. 3 min read

Multi-collateral Dai is Live, Drawing Praise, Criticism and Confusion

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A multi-collateral stablecoin Dai is officially live and is assigned the name Dai. The single-collateral stablecoin Dai (DAI), now has been renamed to Sai.

Source: iStock/thomaslenne

Following Friday’s executive vote by Maker (MKR) stakeholders, the MakerDAO system has seen the activation of Multi-Collateral Dai (MCD), and “beginning immediately, anyone, anywhere can upgrade” the old to new Dai through MakerDAO’s Migration Portal, the announcement says. MCD will allow users to create Dai stablecoins backed by multiple collateral types. While collateral for loans could previously only have been committed in Ethereum (ETH), now Brave’s Basic Attention Token (BAT) can be used as a collateral as well. MakerDAO also offers a DAI savings option meant for rewarding Dai holders with a variable interest rate paid out in Dai.

Furthermore, the Maker community is also evaluating Augur (REP), meaning that “with MKR voter approval, almost any tokenized asset that has appropriate risk parameters could be made available as collateral in the future.”

According to an earlier announcement, the Maker Protocol is upgraded to a new version, MCD, on Monday but the old version is still alive and will be kept that way “for some indeterminate amount of time.” This old version, renamed to Single-Collateral Dai (SCD), will be running in parallel to MCD during that time, meaning that the MKR community will be managing two Dai currencies, two stability fees, and two ecosystems, as the post says.

“Please note,” MakerDAO writes, “the current SCD version of Dai will be called ‘Sai,’ and the new MCD version will be referred to as ‘Dai’,” MakerDAO writes, “and remember that the opportunity to migrate is not open-ended. The Maker community may, at some point, determine that it is no longer possible or desirable to effectively manage the Sai ecosystem, and could trigger an Emergency Shutdown of SCD.” This also brings into question the ‘decentralized’ part in ‘decentralized finance,’ as Dai is not entirely decentralized at the moment.

A ‘milestone’ that ‘needs to be explained better’

People online have been calling MCD a milestone in DeFi (decentralized finance) history and are already wondering what’s next to come, with a number of options/wishes placed on the table, such as: Bitcoin (BTC) being accepted as a collateral for borrowing Dai, Dai becoming number two stablecoin, bringing decentralized cross-chain interoperability to DeFi, etc.

Other people, however, believe that Dai (as well as the new-old Sai) needs to be explained better and brought to more people. Developer Udi Wertheimer commented that “MakerDAO is launching its reeducation plan: exchanges who previously listed the “decentralized” DAI token are expected to delist it or give it another name.” He further added that people “not going through life constantly reading crypto twitter and smart contracts” believe “DAI is a stablecoin backed by ETH (fairly liquid and a bit less volatile than other shitcoins),” but when they go to an exchange to buy some – “Oops! Here’s a Brave-backed shitcoin instead,” says the developer.

Old framework to new technologies

From the regulation side of the equation, it’s still quite unclear as to what regulators’ response to Dai is exactly. “How regulators treat Dai could help shape how, and if, cryptocurrencies can evolve from speculative use to a de facto money of the internet,” writes Reuters. The U.K.’s Financial Conduct Authority said that each coin needs to be analyzed individually, and that it did not use the term ‘stablecoin’ given that “stability was purely an aspiration.”

On the other hand, Phil Angeloff, a lawyer at Clifford Chance in Washington who has worked on stablecoins, is quoted as saying that “the regulators are trying to fit the existing framework onto these new technologies.”

However, CEO at Stealthy new venture and Founding Board Member of Israeli Blockchain Industry Forum, Maya Zehavi, put the legal liability of using DAI for derivatives into question. Furthermore, commenting MakerDao’s termination and suspension policy, she says that it “seems that as part of the TOS MKR can change or terminate any of the DAI at anytime with no prior notice,” asking: “so own your own coins is a marketing mirage?”

At pixel time (12:02 PM UTC), DAI is ranked 56th by market capitalization (USD 100 million).

Top 5 stablecoins by market capitalization:

Source: stablecoinindex.com, 12:05 PM UTC