Oct 6, 2022
DeFi Protocol MakerDAO Puts $500 Million in Treasuries, Bonds
(Bloomberg) -- One of the original decentralized-finance protocols that was set up to challenge the legacy banking system is moving $500 million into short-term US Treasuries and corporate bonds.
MakerDAO, the so-called decentralized autonomous organization that supports the crypto stablecoin DAI, is shifting $500 million worth of the token to the fixed-income obligations, which have traditionally been havens for conventional investors during times of turmoil.
The move aims to diversify MakerDAO’s balance sheet, limit exposure to any one asset and expand revenue, according to a statement issued by the DAO on Thursday. The allocation of DAI will promote the usability of digital assets in the traditional space, extending DAI’s influence beyond crypto, the statement said.
The community behind MakerDAO, which was launched in 2015, agreed to put 80% of the fund in short-term Treasuries and 20% to investment-grade corporate bonds, after an initial vote was put in place in late June. An initial deployment of $1 million has now been completed by DeFi asset advisor Monetalis.
DeFi, which took off in the last bull market, has faced challenges this year as the prices of tokens that underpin the system crashed and the sector continued to be plagued by hacks. Many projects have sought to develop strategies to survive. Lido, another DeFi startup, recently sold its native tokens to venture capital firm Dragonfly in order to cover two years worth of expenses.
MakerDAO’s shift comes just a few months after another decentralized stablecoin, TerraUSD, collapsed dramatically. Unlike TerraUSD, which used an algorithmic model to keep its peg to the dollars, MakerDAO’s DAI stablecoin is issued on an over-collateralized basis. Previous discussions argued that an investment in Treasuries and short-term bonds wouldn’t affect DAI’s peg to the dollar.
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