Why Maker is the largest USDC holder

Maker is the publisher of the decentralized stablecoin DAI. Meanwhile, the DAO is also the largest USDC holder. TokenTopNews answers the question of why the organization invested billions and voluntarily gave the custody of the crypto exchange Coinbase .

MakerDAO rises to become the largest USDC holder

As of October 24, Maker is the organization with the largest USDC reserve ever. Maker is a DAO and is responsible for managing the decentralized stablecoin DAI.

On October 10th, the organization’s community made the decision to put billions of dollars into custody on US crypto exchange Coinbase .

At that time, Coinbase Maker explicitly proposed this deal after the DAO had criticized the USD coin . Coinbase is part of Centre . The coalition is responsible as publisher for the USDC.

Maker backs its algorithmic stablecoin DAI with a reserve of cryptocurrencies. USDC is a particularly important part of this. This is intended to achieve a stable peg to the US dollar.

The DAO became aware that this idea could be in jeopardy after Center froze all USDC associated with the sanctioned dApp Tornado.Cash. The long-term plan of leaders behind Maker: scrapping the USDC for the long term .

Maker puts $1.6 billion in custody with Coinbase

The idea: If Center can freeze the money remotely (usually a problem with ERC-20 tokens ), then the USDC could also be held in custody to generate interest on it. Of course, the capital is then used elsewhere. According to a press release , Coinbase is investing the money in short-term bonds.

Maker founder Rune Christensen in particular was convinced of the idea at an early stage. In his endgame plan , however, he also makes it clear that it shouldn’t stay that way in the long term. At some point he wants to deposit the DAI only with volatile cryptocurrencies like Ethereum .

Then DAI would be unpegged from the US dollar. Until then, Maker aims to earn $24 million a year in interest. Coinbase promises this 1.5 percent interest rate to the DAO.

Where does the money come from?

In order to create DAI, the creator must deposit cover. DAI is targeting an overcollateralization of 150 percent. So the money comes from DAI users.

Maker is only handing over part of the USDC reserve to Coinbase. So why is Maker only now becoming the largest holder of the centralized USDC? Usually the money is locked in a smart contract .

Only through the decision of the maker community could this system be changed and the USDC transferred to Coinbase.