MakerDAO Co-Founder Suggests Discarding Reserves in USDC for ETH
Rune Christensen, the co-founder of MakerDAO recently suggests a plan to remove the entirety of the USDC reserves from the peg-stability module of DAI stablecoin. He proposed that USDC – with a worth of up to $3.5B – could be utilized to rather purchase ETH. However, notwithstanding what could be done by this type of conversion to enhance the price of ETH, Vitalik Buterin (the founder of Ethereum) stated that the respective concept was awful.
Eliminating USDC Exposure in MakerDAO
In MakerDAO’s formal Discord governance channel, Rune expressed apprehensions regarding the exclusive sanctions of the US Treasury Department confronting the privacy protocol named Tornado Cash. He mentioned that it seems to be considered more serious than he initially assumed. As per him, they should pay more attention to preparation to depeg from the prominent fiat currency USD.
He added that this type of transfer is approximately necessary and they should only do that with great preparation. A method to do so could take into account “uprooting,” as he put it. The community of cryptocurrency has long been debating the hazards associated with the centrally-released stablecoins that are inclined toward state-based censorship and enforcement.
On the contrary, the DAI of MakerDAO counts as a decentralized stablecoin having support from a few digital assets. Though up to half of the reserves are in USDC, the other half of the assets are in ETH as well as the rest of the centralized cryptocurrencies. Nonetheless, Buterin does not support the respective strategy and shared on Twitter that this appears to be a terrible and hazardous concept.
Ethereum Co-Founder Doesn’t Support the Idea
He moved on to say that if the value of ETH declines substantially, collateral’s value would be lowered nonetheless no liquidation would be witnessed in CDPs, and thus the entire system would be in danger of turning into a fractional reserve. The developer specified that the centralization hazards could be eliminated by the DAI. As a substitute, he proposed the implementation of a negative interest amount to DAI for having sovereignty in its advancement.
In the Discord of MakerDAO, Rune predicted that the transformation could elevate the hazard of DAI dropping its dollar peg, nevertheless, he even now considers that there could be a risk involved in partial uprooting. He disclosed that the market may eventually begin rewarding decentralization to the level where the respective hazards are tolerable as USDC is not categorized as the no-brainer as it was previously.
