MakerDAO Income Declines 86% Because To Issues With Wrapped BTC And Ether

A decline in loan demand and fewer liquidations in the third quarter of 2022 resulted in a sharp decline in revenue for MakerDAO, the organization in charge of the Maker Protocol, while expenses remained high.

A Messari analyst and co-author of “The State of Maker Q3 2022,” Johnny TVL, noted on October 13 that the decentralized autonomous organization saw its revenue fall to just over $4 million in Q3, down 86% from the prior quarter.

One effect of this was the first quarter of net income loss for MakerDAO since 2020.

Few liquidations and weak loan demand, according to the senior research analyst at Messari, are to blame for the decline in revenue.

Ether and Wrapped Bitcoin (wBTC), its two major revenue generators, underperformed in the most recent quarter, with revenue from ETH-based assets decreasing by 74% and revenue from BTC-based assets declining by 66%.

These cryptocurrencies are used as collateral by borrowers for Dai stablecoin loans, offering some protection from the market volatility at the cost of interest paid on the loans.

Additionally, the analyst has noted a decline in MakerDAO’s collateral ratio, claiming the ratio has dropped to 1.1 from 1.9 at the same point last year.

However, the analyst noted that “expenses are not that elastic” because the report revealed that expenses were still high in the quarter at $13.5 million, declining only 16% from the prior quarter.

MakerDAO has just started a proposal to invest $500 million in treasuries and bonds in an effort to boost the return on the assets it holds as collateral.

MakerDAO thinks that this will add some low-risk yield to the protocol

Real World Asset (RWA) backed loans have increased, and they now make about 12% of MakerDAO’s overall revenue after the company successfully extended its largest RWA backed loan to Huntingdon Valley Bank (HVB) in the third quarter of 2022.

The loan, which required the formation of a vault with 100 million Dai, introduces a new type of collateral to the Maker Protocol and has the potential to help it make more money through vault stability fees related to upkeep of the vault and DAI minting.

As a result of this integration, HVB is still able to extend its permissible lending limit. If all goes according to plan, MakerDAO anticipates that other banks will follow in HVB’s footsteps.

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