MakerDAO is a Value Trap. But it can turn into Deep Fucking Value with a few reforms. Whether those reforms occur is, of course, what breeds the differences of opinion that make a market

Let’s start with a basic fact: DAI is a cash generation monster. The largest revenue source for Maker, even now, is lending DAI. Demand to borrow DAI remains robust, despite current management neglecting or even attempting to dismantle it.

DAI is a fantastic product with natural demand, a deep moat, and little chance of being replicated

https://twitter.com/imperiumpaper/status/1890413934047285735

How did Maker go from $216m annualized revenue two months ago to $62m today? It’s actually pretty simple! We’re seeing the flip side of the exact same coin. Anyone who follows fixed-exchange currencies, banks, and stablecoins should be familiar w these mechanics 1/n

https://twitter.com/hexonaut/status/1858899226635497673

In the fall, Maker’s rates were too low. You could borrow from Maker, swap to USDC, then go play carry trade games for substantial interest margin. Maker was underpricing lending fees; it was overheating. Loans up, reserves down, revenue higher than a hub cap on a Ferris wheel

https://twitter.com/imperiumpaper/status/1864667025374630197

One area DeFi lending is still primitive is pricing loans. While I’m not advocating for a Merton model, it’s commonsense to acknowledge that each additional $1 of loan on X amount of collateral increases risk. Yet, DeFi generally ignores this. You pay same % on 10% LTV as 50% LTV Maker vaults imperfectly try to address this, with multiple levels of max LTV for major assets like ETH, stETH, and WBTC. Lower max LTV = lower rates. The spreads are typically fixed, though, and seem less important at higher rates levels

What a change! MakerDAO moving from “deposit into Aave is too risky, turn it off” in March 2023 to paying them in Spark gov tokens(!) to accept (s)USDS. I hold MKR, not AAVE, but you can respect Aave’s taking the chance to extract a good deal from position of strength. The thing here is that while Aave may not be able to dictate a stablecoin succeeds, on mainnet at least, it really does have veto power. I think it also says a lot that after 16 months of trying to cut Aave out, there’s finally cooperation. Hopefully that deepens

It’s devastatingly disappointing to see @MakerDAO’s co-founder pushing this plan. It’s as if nothing was learned this cycle. Link for those who are the type to slow down when they see a car crash endgame.makerdao.com/tokenomics/mkr…