The Maker Protocol, commonly known as the Multi-Collateral Dai System, permits the creation of Dai by users utilizing approved collateral assets, as authorized by "Maker Governance." This governance represents the community-driven procedure that manages the various components of the Maker Protocol. Dai is a decentralized cryptocurrency, unbiased and secured by collateral, with a value soft-pegged to the US Dollar.
Maker DAO led the charge over the last 12 months within the Real World Assets sector with the token up over 270% since the beginning of 2023. Key factors contributing to its performance include its continuous buyback and burn mechanism, as well as recent discussions about future token split.
MakerDao owns ~$5.2B worth of assets and has a TVL of $8.5b. Notably over $2b worth of these are in US T-bills earning 5% yield. Throughout a 24h period it uses these interest payments to buy back its own token $MKR.
Buyback Mechanism
On July 5, 2023, MakerDAO launched its Smart Burn Engine, a system engineered to 'burn' MKR using the protocol's surplus. This mechanism is triggered when the protocol's surplus surpasses $50 million. This burn works out at around $100m per year and will later be reduced to $60m per year .
Token Split
In its roadmap, MKR plans to implement a token share split, converting MKR into a newly branded governance token, codenamed New Governance Token (NGT).
The conversion ratio is set at 1 MKR to 24,000 NGT. This would render the price per token of MKR today at $0.078. Despite the effects of such a split seeming trivial, it is noteworthy that lower unit bias has the potential to have a tangible impact on attracting a new holder base. Price jumped 12% shortly following token split dialogue.
Conclusion
Maker DAO has made considerable advancements in the Real World Assets sector, marked by impressive performance over the last 12 months and a robust $5.2 billion asset portfolio. The continuation of the Smart Burn Engine and the planned token transition to NGT, at a ratio of 1 MKR to 24,000 NGT, highlight its strategic financial management and commitment to market growth.
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