Explanations from Rune about the economics

MakerDAO has long been considered one of the pillars of decentralized finance (DeFi), boasting a robust stablecoin ecosystem and a sophisticated governance model. However, despite its technical and economic achievements, MKR—the governance and value accrual token of the protocol—has been consistently underperforming.

The reason? Governance.

Decisions made within MakerDAO have systematically led to the dilution of MKR’s value proposition. Instead of ensuring that the protocol’s success translates into token appreciation. The governance decisions have created a large corporate structure that has been adjusted through different strategic plans, financing an ecosystem of startups whose generated value has contributed only marginally to the token. One should question why token holders have voted for these decisions and what their actual representation is in these votes.

Based on the previously discussed definitions, the strategy followed by MakerDAO can be classified as a corporate spin-off with no retained equity

The Core Issue: A Governance Model That Bleeds Value

The core problem with MKR’s governance is that it has failed to align incentives between stakeholders. While the protocol generates significant value, that value is not being captured effectively by MKR holders. Instead, it is being spent on initiatives that have not yielded meaningful results for the token holders, or worse, given away through inefficient mechanisms.

The project data shows that it is one of the most important protocols in the DeFi ecosystem and that it has improved substantially in 2024

• Gross protocol revenue of 311.9M vs 107.7M USDS in 2023, up 190%

• Net protocol earnings of 70.4M vs 21.7M USDS in 2023, up 224%

The result? A protocol that continues to be one of the most important in DeFi, yet a token that remains fundamentally unattractive to serious investors. The token has been treated as a low-level passenger or a mere bystander in the project.

This was our analysis that we wrote about the SKY token.

“What is the endgame in this scenario? The inertia suggests that the project’s market capitalization could continue to decline, potentially leading to governance risks where, with a significantly undervalued token price, a large portion of the project could be acquired to change the current policies”

The only strategy that aimed to return some value to token holders through the System Surplus, which was intended to buy back tokens, has even been repurposed to increase project funding. The initial token burn was modified to use those tokens to provide liquidity to the project—an excellent idea, but one that ultimately leaves those tokens available to be used for the project's capital needs.

Conclusions

Maker is an excellent project. If we analyze its fundamental data, we should determine that it is one of the most undervalued projects in DeFi. However, it is a token that is not investable for professional investors because it represents one of the most significant governance traps in this ecosystem. Nevertheless, changing this reality is extremely complex, as voting will continue to be dominated by the same delegates who have led token holders to this situation. This explains the divergence between a project delivering strong results and a token on its way to being worth zero.