Maker’s Dai has quickly won the heart of the DeFi community. The crypto-native stablecoin has been widely adopted across the majority of DeFi protocols. In February, Dai locked in DeFi went parabolic where it ultimately reached a peak of $85M in early March according to DeFi Pulse. The trend was largely led by Maker as the protocol offered high-yielding interest rates through the Dai Savings Rate (DSR). Of the $85M in Dai locked in DeFi, around 90% of it was locked in the DSR earning a high yield of 8% APY.

While all was well for DeFi, the global uncertainty surrounding COVID-19 brought significant volatility to the crypto markets as the price of Ether nearly halved on March 12th. The day has become known as Black Thursday and it was one of the biggest tests the Maker Protocol has faced to date. The ~50% drop in asset prices resulted in mass liquidations for Vault owners and significant volatility in Dai as users scrambled to recapitalize their CDPs. In response to the high demand in Dai, the DSR was reduced to zero as the protocol tried to restore Dai’s peg to $1. Since then, roughly 54M DAI has left the ecosystem in the past month likely due to fear in the protocol and a lack of incentive from the DSR.

Date Changed New DSR Change (+/-) Current 0 0% March 24th, 2020 0% (-4%) March 19th, 2020 4% (-4%) February 26th, 2020 8% (+0.5%) February 12th, 2020 7.5% (-1.25%) February 5th, 2020 8.75% +1% January 27th, 2020 7.75% +1.75% January 8th, 2020 6% +2% December 7, 2019 4% (0)

Despite the fact the event caused a short-term downturn in circulating Dai, it was an important test for the protocol’s resiliency. All said and done, Maker made the best of the situation as the DAO was able to re-capitalize the system via an MKR debt auction and is now considering native compensation for victims who incurred unfair liquidations amid the volatility.

One of the more notable changes made in response to Black Thursday was the addition of USDC collateral. Coinbase and Circle’s fiat-backed stablecoin continues to garner adoption throughout the DeFi ecosystem as it’s now a supported collateral type for DeFi’s biggest money protocol in terms of value locked.

However, a few things remain to be fixed in order for the Maker system to make a full recovery. Most notably – Dai stagnates off its peg at $1.02, the Dai Savings Rate continues to sit at 0%, and protocol revenues are at historic lows.

Diving Into Maker

Data via Token Terminal

Since the introduction of Multi-Collateral Dai, the outstanding supply of Dai has seen a steady trend upwards. Today, the crypto-native stablecoin has roughly 93M in circulating supply after reaching a peak of nearly 150M back in late February. Since launching Multi-Collateral Dai in November 2019, the newer version of Maker’s stablecoin quickly grew to dominance within the system. Over 85% of all Dai in circulation is in MCD form while the remaining 15% continues to stay in the protocol’s legacy stablecoin – SAI.

Data via Dune Analytics

While SAI saw a fair amount of success, averaging $32.6M in daily transaction volume, the launch of Multi-Collateral Dai quickly phased out the use of Sai. Over its lifespan, Dai has averaged around $80M in daily transaction volume while continuing to garner more and more traction in recent months. In December 2019, Dai averaged $32M in daily on-chain transaction volume. Fast forward to March 2020 and the stablecoin is averaging $105M in daily transaction volume – a 228% increase in only four months.

Data via Dune Analytics

Looking at vault creations (also known as CDPs), the Maker Protocol has seen consistent new vaults per day, reaching over 8,000 in cumulative vaults opened since inception. The biggest spike came with the initial launch of MCD as many community members migrated their SAI over to DAI. In the first five days of launch, over 1,226 vaults were created. After the initial launch of MCD, there’s been an average of 57 new CDPs opened per day while the median sits slightly lower at 48 vaults opened per day.

Data via Dune Analytics

One of the more notable features with the launch of MCD was the introduction of other collateral types. While some community members feared new collateral types may take away from Dai’s position as a trustless stablecoin, ETH is still the dominant collateral type by far. According to Dai Stats, collateralized ETH currently comprises 94.21% of the system’s collateral.

If you look closely at the bottom right corner on the graph above, you can see the sliver of value derived from other non-ETH collateral types. While Brave’s Basic Attention Token (BAT) was the first additional collateral type supported by the Maker Protocol, it has failed to garner any significant traction to date. According to Dai Stats, only 0.48% of Dai’s total supply derives from BAT as collateral.

