MakerDAO, a prominent decentralized finance (DeFi) protocol, is undergoing a significant transformation as part of its strategic ‘endgame’ plan. This week, MakerDAO unveiled two new tokens, NewStable (NST) and NewGovToken (NGT), which represent advanced versions of its existing ecosystem tokens, DAI and MKR. This initiative aims to modernize the MakerDAO ecosystem, enhance governance, and improve the protocol’s stability.
Evolution of MakerDAO Tokens
DAI, a stablecoin launched in 2017, is the third-largest stablecoin by market capitalization, valued at $5.365 billion as reported by CoinMarketCap. DAI maintains its value stability by being backed by collateral locked in smart contracts known as Vaults, ensuring it remains independent of centralized control. On the other hand, MKR facilitates decentralized governance and acts as a safety net, ensuring the system’s stability and handling instances of bad debt or insolvency.
The introduction of NewStable (NST) aims to refine DAI’s stability features. The new stablecoin will be pegged to the U.S. dollar and will offer enhanced stability and support for real-world assets, which MakerDAO hopes will attract institutional users. DAI holders will have the opportunity to transition to NST on a 1:1 basis, allowing for a seamless upgrade.
NewGovToken (NGT) is designed to enhance the governance aspect of MakerDAO. Replacing MKR, NGT introduces improved incentives for governance participation. MKR holders will be able to exchange their tokens at a ratio of 1 MKR to 24,000 NGT, broadening user engagement in governance processes.
The Endgame Plan
The ‘Endgame’ plan, initially proposed in May 2022 and approved in August 2022, outlines a three-phase roadmap for transforming MakerDAO’s ecosystem. In March 2024, MakerDAO Founder Rune Christensen provided a major update on this transformation. The latest announcement confirms that both DAI and the new tokens, NST and NGT, will coexist unless future governance decisions dictate otherwise.
The ecosystem aims to differentiate the use cases of DAI and NewStable, with DAI focusing on crypto-native applications and NewStable targeting broader adoption. Conversion between the old and new tokens will be optional, and users can revert to the original tokens if desired. However, the specific rollout date for NST and NGT has not yet been disclosed.
Market Impact on MKR
MKR, MakerDAO’s governance token, experienced significant volatility in early August due to the global market crash. The token’s price dropped sharply from $2,773 on August 1 to $1,724 by August 5, marking its largest 4-day decline since early April. Despite a recent recovery, MKR remains fluctuating between $1,870 and $2,170, with potential resistance observed at $2,185.The introduction of NST and NGT represents a strategic move to bolster MakerDAO’s position in the DeFi space, potentially enhancing stability and governance while attracting broader user engagement. As the DeFi landscape evolves, these changes may set new standards for decentralized finance protocols.
August 2024, Cryptoniteuae