MakerDAO, The New Coinbase Effect? – Trustnodes

MakerDAO, The New Coinbase Effect?


After adding tokenized bitcoin (wBTC) on May the 6th 2020, wBTC saw an almost instant initial spike with $2 million worth added by May 8th.

Then on May 12th wBTC’s market cap doubled, from around $10 million to $20 million, with another jump seen to send it close to $35 million.

WBTC's market cap, May 2020
WBTC’s market cap, May 2020

The reason for the jump is most likely only because wBTC was added to MakerDAO’s DAI dapp where it can be used as collateral to in effect borrow print dollar pegged tokens based on the current price of bitcoin.

That gives effectively btc some new utility in as far as you can unlock and utilize about half of its price if you are cautious, while still hodling the bitcoin or its tether like tokenized version of wbtc.

So giving the market a reason to go through this tokenization process where you hand over bitcoins to a defi custodian consortium, and you get the wbtc token corresponding to it.

And so giving dai a significant role in the decentralized finance (defi) ecosystem because it can breath life into a project.

WBTC trading volumes spike on Uniswap because of DAI addition, May 2020
WBTC trading volumes spike on Uniswap because of DAI addition, May 2020

That’s because there’s a whole ecosystem around dai that kind of feeds on its service of maintaining a dollar peg in a decentralized way based on the buying and selling of collateralized crypto assets priced through oracle feeds from participating exchanges.

Quite a bit of that buying and selling where for example a collateral is called is done through Uniswap, a decentralized broker of sorts that prices assets based on kind of algorithmic formulas instead of bids and asks.

Algorithmic formulas which then sort of depend on the ‘real’ pricing in decentralized or centralized exchanges through bids and asks as they are needed for an anchor to arbitrage.

So creating then a symbiotic system where new original innovations are possible because you can kind of ‘outsource’ certain tasks or you can rely on others doing certain tasks, making the entire defi space pretty unique.

Unique and more importantly only possible on something like ethereum because the data is open sourced and access is free as well as permissionless.

So you can build something that relies on other things without asking them and with the full certainty that there’s pretty much nothing they can do about it as they’d have to kill their own business if they want to kill yours, unlike on Youtube for example where they can kill your channel without care.

Top defi projects, May 2020
Top defi projects, May 2020

Maker in a way sparked this whole system, so their influence is far greater because their asset holdings are four time more than the next one.

The next one here arguably should be Compound because Synthetix is kind of cheating in having its own token as the dapp market cap.

If wbtc was added to Synthetix, for example, it is not clear whether we would have seen the same spike.

If it was added to Compound, which it was actually added quite a long time ago relatively speaking, then some additional utility is added, but clearly no where near dai’s addition of wbtc as collateral.

Why? Well the dollar remains the most stable currency, backed by the world’s biggest economy, so being able to just print it based on crypto assets collateralization is quite something.

Compound does something similar in as far as you can ‘print’ other assets like Augur’s REP, which has plenty of uses but also the addition of complexity in as far as you now have to manage two volatile assets, instead of one.

Synthetix is more trading which isn’t something lacking in this space in as far as there are plenty of decentralized and centralized exchanges where you can trade actual btc, with Synthetix’s utility being more in regards to accessing potentially even stocks in a derivative form.

So being added to dai clearly appears to have more weight than being added to other dapps, giving it a Coinbase like effect where newly listed tokens or coins tend to see a spike in price, with it here being more a spike in market cap for pegged tokens.

Whether that’s a sign of stratification and perhaps a slowing down in innovation isn’t too clear yet.

Maker has taken VC money and is advised by them, with their strategy usually being the creation of barriers to keep peasants out so that they can maintain their power and control, something that tends to kill innovation and dynamism in the process.

But Maker is no where near there as this is still a very new field, with plenty of ground for any smart man or woman to play still very much available.


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