FRENCH FIRM GAINING LIQUIDITY VIA MAKER DAO
Société Générale, a French multinational investment bank and financial services provider, is using the stablecoin of Maker to gain liquidity on its investment holdings.
As reported by crypto outlet theblock.co, it’s an example of how traditional firms in the financial industry can enlist decentralized finance to open up new sources for borrowing.
Maker (also known as MakerDAO) is a Decentralized Autonomous Organization (DAO) which oversees the issuance and management of the DAI stablecoin. Its widespread community of participant stakeholders has a say on all decisions via a blockchain voting process.
Originally backed by ETH, the dai stablecoin was updated in 2019 to use a basket of on-chain crypto based collaterals, the block.co noted.
The Utility of Banking, With More Equitable Benefits?
Société Générale received approval to launch a Maker vault following a majority vote last year among Maker users.
A vault allows an entity to establish a line of borrowing by using assets for collateral. In Société Générale’s case, they put up 40 million worth of home loan bonds, and can potentially borrow up to 30 million in the dai stablecoin, though they have so far only borrowed 7 million, according to theblock.co.
Maker is an example of how decentralized crypto technology can disperse both rewards and decision-making of an organization in a transparent way.
People can gain voting rights by putting up ETH or other approved crypto collateral in exchange for MKR tokens. DAI stablecoin is then created, based on the value of the collateral.
The mechanism lets anyone borrow money against their ETH holdings if they wish.
Via the MKR token, they also earn fees on DAI borrowed by others, according to DeCrypt.
If the price of ETH (or other accepted collateral cryptos) drops too quickly for the DAI system to handle, MKR is created and sold on the market to raise extra collateral.
MakerDAO has by no means been immune to downturns and crypto crashes. In 2020 the organization altered its protocol in response to a steep downturn.
And in 2022 the DAO again had to act to shore up its financial position during the ongoing “crypto winter.”
The protocol experienced a 74 percent reduction in ETH-based assets, and a drop off of 66 percent in BTC-based assets, and reported its first net income loss since 2020, according to the dailycoin.com.
Their collateral ratio dropped to 1.1 from 1.9 held at the same period in 2021.
In October of 2022, the community agreed to invest $500 million in corporate and U.S. Treasury bonds, which some claimed contradicted the protocol’s aim of maximal decentralization.
Maker remains the largest decentralized financial system with $7.83 billion in total value locked (TVL), dailycoin.com noted, citing info from DefiLlama.
At one point during the dizzying crypto surge of 2021, the MKR token reached 6,339 dollars in value. It’s currently trading in the 650 dollar range.
But the widespread and transparent governance of Maker continues to provide an example of how crypto tech can share risks and rewards in good economic times and bad, while surviving, and at least sometimes, prospering.
DID A DAMAGING COURT DECISION IN THE CASE OF LBRY SET A PRECEDENT?
If U.S. Courts and the SEC insist on trying to hammer innovative crypto technologies into regulatory frameworks that don’t fit or accurately account for what the technology is doing, then the U.S. will lose.
The innovation won’t go away. It will just go elsewhere. And the efficiencies and advances will benefit other regions.
A lone judge, Paul Barbadoro of the New Hampshire District Court, effectively ended LBRY as a company when he ruled in favor of an SEC contention that LBRY’s crypto token constituted a security.
In fact, the LBRY token isn’t merely an investment contract, by any traditional understanding. It incentivises a blockchain network built to offer a decentralized video and social media content sharing alternative to sites like YouTube and Facebook.
If the New Hampshire District Court ruling becomes a precedent, carnage could spread throughout the crypto sector.
A Bloomberg Law article quoted James Gatto, of Sheppard Mullin Richter & Hampton LLP, saying that many of the legal issues involved in the LBRY case could end up being used against other crypto companies.
Gatto said crypto firms needed to adjust and change their practices.
At least one legal expert told Bloomberg that the LBRY company giving its token as a “compensation incentive” to workers arguably showed potential investors that the company intended to increase the token’s value, positioning it as a security investment.
What is LBRY?
LBRY notes on its website that it was built as an enabling decentralized, censorship-resistant network protocol, not a platform, using open-source software.
“In LBRY, the same mechanism [similar to bitcoin] is used to store an index of what content is available and how to download it, as well as financial transactions (such as tips, and purchases of paid content) using the Bitcoin-like currency LBC (LBRY Credits). When a creator publishes something on LBRY, an entry is made on the LBRY blockchain. You can think of it as an announcement: hey everyone, I’ve published this file, here’s some information about it, and instructions for how to download it from the peer-to-peer network.
“For the same reasons that nobody can prevent a Bitcoin transaction from taking place, nobody can prevent a transaction (like a publication or a tip) from appearing on the LBRY blockchain. Other sites exist that share their content from a peer-to-peer data network. However, the index of available content is still centralized and can be easily censored.”
At least the censorship aspect of LBRY has remained true.
Despite the judge’s ruling sanctioning the company behind the protocol, the LBRY blockchain remains in use.
“LBRY is a decentralized protocol used by tens of millions of people to share content without any disruptions despite the legal challenges,” Jeremy Kauffman said recently to CoinTelegraph. “LBRY as a company is almost certainly dead. But Odysee, the most popular way to use LBRY, and the protocol itself, have a bright future.”