First post here. I’ve been a fan of Maker since I found out about it in 2020 prior to the DeFi summer so my knowledge is by no means advanced (on the contrary). But I thought dropping this idea here to see if it makes sense.
Let’s build one-side liquidity mining pools using the collaterals locked on one side of the pool and use MKR tokens in the governance contract to generate DAI to be used on the other side the pool (similar to Bancor to avoid impermanent loss) while distributing the fees to both the MKR holder and collateral depositors and increase the amount of circulating DAI.
So the three-party problem in Maker DAO is fairly documented which is about satisfying the following:
- MKR holders => increased value or some income
- Collateral depositors => reduced fees: targeting zero or even negative rates
- DAI users => keeping the peg at all times
The missed potentials:
- The collaterals in the contracts are sitting without generating any yield (traditional banks usually lend it out)
- The MKR token’s sole purpose is governance so no strong incentive to hold it which is why it finds its way into Aave
- Dai’s stability is tied to its liquidity. The more DAI in circulation, the more resistant it is to fluctuation
- What if we can use the collaterals in circulation to form liquidity mining pools, notably the ETH/DAI and WBTC/DAI
- We can do one side liquidity mining pools similar to Bancor to avoid having to deal with impermanent loss of collateral
- The DAI portion of the liquidity pool should come from using the MKR in the governance contract to generate some amount of DAI to match the other side of the pools.
- We can charge 0.3% for the pool fees which should go equally to the MKR holders and collateral owners to offset some of the stability rate charged.
- Increase the liquidity as MKR’s value goes up and the collateral available without relying on the user to generate more DAI.
- Lock more MKR in the governance contract rather than it being in money markets like Aave which would push the price of MKR up
- Generate yield to both parties (collateral owners and MKR holders) while increasing the supply of DAI leading to more DAI stability
Liquidity mining has its own risks and the maker protocol will be responsible for the risk rather than the user in the case of various liquidity
This is not a well brushed/groomed proposal so I can imagine it has dozens of flaws but would love to discuss it with you all