By George Ward
MakerDAO, a dominant force in the DeFi space, is considering enlarging its investments in US Treasury bonds to $1.25 billion. Recently, the firm submitted a fresh proposal to boost the limit from $500 million.
The proposal said implementing the extra $750 million through a six-month Treasury ladder strategy utilizing a bi-weekly roll-over system. “A proposal to increase MakerDAO’s current US treasury bond investments to $1.25 billion is under review,” MakerDAO tweeted.
Reason For The Latest Proposal
The announcement to assign $500 million to Treasury funds arose in June 2022. The platform created a significant buzz in the industry when it unveiled plans to assign $500 million to Treasury and corporate bonds.
However, the DAO eventually allocated $400 million and $100 million to U.S. Treasury corporate bonds, respectively. Some critics disapproved of the decision, arguing that it contradicted the essence of decentralization.
Among those who criticized the move was Erik Voorhees, the founder of ShapeShift. “Providing loans to a violent regime does not bode well for a cryptocurrency project. We should aim towards making better decisions,” Voorhees tweeted.
Conversely, the rationale for this decision is to capitalize on the prevailing yield environment and generate additional revenue on Maker’s PSM Assets. The investment strategy will be agile and fluid, allowing for significant adjustments and upgrades to comply with existing Maker policies.
As of June 2022, observations revealed that such an allocation could aid Maker in mitigating credit and counterparty risk, which was essential in light of the market upheaval. Notably, Maker intends to implement this allocation promptly, aiming to leverage the current yield environment to its fullest extent.
MakerDAO Taking Giant Strides In The DeFi Space
Interestingly, Maker continues to assert its dominance in the DeFi sector. Recently, the MakerDAO community voted against Cogent Bank’s request to borrow about $100 million from the platform, with 73% opposing the proposal.
Interestingly, the same community had approved a comparable loan to the Huntingdon Valley Bank. This move underscores the platform’s efforts to onboard more traditional financial institutions.
In February, the MakerDAO community allocated 5 million DAI to establish a legal defense fund. The community emphasized that the fund would cater to legal defense expenses not covered by conventional insurance policies.
Last month, MakerDAO announced the launch of its Aave competitor, the Spark Protocol. This new platform will rely on the DAI token for liquidity and offer a lending product as its initial service.
Additionally, MakerDAO recently initiated talks regarding a proposal to permit DAI stablecoin to borrow from MKR tokens, indicating the platform’s constant pursuit of innovative solutions to enhance its offerings.