Opinion: DAI at risk from centralised stablecoins as collateral

The stablecoin DAI is 40% collateralised by centralised assets — USDC, WBTC, TUSD and PAX, according to observations by The Block.

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In addition to Ethereum, the assets backing DAI include:

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• USDC — the stablecoin from the Centre consortium, which includes Circle and Coinbase;

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• The Bitcoin-backed token WBTC, backed by crypto custodian BitGo;

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• Stablecoins TUSD from TrustToken and PAX from Paxos Standard.

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These four centralised assets account for 39.27% of DAI’s collateral.

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Source: The Block.

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Some experts believe that such a collateral structure for DAI carries centralisation risks.

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\”How long would it take to liquidate these 40% by court order, if there were weighty grounds (financing terrorism/climate-change research or any other reason Uncle Sam dislikes)?\” asks HOPR founder Sebastian Bürgel.

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MakerDAO — the protocol that allows users to generate DAI — a synthetic stablecoin, initially backed only by Ethereum (ETH).

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In November 2019, MakerDAO introduced a multisignature version of DAI. This step opened the possibility of using a range of crypto assets as collateral for the stablecoin.

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DAI ranks third in its segment after Tether and USD Coin by market share. Its capitalization approaches $1 billion.

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Data: Messari.

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The total market capitalization of the stablecoin segment currently exceeds $20 billion.

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Data: Messari.

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In this segment, USDT from Tether leads by a wide margin. Its share among all stablecoins exceeds 75%.

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The foundation of DeFi and fuel for Ponzi schemes: how stablecoins affect the cryptocurrency market

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In March this year, Maker Foundation members approved USDC as collateral.

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