Maker, the organization that has been issuing so-called stablecoin DAI since December 2017, has decided to introduce the ability to remotely freeze some of its stablecoins. It is incentivizing users to convert DAI into a new stablecoin, USDS, which will grant Maker insiders the ability to remotely freeze coins.
For years, the self-described decentralized autonomous organization (DAO) has described DAI as a “decentralized currency that is not influenced by any entity or factor.” Now, its team has replaced that description at the top of its homepage — still cached at search engines like Google — with the much briefer “A better, smarter currency.”
USDS’ freeze function “is generally expected to follow rule of law from jurisdictions where Maker needs a high level of certainty that the legal system will enforce recourse against real-world asset collateral.”
Maker insiders noted that although the intention is to activate the remote freeze function, the exact timeline for activating it on-chain might be months or even years.
For years, Maker distinguished itself from centralized stablecoin issuers like Tether that openly admit their ability to remotely freeze coins. Despite Tether’s USDT stablecoin existing on blockchains like Ethereum or Solana and generally trading for $1 apiece, Tether executives have the discretion to devalue the backing of particular USDT to $0 no matter where they are circulating in the world.
Read more: Moody’s reports 600 stablecoin depegs in 2023
The end of Maker’s “not influenced by any entity” era has arrived. Although it’s keeping certain DAI tokens circulating that don’t have the ability for a remote freeze function, it’s rebranding DAI entirely and emphasizing its new stablecoin, USDS.
During a phase-out period that is presently underway, Maker will enforce a 1:1 convertibility peg between DAI and USDS. Furthermore, it’s incentivizing users to leave DAI for USDS with a suite of financial rewards at Sky.money, its new application for “native token rewards.”
Maker is also introducing a new governance token, SKY, that’s apparently superior to Maker’s prior governance token, MKR. Founder and leader Rune Christensen assureshis fans that all of these changes will attract vast sums of capital to Maker that will somehow, in his view, match Tether’s reserves within three years.
A better, smarter currency — with a remote freeze button
Crypto veterans immediately criticized Maker for introducing its remote coin freeze capability, claiming it simply allows executives to comply with international banking regulations — anathema to the crypto ethos.
Indeed, Maker backs its stablecoins with many real-world assets, including instruments benefiting from the yield of US treasuries.
— Adam Cochran (adamscochran.eth) (@adamscochran) August 27, 2024The reality is, if you want T-bill yield backing, even by secondary treasury deals, you're going to have a freeze function, and a VPN jurisdiction blocker.
A trade off this industry needs to decide on, because you can't reap the benefits of the US tradfi system without its rule… https://t.co/oeLWJmmuAZ
All of these changes follow Christensen’s occasionally bizarre string of promises to ultimately make DAI a non-stablecoin for the benefit of the world. He has promised to tackle climate change, use AI to govern Maker, abandon Ethereum for Solana’s blockchain, introduce “metaDAOs” or “subDAOs,” and abandon seven years of DAI’s $1 peg entirely for a free-floating exchange rate.
As a waypoint along this circuitous path toward whatever future Maker is heading toward, Christensen is putting financial incentives on USDS to encourage DAI holders to convert to USDS — with its remote coin freeze ability — and SKY.
Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.
