
Stargate vs. Across
Why does bridging matter?By now, it’s clear that the future is multichain and omnichain. For example, L2 Beat now tracks nearly 60 active networks, with TVL having increased 5x over the past year alone. As more chains emerge, the need for seamless communication between networks becomes more important. From a user’s perspective, they shouldn’t have to waste time and energy moving assets from chainA to chainB by navigating through several apps, signing a handful of transactions and clicking far...

Automated Onramps: Why Don't They Exist?
I Can’t DCA Into Coins Without Clicking ButtonsFor the past few months, I’ve done my best to dollar-cost average (DCA) into Bitcoin and Ethereum. Every two weeks, I’ll take a fixed percentage of my paycheck and manually send it to Newton. Then, based on a daily “recurring buy” order that I’ve set up in-app, Newton will gradually swap my fiat for cryptocurrency. When I feel like I’ve loaded up on enough BTC and ETH in-app, I will execute transfers from Newton to various self-custodial wallets ...

Exploring New Ways to Fundraise for Nonprofits
Starting Out as ToysJust like many other disruptive technologies that came before it, NFTs started out as toys. While the technology has been popularized as a means to own and flip digital art — think Crypto Punks and Bored Apes — NFTs represent a more serious shift in the way we attribute ownership online. NFTs effectively make the internet ownable by users, rather than exclusively by platforms like Facebook, YouTube, and Spotify. As a result, more groundbreaking use cases for NFTs are quick...
Studying DeFi



Stargate vs. Across
Why does bridging matter?By now, it’s clear that the future is multichain and omnichain. For example, L2 Beat now tracks nearly 60 active networks, with TVL having increased 5x over the past year alone. As more chains emerge, the need for seamless communication between networks becomes more important. From a user’s perspective, they shouldn’t have to waste time and energy moving assets from chainA to chainB by navigating through several apps, signing a handful of transactions and clicking far...

Automated Onramps: Why Don't They Exist?
I Can’t DCA Into Coins Without Clicking ButtonsFor the past few months, I’ve done my best to dollar-cost average (DCA) into Bitcoin and Ethereum. Every two weeks, I’ll take a fixed percentage of my paycheck and manually send it to Newton. Then, based on a daily “recurring buy” order that I’ve set up in-app, Newton will gradually swap my fiat for cryptocurrency. When I feel like I’ve loaded up on enough BTC and ETH in-app, I will execute transfers from Newton to various self-custodial wallets ...

