What does a $27.5 million MKR sale mean for Maker governance?

This week, Dragonfly Capital and Paradigm purchased $27.5 million worth of Maker tokens as an investment and entry into the governance of Dai. Maker tokens are mostly used for collecting fees through interest payments and Dai liquidation penalties, and being able to vote for changes in the ecosystem.

Maker has already had issues with a single voter being able to determine the outcome of things like interest rates and the release of improvements, but how much power exactly will this $27.5 million give the new whales?

To get a good understanding of how this new investment can effect governance, we need to understand how Maker’s votes are tallied and how much of the total supply $27.5 million buys.

The total supply of MKR is 1 million and each token is worth around $480, giving the coin a total market cap of $480 million. Owning $27.5 million worth in MKR would be owning 5.7% of the total supply. This was apparently a joint purchase, therefor it is unclear whether the purchase will be split between the investment firms or if they will be on the same page when it comes to voting.

5.7% of the supply is not going to determine the vote in a vacuum, but what really matters is the voter turnout. Unfortunately, I don’t have historical data on Maker governance, but on their voting dashboard, I can see the past two votes. The previous vote to adjust debt ceilings, Dai savings rate and the interest rate had  119,000 MKR in support with a top voter contributing 55% of the voting power.

119,000 MKR * 0.55 = 65,450 MKR (one voter’s power)   /    65,450 * 480 = $31,416,000 (the same voter’s MKR value)

As you can see, $31 million is pretty close to what Dragonfly Capital and Paradigm purchased, and they would easily be able to take a major spot in governance if others didn’t show up.

Still, votes aren’t executed by the majority in Maker - the number of MKR in support of the new vote has to surpass the number of MKR in the previous vote in order to be executed. Where voting power matters more is when there is a spectrum from either no change to a (x) amount of change.

In the end, these new investors will be whales capable of subjecting their will upon Dai holders, but it’s not as much their fault as it is voter participation. According to Etherscan, there are 16,593 MKR addresses and only 8 hold over 1% of the total supply, 2 of which are Maker’s own contracts which I don’t believe vote. The remaining 6 whales hold about 23% of the total supply.



2% of the Sai supply was liquidated today

Sai, formerly Dai has seen $1.2 million in liquidations today with a supply of $45 million. A few months ago, Sai’s supply was around $100 million before the release of the new Multi-Collateral Dai, which is now called Dai. Sai is created by collateralizing Ethereum worth 150% of the Sai a user is taking out.

LoanScan is a great website to look at statistics in the DeFi space. We found the amount of Sai liquidations today through their “Collateral Liquidated.” Maker Liquidations

As you can see, this isn’t the biggest spike in liquidations in the past month. Around November 20th, the price of Ethereum dropped around twice what it has in the past few days and liquidated $2 million worth of Sai. November 18th is when Multi-Collateral Dai released, so that could have had an impact as well.

The minimum collateral of Ethereum to Dai in Maker’s system should be around 150%. Maker’s Collateral ratio is getting eerily close to that point having dropped from 315% to 235% within the past month. Reaching around 115% would essentially destroy the system.

On the same token, Maker doesn’t really care if Sai fails because they are planning to call on an emergency shutdown anyways. Maker is proud of their new innovations in Multi-Collateral Dai and would like everyone to manually convert their Sai tokens to Dai before the emergency shutdown begins.

Because of Ethereum’s price volatility, users that have Sai CDPs have been dumping more Eth into their contract in order to avoid liquidation. Today, about $8 million USD in ETH was added to Maker’s Sai contracts according to LoanScan.

I think everyone in the industry is hoping that prices don’t fall for too much longer. Bitcoin is getting very close to the $6k support levels that price bounced off of for around 10 months in 2018. Pushing below that support once again could be bad for Bitcoin and the rest of the industry on a macro scale.

Multi-Collateral DAI will be listed on Coinbase within weeks of release

Cryptocult just confirmed with Coulter Mulligan, Head of Marketing at MakerDAO that the Multi-Collateral iteration of DAI will be listed on Coinbase within 1 to 3 weeks of its release.

“Unsure of the exact date but they plan on adding Dai (MCD) in first 1-3 weeks so either the change will happen Nov 18 or shortly after.” - Coulter Mulligan

When MCD is released, it will be called DAI and the old, single-collateral DAI will be called SAI. According to Coulter, the current DAI will change to SAI either once MCD is listed or when it is released.

It will be important for current SAI holders who don’t keep up with Maker announcements to realize that they are holding a stablecoin that could soon be subject to volatility. A good way to do this is through Coinbase notifications and users realizing that their stablecoin now has a different name.

There is a DAI-ETH pair on Coinbase pro that has decent trading volume, but those people will have to pull their DAI into a Ethereum wallet in order to upgrade to MCD.

If you hold any $Dai today, either in a wallet, CDP or on an exchange, you must upgrade when MCD is released.” - @makerdao

One Maker voter changed the interest rate for DAI

One Maker voter with 97% of the voting power changed the DAI interest rate by 4%. After the vote, the DAI “stability fee” was decreased from 9.5% to 5.5% The address apparently owns 7.5% of total Maker in existence and due to low participation, was able to take the vote into their own hands.


Maker has an intuitive dashboard on their website that makes it easy for Maker (MKR) holders to vote on topics in the ecosystem. The actual MKR token is something like a utility coin for MakerDAO’s DAI stablecoin.

In order to vote, you have to “move” maker. This means that the more Maker you can move around, the more a vote will count.

Maker’s voting system is very different than Ethereum because of instances exactly like this. Many would consider Maker’s system plutocratic, where as Ethereum is controlled through public conversations with the core dev team.

It’s a trade off between bigger pockets having a bigger say, and lack of democratic control. Some people don’t mind how one voter changed the DAI interest rate, but an issue more pressing than interest rates could potentially change minds.

I say this normatively, as neither good nor bad. In a perfect world, it’d be great if we had a distributed voter pool for a move this big. The pragmatic reality is that as an early stage, hard-to-understand technology, decision making tends to naturally centralize. - @onggunhao