The Dispute Between MakerDAO and Vitalik Buterin: A History of Development from Praise to Doubt

Recently, Vitalik Buterin sold 500 MKR tokens, worth about $580,000. This move has attracted widespread attention and seems to be related to MakerDAO founder Rune Christensen's announcement of building a new chain based on the Solana codebase. This is the final step of the "Endgame" plan proposed by Christensen.

Since its founding, MakerDAO has been a protocol frequently mentioned by Buterin. He has publicly praised MakerDAO as an impressive application on multiple occasions. However, beyond the accolades, Buterin has also questioned the development direction of MakerDAO several times. This article will briefly outline the growth trajectory of MakerDAO, and, in conjunction with Buterin's attitudes at various stages, provide a multi-faceted understanding of the story behind this protocol.

Ambitious Birth

Before launching MakerDAO on the Ethereum network, MakerDAO founder Christensen was exploring whether it was possible to launch the stablecoin Dai on BitShares. After research, he concluded that the conditions on BitShares could not support complex financial protocols, ultimately deciding to build an on-chain dollar stablecoin based on Ethereum. In early 2015, Christensen began discussing the initial code of the Maker protocol with members of the Ethereum community on Reddit. In December 2017, MakerDAO released its white paper, stating that initially, Dai could only be collateralized by ETH.

MakerDAO has developed rapidly, attempting to use other ERC-20 tokens and tokenized gold as collateral in the second quarter of 2018. However, the true multi-collateral (MCD) system did not go live until 2019, reflecting that perfecting an ideal stablecoin protocol is no easy task. At this point, Dai generated by over-collateralizing ETH was called Sai, while that generated by multiple assets was still called Dai, and users could upgrade Sai to Dai.

In September 2018, Christensen stated that he was collaborating with several real estate tokenization projects, hoping to use real estate assets as collateral. This shows that MakerDAO started experimenting with physical asset ( RWA ) innovation early on, laying the groundwork for the current RWA narrative.

At that time, Buterin had communicated multiple times with the MakerDAO and Ethereum community, and he had a high opinion of the protocol. At the end of 2018, Buterin stated in an interview that MakerDAO left a deep impression on him and is one of the most complex protocols on Ethereum. Buterin also pointed out that theoretically, the MakerDAO model could be extended beyond the dollar to touch any asset, consumer price index, or real estate index.

Encountering setbacks but continuously evolving

In September 2018, A16Z invested $15 million in MakerDAO by purchasing MKR. By early 2020, the total supply of DAI reached 100 million pieces, making MakerDAO the largest decentralized stablecoin protocol. However, in March of the same year, a market crash led to the system generating $5.3 million in bad debt, and MakerDAO ultimately weathered the crisis by auctioning MKR. The price of MKR fell from over $600 to over $260.

However, MakerDAO recovered quickly, with bad debts down to about $100 on March 23. Subsequently, MakerDAO transferred control of the MKR token to the governance community and urged the community to "maintain deep involvement." To address the decoupling, MakerDAO voted to support USDC as collateral and offered high interest rates. The introduction of USDC made the system appear less "decentralized."

At this point, Buterin's recognition of MakerDAO has declined. After the introduction of the MCD mechanism in MakerDAO, he proposed a stablecoin protocol that requires a single collateral and minimal governance. However, the community believes that a single collateral is insufficient to support the expanded issuance of Dai, and the introduction of USDC helps Dai quickly return to stability.

Facing Challenges, Turning Crisis into Opportunity

In mid-2021, the price of MKR surged to over $5000. However, the 519 market crash impacted the crypto world and affected MakerDAO as well. Nonetheless, the biggest challenge Dai faced came from the algorithmic stablecoin UST. UST maintained price stability through a swap mechanism with Luna, reaching a market cap close to $20 billion.

To expand the use of UST on Ethereum, the Terra community proposed the introduction of a new 4pool consisting of UST, Frax, USDT, and USDC, excluding Dai. Terra and Frax Finance have gained a significant amount of voting power in Curve through bribery, jointly challenging the position of Dai.

However, on May 8, 2022, UST began to de-peg. The UST/3CRV pool on Curve was severely tilted, with UST accounting for over 67%. Despite efforts by Terra founder Do Kwon to calm the market, UST and Luna ultimately collapsed. Dai won this challenge, solidifying its position as the leading decentralized stablecoin.

Shortly after the collapse of UST, Buterin published an assessment of stablecoins, mentioning a preference for Rai, which is purely decentralized and supported only by ETH, rather than Dai. Clearly, at this point, Dai is no longer Buterin's top choice.

The performance of RWA narrative is stunning

With the Federal Reserve raising interest rates and U.S. Treasury yields increasing, along with factors such as the security of DeFi protocols, on-chain liquidity and protocol revenues have significantly declined. MakerDAO has begun to lay out RWA to respond. A year ago, over 50% of Dai's issuance came from USDC, but the protocol failed to capture the related value. With the layout of RWA, Maker will redeem USDC and other assets for dollars to purchase U.S. Treasuries, shifting the main assets supporting Dai's issuance from USDC to U.S. Treasuries.

Currently, RWA dominates the assets in MakerDAO, allowing users to enjoy the returns from US Treasury bonds, and the protocol's income mainly comes from RWA. This shift helps to mitigate the risks of centralized stablecoins, increases protocol stability, and also enhances user yields such as DSR.

On September 1st, Christensen proposed the idea of building a new chain based on Solana, seemingly intending to break away from Ethereum. This is the final step of his "Endgame" plan, and he believes a new chain is needed to make the ecosystem safer and more efficient. This statement has sparked a huge reaction, and Christensen subsequently called for not viewing it through the lens of "tribalism."

Buterin did not comment on this, only selling 500 MKR on the same day.

Summary

Christensen, as an ambitious pragmatist, continuously drives protocol innovation. In contrast, Buterin advocates for a certain sense of "pure decentralization" and idealism. However, Buterin's concept of "pure decentralization" seems to conflict with some of his practices, such as the fork between ETH and ETC. The divergence between MakerDAO and Buterin is worthy of attention and reflection.