Makers (R)Evolution…

In order to prepare the Launch Season (see below) Rune Christensen introduced a couple of important strategies this week:

You can read the full post yourself, of course, but I will break down the juiciest parts for you in this newsletter. And there’s a lot in there that is revolutionary.

Clearly inspired by the success of Ethena’s USDe, Rune proposed that MakerDAO should embrace a similar delta-neutral strategy of funding shorts while going long, to juice up yields to solid double-digits during bull runs. At the time of his proposal the crypto markets was exuberant, and yields were above 20% for staked USDe.

Rune suggested that Maker could pump DAI into sUSDe/DAI vaults on Morpho, a new lending protocol, to access that yield immediately while developing its own strategy via custodians.

Risk management and monitoring would be outsourced to Ethena, and Steakhouse Finance is already familiar with the setup of Morpho Vaults. Funding the vaults would happen via a D3M Direct Deposit Module that should be risk managed to dial the exposure up and down quickly. In his latest Bootstrapping Edit, he proposed that the D3M be managed by a multisig controlled by JanSky, a governance Faciliator.

This is a controversial position, because until now MakerDAO has never given individuals control over funds directly, but relied on Governance. Our research has shown that Gnosis Safe can use Gnosis Zodiac App Suite to tightly restrict what members can do with funds, and we are certain a similar approach will be taken here, even if no mention of this security technology is part of the proposal.

This somewhat laissez-faire approach to risk management is definitely new to MakerDAO.

Rune also proposes adjusting the Maker Smart Burn Engine and make it more aggressive.

After the burn rate has reached 400m per year, the burn should be slowed as soon as MKR reaches 8000$. I believe the number is there to anchor expectations of investors at a much higher price target than visible today, or evevn historically. MKRs all-time-high is just above $6,000.

At the same time Maker will increase USDC reserves to prevent a liquidity crunch such as the one that forced Stability Facilitators to raise rates by 10% in a hurry, so Maker would not become illiquid over a weekend, when T-Bill sales are impossible.

Even more exciting than the potential use of sUSDe to boost MakerDAO profits is the launch timeline for SubDAOs. In a forum post complete with beautiful AI art, Rune let the community now that the rebranding of MakerDAO is imminent, and that subDAOs will launch this summer!

As a result of the combination of bullish news MKR price picked up steam and is now at almost $3,000.

Launch Season will also introduce the Lockstake Engine, where MKR holders can stake their tokens (what will then be the new governance token) to farm subDAO tokens, new governance tokens and more. Users staking there will have to face an exit fee upon leaving, which should help to keep collateral locked, and create a demand pool for the tokens.

Other than that, SparkLends SPK token was mentioned. Spark was gracious enough to publish there Airdrop formula well ahead. Spark could set benchmarks for a fair token launch that way.

The post is well worth the read, if you want to know all the details. But Maker can become a flywheel of value creation, if and when subDAOs launch successfully.

DAI supply update

Since our last newsletter, DAI supply actually fell another 300m. The causes have been discussed on podcasts with Hasu and others recently, but the canon is that neglecting business development with Layer two protocols and even probably the DAI name not including the magic three letters USD were not helping.

The rebrand can not come soon enough, it seems. Maker has to focus outward and aggressively pursue deals with chains and protocols across the space to create demand for holding DAI. Users who want leverage do not help as DAI quickly gets swapped out.

Rampant arbitrage between Spark (6% borrowing cost before the rate hikes) and Aave (16% funding premium for USDC) also did a lot to depress the PSM and little to create demand for DAI.

Voting update

Rune’s recent Bootstrapping edit can be voted on currently. Please consider voting and using this short respite from high gas prices, or use gasless voting.

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