Even with governance rewards potentially being activated soon, there will still be too few ways to earn yield by holding maker (either governance, or a usually sub-1% yield on Aave) - hence the MKR token price and marketcap will likely still will not catch up to more dynamic defi protocols.
What I propose is to add an another option independent of makerdao governance rewards - minting DAI with MKR in the Maker Stability Module.
Wait, I know what you’re thinking - “But MKR the token is the backstop to black swan events on the MakerDAO platform, let’s not entangle it with leverage.”
Firstly, using that philosophy as an excuse to prevent a tokenomics overhaul has not served the token price and thus overall community sentiment positively, so maybe it’s time for change.
Secondly, this signal request will borrow ideas from Synthetix (as well as Aave) that has locked up the vast majority of SNX supply and increased its market cap to more than 3x MKR’s, despite total sUSD being less than 1/13 of total Dai.
- Deposit MKR into the stability module.
- SM mints Dai worth 1/5 of the USD value of MKR (similar to the SNX staking 500% overcollateralization), over time governance can change this value.
- Stipulate (inspired by aave stability module) that black swan events like March 2020 sell MKR staked in the SM above the printed DAI value first to recapitalize MakerDAO (before then printing new tokens), instead of the flawed stability buffer where makerdao will likely incur massive opportunity cost in 2021 by holding $4MM USD worth of inflationary fiat-based DAI in a crypto bull market. If the proportion of staked MKR is anywhere near the proportion of staked SNX, this along with the token price pump of tokenomics overhaul will be more than enough to hedge some sort of failure a la March 2020, or a potential USDT insolvency crisis.
- In exchange, those that deposit MKR in this pool get a portion of protocol fees, perhaps similar to governance voting rewards. (hopefully get rid of burn, split it half and half). And for that extra risk, MSM get any yield they can get from Dai on a 3rd party platform on top of rewards from maker protocol fees. Could also consider giving extra governance voting weight for those taking the extra risk.
- As an added bonus, this provides resistance against diluting MKR holders that choose to vote in governance without leverage for rewards or not stake at all.
- Creates another potential 100MM Dai (even more Dai if MKR pumps), that can be released into the wild for degen defi activity.
I have also attached an excellent podcast episode of Uncommon Core, which goes through the pros and cons of MakerDAO’s and Synthetix’s token models starting at timestamp 54:50: https://anchor.fm/uncommoncore/episodes/17-Defi-Top-20-with-Arthur0x--Su-Zhu-and-Hasu-eofj2n
Please take a listen, as the host and guests bring up excellent points comparing and contrasting the two tokenomics models. And they’re right, maker’s tokenomics is stagnant and the protocol needs some radical change to climb back uphill.
So in conclusion, what this request is proposing is a three pronged token utility overhaul for MKR.
- Third party interest bearing MKR like aaveMKR (low risk, no involvement needed, lowest yield, already possible)
- Governance rewards for actively participating, or delegating to an active participant in governance voting. (low risk, some involvement needed, mid-yield, already discussed and potentially heading to exec vote: Introducing DssGovRewards)
- Stake in the Maker Stability Module (risky with potential of liquidation, much involvement needed, but gets equivalent of governance rewards + 1/5 USD value of their staked MKR in dai that can be used for yield elsewhere, high yield) Can potentially give 2x the voting power per mkr, for taking all this risk.