Coinbase submits proposal that could earn MakerDAO $24M annually

Coinbase has submitted a proposal that might see MakerDAO (MKR) earn as much as $24 million yearly if handed.

In keeping with the proposal, MakerDAO will switch 33% of its $1.6 billion Peg Stability Module (PSM) — roughly $528 million — right into a Coinbase Prime custody account to earn a 1.5% annual yield on financial savings.

PSM is a mechanism designed to assist preserve Maker’s DAI at $1. It was initiated in the course of the 2020 crypto market crash when the stablecoin spiked above $1.

Since then, PSM has successfully helped DAI preserve its peg.

Not too long ago, key members of the DAO have raised considerations that the PSM is underinvested.

One of many members argued that the PSM underinvestment reduces:

“the protocol’s skill to take dangers and its attractiveness as a stablecoin.”

So, Coinbase’s proposal is designed to supply a secure funding avenue for Maker’s PSM. In keeping with the proposal, the DeFi protocol is not going to must pay a custody payment to allocate its PSM.

Moreover, Maker Governance will be capable of mint, burn, withdraw, and settle USDC in lower than 6 minutes, per Coinbase Prime.

“Coinbase is uniquely located to supply a USDC Rewards Program to MakerDAO that meets this evaluative standards. Particularly, Coinbase is a longtime, respected, and controlled firm.”

The proposal additionally defined how the rewards could be paid and the fee schedule.

DAO members purchase into the thought

Many of the feedback on the proposal have been constructive, saying the funding has restricted dangers.

Nonetheless, some members said the 1.5% APY is a bit low. As a substitute, it ought to “be a variable charge to match the market, with the potential to extend as DeFi begins to see increased APR on stables once more publish crypto winter.”

In the meantime, some members claimed the proposal may have an effect on Maker’s decentralization and add one other layer of regulatory assault to the protocol.

Members of MakerDAO core items, just like the Development Core Unit, Collateral Engineering Providers Unit, and Strategic Finance Core Unit, have additionally expressed their assist for the proposal.

A member of Maker’s Development core unit, Jenn said this isn’t the primary partnership between MakerDAO and Coinbase. The 2 entities have a protracted relationship, and this proposal is simply one other milestone in that relationship.