freely mint, burn, withdraw, and settle its assigned USDC using Coinbase Prime almost instantly.
This smart approach is to generate revenue from idle assets on Maker DAO’s balance sheet.
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Harold
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