Crypto Currency

MakerDAO to dissolve Foundation and become truly decentralized again

Pioneering decentralized finance protocol, MakerDAO, has announced its foundation will formally dissolve in the coming months, marking one of the final milestones in the protocol’s roadmap to decentralized governance.

A July 20 blog post describes Maker’s decentralized autonomous organization, or DAO, as now being “fully self-sufficient” — with its globally distributed community “now responsible for every aspect of the Maker protocol.”

“Complete decentralization of Maker means that future development and operation of the Protocol and the DAO will be determined by thousands or perhaps millions of engaged, enthusiastic community members, all determined to extend the benefits of digital currency to people across the globe.”

The post’s author, Maker Foundation CEO, Rune Christensen recounts highlights from the project’s six-year journey, with Christensen having first revealed his plans in a Reddit post detailing his vision for an Ethereum-back stable token dubbed “eDollar” during March 2015.

The Maker Foundation was created as a non-profit tasked with overseeing the project’s development and funding in September 2018, reportedly at the behest of its early investors. While Christensen created the Foundation with the intention of dissolving it within two to three years, the move catalyzed internal tensions between supporters of the Foundation and those who saw the legal entity as at odds with crypto’s fundamentally anarchic ethos.

He describes Maker as having “come a long way in a relatively short period,” transitioning from a pioneering fledgling DAO, into a Foundation, and back to a DAO again.

“While the Foundation played a specific and important role in the further development of the Maker Protocol and the growth of a global team, it was designed to exist only temporarily,” emphasized Christensen.

In May 2017, more than two years after Christensen revealed Maker on Reddit, the protocol conducted a limited release of ProtoSai — the precursor to Maker’s first stablecoin, SAI, or Single-Collateral Dai.

SAI would enjoy a wholesale release in December of 2017 and circulate for nearly two years, with Maker introducing Multi-Collateral Dai (DAI) during November of 2019 — allowing DAI to be minted against a variety of digital assets approved by Maker governance.

Related: Australian digital finance industry wants to legally recognize DAOs

While Maker would emerge as a pioneering DeFi protocol perched at the top of the sector’s rankings by total value locked, 2020 was not all smooth sailing for Maker, with users launching a class-action lawsuit against the foundation in the aftermath of “Black Thursday” in March. The incident saw Maker lose roughly $6.64 million DAI to cascading liquidations after the price of Ether crashed 50% over roughly 24 hours.

March 2020 would also see the Maker Foundation transfer the MKR token contract to community governance, marking the beginnings of the project’s journey to reinstating decentralizing governance — with Christensen characterizing the foundation as “completely pointless.”

The protocol would also add support for Circle’s centralized stablecoin USDC that month, inflaming controversy regarding Maker’s support for centralized crypto assets as collateral for its purported decentralized stable token.

In March of this year, “Core Units” were established to coordinate management across the protocol’s various teams and activities. The foundation would also return development funds of 84,000 MKR to the Maker DAO in May, worth nearly $500 million at the time.

According to DeFi Llama, MakerDAO is currently the sixth-ranked decentralized finance protocol with a total value locked of $5.62 billion.