MakerDAO Faces Criticism Over Tokenomics Plan Amid High-Risk US Treasury Investment Strategy

ManufacturerDAOthe governance token behind the fifth most popular stablecoin ICDis contemplating a increase in its investments in US Treasury bonds to $1.25 billion from its previous allocation of $500 million.

According to a proposal published on March 6, the move would allow MakerDAO to capitalize on the current performance environment.

Under the new plan, the existing allocation of $500 million, consisting of $400 million in Treasuries and $100 million in corporate bonds, would increase significantly by $750 million.

MakerDAO intends to achieve this by implementing a six-month US Treasury ladder strategy, which would involve bi-weekly reinvestments.

The latest proposal comes on the heels of several high-profile moves by MakerDAO, including a recent initiative that would allow MKR token holders to borrow DAI.

MakerDAO is reviewing a proposal to expand its existing investments in US Treasuries from $500 million to $1.25 billion. pic.twitter.com/DZj72oTJvP

— Creator (@MakerDAO) March 7, 2023

In June 2022, MakerDAO announced a $500 million allocation to Treasury funds. This time, the rationale behind the decision has been explicitly stated as follows:

“ [to] Take advantage of the current performance environment and generate more revenue on Maker’s PSM assets, in a flexible and liquid manner that can accommodate material adjustments and updates that may be required under relevant Maker RWA-related policies.”

MakerDAO Moves

In other news, MakerDAO, 44% of which is controlled by just 3 wallets, recently voted against a $100 million loan proposal from Cogent Bank, with 73% rejecting the offer.

Interestingly, MakerDAO previously approved a similar loan to Huntingdon Valley Bank, suggesting a willingness to work with more traditional financial institutions on the part of the DAI governance token.

The stablecoin market also experienced a boom in the wake of the FTX crash. After FTX filed for bankruptcy on Nov. 11, the dominance of the stablecoin sector in overall cryptocurrency market capitalization pink to 18%, reaching an all-time high, a trend that has continued.

Meanwhile, last month, MakerDAO allocated 5 million DAI to establish a legal defense fund that would address legal defense issues not normally covered by conventional insurance policies, and also introduced Spark Protocol, a rival to Aave that will use DAI for liquidity and will launch a loan product. as your initial service.

In addition, he started talks about a proposal that would allow DAI to borrow MKR tokens, a move that has led some to question whether this borders too much on the same risky behavior that led to the collapse of UST, the Terra Luna-backed stablecoin. .

Critics of Maker’s ‘Endgame’ tokenomics argue that it seems too similar to Terra’s seigniorage mechanism, a process that involves producing and removing tokens according to market demand.

However, opponents of the plan immediately criticized this mechanism, calling it a probable liquidity exit scam that allows users to exit the ecosystem via DAI without disposing of their MKR tokens but maintaining control over the governance of the protocol.

Hmm looks a lot like backing $us with his government token $MOON.

Did @stablekwon secretly infiltrate @MakerDAO? https://t.co/3u6NzOMkPK

—Arthur Hayes (@CryptoHayes) February 24, 2023

Maker doubles on the move

in a cheepMakerDAO said that as of the end of January 2023, “MIP65’s $500 million short-term bond investment strategy has provided ~$2.1 million in lifetime fees to MakerDAO.”