DeFi Protocols Heed MakerDAO’s Call to Back DAI with Real-World Assets

If the crypto market gets wiped out – really, truly zonked – not even MakerDAO’s over-collateralized crypto loans might be able to save its dollar-pegged stablecoin, DAI. Maker is the second-largest DeFi protocol on Ethereum, and its death could roil the DeFi market.

But what if DAI wasn’t just backed by crypto, but by real-world assets, like factories, stocks and corporate debt, too?

Undercollateralized lending protocols think that diversifying DAI’s backing outside of crypto could add tens of millions of dollars to MakerDAO’s revenue and protect DAI from a crypto bear market. Plans to back DAI with real-world assets are already in the works.

Maker + Maple

Yesterday, crypto lending protocol Maple Finance, which has funded over $1 billion in undercollateralized loans since launching 11 months ago, announced plans to partner with MakerDAO to issue loans to institutional borrowers.

Maple says these loans will be “backed by enforceable legal agreements… represent[ing] a diversified lending portfolio that is backed by real-world assets.” Maple’s proposal to create a pool to finance DAI loans in December received 96% support from the MakerDAO community in December.

And on April 11, TrueFi, a lending protocol that’s facilitated $1.3 billion of uncollateralized loans since November 2020, launched a signal request for a pool of between 50 million and 100 million DAI.

TrueFi wants to earmark the pool for “diversified lending and credit opportunities,” with an emphasis on “traditional credit opportunities” that have a low correlation with the crypto market. Maker community members will be able to vote on TrueFi’s signal request until April 25.

Earlier this month, MakerDAO issued an $7.8 million loan to fund a repair centre for Elon Musk’s electric car company, Tesla.

The plans build on a governance proposal from MakerDAO protocol engineer Hexonaut last month. Hexonaut’s hope is that embracing real-world assets will result in “aggressive growth” for DAI, and bolster MakerDAO’s languishing token, MKR.

Although MakerDAO is still the fourth-largest DeFi protocol, with a total value locked (TVL) of $14.3B, the market cap of DAI has sagged behind Terra’s UST stablecoin. Terra lead Do Kwon wants nothing more than the death of his rival. “By my hand $DAI will die,” he tweeted last month.