MakerDAO, on the Significance of Multi-Collateral Dai and Dai Savings Rate

Exclusive interview with Gustav Arentoft: Part 2 (Link: Part 1)

MakerDao is the protocol behind Dai, the world’s first decentralized stablecoin and the contemporary success story for decentralized finance (DeFi). The project went live in December 2017, with Dai as the USD stablecoin and Maker functioning as the governance token. In the world of decentralized finance, MakerDao is by far the most popular DeFi protocol running on the Ethereum network and has been steadily increasing traction since its launch. After only a year and a half into production, MakerDao reached its all-time high market cap of $97M on July 9, 2019.

In part two of our interview with Gustave Arentoft, Business Development, Dai Speaker, MakerDAO: he shared with us the significance of the launch of multi-collateral DAI and Dai Savings Rate (DSR), as well as his favourite Dapps which integrates DSR.

The Future of Digital Cash

Multi-Collateral Dai (MCD) represents the future of digital cash, with a new Dai Savings Rate feature and the activation of a smart contract that paves the way for new collateral assets to back Dai. Maker is touting its arrival as a significant step towards the vision of creating a decentralized platform to help level the economic playing field for people around the world.

MCD was activated on the MakerDAO system on Nov. 18. MCD, as its name states, will enable users to create Dai stablecoins backed by multiple collateral types. The initial collaterals for MCD will be ether and basic attention tokens. The introduction of MCD also allows for today's launch of the Dai Savings Rate (DSR), a feature that makes it possible to earn savings simply by holding Dai.

Arentoft commented on the launch saying, “It’s very similar to having a US dollar-denominated savings account. It works as a form of staking, the savings accounts will take some part of the profits from the system and distribute them back to the users on the system. One of the benefits of having a decentralized system is that we don’t have to abide by traditional monetary policy but can instead focus a lot more on helping people.”

The Dai savings feature could not only offer a shield to users living in regions where it becomes necessary to guard oneself against rampant currency inflation and poor government monetary policies, but it will also carry an interest rate which will potentially increase the users’ wealth. Reflecting on a personal note, Arentoft said, “I lived in Argentina for a year and a half before joining Maker, so I really have firsthand experience living in the oblivion of monetary uncertainty. Trust me, a Dai savings account would have been a gift from heaven during that period to protect myself and my finances, so I know that this product will really be capable of creating a very positive impact in communities that are often facing fiscal uncertainty.”

MCD Functionality and the Vault

In order to support MCD functionality and its features, such as the DSR and new collateral types, the core Maker Protocol smart contracts were rewritten. Therefore, users and partners interacting with Sai must upgrade their existing Sai tokens to Multi-Collateral Dai tokens (Dai) and Vaults (formerly CDPs) to the new system. Additionally, companies or projects integrated with Sai and Vaults must update their codebases to point to the new smart contracts and support the updated functions.

Arentoft offered some clarification on the change in terminology, “It was felt that some of these words weren't really accurately describing what they really represented and bore too many similarities to traditional financial instruments. Therefore, a decision was made to go out and create some more informative terms—the vault, for instance, just represents the ability to hold collateral in the system, and the visual trigger represents how safe it is to actually hold assets and collateral in our system.”

Migration webpage of MCD
Source: MakerDAO website

DSR Dapps

Prior to the launch of the MCD, the team at Maker rigorously tested the smart-contracts to uncover and integration issues and to ensure the decentralized applications (Dapps) featuring Dai on the Maker protocol would support MCD functionality.

Arentoft discussed some of his favourite Dapps, he said, “My personal favorite is Argent—it is a very easy to use smart contract based wallet that will have the DSR on launch as well as CDPs.” He added, “Of course there is Wirex, one of the biggest debit card providers with three million registered users, obviously it will greatly appeal to our users if you can keep Dai on a debit card while earning savings interest, which their product will. The key to these products is easy user accessibility and functionality as the world of decentralized finance can be a daunting place to the uninitiated.”

The Future is What We MAKER

Following the launch of the MCD, Maker will still have plenty of projects on the horizon. Arentoft shared, “We're going to make a few enhancements to the infrastructure as well as build a token representation of the DSR. We also want to take a more focused and proactive approach with our partners and offer more in terms of support and resources.” Concluding our interview, he said, “In general, on the partnership side of things, we've already been pretty successful. This year, we've scaled from just 100 projects to 400 projects that use Dai in one form or another—we would like to continue to scale up. We don’t have anything as major as the MCD or DSR coming out but in fairness these are probably two of the biggest innovations ever in cryptocurrency so we can’t be expected to change the game every year. But there's still a lot of exciting things to come so definitely stay tuned.

Stay tuned on Part 3 of MakerDAO’s interview, on staying compliant over 400 global partnerships!