Making MakerDAO Sexy Again
During the "DeFi Summer" bull market of 2020 that propelled this nascent corner of the cryptocurrency industry from the blockchain backwaters to a multibillion-dollar opportunity, DeFi Pulse's "Maker dominance" widget began to seem a bit like an anachronism.
The tool was simple, provided by decentralized finance's premier data provider. It was a way to track the total percentage of capital allocated to MakerDAO, the issuer of the DAI stablecoin that's managed by a group of stakeholders, compared to all other decentralized finance protocols – the lenders, the exchanges, the yield generators.
At the time DeFi Pulse launched in early 2019, it made sense to measure Maker's "dominance," DeFi Pulse founder Scott Lewis said. The stablecoin project was first theorized in 2014 by founder Rune Christensen, released in 2017 and had already garnered "product-market fit," something of a rarity for any crypto project.
Maker offered a way for people to essentially print their own U.S. dollar-denominated tokens, DAI, in exchange over-collateralized ETH deposits – all without a middleman. That meant crypto users had access to tokenized greenbacks without having to deal with centralized companies or consortia like Tether or Circle.
It was a potentially huge market, and Maker was essentially profitable from the jump. By 2019, people were comfortable minting $1 million dollar loans on MakerDAO. Its smart contracts attracted hundreds of millions worth of currency. It was the gold star DeFi project.
Compound was the first DeFi protocol to "flip" MakerDAO. It had just issued a governance token, COMP, to give control over the protocol to its users, kick-starting a trend of DeFi tools issuing tokens and garnering previously untold numbers of users.
Today, Maker's dominance stands around 20% of the DeFi market, as measured by DeFi Pulse. Of course, "dominance" in DeFi is not zero-sum – the entire industry has grown significantly – worth some $80 billion in total, down from an all-time high of around $110 billion in November – with MakerDAO alongside it.
But the stablecoin project is facing steep competition. Terra, an all-in-one layer 1, or base, blockchain that offers its own DeFi ecosystem, is built around its own "decentralized" stablecoin, UST. According to CoinGecko, there are some $15.9 billion USTs – making it the fourth-largest stablecoin behind tether (USDT), USDC and Binance coin (BNB) – compared to $9 billion DAI.
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–Daniel Kuhn
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