The original decentralized finance (DeFi) protocol started out decentralized and to decentralization it will return.
The Maker Foundation has announced it is turning over operations entirely to its decentralized autonomous organization (DAO), MakerDAO, as founder Rune Christensen has long promised.
“The Foundation will formally dissolve within the next few months,” Christensen wrote in a blog post shared in advance with CoinDesk. No more specific timeline was offered.
MakerDAO has been wildly influential within crypto, especially the Ethereum community.
It has more often than not had the most assets locked in its smart contracts of any other DeFi protocol. Its founders pioneered the DAO structure early on only to formalize into a traditional organizational structure in 2018, which engendered internal tension and division.
MakerDAO is best known as the creator of the DAI stablecoin, but DAI is enabled by a lending system that has allowed many crypto holders to make use of their assets without selling them.
The Maker Foundation is the formal organization that was created to steward the protocol through its early days until holders of the MKR token were ready to take on all aspects of stewarding the project, managing all its teams, making necessary upgrades and promoting its use around the world.
The intent was always to gradually decentralize the home office out of existence.
On Tuesday, Christensen wrote:
"From the earliest days of Maker, everyone involved worked tirelessly to devise a framework for scientific governance and create an infrastructure for a new generation of open financial services that can be used by anyone, anywhere, anytime. We all hoped for success, but knew it would never be guaranteed. We realized that only a very independent, passionate, and committed Maker community could make success a reality in the end."
Looking back
When CoinDesk spoke to Christensen in 2019, he seemed as though he was looking forward to a project he didn’t have to be in charge of any longer. While Christensen has been preparing everyone for this move from the Foundation’s earliest days, it echoes a move by a pioneering non-custodial exchange, ShapeShift, which also put the wheels of decentralization in motion this month, though that came as a surprise to everyone.
The Foundation was set up in 2018 at the behest of its early venture investors. In early 2019, this led to a rift between MKR holders and the organization, particularly in light of what one leaked legal letter described as a forced reconstitution of the foundation’s leadership. A detailed recounting of that transitional period would later be reported out by Bloomberg.
Since then, though, the protocol has generally made strong progress.
In April 2020, Christensen rolled out a plan to reach decentralization, putting more power in the hands of community members and remunerating them for their time.
As noted, it has remained one of the dominant forces in DeFi, found ways to improve itself and decentralized the assets it is able to incorporate as collateral for loans that generate DAI.
The community was tested in early 2020 when a sharp downturn in ETH prices left the overall protocol several million dollars undercollateralized. In a controversial move, it subsequently incorporated the fiat-backed stablecoin from Circle and Coinbase, USDC. MKR holders have subsequently added many more crypto assets to the mix, under the theory that the more assets it can incorporate the less the collapse of prices in any one can threaten the project.
Christensen’s ultimate vision has always been to include real-world assets as collateral.
In March of this year MakerDAO created the Core Units framework, essentially committees that would take the lead in key aspects of running the protocol; that is, they do the work the Foundation once took on. This very much squares with what Christensen described to CoinDesk as “DAO teams” in 2019.
“I look forward to once again being an independent community member and Maker Forum participant,” Christensen wrote.