Decentralized finance (DeFi) protocol MakerDAO is looking to allocate 600 million DAI stablecoins USDe and Stacked USDe (sUSDe) protocol by DeFi lending platform Morpho Labs. The proposed allocation aims to improve risk management and maximize user incentives in the DeFi landscape.
MakerDAO allocated a maximum of 600 million DAI
Spark DAI Vault, launched as a lending platform in 2023, saw strong demand immediately after launch, according to MakerDAO Declaration on the Governance Forum of the Protocol.
Given the desire to keep liquidity risk at an acceptable level, MakerDAO proposes a greater allocation of DAI to USDe pools, which can be instantly redeemed by Athena (ENA), a synthetic dollar protocol developed on the Ethereum blockchain.
This revision also allows Ethena to retain a larger revenue share for their insurance fund, potentially improving the overall risk profile of MakerDAO’s Ethena allocation.
Furthermore, MakerDAO recommends focusing future allocations on 86% and 91.5% loan-to-liquidity-value (LLTV) pools, which have shown respective “high performance”. Loan rates and user demand. Lower LLTV pools such as 77% and 94.5% pools will continue to receive allocations, proportionally less than the two primary pools.
To reduce potential bankruptcy risk and ensure a favorable risk-reward ratio, MakerDAO limits the total allocation to 600 million DAI. However, the Dividend Debt Mechanism (DDM) line parameter is set at 1 billion DAI to provide flexibility for future increases should the limit change.
In addition, MakerDAO recommends increasing funds deployed in 77% and 94.5% pools to 10 million DAI each to ensure adequate pool size for “efficient management of positions” and calibration of interest rate models.
The recently unveiled Athena Points program for Season 2 introduces a $500 million cap on total eligible collateral for incentives on Morpho. If there is a demand DAI Borrowing Through the decline of the vault after reaching this threshold, the protocol states that MultiSig may reduce allocations below $600 million to maintain a balanced supply/demand dynamic and align with expected collateral returns.
MKR rose to near three-year highs
MakerDAO’s parent token, MKR, hit a near three-year high of $4,074 on Sunday, 40% below its current all-time high (ATH) of $6,292 in May 2023. The token has pulled back almost 2% and is currently trading. at $3,717. It is consolidating above the next support level at $3,640.
Despite the retracement, MKR still makes significant gains over the long term. There has been a 25% increase in the last fourteen days and an 80% increase in the last thirty days.
The demand for MKR tokens is evident as trading volume has grown to $274,659,607 in the past 24 hours, a significant 40% increase from a day earlier, according to CoinGecko data. Besides, MKR’s market capitalization has seen a remarkable increase of almost 100% in the last month.
Starting March with a market cap of $1.8 billion, as of the most recent update on April 2. Market Cap is $3.46 billion. This significant growth underscores the high level of interest in the MakerDAO protocol and its underlying token.
Featured image from Shutterstock, chart from TradingView.com
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