- MakerDAO resumes full decentralization, 6 years after the introduction of the first iteration of Dai.
- The MakerDAO foundation will be dissolved in the near future as a result of cycle completion.
- Co-founder Rune Christensen reflects on MakerDAO’s progression from its first iteration to its current decentralized state.
- MakerDAO encountered a few hiccups along the way, including a class-action lawsuit and the resignation of its CTO amid internal struggles.
In its current form, cryptocurrency decentralization is challenged by high capital clusters. As a comparison, China’s mining hegemony raised concerns about hashrate mining centralization, bringing additional concerns about asset centralization. DAOs have developed as a requisite for the growing blockchain economy, as it creates a transparent and auditable foundation for maintaining decentralization.
MakerDAO Embraces Full Decentralization
In a new post, MakerDAO’s founder, Rune Christensen, disclosed that the project’s foundation would formally dissolve and pave the way to the promised decentralization ideal of the roadmap. As announced on July 20th, the DAO is currently self-sufficient as the Core Units have successfully completed their organizational responsibilities.
The foundation was created as a non-profit community in September 2018 to align stakeholders to 5 key principles and oversee the funding and development of the protocol. As a result, the MakerDAO foundation has fulfilled its intended duties as the global community is “now responsible for every aspect of the Maker protocol.”
In addition, the foundation was designed to exist only “temporarily” until it had met its end goal. As Christensen highlighted, “everyone involved worked tirelessly to devise a framework for scientific governance and create an infrastructure for a new generation of open financial services,” and that emphasizing only high community involvement “could make success a reality.”
From Design to Achievement
The first iteration of the DAI was distributed on Reddit by the co-founder as a non-volatile eDollar for users to interact with dApps on the Ethereum network. In 2017, developers released the ProtoSai, a limited release of the first iteration of what is now the Dai Stablecoin System (DAI), which was later introduced in 2019.
In 2018, Andreessen Horowitz invested $15 million into MakerDAO, enabling him to become part of its governance. Furthermore, Mark Cuban publicly praised DAOs for their ability to democratize companies in the future, as DAOs have become legal entities in the state of Wyoming.
MakerDAO has progressed according to their roadmap. In 2020, MKR contracts transferred to the MKR governance, entailing governance approval were the only way to change “token authorizations.”
In 2021, Maker Foundation returned 84,000 tokens from dev fund holding to the DAO, whilst approving the Liquidation 2.0 module that “approved Maker governance for acceptance in the Maker Protocol.” As each step was achieved, MakerDAO inched closer to its current state of complete decentralization.
On The Flipside
- The news of full decentralization did not have a positive impact on the price of MKR.
- Judge Maxine Chesney has moved the MakerDAO lawsuit to the American Arbitration Association.
- MakerDAO failed to fulfill its promise of protecting against large drops due to over-collateralization.
- MakerDAO and Reserve0 are the only protocols that do not depend on the USD to back their stablecoin
The Road to Hell Is Paved with Good Intentions
Developing a self-sufficient DAO to facilitate dApps access proved to have its challenges. Internal struggles within the company led to discord between foundation supporters and decentralization maximalists, resulting in the departure of the CTO. A 24-page letter highlighted the “Maker development team going through its most difficult challenge,” stressing an internal conflict between Andy Milenius and MakerDAO’s CEO.
Adding to that, MakerDAO disclosed a flaw in their code in which, according to reports, MakerDAO had a “lack of access control in a MakerDAO smart contract,” which impeded anyone trying to auction collateral in return for DAI. Furthermore, the project was faced with a $28 million class-action lawsuit after the protocol lost $5.7 million, between March 11th and 12th, in a liquidation tumble, as the price of Ethereum decreased by 50%.