Anyone can make a smart contract. But making a decentralized application that can stand the test of time is another matter entirely. It’s this latter challenge that the makers of MakerDao are looking to help solve with its new layer 2 solution, StarkNet.
Stablecoin protocol StarkNet has announced the integration of Ethereum’s “blue chip” stablecoin protocol with another scaling solution based on rollups.
- StarkNet, the Ethereum Layer 2 network, has been integrated with MakerDAO in phases.
- A DAI bridge will be built between Ethereum and StarkNet during the first of four phases. It will begin operating on April 28.
- MakerDAO plans to fully integrate with StarkNet by the beginning of 2023.
MakerDAO, the company behind DAI, the second largest decentralized stablecoin in the market, has announced that it will integrate with StarkNet, the Ethereum Layer 2 network, as part of its long-term multi-chain expansion strategy.
MakerDAO’s Expansion Strategy
Ethereum’s Layer 2 network MakerDAO is expanding to another network.
In announcing its plans to expand to the Ethereum Layer 2 network StarkNet, Ethereum DeFi protocol, which created the decentralized stablecoin DAI, has revealed its plans to create its own protocol for Ethereum. Four phases of integration will take place, beginning with a simple bridge between the two networks scheduled to go live on April 28. During the second phase in 2022, users will be able to quickly withdraw from Layer 2 to Layer 1.
Later, users will be able to upgrade to a “teleportation” feature to traverse Layer 2 networks with DAI. Last but not least, the fourth phase will feature a full-scale integration of MakerDAO on StarkNet by late 2022 or early 2023.
Developed byStarkWare, an Israeli crypto startup valued at $6 billion, StarkNet is an Ethereum layer 2 scaling solution. Zero-Knowledge Rollups increase Ethereum’s scalability by several orders of magnitude while benefiting from the base chain’s security.
Users will be able to transact with DAI on the overlay network, a faster transaction time and cheaper costs, thanks to MakerDAO’s integration with StarkNet.
From the perspective of StarkWare, StarkNet should offer 100 to 200 times lower fees than Ethereum.
Vitalik Buterin, the number two blockchain’s inventor, has previously estimated that the StarkNet rollup could help the network achieve 100,000 transactions per second, a significant increase from the 15 transactions per second that the network currently processes.
As a multi-chain stablecoin, DAI should be able to be moved between Layer 2 networks and back to Ethereum mainnet at high speeds and low costs with the second and third implementations of this integration.
Users will be able to mint DAI natively on the StarkNet network by the first quarter of 2023 once the fourth phase of implementation is complete.
DAI should be ten times cheaper to borrow or mint than Ethereum, giving it a better chance at becoming an ecosystem favorite stablecoin.
A year ago, MakerDAO, which integrated the Ethereum Layer 2 solutions Arbitrum and Optimism, was criticized by the crypto community and rival stablecoin projects due to its alleged centralization issues and refusal to expand to other ecosystems.
According to Dai Stats, roughly half of DAI’s collateral consists of USDC. This is the source of much criticism.
Terra’s cofounder, Do Kwon, announced a new, highly-incentivized liquidity pool for UST on the largest decentralized exchange, Curve Finance, to end DAI. Kwon hopes that Terra’s UST will flourish with the help of the new pool, called “4pool.”
Because of capital efficiency and more widespread adoption of multi-chains, UST has doubled in size to DAI. This has increased the pressure on MakerDAO to innovate and compete.
MKR, MakerDAO’s governance token, is currently trading around the $1,850 mark, 1.5% higher on the day and 70% down from its all-time high price of $6,292. Ethereum DeFi users will likely welcome the MakerDAO news, but the news of the forthcoming StarkNet integration failed to move the needle in MakerDAO’s governance token, which is trading at around $1,850, nearly 70% down from its all-time high price of $6,292.
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