Research Summary
The report provides an update on MakerDAO, a decentralized autonomous organization within the Ethereum blockchain. It discusses the growth of DAI supply and DAI staked into the DAI Savings Rate (DSR), the emergence of products building on top of sDAI, and the consistent profitability of MakerDAO. The report also highlights the potential future drivers of MakerDAO, including the Endgame transition and SubDAO Farming.
Key Takeaways
Growth of DAI Supply and DAI Staked into DSR
- Increasing DAI Supply: The report notes that the DAI supply and the amount of DAI staked into the DAI Savings Rate (DSR) have continued to grow. This growth has been driven by the successful bundling of off-chain treasury yields into a yield-bearing dollar.
- Emergence of sDAI Products: The growth trend has been accompanied by the emergence of products building on top of sDAI, such as Agave Finance on Gnosis Chain. These products are enabling access to the DSR on Gnosis Chain by placing idle DAI in the bridge into the DSR.
Consistent Profitability of MakerDAO
- Upward Trend in Profitability: The underlying profitability of MakerDAO shows a consistent upward trend, recently surpassing $200 million on an annualized basis. This profitability continues to drive flows into the System Surplus and consequently on-chain buybacks of MKR via the Smart Burn Engine.
- Increased Pressure on DAO: The report expects this trend to continue given the increased pressure on the DAO for the yield optimization of its RWA portfolio and the recent proposal to increase the respective Debt Ceilings of the Andromeda and Clydesdale RWA vaults to 3 billion DAI each.
Endgame Transition
- Significant Transition for MakerDAO: The report discusses the Endgame transition, which represents a significant shift for MakerDAO towards the ossification of the core Maker protocol while shifting innovation to subDAOs. This includes the rebranding of MKR and DAI, a 1:12000 split of MKR, and SubDAO Farming.
- SubDAO Farming: SubDAO Farming involves multiple spin-offs of different entities and protocols currently part of MakerDAO. Participants will be able to stake rebranded MKR and/or DAI to earn a share of these SubDAOs. This is expected to lead to DAI supply expansion, DSR outflows, and an increase in MakerDAO profitability and MKR buybacks.
Actionable Insights
- Investigate the Potential of SubDAO Farming: With the upcoming Endgame transition, SubDAO Farming could offer potential benefits for participants who stake rebranded MKR and/or DAI. This could lead to DAI supply expansion, DSR outflows, and an increase in MakerDAO profitability and MKR buybacks.
- Monitor the Growth of DAI Supply and DAI Staked into DSR: The continued growth of DAI supply and DAI staked into the DSR indicates a positive trend for MakerDAO. Keeping an eye on these metrics could provide insights into the future performance of MakerDAO.
- Assess the Impact of MakerDAO’s Profitability: The consistent upward trend in MakerDAO’s profitability, driven by flows into the System Surplus and on-chain buybacks of MKR, suggests a strong financial position for the organization. Evaluating this trend could help understand the financial health of MakerDAO.
