MakerDAO Co-Founder Lays Timeline for Free Floating DAI

Weeks after threatening to “YOLO” DAI collateral from Circle’s USD coin to ether, MakerDAO’s co-founder Rune has proposed a path to “free floating” DAI — letting the stablecoin de-peg from the US dollar altogether.

Rune’s proposal on MakerDAO’s forum, submitted on Wednesday, calls for the decentralized autonomous organization (DAO) treasury to accumulate ether through its current investments for three years before cutting back on real world plays (RWAs) and reducing its exposure to “seizable” assets. 

Rune’s plan represents a struggle to overcome a growing schism emerging in MakerDAO, as members plan to avoid potential — and still hypothetical — fallout from the United States’ Tornado Cash sanctions.

The proposal outlines three different “stances” for MakerDAO as the organization moves away from real world assets and DAI loses its dollar peg: Pigeon (maximum growth), Eagle (balance between growth and resilience) and Phoenix (maximum resilience at the cost of less growth).

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In the blog post, Rune emphasized his support for real world asset projects which can onboard users into decentralized finance (DeFi), but warns a free floating DAI backed solely by crypto and not pegged to the dollar may become necessary.

Rune wrote DAI will detach from the US dollar — doing away with what’s known as the Price Stability Peg — only in the case of an “authoritarian threat.” Since the US Treasury sanctioned Tornado Cash in August and Circle blacklisted a host of USDC Ethereum addresses, Maker members have been sounding alarm bells that government interference could quickly torpedo DAI’s value. 

Maker is still pursuing partnerships with non-crypto financial institutions — such as its recent $100 million debt facility with Huntingdon Valley Bank — but the US’ Tornado Cash sanctions reduced the DAO’s appetite for regulatory risk.

‘Futurists’ and ‘centralists’ torn over free floating DAI

In a group built to avoid centralized authority, MakerDAO is struggling to find a unified path forward.

“It seems everyone in MakerDAO understands there [needs] to be changes, but the action plan is not decided yet,” Maker contributor Ignas told Blockworks in a Twitter DM. “[Maker]DAO is just unsure and disoriented where to even start.”

MakerDAO’s current split centers on what the protocol should do with its assets. The worldview shared by Rune and fellow “futurists” holds that a truly decentralized DAI can eventually replace fiat at a large scale, and government sanctions are a major threat to this mission.

On the other hand, “centralists” include venture capital investors who hope to expand the protocol’s real world credit facilities to make the DAO profitable. 

It remains unclear which worldview is ascendant, but futurists received a boost in June when MakerDAO voted down the creation of a lending oversight committee that would have expanded the DAOs reach into RWAs. The vote was controversial, drawing accusations that a minority of Maker whales, including Rune, used large tranches of votes to shift the outcome.

As specifics on the US Treasury’s sanctions loom, though, MakerDAO may be facing a test for its continued existence. As its former head of business development Greg di Prisco wrote on Twitter this week, Maker seems to be entering a “battle for the soul” of the protocol.

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