MakerDAO Votes To Allocate $500M Into Minimal Risk Bonds And Treasuries

MakerDAO, the decentralized autonomous organization (DAO) behind the DAI stablecoin, is voting on how to allocate $500 million in treasury funds. The proposal is aimed at helping the organization navigate the ongoing bear market through investments in United States treasuries and bonds. 

Navigating The Bear Market

The MakerDAO proposal is intended to help the organization weather the bear market and use its untapped reserves. The plan is to invest 500 million DAI stablecoins into a mixture of United states treasuries and bonds. Members of the decentralized autonomous organization (DAO) now have to decide if the dormant DAI funds must be allocated entirely to short-term treasuries or split 80% into treasuries and the remaining 20% into corporate bonds. 

MakerDAO took to Twitter to make the announcement about the vote, stating, 

“The Maker Governance votes to determine how to allocate 500 million DAI between different investment strategies. This allocation poll is a result of the passage of MIP65: Monetalis Clydesdale: Liquid Bond Strategy & Execution.”

The thread also explained how the entire process would work. 

Expanding Beyond The Crypto Space 

MakerDAO is the governance entity of the Maker Protocol, which issues the DAI stablecoin in exchange for ETH, Wrapped Bitcoin (wBTC), and a host of other cryptocurrencies. The proposal is significant for MakerDAO as it outlines the protocol’s intention to step out of the shadow of the crypto realm and earn yield from traditional and so-called “safe” investments using its DAI stablecoin. 

The maker community also seems to be heavily favoring the splitting of the DAI between the treasuries and bonds option, which has so far received 99.3% of the votes, albeit these votes have come from just 12 voters so far. Currently, governance participation on Maker is at its lowest levels during the ongoing year, with only 169,196 MKR staked. 

Doo, one of the largest delegates in the MakerDAO ecosystem, voted for the 80/20 split allocation, reasoning that the allocation in treasuries and corporate bonds would be beneficial for the protocol in the long run for a host of reasons. They also cited its recent exposure to traditional financial institutions and learning how to navigate the ongoing bear markets. Doo stated, 

“As TradFi is seeing interest rate increase due to the FED. Maker protocol working with TradFi to take advantage of the high interest would be able to strengthen its revenue model.”

After The Voting Ends 

The poll ends on the 30th of July 2022 at 12:00 pm EST. Once the users have selected an option, Monetalis, European wholesale lender, will give MakerDAO access to the financial instruments needed. Allan Pedersen, CEO of Monetalis, had put the Signal Request in the forum, listing the options that the firm could provide. 

MakerDAO has decided to invest significant funds after members recommended that deploying the unused funds in such a capacity would significantly boost the protocol’s bottom line while incurring minimal risk. Sebastien Derivaux had, in an assessment of the feasibility of the allocation, stated that while the amount being committed was significantly high, it was a safe choice. 

“An investment of 500M DAI in this context, that is expected to remain liquid and low volatility is therefore not a significant risk for the DAI peg nor the solvency of MakerDAO.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.