Decentralized Finance, or DeFi, has been the topic of conversation across the space lately. In New York Blockchain Week, DeFi has been a main focus of Consensus 2019, and has similarly been the focus of many of the other events and meetups that are taking place elsewhere in the city. At the epicenter of DeFi is MakerDAO, the peer-to-peer lending platform and autonomous financial ecosystem.
For many attending Blockchain Week, their week began on Sunday night with the “DAI Hard Drinks” event by Maker and Monsendo. The purpose of the networking event was to showcase the Monsendo payment application, which is a tier two payment solution that operates in DAI.
At the event, attendees were provided with unique QR codes. When interacted with on their mobile devices, a web wallet opened up in their browsers and topped up with DAI, that could then be used to purchase drinks at the bar. The DAI persisted in a state channel, enabling fast and free payments the whole night, no GAS required. Over the course of the event, close to 500 state channel DAI transactions were executed.
As the Maker ecosystem continues to grow, this demonstration speaks volumes to the potential of DAI beyond just investment. In a “DeFi” future, DAI might perhaps be the medium of choice for everyday payments. DAI already sees scattered use in countries across Latin America, although it has not seen much use in places like the US.
Maker currently boasts 165 live integration partners. But for many, these current progressions and potential has been overshadowed by the increasing DAI fees. At time of writing, the cost to settle a DAI loan is 19.5%.
DAI has historically struggled to keep its peg to US$1, typically fluctuating between US$0.98 and $1.02. As such, Maker holders have elected to continually increase the stability fee in hopes of limiting volatility. But as DAI is already hyper-collateralized, with an average collateral over 400% the size of the loan, increasingly exorbitant settlement fees beg the question of if this system is actually sustainable.
In a presentation at Consensus, Greg Diprisco, head of business development at Maker Foundation, addressed the concerns. Over 2% of all Ether is currently locked up in Maker as collateralized debt positions (CDP).
Diprisco stressed the need and inevitability of multi-collateral debt positions for the longevity of the system. He explained that peer-to-peer lending in Maker, as it is currently offered with only ETH integration, is still very much an experiment. “We need multi-collateral DAI or the system isn’t scalable,” he said.
He also pointed to the success of DAI throughout the 2018 bear market, which saw ETH losing more than 90% versus USD. Despite the stability fee concerns, DAI and Maker persisted beautifully throughout the bear winter.
Ultimately, Diprisco hammered home the role multi-collateral DAI must and will play in the system. Initially, it can be expected to incorporate more assets on the Ethereum blockchain, but will also support coins on different blockchains and even off-chain assets, as determined by the Maker holders that vote and govern the DAO. He also talked about the potential of leveraging other stablecoins, “Some of the first collateral coins in multi-collateral will be other stablecoins,” he said.
While a date was not revealed for the anticipated launch of multi-collateral debt positions, Diprisco did share the classic assurance of “soon”.