It’s time for the Maker protocol to take bold action and seed the next phase of DeFi.

The bull market has been kind to us all, but that time is passing. We need to take the next step and begin integrating with the real world at scale.

Here’s how we do it

As a short-term crutch DAI has onboarded centralized stablecoins to maintain the peg, but with crypto-native yields drying up stablecoin exposure has increased a fair bit.

We want to expand to uncorrelated, quality loans to diversify the portfolio with productive assets again.

Today @nad8802 , @krzKaczor and myself are proposing an aggressive growth strategy to bootstrap the Real World Asset (RWA) markets and diversify the DAI collateral pool.

We propose a 2-step plan:

Step 1. Capital raise.

Maker’s System Surplus is the first line of defense for losses. So far it has only been filled by revenue. While it’s great to be sustainable, more capital will expand Maker’s portfolio with novel RWA loans and turbocharge the multi-chain expansion.

Maker is in a really good position to raise capital. DAI is the number one decentralized stablecoin that has proven itself a survivor through several bear cycles. People flock to DAI during market downturns as a flight to safety.

With products such as Wormhole and D3Ms, Maker will have a strong presence in the multi-chain world providing backbone infrastructure for the next stage of DeFi in a sustainable way.

Maker has the problem of having too much demand for its product (DAI). As much as this is a problem, it is a good problem to have for a nascent industry.

Between selling MKR from the treasury, and debt issuance we’ll be able to grow the System Surplus to the required numbers.

Step 2. Risk-on.

Traditionally Maker has sat at the lower end of the risk curve - not wanting to take any losses. However, this is sub-optimal. Normally lenders accept some level of defaults with their loans.

By increasing the size of the System Surplus we can tolerate higher risk loans at scale without causing existential threat to the protocol. This will increase our total addressable market and thus our revenues / portfolio diversification.

In addition to individual deals we should be connecting to lenders that have existed in TradFi for hundreds of years. These people are experts in assessing risk and who to extend credit to. There is no need to reinvent the wheel here.

Many protocols have emerged in the past year or so that are spearheading the effort to connect real world assets (RWAs) onto the blockchain.

@Centrifuge , @MapleFinance and @TrustToken

are all working to make this happen. Let’s use the DeFi legos to grow exponentially.

Maker needs to focus on being a competitive and innovative credit wholesaler rather than assessing individual loans. By going wide with many protocols / lenders, we can scale to the next order of magnitude and beyond.

You can read the full proposal here: