MakerDAO founder says DeFi driving the price of Ethereum isn’t a good thing

Investors might look at DeFi’s growth as a reason to expect Ethereum’s price to rise, but MakerDAO’s founder says that entire worldview is just wrong.

During a DeFi Nation conference call yesterday, Rune Christensen clarified his philosophy behind how DAI impacts the value of Ethereum.

“if you think that a stablecoin should drive the price of Eth, then you’re thinking about it the wrong way. Eth needs to inherently have that value and Dai can draw the stability out of it.”

Christensen acknowledges that DAI could increase Eth’s price in the short termĀ 

Decentralized finance has contributed tangible products and growth to the Ethereum network. In comparison to Ethereum based video games, collectables and social networks, DeFi has proven to be useful to anyone who owns money, and garnered the interest of even institutional minds in 2019.

Crypto Chico’s video is an example of retail traders interpreting DeFi as a catalyst for price movement. Christensen seemed to acknowledge the potential of DAI’s impact on the price of Eth, but only in the short term.

“if you try to do it the other way (grow Eth through DeFi), it’s like you’re putting the cart before the horse. sure its gonna be fun on the way up because you can really pump a lot of value into Eth. The problem is once things start going down, it will have the opposite effect. You will have Dai totally destroying the price of Eth as you get this liquidation cascade.”

Christensen views people who think that DeFi will only be used on Eth similarly to Bitcoin maximalists. He says that it is impossible to scale a singularly collateralized stablecoin.

In the long run, it’s about Ethereum’s transactions

MakerDAO ultimately wants to provide services to as many users as possible. Multi-Collateral Dai will allow 7 new ERC-20 tokens to collateralize for DAI, but Christensen is open to adding real world assets in the future.

“Eth’s value comes from proof of stake, staking and earning the fees. the value of eth comes from the transactions happening on the blockchain, not from it getting pumped up by defi. Having real world assets (coming into Eth) will be really beneficial.”

Christensen says that backing DAI with centralized assets will fuel Ethereum as it creates more transactions on the chain, as will the seven new decentralized assets.

Watch the full conversation here: