Key Takeaways
- MakerDAO is a very popular body within the cryptocurrency ecosystem.
- In recent times, the governing core of the Maker Protocol has witnessed a drastic and discouraging reduction in revenue in the latter part of 2022.
MakerDAO is a very popular body within the cryptocurrency ecosystem. In recent times, the governing core of the Maker Protocol has witnessed a drastic and discouraging reduction in revenue in the latter part of 2022. This drastic cut is based on the low demand for loans and few liquidations, as well as the ongoing high cost of expenses.
A tweet by Johnny_TVL on the 13th of October hinted more about the situation. Via the tweet, Johnny, a Messari analyst and co-author of "The State of Maker Q3 2022," revealed that the decentralized autonomous organization (DAO) revenue has suffered a reduction of 86% compared to the previous quarter.
Read: Bitcoin Price to Benefit From Record High Open Interest as YTD Volatility Weakens
MakerDAO revenue tumbles 86% on Ether and Wrapped BTC woes
Johnny attributed the MakerDAO's drastic drop in revenue to some liquidations and a squat loan demand. Significantly, two cryptocurrencies—Wrapped Bitcoin (wBTC) and Ether (ETH)—that are the core sources of MakerDAO's massive revenue have performed poorly in the market in recent months. The value of Ethereum's based assets fell by 74%, and the revenue acquired from BTC-based assets dropped by 66%.
These two cryptocurrencies are regularly used by borrowers as collateral for loans of Dai stablecoins, offering a stable shield for the endless volatility suffered within the cryptocurrency ecosystem at the cost of interest offered on the loans. He also showed a drop in the collateral quotient of MakeDao, hinting the quotient has dropped from its high of 1.9 to 1.1 at the exact period one year ago.
Nonetheless, "expenses are not so elastic." As Johnny mentioned, the report revealed that expenses sustained their high rate in the quarter at $13.5 million, dropping 16% from what was obtained in the last year. However, MakerDAO is staying numb and indecisive. MakerDAO has begun to explore several options to spike the revenue on assets it possesses as collateral.
One of the options is its commencement of a proposal to stake $500 million in bonds and treasuries. It is believed that MakerDAO does not doubt the efficacy of this option. It is widely assumed that this will provide the protocol with a low-risk additional yield.
Let us know what your thought are about this in the comment section.
