Right now, Multi-Collateral Dai is like an iPhone without an App Store

The token that holds DeFi together, Dai, just went through a highly anticipated improvement. Last week it was only able to be created by giving Maker Ethereum and now the system is capable of collateralizing any ERC-20 token. Even though it’s exciting, in its current adolescent stage, it’s hard to be truly excited.

Maker is right though, Ethereum limits interest in Dai

There are a considerable amount of people who hold all Bitcoin and no Eth. That same amount of people are not able to, and are not planned to be able to collateralized their assets for Dai in the way Ethereum holders can.

If Maker wants to maintain the most adopted decentralized stablecoin, they will need ways to increase supply to match ideal demand. Before Multi-Collateral Dai, the supply was limited by the amount of Eth holders who were willing to collateralize their positions.

Now, they added compatibility for ERC-20 tokens, and are starting things off with Basic Attention Token. Still, BAT will only be able to make up about 3% of Dai’s total collateral. And this is where things get less exciting.

In reality, this MCD launch is a baby step. I won’t criticize taking things slowly, because messing up the stability of Dai would dissuade people from using it, but 3% of collateral being BAT is really just not that cool.

Like an iPhone without an App Store

Maker is giving us a revolutionary product with Multi-Collateral Dai, but it still has yet to be realized.

First of all, it lives in the Ethereum network which has its own issues. Until Proof of Stake is a thing, payments are slow. Paying with Dai is like streaming video over a 2g network, just not worth it. It’s not Maker’s fault, it’s just that the technology isn’t there yet.

Like how iPhone users had to jailbreak their device to download apps before the app store existed, Multi-Collateral Dai still is forcing potential lenders to other avenues. The extremely limited amount of assets able to be collateralized still push Bitcoin holders take out centralized loans.

Right now, sites like Celcius allow users to exchange enter a CDP with Bitcoin and receive USDC. This doesn’t make USDC the same as Dai, because it is not being created by the CDP, just lent. Yet, it still will result in people avoiding Dai because they might not be comfortable holding an Eth position.

If Ethereum’s price moves the wrong way, lenders have a chance of being liquidated, and the Bitcoin / Ethereum markets have been quite different since the 2017 bull run.

Multi-Collateral Dai could include centralized assets in the future

It is possible for a trusted custodian to tokenize real world assets like gold. It is also possible for Maker to accept those tokens as collateral. In an interview with DeFi Nation, (and possible elsewhere) Rune Christensen talked about how accepting real world assets could help Dai scale.

DeFi purists likely won’t like the idea of trusted custodians playing a role in their decentralized stablecoin, but the more types of collateral Dai can accept, the more it can expand.

Along with that, Christensen noted that Maker loves Ethereum and it can take DeFi a long way, but it didn’t seem like he felt the need to be tied to it forever. Maker is having all Sai holders manually transition to Dai, so they might not be afraid of asking all holders to manually transition to a non-Ethereum network if the opportunity arose.

Compromising to expand (and be profitable)

As long as Maker stays on a secure, decentralized network which people lock value in to create a non-custodial stablecoin, it will still be beating the competition in terms of decentralization.

Some users will definitely be turned away from accepting centralized collateral, but it can also bring a less crypto-enthusiast demographic of users into the DeFi space.

Maker’s plans are still very speculative but one thing is for sure. MakerDAO wants to expand. Just like a company trying to appease shareholders, Maker needs to increase transactions in order to increase the value of their MKR tokens. MKR hasn’t seen a lot of ups and downs, but no true bull runs thus far.