Following the events of Tornado Cash, Rune Christensen, the founder of MakerDAO began thinking about a more decentralized model for DAI, his stablecoin pegged to the dollar. As part of his research, he recently opened a governance discussion, in which he shares his ideas about a “pegless DAI.”
What if the DAI was no longer totally pegged to the dollar?
Rune Christensen, the founder of MakerDAO, had recently raised the idea of a DAI that would choose the path of independence from the dollar. These thoughts follow the Tornado Cash event and the centralization points that were revealed. So, in a lengthy post on the MakerDAO governance forum, the protocol founder presented his vision of a floating DAI last Friday.
First, he paints a relatively pessimistic picture of the situation. MakerDAO is intended to be decentralized and is inherently opposed to any censorship. But stablecoin is dependent on real-world assets, in this case the dollar, either through its peg or through the presence of USDC in its collateralization.
These elements therefore present a potential pressure point from the U.S. government:
“In the future, there is a high probability that Maker will be hit by a serious attack by global authorities targeting any attack surface they can find, through a process similar to that which led to the Tornado Cash sanctions.”
In fact, Rune Christensen doesn’t really give a time horizon to this thinking. He even believes it might not happen for many years and that such a negative scenario would only have a 50-50 chance of happening:
“But if you know there is a 50 percent chance of a plane crashing, you’re not going to get on that plane.”
Thus, two paths are open to DAI in his view: full regulatory compliance or full decentralization.
The concept of a floating DAI
Before we go any further, let’s make it clear that the ideas presented in this governance discussion are to be considered only for what they are: ideas. Ideas that are still vague and difficult to grasp. Nothing is concrete and definitive, and it might as well never happen.
For example, the share of “Real World Asset” (RWA) in the DAI collateralization could be capped at 25%. The USDC would then be included in this portion. The paper then discusses the theory of a floating DAI against the dollar, i.e. it would no longer be “pegged” and its price could move freely, like the euro against the dollar, for example.
The issuance of the stablecoin, which would no longer be totally a stablecoin, could be delegated to “MetaDAOs,” which would offer returns to IAD holders to compensate for the volatility. A MetaDAO would be a third party operating on behalf of MakerDAO and the protocol would act as a central bank to set the rules.
Each blockchain could then have its own issuing MetaDAO. The return mentioned would be generated by the assets brought in as collateral to mine DAI. A variant of this system is based on a similar model, but managed by the protocol itself.
All of these elements are rather complex and the viability of the system has yet to be defined. Nevertheless, they are the result of interesting reflections on the search for a better decentralization of stablecoin.
It is true that DAI is regularly mocked as a “wrapped USDC”. While this criticism is somewhat exaggerated, it does show that there is room for improvement in the current system.