MakerDAO launches fast DAI transfers and tightens checks on vaults

DeFi lender unaffected by FTX but taking steps to ward off potential contagion

MakerDAO, the #1 DeFi platform with over $8 billion in total value locked, now allows users to transfer its DAI stablecoin between Ethereum’s mainnet and Layer 2 networks, the protocol announced on Wednesday. .

Dubbed Maker Teleport, the service supports Tier 2 arbitrage and optimism, allowing near-instantaneous transfers between the two chains and fast withdrawals to the Ethereum mainnet.

Connected entity

MakerDAO is a collateralized debt protocol allowing users to mint DAI against collateral assets such as ETH, WBTC, and USDC. DAI is the fourth largest stablecoin with a capitalization of over $5 billion,

In response to the failure of FTX, the No. 2 cryptocurrency exchange in the world, the project said that MakerDAO, Maker Protocol and DAI are in no way affected by the financial problems triggered by FTX, Alameda Research or any other connected exchange. entity.”

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Still, Maker has taken steps to protect its platform from FTX damage. On November 16, he reduced debt caps for some of its vaults, which contain tokens that may be vulnerable to contagion. They include the MATIC, LINK, YFI, and MANA vaults, and Maker also reduces its RENBTC vault to zero.

“These parameter changes were executed for the sole purpose of protecting DAI holders and the financial health of the Maker Protocol from uncertainty surrounding the financial stability and liquidity of the affected assets,” Maker tweeted.

Transaction fees

As for its new feature, Maker addresses a quirk in the Layer 2 proposal. Both Arbitrum and Optimism are optimistic cumulative networks. Rollups aggregate transactions executed on Layer 2 and submit them in batches for validation on Ethereum’s base layer to reduce transaction fees.

However, cross-chain transfers from an optimistic rollup require a seven-day verification for fraudulent transactions and validators have submitted inaccurate transactions at the risk of losing important collateral, according to the Ethereum Foundation.

Lack of usability

Maker describes the delay in performing the transfer as a significant “usability shortcoming” for optimistic rollups. “Teleport solves this problem…by avoiding having to withdraw tokens to Layer 1 before connecting to another Layer 2 network,” MakerDAO said in its announcement.

MakerDAO is also offering a 10,000 DAI grant to any builder who can develop a user interface for its teleport feature.

Arbitrum is Ethereum’s layer 2 network, with 52% of the industry’s $4.4 billion TVL, according to L2beat. Optimism ranks second with $1.3 billion.

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MakerDAO officially began developing a multi-chain strategy in the second quarter of 2021. While MakerDAO regained the title of largest DeFi protocol from TVL amid the 2022 downtrend, it was overtaken by Aave and Curve during the 2021 bull cycle – both of which have numerous multi-chain rollouts.

On the MakerDAO governance forum, Derek, a CPU enabler, wrote that Maker could find itself chasing value from Ethereum if the majority of DeFi transactions start taking place on Layer 2.

Settlement layer

“Maker protocol needs collateral to hit DAI. If more and more collateral is transferred to other chains, Ethereum could eventually become a global settlement layer for these chains/rollups while most real DeFi transactions will occur on L2s. Derek says.

Derek also highlighted the benefits of Maker leveraging its own deck when expanding across multiple channels. Relying on multiple third-party bridges would fragment DAI’s liquidity by creating wrapped versions of a token that are not fungible with each other, he warned.

“Many versions of DAI create confusion in the community, especially among retail users,” Derek said. “The ideal solution would aim to make the bridged DAI and the minted DAI fully fungible, so that for the end user it is the same DAI. This is ultimately only possible if MakerDAO controls the bridge used to transfer DAI to other channels/rollups.