MakerDAO’s Revenue Could Increase By $24M Following A Proposal From Coinbase

Coinbase, the biggest crypto exchange in the United States, has published a proposal on MakerDAO’s governance forum which will transfer 33% of Maker’s $1.6 billion Peg Stability Module (PSM) into a Coinbase Prime custody account.

According to a Wednesday report by The Block, the proposal could increase the revenue of MakerDAO by around $24 million. This is because the proposal would pay the DeFi platform an annual percentage yield of 1.5% on $528 million USDC.

MakerDAO is a decentralized autonomous organization that is responsible for the generation of DAI, a stablecoin cryptocurrency on the Ethereum blockchain.

The Peg Stability Module (PSM) was introduced during the Covid crypto market crash in 2020 to retain the peg of MakerDAO’s stablecoin DAI to $1 in a 1:1 ratio after the DAI price surged past the $1 mark due to a surge in demand to repay the loan liquidations triggered by Ether’s 40% price crash at that time.

“Users of PSM don’t retain ownership of the asset and borrow DAI, instead they swap the asset directly for DAI,” MakerDAO explained.

PSM has been widely successful in retaining the peg of DAI to $1 but as noted by adcv, a pseudonym used by a member of MakerDAO’s strategic finance core unit, a major issue with the DAO is its “inability to invest our balance sheet correctly.”

Advc further said that the current PSM asset allocation is “highly underinvested,” adding that this “reduces the protocol’s ability to take risk and its attractiveness as a stablecoin.”

Interestingly, as The Block pointed out, the proposal, if passed, will allow MakerDAO to pay zero fees for its PSM allocation to Coinbase and as a result, the protocol will be able to mint, burn, withdraw and settle its allocated USDC with the help of Coinbase Prime in an instant.

Coinbase Prime is a service provided by the crypto exchange which includes its custody as well as trading services.