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.

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.

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.”

Monetils MIP65: Clydesale Overview
(Source: Dune Analytics)

This investment strategy currently accounts for more than 50% of MakerDAO’s annualized revenue, Dao added.

As of today, the current MIP65 portfolio is made up of:

• ~$351.4 million from IB01: iShares $ Treasuries 0-1 year UCITS ETF

• ~$150.6 million from IBTA: iShares $ Treasuries 1-3 years UCITS ETF

MakerDAO MIP65 Monetail Cydesale
(Source: Dune Analytics)

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