MakerDAO DeFi Protocol Revenue Falls 86%

In the third quarter, revenue at one of the oldest DeFi projects, MakerDAO, collapsed by 86%, according to analysis by Messari.

@MakerDAO third quarter was a painful one for the decentralized lender.

Notables:
— revs fell 86%, collateral ratio down to 1.1
— G-UNI dominating, is this increasing liquidity and on-chain volumes for DAI?
— wBTC reliance on whales/institutions
— RWAs
— Endgame

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— Johnny_TVL (@john_tv_locke) October 13, 2022

An analyst using the pseudonym Johnny_TVL cited a drop in demand for lending and several large liquidations as reasons for the decline. The protocol’s revenue fell to $4 million from $30 million in the prior period.

By contrast, MakerDAO’s expenses proved relatively inelastic and declined by only 16%, the expert noted.

As a result, the project posted its first quarterly loss since 2020.

Revenue from Ethereum-based assets fell 74%, from Bitcoin-based assets 66%, and from others 36%.

Weak loan demand and few liquidations = smol revenue. Revs declined from 30m in Q2 to only $4m in Q3.

Expenses are not so elastic. The protocol had its first net income loss since 2020.

Revenue from ETH-based assets fell 74%, from BTC-based assets 66%, and from others 36%
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— Johnny_TVL (@john_tv_locke) October 13, 2022

The analyst also noted the growth in volumes of the Gelato Uniswap token (G-UNI), representing the DAI/USDC liquidity pool. In his view, this yields little income for the protocol, but it increases dependence on Centre’s stablecoin.

We covered the G-UNI takeover last q. Maker gets almost no value from this while greatly increasing its reliance on $USDC.

It might be having an impact on liquidity and usage of $DAI tho. on-chain transfers increased 57% and 149% the last 2 quarters.https://t.co/qZqdLWQz9a
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— Johnny_TVL (@john_tv_locke) October 13, 2022

However, this boosts liquidity and expands the use of DAI, as on-chain activity in the stablecoin rose 57% and 149% respectively over the last two quarters, according to Johnny_TVL.

In his view, MakerDAO has recently become more dependent on borrowing from whales and institutions. As an example, he cited Alameda Research’s positions.

At the start of the quarter, the firm Sam Bankman-Fried held 63,000 wBTC locked in the protocol. In July, Alameda liquidated 13,000 wBTC (about 20%), and by the end of the period the position stood at less than 15,000 wBTC.

At the same time, the expert noted a turn toward lending against real-world assets. Following a $100 million loan to Huntington Valley Bank, the share of revenue from such positions in the protocol rose to 12%.

RWAs to the rescue? After the successful $100m rollout of HVB this quarter, Maker now gets 12% of its revenues from RWA loans.

The DAO is piloting an investment in US Treasury bonds, with aspirations of making this a $500 million investment.https://t.co/9lJKL8vb6W

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— Johnny_TVL (@john_tv_locke) October 13, 2022

As a positive factor for MakerDAO’s financial resilience, the analyst pointed to the decision to move $500 million in reserves into short-term U.S. Treasuries.

Johnny_TVL also recalled a governance proposal called Endagame by MakerDAO co-founder Rune Christensen. As part of the initiative, he proposed decoupling DAI from the dollar.

In a ForkLog piece, the features and risks of this idea were examined.

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