A Quick look at the Maker / Dai Drama

The longstanding top Ethereum project Maker (MKR) was one of the best preforming coins of the bear market. However, drama has since circled around Maker DAO (the Maker “decentralized autonomous organization”) and Dai (the stable coin attached to Maker).

Here is a “super short” (sort of) explainer of what happened so you can DYOR.

1. Maker / Dai is a longstanding Ethereum project that lets you lend ETH and borrow the Dai stable coin.
2. The Dai stable coin is probably the most successful decentralized coin.
3. The project generally had a great 2018 getting an investment from Andreessen Horowitz and getting listed on Coinbase.
4. With ETH falling, and people leveraging ETH for Dai to buy ETH, and with the other news, MKR outperformed almost every other coin during the last half of the bear market.
5. However, then some drama started.
6. Dai came slightly off its peg trading a little under a dollar (no one really knows why for sure, but the market has spoken, and other stables have held their peg better).
7. To combat the de-pegging Maker holders used their voting shares to raise the the “Dai stability fee” (the interest rate people pay to borrow dai).
8. Thing is, they didn’t just raise the rate, they kept raising the rate all the way to 16.5% (meaning you would pay 16.5% in interest a year for borrowing dai). See: MakerDAO Fees Continue To Rise With New Governance Decision.
9. The problem is, the market has not reacted to the fee increase (meaning one of Maker’s tools for stability is not fully working in practice here).
10. Perhaps because of this, but certainly not all because of this according to insiders, the Maker DAO team also started having some drama (you could say that existing tensions boiled up into the current drama). This drama resulted in a bunch of letters and firings (and re-hirings). See: Inside Maker DAO: leadership conflict over direction fuels multiple departures and Leaked Letter Exposes Infighting Atop Flagship Ethereum Project MakerDAO.
11. Part of what we learned from all of this is that there has been some ongoing tension between devs working in a more democratic fashion and the top brass (in short the concept of a Decentralized Autonomous Organization is being tested a bit, at least one in this somewhat limited form).
12. All that said, none of the issues are fully new, they were resolved in the past, and it looks like they are in the process of being resolved again.
13. Also it should be noted that infighting between stressed out team members is not the same as the project having sticking points. Pretty much the one and only thing going wrong with Maker is the dai peg (otherwise it is a working and useful system with cool updates planned).
14. So I guess, your stable coin loses its peg a bit, your rates go up in what seems like a futile attempt at stability, and your project loses half its value in ETH after an epic run…. gonna be some salt. Seems like things got a little heated, but are now back on the right track… still need to get that dai peg though, and potentially the answer is not going to be found in interest rates, so it’ll be interesting to see what direction the team takes and to what extent the solution is found by decree from the top vs. distributed devs and voters.

TIP: For fun, you can also see this slightly hilarious article “Mad King” Rune Christensen tries to Burn Down MakerDAO to decompress (useful if you are a MKR holder and just watched your coin lose a bunch of value while the team fought with each other and somehow just missed an opportunity to strike as USDT floundered with its latest drama 😉 ).