coindesk.com
Maker (MKR), the governance token of $5.3 billion decentralized finance (DeFi) lender MakerDAO, surged to near a one-year high price Friday following the introduction of a token buyback program.
MKR briefly rose above $1,200 early Friday for the first time since last August, then pared some of its gains to change hands at around $1,144. The token is up 28% over the past week, significantly outperforming the 4.6% decline of the CoinDesk Market Index, which tracks the broader crypto market’s performance.
The price action occurred as the lending protocol activated a token buyback scheme on Wednesday, removing MKR supply from the market. The so-called Smart Burn Engine periodically allocates excess $DAI stablecoins from Maker’s surplus buffer to purchase MKR from a UniSwap pool, a governance proposal explains.
The program was deployed earlier this month, and it went live Wednesday once the surplus buffer exceeded $50 million.
In the last 24 hours, the protocol bought back some $230,000 worth of MKR, according to blockchain data by Etherscan. At this pace, the protocol is on track to purchase about $7 million in tokens in the next month.
The token’s total market capitalization is about $1 billion, so the buyback would reduce 0.7% of the supply per month at current prices.
Maker is one of the largest and oldest DeFi lending protocols, and also issues the $4.6 billion $DAI stablecoin. It is led by a decentralized autonomous organization (DAO), in which MKR holders vote on governance proposals.
The protocol has been increasingly investing $DAI’s reserve assets in traditional investment products such as bank loans and government bonds to earn revenue from yields. MakerDAO also is undergoing a major overhaul that includes upgrading the $DAI and MKR tokens, and breaking up its structure into smaller, autonomous organizations called SubDAOs that could issue their own tokens.