Coinbase releases governance proposal that could increase MakerDAOs revenue by $24 million

Quick Take

  • Coinbase released a proposal that would transfer 33%, equating to $1.6 billion, of Maker’s Peg Stability Module (PSM) into a Coinbase Prime custody account.
  • If passed, this would increase MakerDAO’s revenues by $24 million.

Coinbase released a proposal today on MakerDAO’s governance forum that would transfer 33%, equating to $1.6 billion, of Maker's Peg Stability Module (PSM) into a Coinbase Prime custody account, increasing Maker’s revenue by roughly $24 million.

If passed, the proposal would pay Maker 1.5% annual percentage yield on $528 million USDC.

Maker’s PSM was designed to hard-peg the price of DAI to $1 and launched after the protocol saw the peg go above $1 during the Covid crash in 2020. This was due to increased demand to pay off loan liquidations caused by ETH dropping more than 40% during the crash.

Although PSM has been effective in maintaining DAI’s peg, one of the main issues adcv, a pseudonym used by a member of Maker’s strategic finance core unit, identified on the forum is Maker’s ability to invest its balance sheet correctly.

Maker’s current PSM asset allocation is “highly underinvested,” which “reduces the protocol’s ability to take risk and its attractiveness as a stablecoin,” adcv wrote.

If the proposal passes, Maker will pay zero custody fees on its PSM allocation to Coinbase and be able to freely mint, burn, withdraw and settle its allocated USDC almost instantaneously through Coinbase Prime.

This proposal is a strategic move that will generate revenue on idle assets within Maker DAO’s balance sheet.

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Correction: This story has been corrected to clarify that 33% of Maker's Peg Stability Module is worth $1.6 billion.


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About Author

Mike is a reporter on the crypto ecosystems team who specializes in zero-knowledge proofs and applications. Prior to joining The Block, Mike worked with Circle, Blocknative, and various DeFi protocols on growth and strategy.