Climate change is the unifying challenge of the era and the biggest problem humanity is running out of time to solve — and MakerDAO can help.
That’s the case Rune Christensen, the founder of MakerDAO, makes in a long essay he released today called “The Case for Clean Money,” where he articulates a vision for how the issuance of its DAI stablecoin could be used to drive investment in clean energy sources at a global scale.
Not only would using decentralized finance (DeFi) to intentionally drive investment into confronting climate change be a social good, Christensen also argues that it’s one of the smartest possible bets for investors with a long view:
“Grasping climate alpha early is likely the largest economic opportunity that will exist over the next decades because of how bad things are getting – like discovering bitcoin in 2010 but at the macro level.”
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“Climate alpha” is the return that investors will reap when they take a bet on companies that have factored climate change into their business plans. By and large, most investor theses do not factor in the long term costs of destructive behavior nor the long term gains of constructive behavior, in environmental terms. In Christensen’s mind, the market will rapidly catch up to the reality of climate change at some point in the near future, and those who bet on addressing sustainability early stand to make dramatic gains.
MakerDAO is governed by the MKR token, with each token offering voting rights within the larger organization. When MakerDAO took its first governance vote in 2018, MKR holders voted on five principles to govern the organization, one of which included using its capital assets to support sustainable business practices. He writes:
“Maker and Dai can coordinate the global build-out of sustainable energy pathways by funneling billions of dollars into senior credit positions for projects that will build solar farms, wind turbines, batteries, recharging stations and other cost-efficient renewable energy solutions, as well as their supply chains, sustainable resource extraction and recycling.
“Renewable energy alone isn’t enough to achieve a sustainable economy, but it is an area that Maker is well positioned to deal with, as it allows Maker Governance to build up specialized expertise for risk assessments within a well defined market that is commoditized and highly scalable.”
Christensen estimates that if the DAO aligns around taking climate action quickly, it could reallocate $3B of its exposure to Circle and Coinbase’s fiat-backed stablecoin, USDC, to environmental, social and governance bonds (ESG, a shorthand in finance for socially beneficial investments).
Christensen wants to see MakerDAO double down on its original core principles, and he presents a vision for how DeFi’s central bank can lead the way to a sustainable future, using what he calls “DeFi superpowers” to succeed in advancing longtermism, an area where traditional markets have failed.
“Transparency, stakeholder governance, carefully designed incentives, decentralization and the ability to turn future long term value into present day cash flows is what the world needs, and that’s exactly what Maker, Dai and DeFi can deliver,” Christensen writes.
He foresees a future where existing systems will fail, existing forms of money will lose their value, nations will fall apart and Ethereum will thrive.
“The Ethereum blockchain is built for human coordination and resilience,” he writes. “As the world is forced to deal with the impacts of climate change, Ethereum will enable financial markets to coordinate on mitigation, and it will continue to function even during large-scale disasters.” In order to achieve a vision where DAI can scale massively to undergird a sustainable economy, he outlines a complex new vision for MakerDAO, one that further evolves its operational systems, introduces a yield farming program for MKR with a 50-year emission plan and even deploys NFTs so MKR holders can claim social clout for backing climate wins. Christensen acknowledges that with the end of the MakerDAO Foundation, the DAO is in what he calls a “governance earthquake” period, a somewhat chaotic time where it adjusts to a gigantic change. “By making Maker a tool for global climate action, with much increased decentralization and resilience, we create momentum, focus and an opportunity for hypergrowth of both Dai and MKR adoption,” he writes.