MakerDAO Proposes Additional $750 Million In U.S. Treasury Purchases

To further diversify its holdings and take advantage of what many see as a favorable opportunity, the decentralized autonomous organization MakerDAO, in charge of issuing the DAI stablecoin, is currently reviewing a proposal in which it was suggested to invest about USD $750 million in U.S. Treasury bonds.

The proposal, according to information posted on the MakerDAO blog, calls for investing the previously mentioned USD $750 million in six-month U.S. Treasury bonds using a staggered strategy. It would see a portion of that capital used in tiered purchases, allowing for the receipt of the corresponding dividends every two weeks as they start to expire.

Among the considerations for this is increasing the ceiling previously set for the purchase of Treasury bonds from the previous USD $500 million to USD $1,250 million, in addition to the caveat of being able to readjust the aforementioned investment scheme as it adjusts to the needs of the DAO.

DAOs are groups that have come together with a common goal or concept. Instead of having a single leader, these organizations rely on community votes and software to carry out their decisions. The goal of Maker’s initial investment in U.S. Treasuries was to better support its overcollateralized DAI stablecoin.

Information Table of Stablecoin Issuer, MakerDAO

FoundersRune Christensen
PurposeMakerDao is a decentralized autonomous organization (DAO) that operates on the Ethereum blockchain. It is designed to provide a stablecoin called Dai, which is pegged to the value of the US dollar.
How it worksMakerDao uses a system of smart contracts and collateralized debt positions (CDPs) to maintain the value of Dai. Users can deposit Ether (ETH) into a CDP, which locks it up as collateral. They can then create Dai tokens, which they can use to make purchases or transfer value, similar to other cryptocurrencies. The amount of Dai that can be created is determined by the value of the collateral deposited.
Stability mechanismTo maintain the stability of Dai, MakerDao uses a series of automated mechanisms that adjust the supply of Dai in response to market demand. For example, if the price of Dai rises above $1, the system can create more Dai tokens to bring the price back down and vice versa below $1.
AdvantagesMakerDao offers several advantages over other stablecoins, such as Tether (USDT) or USD Coin (USDC). First, it is a fully decentralized system, meaning that there is no central authority controlling the supply of Dai. Second, it is backed by real-world assets (i.e., ETH), which provides an additional layer of security. It is also more transparent than other stablecoins, as users can verify the amount of collateral backing each Dai token.
Use casesDai can be used as a stable medium of exchange, a store of value, or a unit of account. It can be used for online purchases, international remittances, or as a way to hedge against volatility in other cryptocurrencies. Dai can also be used to access decentralized finance (DeFi) platforms, such as lending protocols or DEXs.
Market capitalizationAs of March 2023, the market capitalization of Dai is over $6 billion USD, making it among the largest stablecoins in circulation.
RisksAlthough Dai is designed to be stable, there is still a risk of price fluctuations. If the value of Ether drops sharply, for example, the collateral backing Dai could be insufficient to maintain its peg to the dollar. There is also a risk of smart contract vulnerabilities or hacking attacks, which could result in the loss of collateral or the creation of counterfeit Dai tokens.

Bear in mind that when MakerDAO first consented to invest in US Treasury bonds, it was done with the intention of giving the DAI cryptocurrency, which was already highly stable at the time. These and other actions helped the stablecoin maintain its position when the stablecoin ecosystem was severely impacted after Terra’s UST collapsed.

And just like it did with earlier procedures, like deciding whether to store money in the Gemini stablecoin (GUSD) or lend money to other organizations accepting security, the idea will be examined and then put to a vote among Maker token holders (MKR).

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