The Defiant

Winklevoss Offers MakerDAO Deal But Christensen May Be Underwhelmed

Gemini’s Offer to Deposit Stablecoin with Maker is Latest Tempting CeFi

Winklevoss Offers MakerDAO Deal But Christensen May Be Underwhelmed

MakerDAO, the leading DeFi protocol, is increasingly being tempted by tantalizing offers from major centralized players.

In its latest potential tie-up, the leading DeFi protocol is entertaining an offer from Gemini, the crypto exchange founded by the Winklevoss twins. Gemini is offering to pay Maker a 1.25% annual interest rate on deposits of GUSD, its dollar-backed token, according to a proposal posted by Tyler Winklevoss on Sept. 30.

In return, Maker must hold more than 100M GUSD in its Peg Stability Module. Known as the PSM, the module keeps MakerDAO’s stablecoin DAI valued at $1 by allowing users to swap the token on a one-to-one basis with other stablecoins.

Fresh Revenue Stream

The deal may accelerate adoption of GUSD in the MakerDAO ecosystem, Winklevoss said. That would be beneficial for Gemini, which is racing to keep pace with rivals such as Binance. As for Maker, the arrangement would provide it with a fresh revenue stream during a rough bear market. Earlier this month, Coinbase offered that MakerDAO deposit 1.6B USDC in its institutional platform, called Prime, in exchange for an annual yield of 1.5%.

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But first, Maker’s community will have to approve the deal, and one key figure — Rune Christsensen, the former CEO of the Maker Foundation — may not cotton to the offer. He’s been urging the Maker community to wean the protocol from exposure to centralized stablecoins and regulatory risk.

Just a month ago, the Maker community was debating whether to float DAI, its widely used stablecoin, and limit the protocol’s exposure to CeFi stablecoins. Now centralized issuers are looking like they may be Maker’s best source of revenue, and the community is approaching these deals largely with open arms.

The Gemini deal was negotiated in partnership with Maker’s Strategic Finance Core Unit and Growth Core Unit. Gemini will begin tracking the PSM’s GUSD holdings from Oct. 1. It will pay interest to Maker on the last day of each month provided the module holds at least 100M GUSD on average during the month.

Initial Offer

The initial offer will stand for three months. Winklevoss said Gemini will decide whether to renew the offer at the end of December.

MakerDAO is a collateralized debt protocol allowing users to mint its DAI stablecoin against deposited collateral assets. It is the largest DeFi protocol with a total value locked of $8.6B, according to Daistats.

At the moment, Maker’s module holds just $24,400 GUSD, according to data from Dune Analytics.

This is the way that all PSM pairs should be onboarded going forward.

Truemaker

The proposal has received support from the MakerDAO community, with several members arguing that the protocol should select assets for its module as a means to generate yield.

“This is the way that all PSM pairs should be onboarded going forward,” said Truemaker, a recognized governance delegate. “The PSM benefits DAI by maintaining its peg close to $1.00 but it also greatly benefits the collateral by creating stability for them to continue to grow and earn revenue from their collateral, which we should be compensated for.”

Deepening Divide

“Going forward, we should favor PSM vaults with at least a corresponding level of commitment to the MakerDAO ecosystem, and strongly disfavor vaults that do not meet our objectives,” said adcv of Maker’s Strategic Finance Core Unit.

But the proposal also reveals a deepening divide between Maker’s Strategic Finance Core and Growth Core teams and Christensen.

The teams have been negotiating deals for stablecoin issuers to pay yields on MakerDAO’s large reserves in recent months. The negotiations come despite Christensen calling for a shakeup of the project’s structure.

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Christensen co-founded MakerDAO in 2014, but dissolved its foundation and stepped back from the project in July 2021, leaving behind a decentralized DAO to govern Maker moving forward.

But Christensen has become increasingly active on MakerDAO’s forums in recent months, publishing several lengthy manifestos outlining his vision for the project moving forward. 

In July, Christensen criticized Maker’s DAO-based governance for being plagued by voter apathy and competing interests, advocated for it to restructure into several subDAOs, and petitioned for greater adoption of real-world assets (RWAs).

New Manifesto

In late August, Christensen published a new manifesto in response to Centre, the consortium behind the centralized stablecoin USDC, freezing 38 wallets after the U.S. Treasury Department sanctioned addresses associated with the Tornado Cash crypto mixer. 

This time, Christensen called for MakerDAO to limit its exposure to RWAs (including USDC), float DAI against the dollar, and make plans for an emergency shutdown and resurrection in the event its PSM contracts are targeted by U.S. sanctions.

Just two weeks after Christensen’s latest post, Coinbase offered to pay MakerDAO a 1.5% yield to deposit up to 1.6B USDC on its institutional platform, Prime, following negotiations with Maker’s Strategic Finance Core and Growth Core units. 

Pushback

USDC is the largest asset locked in MakerDAO, with the asset currently representing 42.4% of DAI’s backing and an additional 15% coming in the form of Uniswap LP tokens for the DAI/USDC pairing.

While the proposal received some pushback from Christensen’s supporters, many in the community threw their support behind the proposal. “There are many of us who think Rune’s efforts to be the DAO CEO are misguided and tired of the senseless drama he creates,” commented Tosh9.0, a community member.

Christensen’s call to reduce exposure to real-world assets also came shortly after Maker governance voted to issue a 100M DAI loan vault to Huntingdon Valley Bank, a 151-year old Pennsylvania lender, and to provide a 30M DAI credit line to a subsidiary of France’s third largest bank, Societe Generale.

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