Maker is also now supporting another asset beyond BAT and ETH – Coinbase’s USDC. The fiat-backed stablecoin was inducted into Maker following Black Thursday – an event which resulted in a significant amount of stress for the sector leading lending protocol. As a response to the volatility, Maker Governance elected to support the centralized stablecoin in an effort to stabilize the system with a liquid, stable asset type. Since introducing USDC, the stablecoin has quickly surpassed BAT as a collateral type in a matter of weeks. Coinbase’s stablecoin has attracted roughly ~900K in circulating Dai or 1.12% of the total supply as of writing.

Data via Dune Analytics

One of the most recent changes with the Maker Protocol in lieu of Black Thursday was the sudden drop in the Dai Savings Rate (DSR). In an effort to decrease demand for the stablecoin and return the peg to $1, Maker governance elected to reduce the DSR to 0% APY. As a result, DAI locked in the DSR has decreased from 76.8M at its peak in early March, down to 16.6M as of writing. Despite the -78% decline in Dai locked in the DSR along with a decrease in circulating supply by over 50M, Dai still remains slightly above its peg at $1.02.

Date Changed New DSR Change (+/-) Current 0 0% March 24th, 2020 0% (-4%) March 19th, 2020 4% (-4%) February 26th, 2020 8% (+0.5%) February 12th, 2020 7.5% (-1.25%) February 5th, 2020 8.75% +1% January 27th, 2020 7.75% +1.75% January 8th, 2020 6% +2% December 7, 2019 4% (0)

Regardless, the Dai Savings Rate has seen a tremendous amount of success since its launch back in November. Near its peak, the DSR was distributing over $17,000 per day to DSR users while nearly reaching $1M in cumulative rewards.



If one thing’s for sure, the DeFi community is eager for MakerDAO to raise the savings rate in the coming months. Given the DSR acts as the risk-free rate for DeFi lending markets, Dai lending rates (as well as USDC) have seen a steep downturn. Average 30-Day lending rates on Dai sits at roughly 1.94% on Compound and 1.95% on Aave, which is down from around ~8% APY in February.

The last graph here outlines MKR revenue over time. It’s important to note that our data does not factor in the events of Black Thursday and the MKR minted to cover the system’s debt.

So while nearly $8M in protocol earnings sounds enticing, the protocol’s net profits are actually negative as the entire supply burned since inception was re-minted (and some) in order to repay back the system’s outstanding debt. With that, the circulating supply of MKR stands at 1,005,839 MKR – nearly 6,000 more than originally minted at inception. Therefore, in practice, the protocol currently boasts a net loss of -$1.7M.

With the current spread sitting at 0.5%, the Maker system is on track to burn roughly 4,925 MKR this year – or $1.475M in annualized revenue. If this holds true for the remainder of the year (and there’s zero growth in DAI outstanding), we should see the protocol break even within the next 12-14 months.

The last tidbit surrounding the protocol’s net profits is that Maker Governance is currently deciding whether or not to compensate Vault owners from Black Thursday’s events. If this proposal passes an executive vote, we’ll have to see the protocol come up with another seven figures in capital to compensate those who were wrongfully liquidated.

Exact amounts surrounding required compensation are still under review by the Maker Governance Risk Team.

Data via Token Terminal

Key Takeaways

While Black Thursday put the Maker Protocol through a slight hiccup, the system at large is still fairly healthy and growing when looking at the big picture – an important sign for the proliferation of DeFi. With USDC collateral now available and the system slowly recovering from the events of Black Thursday, we should see the Maker system restore back to full health and hopefully, bring the DSR back online to entice Dai users to buy and mint DAI. Once this happens, we should see a bounce in lending rates offered on third party lending platforms like Compound, dYdX, and Aave.

With more Dai in circulation, the higher the annualized revenues for the protocol at large. Given it suffered significant losses while repaying the system debt from Black Thursday, recalibrating Maker’s revenues to drive net gains for MKR holders will likely become a core focus in the coming months once the system is back in good health and the Dai’s peg is restored back to $1.

The coming year will be critical for Maker. With the Foundation now emphasizing the transition towards a fully decentralized, self-sustaining protocol, we should see more participation from the broader Maker community along with some potential changes to the protocol’s economics. Maker’s announcement post surrounding this transition outlined the role of Elected Paid Contributors (EPCs) to the protocol. We can imagine that a portion of Maker’s annualized revenues will be directed towards the DAO in order to pay for EPCs to evangelize the system at large.

If you’re interested in staying up to date with Maker, be sure to follow the team via the official Twitter account. For those looking to get more involved in the discussions and governance, you can jump into the official Maker Forums.