MKR Voters To Support A Staking Mechanism Proposal by Monetsupply Aimed At Reducing MakerDao’s Tokenomics Disparity

2 min read

makerdao mkr explained founders

The MakerDAO ecosystem is in the midst of a transition to a Staked-Based Reputation System. The MakerDAO community is currently brainstorming solutions to remedy the tokenomics disparity and mitigate the risk of negative collateral effects. One of the proposals being considered is the introduction of a staking mechanism.

Utility does not always translate into value.

Holders of MakerDAO’s MKR token have learned this hard lesson over the past year. Even though DAI, the protocol’s stablecoin, has increased by a multiple of 3.5 times, MKR has dropped 11% in the last 12 months. 

The Maker’s forums have been buzzing with a new proposal aimed at reducing this disparity. MKR’s price may not rise directly as a result of monetsupply’s proposal, but its tokenomics may be disrupted, according to the proposal’s author.

MKR’s Growth

In general, the proposed change involves adding a staking mechanism for MKR tokens. When a user stakes MKR, they will receive stkMKR, a token that will accrue fees in the form of additional MKR. The proposed mechanism change for Maker.

These fees will be charged by Maker’s DAI, which users must pay back as interest. These are normally used to buy back MKR on the open market and burn it, thereby reducing token supply and theoretically increasing its price. The new proposal will return some of that bought-back MKR to holders of stkMKR instead. 

It is not explicitly said that the proposed mechanic will increase the price of MKR, but a member of the Risk Core Unit believes the changes will change how the token is perceived.

In monetsupply’s proposal, he wrote: “While in my opinion tokenomics should not focus on price impacts, I think positive narrative shifts benefit the protocol by making MKR issuance for hiring, capital raising, and user incentivization more efficient.” 

According to the author, the changes would allow for an APR to be associated with MKR, which might make people more favorable toward the token. The APR for OlympusDAO practically sold the project.

Price movement of Maker’s MKR token has been somewhat mysterious. The project is widely regarded as DeFi’s oldest and most effective approach to decentralization. Unlike many of DeFi’s “Blue Chips,” Maker has yet to capture the imagination of investors. 

Even if the MKR token only receives a boost in terms of public perception rather than value accrual, the proposed revamp may be enough to give it the boost it needs. In any case, that’s the idea.

Protocol Updates

In addition, Moneysupply identified a couple of other reasons to divert some of the interest the protocol charges towards returning tokens to holders of STKMKR. Members who stake MKR will be able to vote, and the additional fees may encourage greater participation in governance. 

The proposal also introduced the concept of an “unbonding period,” which would require users to wait for a period of time – perhaps 21 days – before they can withdraw their stkMKR and collect their fees. People could be discouraged from buying MKR tokens with the intent of voting on a specific topic, then quickly selling their tokens. 

Although monetsupply’s proposal is still only on Maker’s forums, it has not yet been put up for voting. A similar proposal last year, Maker Improvement Proposal 49, that would have modified MKR’s tokenomics, means that this current attempt is not likely to succeed.

Because monetsupply works for Maker, the anonymous contributor is still a deeply informed member of Maker’s governance. At least one influencer supports the proposal: Fiskantes, the popular crypto personality, tweeted, It “sounds like [a] very based proposal, will support with my micro MKR vote.”

Via this site.

Have A Story? Get Featured On Daiflash Plus 100+ More Exclusive Crypto News Sites