Market-making deals are usually sorted out in private, but DeFi might be making headway for transparency.
Wintermute proposed a market-making deal with MakerDAO on Friday via the MakerDAO governance forum. It requested a loan of 10,000 MKR ($24M) from the DAO in order to provide market-making services for both DAI and MKR, across all kinds of exchanges, for one year.
“Typically these proposals are usually done in more of a private manner,” David Utrobin, MakerDAO’s facilitator of governance communications told The Defiant in a phone call. “It’s a really positive thing in our eyes.”
Wintermute is one of the most significant market-making companies in crypto, working on both centralized and decentralized exchanges, and over-the-counter. According to Wintermute’s website, it has done $767B in cumulative trading volume. MakerDAO is the third-largest decentralized finance (DeFi) protocol listed on Defillama, with $12.7B in assets locked in its smart contracts, and it has long been viewed as the grandfather of the industry.
While these sorts of public proposals around market-making are not the norm, it could signal that the blockchain industry’s spirit of transparency is winning over traditionally opaque areas of the financial system.
In the proposal, Wintermute wrote, “Wintermute believes defi is the future of financial industry and Maker will be one of the pillars of new age.”
Wintermute committed to return either 10,000 MKR or 50M USDC at the end of one year and not to use any of the assets for voting on MakerDAO proposals or yield farming activities.
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The proposal was brought forward after discussions with Nadia Alvarez, head of growth with Maker’s DAO and a former staff member at the MakerDAO Foundation, which dissolved itself this summer.
On a Sept. 30 governance call, Alvarez said she had entered into discussions with Wintermute because arranging market making for MakerDAO assets had been something the Foundation had previously done and “It’s important to discuss this topic,” she said.
“We just want to work together,” Jonathan Chan, from Wintermute’s business development team said on the call. “At the end of the day we want to be flexible to be working with you and we want to promote the project.”
Chan explained that the typical arrangement for Wintermute is to take a loan from a market-making partner for the asset to be traded. Wintermute provides the other half of the trading pair itself and makes the market for the agreed-upon term.
“We can’t control the price of the asset that we trade,” Chan said.
Wintermute was not immediately reachable for comment.
The proposal is at the first stage of MakerDAO governance, where the community will provide feedback. If it advances from this stage it would reach a final decision in a couple months at the earliest, though it could be complicated by the fact that this is a new kind of deal for MakerDAO, with no standardized process in place to finalize.
Initial reactions from the community were skeptical about the merits of making an uncollateralized loan, while others asked about Wintermute’s edge versus competitors.