Don’t Lose your DAI! The How, Why, and What Guide to the New MakerDAO
On November 18th, 2019, the MakerDAO system will transition from Single Collateral DAI to Multi-Collateral DAI. What does that mean and what you need to do.
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What you need to do
Let’s save time for you who came here for one reason: To find out what you need to do and how to answer these questions:
How do I protect my DAI?
Or my ETH locked in a Collateralized Debt Position (CDP)?
This 3-minute video covers what you need to do, or you can read below:
If you have your DAI or CDP through your own web wallet like Metamask…
If you have DAI:
Easy. Go to https://migrate.makerdao.com/, send your DAI balance, and they send back the new Multi-Collateral DAI.
If you have a CDP:
Two options here — You can close your existing CDP, receive your ETH back in your wallet, and open a new CDP and get new DAI. Alternatively, you can migrate it by going to https://migrate.makerdao.com/ and clicking to “migrate your CDP.” You will need to pay the stability fees at that time.
If you are one of these other cases…
Compound, Fulcrum, dYdX — Generally, you will want to withdraw your DAI, do the switch, and re-deposit DAI. The situation with these platforms is bound to get, well, a bit hectic. We will not go into that here, but we will in DeFi Nation threads.
Nexo, Celcius, BlockFi — Centralized platforms have been instructed to do the conversion for you.
Uniswap Liquidity Pools — Same as other decentralized services, you’ll do it manually.
Instadapp: You will need to withdraw ownership back to your wallet and follow the above steps.
Centralized Exchanges — Centralized exchanges have been instructed to do the conversion for you. They should let you know. If this concerns you, you are free to withdraw the DAI and do it yourself.
Have another scenario? Ask us in DeFi Nation.
When do I need to do this?
You can do it starting on November 18th. Reports are that there will “months” of time to do the switch. This period is called the “migration window.” This means that while you CAN do it on November 18th, you have plenty of time after that date as well.
What happens if I don’t do this?
Will your DAI self-destruct?
No wait, that doesn’t sound right…
Actually, something really interesting will happen after the migration window closes. MakerDAO will initiate the “Emergency Shutdown” or global settlement contract. From their website:
Emergency Shutdown stops and gracefully settles the Maker Protocol while ensuring that all users, both Dai holders and CDP holders, receive the net value of assets they are entitled to.
What happens in this case is that outstanding V1 DAI will suddenly be changed into ETH, based on the price at the time of settlement. So if you had 400 DAI and ETH was trading at $200, you can go trade your old DAI for 2 ETH.
It also means that the V1 DAI is no longer stable.
In the above example of ETH = $200, that means one V1 DAI is worth .005 ETH. It is no longer worth $1. It is assumed that this DAI will be around forever, somewhere. MakerDAO has not clarified this specifically, but we speculate that the corresponding uncollected ETH will remain in Maker’s contract forever as well. This would be ideal, as who among us hasn’t found crypto in the corner of some hard drive we forgot about?
The title was clickbait.
You will not “lose your DAI.”
What will happen, though, is it will become unrecognizable. It will now be some amount of ETH from now until eternity.
New Name and Logo
MakerDAO wouldn’t want to change the name “DAI” and lose all their brand recognition. When the migration starts:
V1 DAI will be called SAI.
V2 DAI will be called DAI
What the Upgrade will do
Now that you know how to take care of yourself, let’s explore why this is happening?
DAI 2.0 will have the following features:
- Multiple forms of collateral
- DAI savings rate
Multiple Collateral DAI (MCD) will support other forms of collateral other than just ETH. This means that people will be able to lock up other assets and receive DAI.
The supported assets will be selected by MKR token holders. They will also determine important risk factors, such as the “collateralization ratio” — the amount of an asset that must be locked up relative to the DAI issued. The ratio for ETH is 150%.
The DAI Savings Rate (DSR) is a savings account built into the system, and Maker will provide us with a dapp to lock our DAI up and earn the returns.
The purpose of this is to give MakerDAO a demand-side lever to pull in order to maintain the soft peg to the USD. They will be able to adjust the DSR in order to affect demand for DAI, and ultimately, the trading price of DAI.
The DSR will be paid for by stability fees. What does the money do that you’ve locked in this way? Nothing. MakerDAO is paying you to do exactly nothing with it. Developers will be able to integrate the DSR locking feature into their dapp interface.
What Will Happen to DeFi Lending Landscape?
This is topic is an article unto itself, and is something we discuss frequently in DeFi Nation. Some bullet points have fallen out of the conversation:
There is no additional risk for DAI holders to use the DSR, whereas there is an added layer of risk to lend on a lending platform. This means some users will accept a lower return for less perceived risk.
The gains from the DSR will be less than on other lending platforms. This is not a hard-and-fast truth, but follows from the above point. No one would take additional risk and steps to earn less than the DSR. It follows that the rates on 3rd party platforms will be higher.
Still Have More Questions?
You know what to do. Come find is in DeFi Nation.
We’re excited for the coming changes and will be chatting about the hows and also interesting things like…
What happens when everyone goes to take their DAI out of Compound all at once? Will people ever be able to lock real estate or other traditional assets into a CDP? What other assets should be considered for MCD?
List of Helpful Links
MakerDAO Blog — DAI Savings Rate
MakerDAO Blog — MCD Announcement
Detailed GitHub Guide for the Switch to MCD
