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MakerDao proposes a Direct Deposit Dai Module (D3M) to join Maker with another DeFi blue-chip lending protocol Aave more closely. This will allow the Maker protocol to enforce a maximum variable borrow rate on the Aave DAI market. MakerDAO is the protocol that mints the DAI stablecoin, which has a market cap of $3.19 billion and acts as a hedging tool and medium of exchange directly on-chain. DAI, USDT, and USDC are the dominant stablecoins in the decentralized finance sector currently, with the lending rate going as high as 10-12% and borrowing rate up to 19%, as per DeFi Rate. According to the proposal, over-collateralization is the basis of DeFi with more collateral present than the asset minted, providing room for incentivizing a third party to pay back the debt on behalf of borrowers. And “MakerDAO protocol is heavily overcollateralized,” it states. The proposal further mentions that the protocol has also proved itself to be resilient during the March crash. The D3M explores an alternative path to bring more liquidity in secondary DAI venues by minting DAI backed by aDAI and a potential new tool to stabilize DAI peg. aDai is an automatically-generated, native token to the Aave protocol issued to a user who supplies DAI into the Aave protocol. According to Sam MacPherson, smart contracts facilitator at Maker (MKR), this will benefit both the protocol. For Aave leverage seekers, it means not getting stuck in a position with double digits interest rates, and for Maker, DAI supply expansion to reduce reliance on USDC. https://twitter.com/sgmacpherson/status/1379787697615699971 This proposal will further help Maker attract borrowers, more revenue, expand DAI supply, and if Aave starts a Liquidity Mining program, then collecting AAVE and earning governance rights in it. The Aave community is deploying new liquidity pools across various L2 solutions, which means more DAI can bridge into pools to transact affordably. Aave can essentially become the distributor for DAI on every L2. All of this will be achieved by the D3M module mining and directly depositing freshly minted DAI into the Aave V2 protocol.
“The D3M has a target rate for limiting the size of the deposit and ensuring DAI to be the most competitive asset to be borrowed on Aave compared to other stablecoins,” states the proposal.
MakerDAO basically aims to expand its stablecoin across DeFi and ensure its market position amidst the rise of new stablecoins. “Yet another example of how deeply integrated Maker is across DeFi,” commented Ryan Watkins, a researcher at Messari. “Now becoming a bank for banks.”