MakerDAO Doubles Down On US Treasuries

Strategy Helped DeFi Lender Weather The Bear Market By Generating Yield On Reserves

Maker will dramatically increase its exposure to U.S. Treasuries, doubling down on a strategy that has paid off handsomely over the past year.

MakerDAO, the decentralized organization that runs the Maker protocol, voted this week to invest up to $750M in U.S. Treasuries. The measure passed with three-quarters of the votes cast in favor.

The yield earned from Treasuries and other real-world assets has cushioned an otherwise dramatic drop in revenue at Maker. But the lending protocol was built, in part, to create a censorship-resistant, dollar-pegged token. The greater its exposure to real-world assets, the further it moves from its original mission.

Maker’s governance token, MKR, is down around 5% over the past week, according to CoinGecko.

Maker is the second-largest protocol in DeFi, with almost $8B in user deposits, according to Defi Llama.

Borrowers can mint its DAI stablecoin by depositing collateral assets like ETH and WBTC in the protocol’s smart contracts. DAI is the fourth-largest stablecoin with a $5.4B market cap, according to CoinGecko.

The move could more than double Maker’s exposure to U.S. Treasuries; in October, the DAO voted to invest up to $500M in U.S. Treasuries and corporate bonds.

The strategy has helped Maker weather the bear market.

According to a report the protocol published last month, Maker’s net income fell sharply last year. Profit in 2021 was $90M; in 2022, it was $19M. 

But the report credited the DAO’s investment in real-world assets, a class that includes treasuries, with generating half of the protocol’s earnings despite representing only 10% of its holdings.