The Love-Hate Entanglement between MakerDAO and the Founder of Ethereum

On September 2, Ethereum founder Vitalik sold 500 MKR tokens worth about $580,000. This move has attracted widespread attention, and the underlying reason seems to be related to the plans recently announced by MakerDAO founder Rune Christensen. Rune stated that he would build a new chain based on the Solana codebase, which is the final step of his proposed "Endgame" plan.

MakerDAO has been a protocol frequently mentioned by Vitalik since its inception. Vitalik has publicly praised MakerDAO multiple times as an impressive application. However, beyond the praise, Vitalik has also questioned the development direction of MakerDAO on several occasions. This article will briefly review the development history of MakerDAO and explore the changes in Vitalik's attitude towards the protocol at various stages.

Ambitious Birth

MakerDAO founder Rune is an ambitious figure. Before launching MakerDAO on the Ethereum network, he was exploring whether it was possible to launch the stablecoin Dai on BitShares. After researching, Rune concluded that BitShares could not support complex financial protocols, so he decided to build an on-chain dollar stablecoin based on Ethereum.

In early 2015, Rune began sharing and discussing the initial code of the Maker protocol with members of the Ethereum community on social media platforms. In December 2017, MakerDAO released its white paper, initially limiting Dai's collateral to ETH. MakerDAO grew rapidly and attempted to use other ERC-20 tokens and tokenized gold as collateral in the second quarter.

At that time, Vitalik had a high regard for MakerDAO. In an interview at the end of 2018, when asked about the most amazing Ethereum applications he had encountered recently, Vitalik replied, "MakerDAO impressed me deeply." He also pointed out that theoretically, MakerDAO's model could be extended beyond the US dollar and could even be applied to consumer price indices and real estate indices.

Encountering setbacks but continuously developing

In September 2018, A16Z invested $15 million in MakerDAO by purchasing MKR. By early 2020, the total supply of DAI had reached 100 million. However, the market crash in March 2020 led to a significant drop in the price of Ether, resulting in $5.3 million in bad debt for the MakerDAO system. Ultimately, MakerDAO weathered this crisis by auctioning MKR.

After the crisis, MakerDAO quickly recovered. The protocol completed the process of transferring control of MKR tokens to the governance community and encouraged the community to maintain deep involvement. To address the risk of stablecoin de-pegging, MakerDAO supported the use of USDC as collateral through voting and offered high interest rates.

This decision has sparked controversy. Vitalik expressed his disagreement with MakerDAO's direction, believing that a stablecoin protocol with a single collateral and minimal governance is needed. However, community members pointed out that a single collateral is difficult to support the expanded issuance of Dai, and measures like introducing USDC can help Dai quickly regain stability.

Facing challenges, turning crisis into opportunity

In mid-2021, the price of MKR once soared to over $5000. However, the subsequent "519" market event brought a huge shock to the entire cryptocurrency market. Nevertheless, the biggest challenge facing MakerDAO does not come from market volatility, but rather from the competition with the algorithmic stablecoin UST.

UST once became a popular stablecoin with a market value close to $20 billion. To expand the use of UST within the Ethereum ecosystem, the Terra community proposed the introduction of a new stablecoin liquidity pool called "4pool," aiming to challenge the status of Dai. However, UST ultimately collapsed, allowing Dai to maintain its position as the leading decentralized stablecoin.

Shortly after the collapse of UST, Vitalik published an article titled "Evaluating Two Thought Experiments on Stablecoins," in which he mentioned another stablecoin project, Rai. Vitalik expressed more interest in Rai than in Dai because Rai "better represents a purely decentralized, ideal type of stablecoin and is solely backed by Ether." This indicates that Dai is no longer the ideal choice in Vitalik's eyes.

The RWA narrative shows stunning performance

With the Federal Reserve's interest rate hikes and factors such as DeFi security, on-chain liquidity and protocol revenue have significantly declined. In response to this situation, MakerDAO has begun to layout real-world assets (RWA). The protocol has converted part of its reserves of stablecoins like USDC into U.S. Treasuries, which has led to a significant change in the asset structure backing the issuance of Dai.

Currently, RWA has become the dominant asset class in MakerDAO's asset structure, allowing the protocol to enable users to share in U.S. Treasury yields while enhancing protocol revenue. Moreover, reducing reliance on centralized stablecoins has also strengthened the protocol's stability, as demonstrated by its resilience during the Silicon Valley Bank incident.

However, on September 1st, MakerDAO founder Rune expressed his intention to build a new chain based on Solana on social media, which caused a huge reaction. Rune then explained that this proposal should not be viewed through a "tribalism" lens. Interestingly, Vitalik did not comment directly on this but sold 500 MKR tokens on the same day.

Summary

The development of MakerDAO showcases the efforts of founder Rune as an ambitious pragmatist continuously pushing for protocol innovation. In contrast, Vitalik seems to advocate for a certain sense of "pure decentralization" and idealism. However, some of Vitalik's actions, such as the fork between ETH and ETC, seem to contradict this ideology. This complex relationship reflects the collision of ideals and reality in the decentralized space and provides an interesting perspective for us to contemplate the future direction of blockchain technology.