Exploring New Ways to Fundraise for Nonprofits
Starting Out as ToysJust like many other disruptive technologies that came before it, NFTs started out as toys. While the technology has been popularized as a means to own and flip digital art — think Crypto Punks and Bored Apes — NFTs represent a more serious shift in the way we attribute ownership online. NFTs effectively make the internet ownable by users, rather than exclusively by platforms like Facebook, YouTube, and Spotify. As a result, more groundbreaking use cases for NFTs are quick...
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The Maker Protocol is governed by the MakerDAO and is responsible for the creation and management of the DAI stablecoin. DAI is a decentralized stablecoin pegged to the US dollar and is backed by collateral assets that are locked in smart contracts. To gain a better understanding of decentralized stablecoins, see this blog post.
As the most popular decentralized stablecoin on Ethereum, DAI currently holds about 5% of the total stablecoin market and over 50% of the decentralized stablecoin market. See these two dashboards from 21.co and KARTOD for reference.
To mint DAI, depositors must lock tokens like ETH, USDC, wBTC, and others into smart contracts known as collateralized debt positions (CDPs). Each CDP accrues interest over time, representing the cost of borrowing to users.
The cost of borrowing in the Maker ecosystem is referred to as The Stability Fee. It is an annual percentage yield (APY) that is calculated on top of the existing debt within the CDP and has to be paid by the CDP user. The Stability Fee is denominated in DAI, but can only be paid using the MKR token.
From a collateralization perspective, each CDP has its own requirements. For example, a user who deposits $10,000 of ETH is currently required to maintain an overcollateralization ratio of at least 150%. This means that at most, 6,666 DAI can be minted against $10,000 of ETH.
From a depositor’s perspective, creating DAI is meant to generate liquidity which is most often used for leverage. Going back to our example, a user can deposit $10,000 worth of ETH to generate 5,000 DAI. Then, the user can swap their newly-minted DAI for more ETH. As a result, they have set up a trade that captures a leveraged multiple of the ETH/USD price movement since their debt (DAI) accrues in US Dollar terms.
According to this dashboard from Steakhouse, Maker is currently sitting on nearly 4.7B in assets made up of other stablecoins, RWAs, and tokens like ETH, wBTC, and others. On this asset base, Maker earns interest by charging Stability Fees on user deposits.
To put it simply, sDAI is a tokenized wrapper around the DAI Savings Rate (DSR). The DSR helps balance the supply and demand of DAI and is one of the monetary policy levers that the Maker DAO can influence in order to maintain the stablecoin’s peg.
The DSR is funded out of the Stability Fees paid by CDPs. For example, if the average Stability Fees collected on CDPs is 3%, it could be used to fund a DSR of 2%. In other words, the Maker protocol will earn interest income for providing users with liquidity in the form of DAI, and then distribute a portion of this income via the DSR. This means that the DSR is a result of “real yield” generated by the Maker protocol and is not artificially boosted in any way.
A person who holds DAI can lock and unlock DAI into a DSR contract at any time. Once locked into the DSR contract, DAI continuously accrues. For example, if the DSR is 2%, a user who locks 100 DAI into the DSR contract and keeps it locked for a full year would earn two additional DAI. They would receive this additional DAI when they unlock their position from the DSR contrct. Thus, sDAI is not a rebasable token like stETH, meaning that the user's balance of sDAI will not change automatically in proportion to their accrued interest from the DSR. That is why the sDAI / USDC trading pair is currently priced at 1.09 sDAI for each unit of USDC on DEXs like Uniswap.
So, how exactly is the DSR used to maintain DAI’s peg? If the market price of DAI is above 1.00 USD, the DAI Savings Rate will decrease. This lowers demand for DAI in the sense that some users would unlock their DAI from the sDAI contract and then sell it on the open market for other assets. As a result, this should reduce the market price of DAI down towards the 1.00 USD target price.
Conversely, if the market price of DAI is lower than 1.00 USD, the Maker DAO may choose to raise the DSR. As a result, we would see more demand for DAI and thus, a convergence to its peg of 1.00 USD across trading venues like DEXs and centralized exchanges.
Right now, there is nearly 1.4B DAI earning the DSR in the sDAI contract. On March 8th, the Maker DAO passed a proposal to increase stability fees charged on the protocol’s CDPs in order to align borrow rates with those observed on platforms like Aave and Compound. As a result, the proposal also called for increasing the DSR from 5% to 15%, outlined here. Whereas more recently, the stability fee was lowered to 8%, where it currently stands.
Operating since 2017, The Maker Protocol is often referred to as Ethereum’s flagship DeFi project. See here for Maker’s relevance in the history of DeFi.
By depositing USDC into Maker’s sDAI contract, the most significant risk relates to the protocol’s ability to maintain DAI’s peg in the long term. To maintain DAI’s stability, Maker DAO has instituted many risk-mitigation strategies, including their Target Rate Feedback Mechanism (TRFM), Peg Stability Module (PSM), and the DAI Savings Rate (DSR) which can be read about in detail here. Since its creation, DAI has demonstrated relative stability over the past few years.
However, with a significant portion of deposited collateral now in the form of USDC and RWAs, DAI now inherits some of the risk associated with the US banking sector and overall US economic environment.
