MakerDAO

I’ve read about every 3P Stablecoin. None are as good as this one. I give it an ‘OK’ Rating.

We know from this Track, the only 3 things that matter with Stablecoins are:

1. If you can compete with the ‘Trust’ and ‘Retail Footprint’ of a Chase Bank releasing a Digital Fiat product for their customers.
2. If you can maintain the value in your Stablecoin upon a $T ‘peg-attack’ by any of the World’s Largest Banks.
3. If you can get the Saudis to require your Stablecoin as payment for oil.

So let’s see how MakerDAO fares against all 3 of these.

Competing with the ‘Trust’ and ‘Retail Footprint’ of a Chase Bank releasing a Digital Fiat product for their customers.

Nope, Everyday-Consumers will not care to learn about Dai or even use Dai. Everyday-Merchants will not care to learn about Dai or even accept Dai. Both of them will only care about using/accepting Bank-Issued Digital Fiat. It’s easy. It’s trustworthy. There’s no massive learning curve. All they care about is that they can walk in to a Bank Branch and redeem that Digital Fiat for Physical Fiat and walk out. And that is exactly what Bank-Issued Digital Fiat gives them.

But if Dai can follow these directions, then they could actually have a non-zero chance of competing against Digital Fiat.

Maintaining the value in your Stablecoin upon a $T ‘peg-attack’ by any of the World’s Largest Banks.

YES, the MakerDAO System can maintain the value in Dai upon a $T ‘Peg-Attack’ by a Bank.

The reason for that is Dai’s $1 Peg is not actually a ‘Peg’ to a $1 Market Price.

Dai’s $1 Peg is actually a ‘Peg’ to receiving $1 in Collateral upon an Emergency Shutdown of the MakerDAO System, which would be initiated (the Emergency Shutdown) in the case of a $T ‘Peg-Attack’ by a Bank.

And so Dai’s $1 ‘Redeemability Peg’ will work as long as there are Few Underwater CDPs at the time an Emergency Stop is Initiated.

If we assume that a Black-Swan Event causes MANY Underwater CDPs to happen, then we can say:

“Dai’s $1 ‘Redeemability Peg’ will work as long as there is no Black Swan Event at the time an Emergency Stop is Initiated.”

Because if there is an Emergency stop initiated with MANY Underwater CDPs, then Dai holders will take an equivalent Haircut on what their Dai is redeemable for: It may be $0.98 in collateral, or $0.75 in Collateral, or $0.23 in Collateral.

SO

As long as there is No Black-Swan Event when there is a $T ‘Peg-Attack’ by a Bank, Dai’s $1 ‘Redeemability Peg’ will hold.

That means that the MakerDAO System has effectively neutralized the threat of a $T ‘Peg-Attack’ by a Bank during Normal Market Conditions.

I love that.

(And I wish Dai was Redeemable for $1 in Collateral ‘at any time’ instead of waiting for somebody to initiate the ‘Emergency Stop’…but we’ll take what we can get.)

Get the Saudis to require your 3P Stablecoin as payment for oil.

You know, this one is interesting.

The fact that Dai is Decentralized AND can Maintain it’s Peg upon a $T ‘Peg-Attack’ by a Bank (as long as there is no Black-Swan Event at the same time that $T ‘Peg-Attack’ happens) means that Dai has the opportunity to just wait out a USD Failure….and it has a chance to organically become the Saudi’s choice as Payment for Oil…..Bc we know there is no way Dai can out-muscle the USD for Oil Payment Supremacy.

Now, do I think Dai will succeed with the Saudis? Probably not.

Basically, the USD is going to last at least until the World runs out of Oil.

When will that be? Who knows.

And Dai is going to last until the ‘Dummies’ get hold of 51% of the Governance Tokens and make bad decisions that drives the Maker System into the Ground.

How long will that take to occur? No idea.

But I do believe the Time until ‘World runs out of Oil’ is Longer than the Time until “ ‘Dummies’ get hold of 51% of the Governance Tokens and make bad decisions that drives the Maker System into the Ground.”

So there’s a very high probability that the USD just stays King.

[Rune Christensen, Richard Brown, David Utrobin, Scott Herren, u/EmergentCThaeh, u/svantetobias, u/directdirt, and hinder+equivrel+cyrus.younessi+kluge from chat.makerdao.com helped me understand MakerDAO by answering my Qs in this Document.]

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