MakerDAO is upgrading its Maker (MKR) protocol, wherein Multi-Collateral DAI (MCD) will be implemented. However, the upgrade transition might not go as smoothly as expected.
More Assets to Create DAI
MakerDAO’s MCD has been proposed to add new assets eligible as collateral for DAI – the system’s dollar-pegged stablecoin. Until now, only Ether (ETH) was being used to issue that stablecoin, with the MCD upgrade Maker (MKR) holders being able to deposit other cryptoassets as collateral.
The governance community is yet to decide which assets will be added, with options between Augur (REP), Basic Attention Token (BAT), DigixDAO (DGD), Golem (GNT), OmiseGO (OMG) and 0x (ZRX).
Recently, DAI hit its debt ceiling of 100 million. While this represents a major milestone and confirms the demand for a decentralized stablecoin, DAI’s current supply of $100M is still lagging behind other stablecoins on the market. In particular, stablecoins like Tether (USDT) leads the market with $4.1 billion with other competitors like Coinbase’s US Dollar Coin (USDC) at $440 million.
With the introduction of MCD, the team behind Maker expects DAI supply to grow at an exponential rate over the course of the next few years with the introduction of new assets. However, the single-collateralized positions with Ether will still be available as an option.
From DAI to SAI
Since it is expected that everyone will be moving to multi-collateral positions, the upgrade will see the current DAI ticker change to SAI, whereas the multi-asset backed currency will be the new DAI.
Maker chose to replace DAI’s name with SAI to emphasize that it is the single-collateralized version of the product.
While this decision will see DAI’s established reputation transition to the new product, it will create confusion. Established exchanges and wallet providers have pledged their support for the upcoming upgrade, however, there might still be services that will be left behind.
Why is nobody criticising Maker for this mess?
Someone finally did and it got deleted. 🧐 https://t.co/jFOkq9jHHv
— Ivo Georgiev (@Ivshti) November 14, 2019
Especially in the cryptocurrency industry, which is decentralized by design, the ‘old’ DAI sitting on wallets and services that didn’t upgrade will create potential conflicts, for example in data feeds. Even more so that Maker’s decentralized stablecoin DAI is at the heart of the decentralized finance (DeFi) system built on top of Ethereum.
The introduction of the multi-asset collateral has already had a controversial start, with a portion of the community highlighting the risks of using other less-established cryptoassets as collateral. Now, with the upgrade scheduled for Nov 18, it remains to be seen whether the transition will be smooth and users don’t end up mixing their DAIs and SAIs.
Images courtesy of Twitter, Shutterstock.
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