Maker Increases Ethereum Staked Limit to Reduce Reliance on USDC

Maker, the DeFi protocol behind the DAI stablecoinannounced that it has doubled its debt cap on its Ethereum (stETH) vault.

The world’s largest decentralized finance app, Maker is working to reduce its reliance on centralized stablecoins such as the Center’s USD Coin (USDC), especially after the Tornado Cash scandal in mid-August. .

Staked Ethereum is a crypto token representing a unit of Ethereum that has been staked or locked in anticipation of the merger, the upcoming network upgrade.

Decentralized lending platforms provide direct loans to businesses and individuals without intermediaries, while offering interest to other parties who provide capital. Staked Ethereum is a staking token issued as a reward to Ethereum lenders on staking services such as Lido Finance, Coinbase, Kraken, and Binance, among others.

Maker seeks to untie the influence of the USDC and the proportion the token holds as collateral for DAI, the US dollar-pegged crypto lending service’s own decentralized stablecoin. By approving Maker DAO governance proposal at raising the debt cap to $200 million, the protocol expects to see more stETH deposited against DAI, reducing its reliance on USDC.

Data from DAI Stats showed that the WSTETH-B vault – the pool in which users can deposit collateral – now has over 245,000 stETH provided, or around $392 million.

Tornado Cash Impacts

The US Treasury Department sanctioned the crypto mixer Tornado Cash in August, making the use of the protocol and associated smart contracts illegal for Americans.

Circle, part of the Center Consortium, has blacklisted 38 sanctioned wallets as part of the Tornado Cash ban. The The move has been decried by privacy advocates as the companies’ compliance with excessive and unfair government censorship.

“We know that obeying the law and fighting money laundering is both right and our obligation as a regulated financial institution,” Circle founder Jeremy Allaire said in a statement. “We also know that doing the right thing has compromised our belief in the value of open source software on the Internet and our belief that the presumption and preservation of privacy should be enshrined as a design principle in the issuance and circulation of dollar digital currencies.”

Reduce dependency

Tornado Cash developments have largely taken into account Maker DAO’s August 25 setting change proposal. His analysis on the loan market explained, “TThe imposition of sanctions by the US agency OFAC on Tornado Cash smart contracts… could indicate a growing risk for direct holdings of censorable assets such as USDC.

Crypto services have raised concerns about USDC as a centralized asset compared to Tornado Cash. The Manufacturer’s Warranty Ratio still relies heavily on USDC to support DAI, despite recent developments.

MakerDAO founder Rune Christensen took to the DAO’s Discord on Aug. 11, saying, “I think we should seriously consider getting ready to pull out of the USD.”

Christensen suggested an “uprooting” solution, described as the “yolo USDC to ETH” approach. By converting USDC to ETH, the majority of MakerDAO collateral would change to a valueless cryptocurrency locked.

Lenders depositing stETH in exchange for DAI will reduce the proportion of collateral USDC clears in Maker pools. Although this decision would move away from USDC, it could be potentially disastrous given the volatility of the market.

“The market may finally start to reward decentralization to the point where the risks are acceptable because USDC is no longer the obvious it used to be,” Christensen added.

Other analysts such as Erik Voorhees, founder of ShapeShift, spoke to Maker, calling on the protocol to begin “immediately rolling out your USDC collateral, converting it to more censorship-resistant stables.”

A series of changes

In July, urging users to deposit more collateral in the pool, Maker DAO reduced its WSTETH-B stability fee to 0%. The proposal saw an immediate increase in collateral provided near the vault’s previous debt cap of $100 million.

In addition to incentivizing users to deposit more stETH in the vault as collateral against DAI, the doubling of the debt cap bolsters efforts to reduce the collateral ratio USDC has against Maker’s native stablecoin. compared to other assets.

Ongoing news about Tornado Cash and Circle’s blacklisting of wallets has only increased the urge to use less USDC on the Maker Network. Maker’s use of stETH is their latest attempt to unwind their USDC collateral.

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