MakerDAO approved the proposal to transfer 100 million USDC to the Yearn Finance platform

On Monday (January 23), the MakerDAO Community approved a proposal to move $100 million from reserves to the Yearn Finance platform.

MakerDAO approved the proposal to transfer 100 million USDC to the Yearn Finance platform
MakerDAO approved the proposal to transfer 100 million USDC to the Yearn Finance platform

Accordingly, Maker will open a separate and non-custodial Vault on Yearn with a deposit cap of 100 million USDC. This money comes from the Peg Stability Module (PSM) fund, which is a fund set up with the aim of helping stablecoin DAI maintain 1:1 with the USD.

According to the proposal published at the end of November 2022, MakerDAO is expected to earn around 2% annual return from this strategy.

Voting data shows that 72 percent of the votes cast supported the proposal. The tweet from MakerDAO also added that, to ensure the money transfer takes place, the system will have to pass one more “Executive vote” after the recent vote.

The latest strategy on Yearn is part of Maker’s $7 billion reserve allocation plan. Previously, this protocol implemented a yield hunting strategy with the Coinbase exchange, in parallel with the allocations to US government bonds. DAI holders will receive 1% annual interest after these new cash flow steps.

>> See more: MakerDAO Starts Deploying 500 Million DAI into US Bonds

On the Yearn side, this partnership will help the protocol increase the number of active users for the product. The protocol currently has $442 million in assets deposited. This is an extremely deep decrease compared to the peak of $ 6.9 billion in December 2021.

However, in the discussion before the proposal was voted on, the MakerDAO community also listed Yearn’s USDC allocation plans after the money was transferred from MakerDAO side.

Yearn Finance's money allocation plan
Yearn Finance’s money allocation plan

Besides depositing funds into familiar protocols like Aave, Notional or Stargate, the strategy also includes a part of leveraged farming on protocols like Compound or Arrakis Finance.

Another notable detail is that the account of GFX Labs โ€“ which holds about 19.9% โ€‹โ€‹of the votes and is a regular voting account on MakerDAO has chosen โ€œNoโ€ for this proposal.

It can be seen that, although it is a strategy that brings profits for the MakerDAO protocol and real interest for stablecoin DAI, it is still impossible to ignore some of the risks that come from the cash flow and leverage that this strategy creates.

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