MakerDAO co-founder proposes to exclude USDC from DAI reserves
Rune Christensen’s initiative is designed to eliminate the risk of asset freezing after the Tornado Cash mixer was put on the US sanctions list
12.08.2022 - 08:15
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What’s new? Rune Christensen, the co-founder of MakerDAO, a decentralized autonomous organization, has proposed converting USDC from the DAI stablecoin reserve worth $3,5 billion into ETH. In response, Ethereum co-founder Vitalik Buterin said it was “a risky and terrible idea.” In his opinion, if the price of ETH falls, it will lead to the collapse of MakerDAO.
MakerDAO is considering a $3.5 billion ETH market buy, converting all USDC from the peg stability module into ETH.— banteg (@bantg) August 11, 2022
What else did Christensen add? In MakerDAO’s Discord channel, the protocol’s head expressed concern over US government sanctions imposed on cryptocurrency mixer Tornado Cash. For example, Circle, the issuer of USDC, froze more than 75 000 stablecoins linked to the sanctioned addresses since the service was blocked. Christensen believes that the project’s community needs to “seriously consider preparing to depeg from USD.”
In his view, such a transition is almost inevitable and should be done with serious preparation. One of the ways may be to convert USDC into ETH. Currently, USDC has a 32,1% share of the DAI’s stablecoin collateral. Ethereum, including wrapped versions of the asset, holds 29,9%.
Christensen added that DAI can reduce the risks of centralization by diversifying reserves so that no single asset makes up 20% of total reserves. He said that conversion could increase the risk of losing DAI’s peg to the dollar, but still believes “uprooting” could be worth it.
What is MakerDAO? It is a protocol based on the Ethereum blockchain that uses the algorithmic stablecoin DAI. Maker, a decentralized trading platform, provides a lending and borrowing service for cryptocurrencies. As of August 12, 08:45 UTC, the MKR token is trading at $1,086, down by 0,64% in 24 hours, according to Binance.
Earlier, MakerDAO proposed investing 500 million DAI from reserves into bonds. Community members voted on what form to make investments. 6,99% voted for 100% investment, 79,55% voted for 80/20 allocation, 13,46% abstained and no DAO members opposed the initiative.
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