MakerDAO – Impact of Adding New Collateral Tokens

On the Ethereum network, MakerDAO creates technology for borrowing, saving, and a stable cryptocurrency. DAI is a stablecoin backed by ETH that can be lent by anyone with the MetaMask wallet and ETH. MakerDAO’s smart contracts are designed to allow users to create a certain amount of DAI by locking up some ETH. The more ETH locked up, the more DAI can be created. The users simply pay back the DAI loan along with any fees when they are ready to unlock their ETH, which serves as collateral for the loan.

Along with Ethereum there are several dozens of tokens that can be over-collaterized on MakerDAO to borrow DAI. Lets us examine the impact of introducing a new collateral by MakerDAO on the amount of money collaterized in MakerDOA ecosystem.

This chart shows the total number of new collaterals added to MakerDAO. When MakerDAO was launch in Q4 2019, they introduced 6 collaterals with ETH being their flagship collateral. In the following quarter, Q1 2020, they added a record number of 11 collaterals and then on quite often they are adding small number of collaterals whenever the DAO identifies a trust worthy tokens.

The following chart shows the timelines of collaterals introduce in MakerDAO ecosystem

Lets us look at the amount of money collaterized on MakerDAO to borrow DAI. By far, ETH is the most popular collateral on MakerDAO to borrow DAI from the day the smart contracts were launch. The second best collateral that had a significant impact on the amount of tokens collaterized on MakerDAO is USDC.

The following chart shows the number of transactions by collateral type. We have seen hyper growth of transactions on in early 2020 and they are mostly due to Defi OGs deploying ETH on to MakerDAO and pushing number of monthly transactions to over 100K. These days, the number of transactions have steadily decreased and they are in few hundreds and mostly lead by ETH and USDC.

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