In March 2023, when USDC lost its peg following concerns that deposits were locked in the recently-bankrupt SVB, both USDC and DAI fell to 0.90 for a short period of time. It is worth noting that DAI has not suffered from any sustained deviation from its peg, and therefore shouldnt be considered a high-risk asset.
The Maker Protocol is governed by the MakerDAO and is responsible for the creation and management of the DAI stablecoin. DAI is a decentralized stablecoin pegged to the US dollar and is backed by collateral assets that are locked in smart contracts. To gain a better understanding of decentralized stablecoins, see this blog post.
As the most popular decentralized stablecoin on Ethereum, DAI currently holds about 5% of the total stablecoin market and over 50% of the decentralized stablecoin market. See these two dashboards from 21.co and KARTOD for reference.
To mint DAI, depositors must lock tokens like ETH, USDC, wBTC, and others into smart contracts known as collateralized debt positions (CDPs). Each CDP accrues interest over time, representing the cost of borrowing to users.
The cost of borrowing in the Maker ecosystem is referred to as The Stability Fee. It is an annual percentage yield (APY) that is calculated on top of the existing debt within the CDP and has to be paid by the CDP user. The Stability Fee is denominated in DAI, but can only be paid using the MKR token.
From a collateralization perspective, each CDP has its own requirements. For example, a user who deposits $10,000 of ETH is currently required to maintain an overcollateralization ratio of at least 150%. This means that at most, 6,666 DAI can be minted against $10,000 of ETH.
From a depositor’s perspective, creating DAI is meant to generate liquidity which is most often used for leverage. Going back to our example, a user can deposit $10,000 worth of ETH to generate 5,000 DAI. Then, the user can swap their newly-minted DAI for more ETH. As a result, they have set up a trade that captures a leveraged multiple of the ETH/USD price movement since their debt (DAI) accrues in US Dollar terms.
According to this dashboard from Steakhouse, Maker is currently sitting on nearly 4.7B in assets made up of other stablecoins, RWAs, and tokens like ETH, wBTC, and others. On this asset base, Maker earns interest by charging Stability Fees on user deposits.
To put it simply, sDAI is a tokenized wrapper around the DAI Savings Rate (DSR). The DSR helps balance the supply and demand of DAI and is one of the monetary policy levers that the Maker DAO can influence in order to maintain the stablecoin’s peg.
The DSR is funded out of the Stability Fees paid by CDPs. For example, if the average Stability Fees collected on CDPs is 3%, it could be used to fund a DSR of 2%. In other words, the Maker protocol will earn interest income for providing users with liquidity in the form of DAI, and then distribute a portion of this income via the DSR. This means that the DSR is a result of “real yield” generated by the Maker protocol and is not artificially boosted in any way.
A person who holds DAI can lock and unlock DAI into a DSR contract at any time. Once locked into the DSR contract, DAI continuously accrues. For example, if the DSR is 2%, a user who locks 100 DAI into the DSR contract and keeps it locked for a full year would earn two additional DAI. They would receive this additional DAI when they unlock their position from the DSR contrct. Thus, sDAI is not a rebasable token like stETH, meaning that the user's balance of sDAI will not change automatically in proportion to their accrued interest from the DSR. That is why the sDAI / USDC trading pair is currently priced at 1.09 sDAI for each unit of USDC on DEXs like Uniswap.
So, how exactly is the DSR used to maintain DAI’s peg? If the market price of DAI is above 1.00 USD, the DAI Savings Rate will decrease. This lowers demand for DAI in the sense that some users would unlock their DAI from the sDAI contract and then sell it on the open market for other assets. As a result, this should reduce the market price of DAI down towards the 1.00 USD target price.
Conversely, if the market price of DAI is lower than 1.00 USD, the Maker DAO may choose to raise the DSR. As a result, we would see more demand for DAI and thus, a convergence to its peg of 1.00 USD across trading venues like DEXs and centralized exchanges.
Right now, there is nearly 1.4B DAI earning the DSR in the sDAI contract. On March 8th, the Maker DAO passed a proposal to increase stability fees charged on the protocol’s CDPs in order to align borrow rates with those observed on platforms like Aave and Compound. As a result, the proposal also called for increasing the DSR from 5% to 15%, outlined here. Whereas more recently, the stability fee was lowered to 8%, where it currently stands.
Operating since 2017, The Maker Protocol is often referred to as Ethereum’s flagship DeFi project. See here for Maker’s relevance in the history of DeFi.
By depositing USDC into Maker’s sDAI contract, the most significant risk relates to the protocol’s ability to maintain DAI’s peg in the long term. To maintain DAI’s stability, Maker DAO has instituted many risk-mitigation strategies, including their Target Rate Feedback Mechanism (TRFM), Peg Stability Module (PSM), and the DAI Savings Rate (DSR) which can be read about in detail here. Since its creation, DAI has demonstrated relative stability over the past few years.
However, with a significant portion of deposited collateral now in the form of USDC and RWAs, DAI now inherits some of the risk associated with the US banking sector and overall US economic environment.
In March 2023, when USDC lost its peg following concerns that deposits were locked in the recently-bankrupt SVB, both USDC and DAI fell to 0.90 for a short period of time. It is worth noting that DAI has not suffered from any sustained deviation from its peg, and therefore shouldnt be considered a high-risk asset.
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