The Decentralized Autonomous Organization, Maker, has achieved a major milestone with raising its debt ceiling to 100 million Dai. This is a doubling from the previous 50 million Dai in circulation. In this article, we explore the reasons behind this and look at the future implications of this event for MakerDAO and its decentralized stablecoin.
Raising the Debt
The original debt ceiling was set at 50 million Dai. As the value of the Dai is pegged to the value of the US Dollar, this debt ceiling had a value of $50 million. This was set to stress-test the Dai system and ensure stability. As the Dai is still in its experimental phase, and so is MakerDAO and DAOs in general, steady growth and the stability of the Dai stablecoin are essential to proof both novel concepts.
As both concepts are increasingly accepted, adoption and demand are growing. Just days before raising the debt ceiling, a record amount of Dai was created based on demand and caused a 16.7% increase in the number of Dai in circulation. This sudden spike in demand caused the decentralized community to propose a raise of the debt ceiling, which was then voted on.
As the governance of MakerDAO is decentralized, big decisions like this can only be made based on governance vote. This particular vote concerned a new authority in the system—the new authority being a smart contract that replaced the previous smart contract controlling the debt ceiling and enabled a 100 million Dai debt ceiling.
The proposal was accepted by the Maker community and means that 50 million more Dai can now be created by cryptocurrency enthusiasts looking for some peace of mind in this crazy market.
Future
MakerDAO and its Dai stablecoin live completely on the blockchain, which is both exciting and highly experimental. The substantiated increase of the debt ceiling by $50 million worth of Dai indicates an increase in the confidence people have in this decentralized project.
The rise of the debt ceiling also comes in light of other good news for the MakerDAO, as just recently the DAO announced a new partnership with supply chain payments company Tradeshift. This new addition to the MakerDAO network is yet another company willing to work with the decentralized stablecoin solution.
Previous additions to the MakerDAO network were:
- Bifrost, a company focused on delivering foreign aid payments
- Airswap, which is planning to use the Dai stablecoin in the decentralized marketplaces they are launching
- Dether, a blockchain startup devoted to providing easy access of cryptocurrencies to the unbanked that see a valuable tool in MakerDAO’s stablecoin
A big event to look forward to is the launch of the multi-collateral Dai this summer. Once this multi-collateral Dai goes live, public voting will go live. This enables a whole new array of decentralized elements such as debating mechanisms, signalling, proposal overviews, and new processes for governance.
Adoption of the Dai stablecoin has steadily increased over the past 6 months. This can be especially attributed to the fact that the Dai has managed to keep stable against the US Dollar, which is its core purpose.
The fact that demand has increased so much that the DAO was forced to double its debt ceiling indicates strong confidence in the MakerDAO and its Dai. The market really needs a trusted stablecoin and the decentralized solution of MakerDAO is becoming a serious candidate.
Related: What is a Stable Coin and Does the Crypto Market Need Them?
