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Once the most valuable DeFi token, MKR has now dropped to #4
One reason is a structural issue that @DegenSpartan has discussed- its 3-body governance problem
To put another way, there’s a “Satisfaction Trilemma” where it’s impossible to keep all stakeholder groups happy
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One reason is a structural issue that @DegenSpartan has discussed- its 3-body governance problem
To put another way, there’s a “Satisfaction Trilemma” where it’s impossible to keep all stakeholder groups happy
1/
To start there is the Dai user
Their main priority is that the value of their Dai remains pegged at $1
If the price rises they want more collateral types, higher debt ceilings, and higher stability fees to restore the peg
The same vice versa. https://messari.io/chart/dai-peg--43BCC4FB
Their main priority is that the value of their Dai remains pegged at $1
If the price rises they want more collateral types, higher debt ceilings, and higher stability fees to restore the peg
The same vice versa. https://messari.io/chart/dai-peg--43BCC4FB
Then there is the Dai borrower (vault creator)
They are the vehicles of credit creation. They have assets and they want credit
Their chief concern is that the price of their credit (aka stability fee) doesn’t get too high
They are the vehicles of credit creation. They have assets and they want credit
Their chief concern is that the price of their credit (aka stability fee) doesn’t get too high
Finally there’s the MKR holder
They are the equity holders that govern and backstop the system, and ideally benefit from the protocol’s growth
They want to maximize fees paid (through loan growth and stability fees) while minimizing the possibility of dilution
They are the equity holders that govern and backstop the system, and ideally benefit from the protocol’s growth
They want to maximize fees paid (through loan growth and stability fees) while minimizing the possibility of dilution
All three of these groups play pivotal roles
Without 1 you have worthless dai
Without 2 you have no dai
Without 3 you have a stagnant protocol
Without 1 you have worthless dai
Without 2 you have no dai
Without 3 you have a stagnant protocol
The issue is you can’t satisfy all 3 groups
If you want Dai to scale, you can lower SF to incentivize debt creation
But eventually, MKR holders will want compensation
If they raise SF to juice fees then it might cause Dai to break north of the peg
If you want Dai to scale, you can lower SF to incentivize debt creation
But eventually, MKR holders will want compensation
If they raise SF to juice fees then it might cause Dai to break north of the peg
This dynamic exists across a multitude of parameter decisions
It results in a persistent tension that inhibits Dai from staying at $1, Dai from scaling further, and MKR from accruing value simultaneously
It results in a persistent tension that inhibits Dai from staying at $1, Dai from scaling further, and MKR from accruing value simultaneously
This isn’t to say Maker can’t succeed
Reaching $1b is nothing short of a monumental achievement
We’ve even written at length about a path forward
cc: @RyanWatkins_ https://messari.io/article/an-opportunity-for-maker
Reaching $1b is nothing short of a monumental achievement
We’ve even written at length about a path forward
cc: @RyanWatkins_ https://messari.io/article/an-opportunity-for-maker
But carefully balancing the needs of all three stakeholders will be pivotal going forward
Failing to satisfy any one group could put the whole system at risk
And crypto loves looking at problems through three-sided infographics
Failing to satisfy any one group could put the whole system at risk
And crypto loves looking at problems through three-sided infographics
