The MakerDAO community has approved a proposal to deploy around $100 million worth of USDC into Yearn Finance.
The decision to deposit the funds on Yearn Finance will allow MakerDAO to earn an annual yield of around 2% on the stablecoin deposits.
MakerDAO To Deposit $100 Million On Yearn
Decentralized finance (DeFi) protocol MakerDAO’s community has approved a proposal to deploy $100 million in USD Coin (USDC) on the DeFi protocol Yearn Finance. The funds will be deposited in a special investment account called a “vault,” which is managed by Yearn Finance. The vault’s ceiling will be set at $100 million and will allow MakerDAO to earn a yield of around 2% per year, totaling around $2 million on an annual basis.
“Maker Governance voted to deploy 100 million USDC from the PSM into a bespoke @iearnfinance on-chain vault.”
Strong Support For Proposal
The proposal to deposit the funds on Yearn was submitted in November 2022 and has found strong support within the Maker community. Around 72% of members voted in favor of the plan. The final implementation and the transfer of funds will require a further “executive vote,” according to the information shared by MakerDAO.
Talk of a partnership between MakerDAO and Yearn Finance was first suggested by Yearn Finance in November 2022. However, the partnership still requires a final approval through an executive vote. The executive vote is the final step in the MakerDAO governance process and is primarily used when implementing a technical change to the Maker Protocol.
In Line With Long Term Vision
MakerDAO’s move to deposit funds on Yearn Finance is in line with the protocol’s vision of earning a steady revenue stream by the allocation of a part of its reserve assets to several yield-generating strategies such as investing in US government bonds and partnering with cryptocurrency exchange Coinbase. Under the partnership with Coinbase, Coinbase proposed that MakerDAO deposit around $1.6 billion worth of USD Coin (USDC) on the platform, allowing the latter to earn an annual yield of 1.5% per year.
MakerDAO has also allocated USDC on a number of other decentralized finance platforms, including Idle Finance, Aave, and Compound. Additionally, DAI stablecoin holders have also received an annual reward of 1% since last month. MakerDAO is a platform managed by a decentralized autonomous organization (DAO), with holders of the MKR token being able to vote on governance proposals.
The move to deposit USDC on Yearn could also improve the protocol’s dwindling user activity. Yearn Finance’s total value locked (TVL) is currently at around $442 million. This is a small fraction compared to the protocol’s all-time high TVL of $6.9 billion, which was reached in December 2021, according to data sourced from DeFiLlama. The total value locked is an indicator of the worth of the assets deployed on a protocol.
An Active Community
The MakerDAO community has been quite active when it comes to governance proposals and recently voted on two important proposals related to Alameda Research and Gemini’s GUSD stablecoin. In November 2022, the protocol announced that the community had voted on and passed a governance vote to remove the Alameda Research-linked RenBTC from its collateral vaults. The move was made to reduce the exposure to what the DAO deemed a risky asset following the collapse of FTX and Alameda Research.
The MakerDAO community is also debating about keeping Gemini’s GUSD stablecoin as part of the reserves. The vote comes amidst growing concerns about a liquidity crisis that has impacted Gemini’s Earn program. Maker and Gemini had announced a partnership in September 2022, which allows Maker to earn 1.5% whenever the GUSD in Makers Peg Stability Module (PSM) goes above $100 million.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.