Decentralized finance (DeFi) protocol MakerDAO is considering allocating 600 million DAI stable coins to USDe and staked USDe (sUSDe) protocols via the Morpho Labs DeFi lending platform. The proposed allocation aims to improve risk management and maximize user incentives in the DeFi scenario.
MakerDAO sets maximum allocation of 600 million DAI
Spark DAI Vault, launched in 2023 as a lending platform, saw strong demand shortly after its launch, according to MakerDAO’s announcement in the protocol governance forum.
Given the desire to keep liquidity risk at an acceptable level, MakerDAO proposes a larger allocation of DAI to USDe pools, which can be redeemed immediately via Ethena (ENA), a synthetic dollar protocol built on the Ethereum blockchain.
This reallocation also allows Ethena to retain a greater portion of revenue for its insurance fund, potentially improving the overall risk profile of MakerDAO’s Ethena allocation.
Additionally, MakerDAO recommends focusing future allocations on the 86% and 91.5% Loan-To-Liquidity-Value (LLTV) pools, which have shown “greater efficiency” relative to loan fees and user demand. Although the lower LLTV pools, such as the 77% and 94.5% pools, will continue to receive allocations, they will be proportionately lower than the two primary pools.
To mitigate potential insolvency risks 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 if restrictions change.
Additionally, MakerDAO recommends marginally increasing the funds mobilized in the 77% and 94.5% pools to 10 million DAI each to ensure a sufficient pool size for “efficient position management” and calibration of fee models interest.
The recently revealed Ethena points program for Season 2 introduces a $500 million cap on total collateral eligible for incentives on Morpho. If the demand for DAI loan Through vault drops after this threshold is reached, the protocol states that Multisig can reduce allocations below $600 million to maintain a balanced supply/demand dynamic and align with expected collateral returns.
MKR Hits Near Three-Year High
MakerDAO’s native token MKR reached a near three-year high of $4,074 on Sunday, which is 40% below its current all-time high (ATH) of $6,292 in May 2023. The token has retreated nearly 2% and is currently being negotiated. for $3,717. It is consolidating above its next support level at $3,640.
Despite the pullback, MKR still shows significant gains over longer time frames. It has recorded a 25% gain in the last fourteen days and an impressive 80% gain in the last thirty days.
The demand for MKR tokens is evident as trading volume has increased to $274,659,607 in the last 24 hours, a substantial 40% increase from just a day ago, according to CoinGecko. data. Furthermore, MKR’s market capitalization has seen a remarkable increase of almost 100% in the last month.
Starting in March with a market cap of $1.8 billion, as per the most recent update on April 2, the market value is US$3.46 billion. This significant increase underscores the high level of interest in the MakerDAO protocol and its native token.
Featured image from Shutterstock, chart from TradingView.com
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