DeFi plays an important role in banking the unbanked and making the money market more efficient. The DeFi space includes stablecoins, derivatives, decentralized exchanges, and lending services. The year saw a growth of $160 million in this sector and the prevalence of lending platforms like Maker.

Maker DAO is a blockchain-based lending platform within the Ethereum blockchain. Maker works to minimize the volatility of Dai, its stable token, compared to the U.S. dollar, with holders of MKR tokens governing DAI.

Dai was created by MakerDAO, to allow borrowing or generating the stablecoin by staking their cryptocurrency holdings as collateral. Dai is not supported with bank accounts of reserve currencies but is generated by putting Ether into the collateralized debt positions (CDP) smart contract.

As one of the earliest Ethereum projects, Maker continues to shine as it is the dominant leader responsible for nearly 51% of the value locked within the lending sector as the process for generating Dai is pretty straight forward. A little bit of ether ($ETH) and a web 3.0 wallet such as Metamask or Ledger Nano S is needed to get started.

1 address holds 27% of all collateral

A recent report from financial technology data firm Digital Assets Data shared with Cointelegraph on January 26 reveals that of all the Ether (ETH) locked in the CDPs of the old MakerDAO system, 27% belongs to a single Ethereum address.

In the second half of 2019 was the MakerDAO project upgraded the Dai stablecoin in November. The upgrade introduced new smart contracts that enabled a Dai Savings Rate (DSR) and the Multi-Collateral Dai (MCD) system.

The old system, Single-Collateral Dai (SCD), wasn’t immediately phased out, however, so the old Dai became “Sai,” while the upgraded, MCD version became the new Dai. CDPs for different assets were rebranded as “vaults.”

The report further states that about 155,000 CDPs were initiated on the old version of the Maker protocol and 77% of those held under 0.05 ETH. Over 3,500 vaults have been created with the new system, most of which hold over 1 ETH, according to Digital Assets Data. One of the data scientists, Brandon Anderson said:

“There is one address that maintains 27% of the value locked in CDP’s. Likewise, the new Vaults system has a similar distribution, with one address holding 15% of the value locked. As Maker continues to grow, we will see how these distributions play out and if there is more adoption within the lower bins.”

He clarified that these addresses might not always be owned by a single entity stating:

“It is possible that one or more of those addresses could be smart contracts that contain ETH as a part of MakerDAO, and do not represent a single entity. Without a significant amount of additional research, we cannot commit to singling out/identifying these addresses.”

Growth of DeFi

The Maker Foundation has seen a lot of progress in the last few years with its debt ceilings doubling consecutively for two years that pushed the debt ceiling up to 120 million Dai. By the end of 2019, more than $339 million worth of Ethereum was locked up as collateral.

Despite all the progress, the Maker Foundation had to add a new poll last month to allow a 24-hour governance delay to its protocol the ERC20 synthetic stablecoin, Dai. The move was the result of a community member flagging a loophole in the system that allows anyone with a substantive amount of MKR token to create an executive contract programmed to transfer all collateral from Maker to their account, immediately vote on and activate the contract, and effectively steal all of Maker’s collateral.