September 25, 2023

MakerDAO Votes To Deposit $1.6 Billion USDC On Coinbase For 1.5% Yield

MakerDAO passed a proposal to invest $1.6 billion USDC in Coinbase Prime for a 1.5 percent annual revenue. Voting on the proposal ends in three days. Analysts believe this move could morph the decentralized platform into a centralized one.

MakerDAO Received 88% Prop From The Community

Validators, developers, and the MakerDAO community have supported several proposals passed this month. However, analysts believe that these will alter the platform’s system. Balloting began on October 10 and is supposed to wrap on October 24. 

In the list of proposals voted on is a suggestion to invest funds in Coinbase. Coinbase is an America-based company offering several investment programs. According to the proposal, MakerDAO plans to deposit $1.6 billion USDC on Coinbase Prime for a 1.5 percent annual return. 

This money amounts to one-third of the USDC supporting DAI’s reserve. So far, the proposal has gained backing from 88% of the community. Given that it is three days away from rounding off and has only 0.05% rejection, the odds of it passing are high. 

The Strategic Finance and Growth department of MakerDAO is coordinating the proposal. The firm is a digital asset lending platform developed on Ethereum. It currently holds $7.59 billion in Total Value Locked (TVL). 

MakerDAO is a Decentralized Finance (Defi) bellwether. Platform users can mint its uncollateralized stablecoin DAI. However, users planning to keep the token must hold any crypto asset. 

With this, DAI can remain pegged to the Dollar. Compared to USDC or USDT, which are governed from the center, DAI is entirely decentralized. 

MakerDAO Raises Centralization Worries

Experts are worried about this new tandem formed between MakerDAO and Coinbase. However, this is because the latter often ends up under government scrutiny. 

Centre, the founder of USDC, ostracized 38 wallets in August. Furthermore, since USDC launched in September 2018, Circle has barred 81 wallets. DAI’s decentralization gained exposure after Circle suspended Tornado Cash wallets. 

The Peg Stability Module created by MakerDAO keeps DAI pegged to the USD. Hence, users can trade DAI for other stablecoins at the same rate. However, some experts believe there is nothing wrong with MakerDAO staking USDC on Coinbase. 

Currently, the platform holds a considerable amount of USDC. Daistats showed that DAI is 40% supported by USDC, a total of $3.4 billion. That is the most significant collateral asset propping DAI. 

Chris Blec said MakerDAO is holding USDC and can Dow whatever it wants. According to the protocol’s representative, the platform can sell it, stake it, or move it. So it has complete control over its assets.

But, with MakerDAO’s USDC on Coinbase, the former can neither withdraw nor use its assets for another purpose without the latter’s consent. 

Apart from the Coinbase investment proposal, the community is considering a Gemini proposition. Gemini agreed to compensate MakerDAO with a 1.5 percent return if it decides to hold $100 million of GUSD. 

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