MakerDAO’s Embrace of Centralized Stablecoins Offers Risks and Rewards

MakerDAO’s ingestion of centralized stablecoins is part of its strategy for bringing Dai back in line with its $1 target. By loosening its collateral requirements (it did the same for Paxos Standard and TrueUSD stablecoins), MakerDAO encouraged a massive influx of centralized stablecoin collateral into the system and an efflux of new Dai.

The problems posed by the ingestion of centralized stablecoins are a prelude to the larger challenges MakerDAO will face as it incorporates “real world assets,” or RWAs, as Dai collateral. For instance, if the system could be modified to allow for negative rates, then the next time Dai wanders up to $1.05, MakerDAO wouldn’t need to slurp up centralized stablecoins.

Timeline of Dai, Paxos-standard, Trueusd