Maker DAO is preparing for the endgame – and has a potent partner in BlackRock

Maker, the decentralized issuer of the DAI dollar, plans to invest one billion dollars in Real World Assets (RWA). BlackRock is eager to participate with its BUIDL token.

Maker DAO is the issuer of the DAI dollar: the only relevant, decentralized, and algorithmic stablecoin that mirrors the value of the dollar without involving a central party or holding dollars in a bank account.

Currently, Maker DAO is in a sort of limbo. It is only with the „Endgame“ that the Decentralized Autonomous Organization (DAO) is expected to reach its final form. As preparation, the “ Spark Organization Grand Prix“ has been announced: a kind of competition to bring one billion dollars in tokenized assets on board.

The DAO invites companies to present their RWA tokens by August 12. The focus is primarily on short-term U.S. Treasury bonds and similar tokenized products. The Spark unit, a part of Maker DAO, aims to become the central hub for Real World Assets (RWA) on Maker and Ethereum.

The financial sector is excited!

The Grand Prix is being well-received: several exchanges and projects are participating, such as an exchange from Singapore, the stablecoin issuer Paxos with its treasury-backed Lift Dollar (USDL), the Mountain Protocol with its interest-bearing USDM, OpenEden, Etherfuse, the Arca US Treasury Fund, Superstate, Ondo Finance, among many others.

Most notably, the world’s largest asset manager, BlackRock, seems to be on board. Carlos Domingo from Securitize, BlackRock’s partner for tokenization, publicly stated: „Strong move by MakerDAO. We will support this initiative with Blackrock, the largest provider of tokenized treasury bonds.“ This can be taken as a strong „YES!“

Both the modern decentralized financial sector around DeFi and the traditional ones like BlackRock seem eager: Eager to tokenize traditional financial products like treasury bonds and eager to use these tokens in new constructs to create new products. BlackRock CEO Larry Fink said in late 2022 that tokenization is „the next generation for markets, the next generation for securities.“

The only independent world currency

Maker DAO is the decentralized organization that issues the DAI dollar by making cryptocurrencies and tokens circulating onchain the collateral, which secures the dollar value of the DAI token.

However, only the „Endgame Plan“ will transition Maker and the DAI dollar into a “self-sustaining equilibrium state.” This „endgame status“ will make the DAO resilient to external risks and regulatory pressures. It aims to scale the DAI dollar in a decentralized way.

Currently, this is still a contradiction. If the DAI dollar is secured by native, decentralized tokens, such as Ether (ETH), a significant over-collateralization is required due to high volatility. To create one DAI dollar, you need to deposit ETH worth 1.5 dollars or more. This hampers scaling. It works better with other stablecoins like USDC. But since these have a central issuer, they bring potential regulatory pressure.

The endgame state aims to combine both characteristics. A „globally spanning world currency,“ MakerDAO, is envisioned to make the dollar more „bitcoin-like.“

Part of this endgame plan is to create a collateral portfolio that includes genuinely decentralized assets such as Ethereum, including its „Liquid Staking Tokens (LST),“ as well as Real World Assets, referring to both Treasury bonds and stablecoins that provide liquidity and stability. In the long term, the strict peg to the dollar is to be abandoned, and a hard limit for Real World Assets is to be set.

Nevertheless, Real World Assets play an important role, and the exciting prospect is that the DAI dollar could eventually become a decentralized basket of global assets, somewhat like the International Monetary Fund’s Special Drawing Rights.

BUIDL – BlackRock’s tokenized bonds

One of these „Real World Assets“ is BlackRock’s BUIDL: tokenized U.S. Treasury bonds on the Ethereum blockchain. However, they are not freely circulating but are offered only to institutional clients. They are not intended for end consumers but for other financial institutions.

Currently, BUIDL has tokenized treasury bonds worth over 500 million dollars. One of the drivers of demand is Ondo Finance, which issues, among other things, a sort of collective token for tokenized treasury bonds – but only for qualified investors.

„Real World Assets“ are slowly but surely reaching blockchains and DeFi. It is challenging to reconcile them with the open principle of DeFi markets, which will probably be the last step. Initially, they serve as the basis for further financial products. Although it sounds tedious, this could be a crucial beginning to bringing the global financial system onchain.

And this will be the foundation to replace significant international institutions with decentralized DAOs – which, if we are realistic, is the only plausible, desirable future.