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MakerDAO’s Rune Christensen says appropriate regulation will see stablecoins become mainstream, but the real opportunity is in decentralized stablecoins.

Decentralized stablecoins may eventually dominate the stablecoin market, so long as crypto “ends up living up to its potential,” says Rune Christensen, the co-founder of DeFi pioneer MakerDAO.

Speaking to Cointelegraph’s Andrew Fenton at Token 2049 in Singapore, Christensen aired his thoughts on the future of decentralized stablecoins such as Dai (DAI) and their role in the wider crypto economy.

They discussed a presentation by Castle Island Ventures partner Nic Carter at the TOKEN2049 conference in Singapore in which he said that interest-bearing stablecoins could become 30% of the market within two years.

Christensen agreed but said it would probably depend on the macro situation, adding “if high inflation high rates continue, then probably,” stablecoin dominance will increase.

*MakerDAO presentation at Token2049. Source: Cointelegraph*

When asked whether a decentralized stablecoin could compete with its centralized cousins, he replied:

“Easily I mean, I think if the space ends up living up to its potential, then decentralized stablecoins will be the entire market like centralized stablecoins would be the edges that connect us to like the legacy system.”

He added that if crypto “delivers” and becomes regulated, centralized stablecoins will become more mainstream. However, the real potential is in decentralized stablecoins, he suggested:

“I think the real killer advantage of decentralized stablecoins, run by actual data like Maker, is this ability to gamify your savings.”

In mid-2022, Christiansen proposed MakerDAO’s “Endgame Plan”. The plan proposes making DAI a free-floating asset, initially collateralized by real-world assets (RWA).

There will be a three-year period when DAI remains pegged to the dollar. During this period, the protocol will double down on RWA to accumulate as much Ether (ETH) as possible which increases the ratio of decentralized collateral.

*MakerDAO Endgame. Source:* *forum.makerdao.com*

Rune believes that Maker has built a very solid and stable foundation but it has been overtaken by scammy and illegitimate projects.

He wants to try and gamify to make the protocol fun and more appealing to younger users. “It's what people want,” he said before adding, “Things are designed like a game and that's the kind of interface they will use.”

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Stablecoin de-pegging plagued USDC and DAI more than others: Analysts

September 12, 2023 Coin Telegraph

BUSD

Stablecoins from Circle and MakerDAO have been more unstable than those from Tether and Binance over the past couple of years, according to a new report from S&P Global.

Dollar-pegged stablecoins are not immune to dropping their pegs, but some such as Circle’s USD Coin (USDC) and MakerDAO’s Dai (DAI), have been more prone to depegging than others, according to analysts at S&P Global.

A September research paper from Dr. Cristina Polizu, Anoop Garg and Miguel de la Mata, delved into stablecoin valuation and depegging for five leading stablecoins: Tether (USDT), Binance USD (BUSD), Paxos (USDP), USDC and DAI.

The analysis revealed that USDC and DAI have spent more time below a dollar than USDT and BUSD over the past two years. In the longest and deepest de-peg event, USDC was below $0.90 for 23 minutes and DAI for 20 minutes.

However, USDT dipped below $0.95 for only one minute, while the price for BUSD did not drop below $0.975 at all between June 2021 and June 2023.

*Stablecoin de-pegging by time. Source: S&P Global*

Moreover, the frequencies of de-pegging were far higher for USDC and DAI than USDT and BUSD over the two-year period.

The researchers noted that one-minute de-peg events “can be attributed to noise,” especially for thresholds closer to $1. Longer de-peg events were considered “more meaningful” but the results still favored USDT over USDC.

*Frequency of stablecoin de-pegging. Source: S&P Global*

USDC dropped to $0.87 in March 2023 in connection with the Silicon Valley Bank collapse. USDC issuer Circle had $3.3 billion of its $40 billion USDC reserves at the time with SVB.

MakerDAO was one of the largest holders of the stablecoin at the time, with over 3.1 billion USDC in reserves collateralizing DAI which also de-pegged.

“Maintaining the peg and a stabilization mechanism requires good governance, adequate collateral and reserves alongside liquidity, market confidence and adoption,” Dr. Polizu and colleagues concluded.

Tether has been plagued with mainstream media FUD for years, yet the findings suggest USDT has been more stable than its rival USDC over the same period.

Moreover, the supply of USDT has increased by 25% since the beginning of the year to 83 billion, giving it a commanding stablecoin market share of 67%. This has largely been at the expense of Circle, which has seen USDC supply shrink by 41.5% and market share fall to 21% over the same period.

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DAI

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