MakerDAO Update: Governance Battles and Real World Assets

Maker continues to be one of the most important and involved DAOs in the entire crypto space, despite some recent roadblocks. DAI supply is down over 27% YTD, with most of the drop in demand resulting from the crash of UST causing a flight to fiat-backed USDC and a decline in the demand for leverage. With less fee income coming in from non-stable collateral such as ETH, revenue is falling even as costs are rising. Despite earning a net income of $6 million in June, Maker is running a net loss of $1.6 million for July MTD.

Maker has been struggling with its identity, as MKR holders disagree on Maker’s most fundamental values and goals. Maker is also experiencing a problem in governance, as the current structure forces token holders to be experts in every branch of Maker’s strategy and there are misaligned incentives between core units and MKR holders. Meanwhile, Maker has been making strides in its ambitious efforts surrounding real world assets (RWAs) and their integration directly with the protocol and treasury, establishing strong partnerships with large financial institutions and paving the way for DeFi’s direct interaction with TradFi.

Identity and Governance Crisis

Maker is in the midst of an identity crisis. There are disputes over fundamental issues such as long-term strategy and organizational structure. It will be difficult for the differences in opinion to be reconciled.

MKR holders do not have a unified clear vision for the future of the protocol, and can not agree on where efforts should be focused. While some think Maker should continue to focus on stability and risk minimization, others think it should be focused on growing protocol fees though expansion into new markets. While some are in favor of a buy-back program in order to bring more value to the MKR token, other core operators such as Rune and MonetSupply think that the buy-backs were not the best use of earnings. There are also differing opinions on the role of the PSM, and whether or not the protocol should put its USDC holdings to work.

Maker is also suffering from a governance crisis. The current governance structure of Maker requires and incentivizes all token holders to be completely informed on every decision. Not only is this extremely time consuming, but extremely inefficient as most token holders are not experts in every area of concern. Voter apathy results.