MakerDAO DAI Deep Dive: A StableCoin Without The Tethered Centralized Party; $2500 MKR Is Possible

MakerDAO DAI Deep Dive: A StableCoin Without The Tethered Centralized Party; $2500 MKR Is Possible

MakerDAO DAI Deep Dive: A StableCoin Without The Tethered Centralized Party; Valuation Model Points to $2500 MKR

 

Executive Summary

 

Stablecoins are a critical cornerstone to solving the volatility issue associated with crypto coins through the use of a separate medium that is not subject to price swings. Stablecoins have the potential for multiple use cases ranging from a constant exchange of value for goods and services to a global currency and the creation of decentralized leverage.

 

Of the three main types of stablecoins (fiat-collateralized, crypto-collateralized and non-collateralized), MakerDAO’s Dai is the first fully functional crypto collateralized stablecoin built on verified smart contracts. This is a new paradigm; as existing stablecoins are subject to the very real risks of centralized third party risk, such as Tether which has been the subject of numerous allegations.

 

MakerDAO’s Dai allows users to create new use cases such as leverage, decentralized credit facilities, and secured lending operations. It can create any kind of derivative business in a trustless environment. The MakerDAO’s system is more transparent than any bank, even the federal reserve, and centralized stablecoin regimes such as Tether.

 

While we are positive on the MKR token, and are confident in the stability of Dai, a bet on viable stablecoins is synonymous with a bet on the entire crypto ecosystem. A viable decentralized stablecoin offers the ability to create truly untouchable crypto communities ranging from payments to decentralized autonomous organizations with no link to centralized third parties.

 

Stablecoin Use Cases

 

At their core, stablecoins solve the volatility problem of existing cryptocurrencies (Bitcoin, Ethereum, EOS). With a volatility profile that can range from 5% to 25%, the use case of cryptocurrencies to purchase goods and services is lackluster. One could pay $5 for a coffee today and have its value could increase 20% or more in less than a day, or worse, an ICO can raise $1B today and its value could decrease by 75% in only a few months.

 

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Recognition:

Thanks to Richard Brown, Dan Zuller, Chris Burniske, Mike Porcaro and Alex Evans for their input with this report.

Disclosures:

Tom Shaughnessy owns ETH and does not currently own MKR or DAI and has never owned either token. Tom Shuaghnessy reserves the right to purchase MKR or DAI in the future. By reading this post you agree to 51percent Crypto Research’s Terms and Conditions. This report is solely informational and is not investment advice. Do not act or make investment decisions based upon this report. 51percent was not compensated by MakerDAO for this report. Our valuation model is strictly informational to better our understanding of cryptoeconomics and should not be relied upon, and is subject to significant and real risks.

  • Additional Disclosures:
  • 51percent is not a FINRA registered broker-dealer or investment adviser and does not provide investment banking services
  • The author did not accept fees, stock or other compensation for preparing this research report. The only fees 51percent earns is through paying subscribers to 51percent, the companies (or entities, since networks or protocols are not all companies) themselves do not compensate 51percent.
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  • Compensation is not received on any basis (fixed or contingent on positive opinions in this report) since 51percent is only compensated by paying subscribers to 51pct.io and not the companies or entities mentioned.
  • The author, Tom Shaughnessy, owns tokens in Ethereum, MakerDAO, 0x Protocol, HYDRO, Civic, Polymath and Gladius. These are subject to change.
  • This report belongs to the author, not any entities mentioned in this report.
  • This report is based on publicly available information about the entities covered, and the authors consider them to be accurate and reliable. 
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  • This report is not investment advice, it is strictly informational. Do not trade or invest in any tokens, companies or entities based upon this information.

Research via 51pct.io

 

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