Title: The Endgame Plan by MakerDAO: Balancing Decentralization, Stability, and Scalability
Article:
Stablecoins face a trilemma in their design, balancing decentralization, stability, and scalability. Fully decentralized stablecoins often sacrifice price stability as they do not rely on any centralized asset backing and instead determine prices through market supply and demand, leading to significant price fluctuations. On the other hand, stablecoins that prioritize stability often rely on centralized asset support, such as USD reserves. While this provides price stability, it compromises the initial intention of decentralization and makes these stablecoins more susceptible to regulation and control by centralized institutions.
The scalability issue involves expanding the user base and use cases while maintaining decentralization and stability. Many stablecoins have adopted partially centralized or compromised solutions to strike a balance between the three factors. For example, some stablecoins ensure price stability by using USD reserves, but this also means relying on centralized custodial institutions, which weakens their decentralized nature. Ultimately, finding the best balance between decentralization, stability, and scalability remains a significant challenge in stablecoin design.
MakerDAO’s Endgame Plan
MakerDAO’s Endgame plan aims to address the aforementioned dilemma by introducing two new stablecoins, PureDai and NewStable. Founder Rune Christensen proposes that this plan attempts to balance decentralization with the practical needs by separating different stablecoin paths. PureDai will serve as a fully decentralized stablecoin, while NewStable will focus on growth and returns.
NewStable: Combining RWA as Collateral for Additional Stability and Yield
NewStable is a new type of stablecoin introduced by MakerDAO in its Endgame plan, aiming to strike a balance between decentralization, stability, and scalability. Unlike DAI, NewStable focuses on growth, yield, and resilience by combining RWAs (Real World Assets) for additional stability and returns, while still being pegged to the USD. It also introduces a freeze function to enhance security and compliance.
NewStable offers a stablecoin option with enhanced stability and security supported by RWAs such as real estate. These RWAs not only provide additional sources of revenue and stability for the stablecoin but also increase security through the freeze function when necessary. Additionally, NewStable is designed to be upgradable, enabling the addition of industry-standard freeze functions through governance voting in the future. This feature is typically used in other major RWA-backed stablecoins to comply with legal requirements in different jurisdictions, providing higher security and stability on a global scale.
Existing DAI users can seamlessly upgrade to NewStable (this feature will be launched shortly), which maintains the freedom to convert between DAI and NewStable, ensuring the protection of existing users’ interests while attracting new users. DAI will continue to be pegged to the USD and allow users to convert it back to NewStable at any time. During the initial transition period, the Dai Savings Rate (DSR) will gradually be phased out, and future returns will primarily be realized on NewStable. Meanwhile, DAI will continue to serve as the liquidity backend for NewStable, ensuring a smooth user experience and providing flexibility and convenience through instant 1:1 conversion.
The launch of NewStable is accompanied by a new governance token, NewGovToken, which will enhance the governance process of MakerDAO and increase participation. Holders can earn returns by participating in governance and locking tokens, incentivizing long-term engagement. To improve scalability, MakerDAO will introduce NewBridge, a new Layer 2 solution that connects all MakerDAO ecosystem tokens. NewBridge will reduce transaction costs, enhance user experience, and promote cross-chain compatibility, allowing NewStable to better integrate into the broader blockchain ecosystem.
PureDai: Using only stETH as Collateral, Unpegged from the USD
PureDai is a fully decentralized stablecoin introduced by MakerDAO in its Endgame plan. Unlike Dai, which includes centralized assets like USDC, PureDai excludes these assets and only uses ETH and ETH staked in Lido (stETH) as collateral, with a freely floating target price rather than being directly pegged to the USD. This design aims to enhance decentralization and flexibility to meet the demands of users who prioritize these principles, ensuring they are not subject to the control of a single entity.
To avoid reliance on centralized data sources, PureDai obtains price information through decentralized oracles. Additionally, PureDai adopts minimal governance and simple token economics that incentivize long-term holding and promote supply-side growth. Holders can earn returns by participating in governance and locking tokens, further enhancing the decentralized nature and community involvement of the system.
The primary source of income for PureDai comes from interest earned by collateralizing ETH and stETH. These earnings support its value and provide stability and resilience during market fluctuations. According to the latest information, PureDai is expected to go live in the coming years and will operate on the Ethereum mainnet. Once launched, PureDai will be immutable and will not require further upgrades or modifications.
In summary, PureDai represents MakerDAO’s return to its decentralized roots, while NewStable provides assurance for widespread adoption and compliance. Through this dual-track strategy, MakerDAO can cater to the needs of different users. Of course, the transition from Dai to PureDai and NewStable will be gradual, and as users gradually migrate to the new stablecoins, Dai will eventually be phased out.
