Maker, Now Rebranded to Sky, Draws Ire From DeFi Community on Controversial Stablecoin Change
08/28/2024 06:40
MakerDAO co-founder Rune Christensen said the feature won't be live when the USDS token goes live and the old DAI token will remain in circulation unchanged.
Maker, which just rebranded to Sky, announced a new version of its $5 billion stablecoin DAI but crypto enthusiasts weren't impressed.
The new token called USDS apparently has a piece of code that would allow the issuer to remotely freeze the asset, observers pointed out.
The feature exists in the largest stablecoins of centralized issuers like Circle's USDC and Tether's USDT. They often freeze assets linked to illegal activities at the request of government authorities, like Tether did last week by aiding the U.S. Department of Justice in the seizure of $5 million of USDT for fraud victims.
However, the feature goes against crypto's decentralized ethos that MakerDAO pioneered at its launch and rattled many decentralized finance (DeFi) enthusiasts.
MakerDAO was an OG DeFi protocol aiming to build an autonomous, decentralized stablecoin for the internet with low volatility against fiat currency, backed by ETH.
DAI is now migrating to USDS, a censorable stablecoin that goes against its original vision.
RIP DAI, 2017-2024 pic.twitter.com/L2g6KRvNHe
— Lumberg (@lumbergdoteth) August 27, 2024
I think Maker begins its descension to irrelevance from here.
As a defi native I can’t begin to tell y’all how bearish and poorly thought out the roadmap is.
By the time any of it plays out DAI will have lost its entire moat and will be entirely replaced by much more reliable…
— MilliΞ (@llamaonthebrink) August 27, 2024
Rune Christensen, the co-founder of MakerDAO, confirmed the existence of the freeze function but explained that it's an option built into the code and won't be switched on when the token goes live next month.
He also added in a separate post that "upgrading to USDS is optional, and it is only USDS that will have a freeze function."
"Dai is an immutable smart contract and cannot be altered," he said.
AJ Scolaro, senior analyst at crypto research firm Messari, said that concerns are overblown as the feature was already public knowledge and is necessary for a stablecoin backed in part with U.S. Treasuries to reach widespread adoption.
"The sudden USDS fud [fear, uncertainty, despair] is funny," he said. "We knew about the freeze function several months ago; it's 100% necessary to safely scale an RWA-backed stablecoin."
"A major decentralized stablecoin should both be governed by its users and able to comply with legal systems," he added. "PureDai will be a reasonable alternative offering for skeptics."
Christensen previously floated plans to craft a purely crypto-backed, decentralized stablecoin referred to as PureDAI.