DAI-namic Shift: MakerDAO’s stablecoin supply drops 50%, thanks to…

ambcrypto.com:

Due to the decline in the prices of its underlying assets, the total supply of DAI, MakerDAO’s decentralized stablecoin, has since dropped by 50% from its early 2022 peak, data from Delphi Digital revealed. 

— Delphi Digital (@Delphi_Digital) March 10, 2023

This contraction in DAI supply is due to the DeFi protocol’s Collateralized Debt Position (CDP) model. MakerDAO CDP allows users to generate the DAI stablecoin by collateralizing other cryptocurrencies, such as Ethereum.

Users deposit their crypto assets as collateral in a smart contract. In return, they receive DAI, which can be used for transactions or stored as a hedge against market volatility.

Read Maker [MKR] Price Prediction 2023-24

The MakerDAO CDP model maintains DAI stablecoin’s value at $1 through interest rate incentives. The automatic system increases or decreases interest rates to encourage the creation or burning of DAI.

This mechanism effectively manages the decrease in DAI supply due to crypto price drops, keeping it close to its target price.

In addition to a contraction in the supply of DAI, MakerDAO’s revenue from transaction fees has returned to its May 2022 levels. According to data from Maker Burn, the protocol’s fee income (annualized) stood at 47.39 million DAI at press time. 

Source: Maker Burn

On 2 January, the total value of assets locked (TVL) on the leading liquid ETH staking platform Lido Finance [LDO] exceeded that of MakerDAO to displace it as the DeFi protocol with the most TVL. 

Lido’s dominance in the DeFi realm of the crypto ecosystem has grown to 19.65%, according to data from DefiLlama .

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