📈 Up And To The Right — Issue No. 53

📰 News

This week, the team behind MakerDAO published an updated set of metrics tracking the adoption of the decentralized DAI stablecoin. The numbers are interesting. Both active addresses and addresses holding a non-negligible amount of DAI have grown 20% each month in 2019. That means they've doubled since January. It's important to note that on-chain numbers like active addresses are susceptible to gaming via "fake" transactions. If the adoption is real, though -- and there's no reason to think it's not -- then the sustained growth rate is eye-catching. Another interesting aspect of the report: the number of decentralized applications which integrate DAI continues to grow, as does the DAI held in their contracts. It lends credence to the idea that DAI is becoming the primary medium of exchange in the burgeoning Ethereum economy. Link.

Regular readers of this newsletter will remember, from issue 41, that the Maker project uses a set of smart contracts on Ethereum to implement a collateral lending system. A synthetic, decentralized, dollar-pegged stable coin is the by-product of this system. In its current form, Maker allows lenders to lock only Ether as collateral. For nearly two years, the Maker team has been working on the next iteration of the system that will allow any Ethereum based token to be used. That project is known as Multi-Collateral DAI (MCD). The updated system went live on the Kovan testnet in May. Link.

If implemented and launched successfully, MCD has the potential to put even more fuel in the Maker engine. With many more assets available as collateral, we could see the DAI supply grow rapidly. It also makes it easier to create additional synthetic assets, such as stablecoins pegged to other currencies or index funds, by using the already-stable DAI as their collateral. According to an announcement made this week, the Maker team expects MCD to launch in the fall of 2019. Link.

Maker looks like a project that has found product-market fit. Will it be the first in the crypto ecosystem to achieve hyperbolic growth and mainstream adoption? Or is this just a short period of growth correlated with rising crypto prices? Who knows! Needless to say, I'll be keeping a close eye on the project. I've made this point before, but Maker is at the top of my list for projects which demonstrate the incredible potential of smart contract platforms.

That said, there's also something about Maker's ascent that worries me. If the DAI stablecoin becomes so intertwined with the Ethereum environment that its failure could collapse the entire ecosystem, what does that say about Ethereum's security as a platform? Is the security of Ethereum's network reduced, in practice, to the security of the Maker smart contracts and oracles? Might we be allowing some systemic risk to creep in, potentially putting the whole chain at risk?

As usual, only time will tell the answers to these questions. That's what makes the crypto space so interesting. By their grand successes, or by their catastrophic failures, the projects we're watching emerge right now will set the precedent for decades of innovation to come.

📊 Statistics

$10 Million. The alleged cost for the right to run a "node" in Facebook's upcoming "cryptocurrency" according to a report from The Block. A number of large partners, including those in the traditional payments space, are also being reported. I've written previously about why I'm deeply skeptical of anything Facebook will produce in this space. I'll save the rest of my judgement for whenever we get an official announcement. Link.