Decentralized finance (DeFi) lending protocol MakerDAO has partnered with cryptocurrency exchange Coinbase for custody of $1.6 billion USDC. Last Monday (24), Coinbase announced that the MakerDAO governance had voted in favor of the proposal. “Coinbase Institutional Rewards (MIP81)” provides for the custody of stablecoins with Coinbase Prime.
Coinbase Institutional Rewards (MIP81) has been approved by Maker Governance through a Ratification Poll. 🗳 https://t.co/7Hk6gqKTsO This outcome enables Core Units to initiate the onboarding of 33% of the PSM’s USDC to @Coinbase‘s Institutional Rewards program. 🧵↓ 1/ pic.twitter.com/aOMdGev1QG
— Maker (@MakerDAO) October 24, 2022
“Coinbase Institutional Rewards (MIP81) has been approved by Maker Governance via a ratification vote. This result allows the main units to start integrating 33% of the USDC from PSM [Peg Stability Module] to Coinbase’s institutional rewards program,” said MakerDAO on Twitter. The PSM, quoted in the tweet, allows users to exchange one type of collateral for DAI at a fixed rate, rather than borrowing from DAI.
MaketDAO Joins Coinbase Institutional Rewards
As reported by MaketDAO, on September 6, Coinbase Institutional introduced “MIP81”. The proposal aims to integrate PSM’s USDC with Coinbase Prime. Thus, it allows MakerDAO to participate in Coinbase’s Institutional Rewards program. Per the protocol, the program described the following yield schedule for USDC integrated by MakerDAO: 1% APY on the first USD 100 million; and 0.1% more APY on every USDC 100 million thereafter. But the rewards must not exceed 1.5% APY. With approval, MakerDAO will be able to freely mint, burn, withdraw and settle USDC almost instantly (about 6 minutes). And in the future, Coinbase and MakerDAO aim to automate transactions between PSM and Prime account via smart contract or API.
Additional revenue is positive for MakerDAO
According to MakerDAO developer Jennifer Senhaji, the collaboration with Coinbase satisfies the protocol’s desire to invest its collateral in short-term bonds that will generate more rewards for its operation. “The additional monthly revenue generated by this agreement allows Maker to advance even further in its overarching mission of creating a trustless, global financial future built on decentralized rails.” Meanwhile, for Coinbase, the partnership will allow the exchange to maintain its position as the top choice for USDC holders. The proposal in question received 75% of the votes in favour, or 109,944 MKR tokens, on October 24th. Coinbase is confident that stablecoins will be an integral part of the future of finance. Its currency USDC increases its market share at the expense of the popular stablecoin USDT. MakerDAO has now become the largest holder of USDC. However, the move goes against some of the decentralized properties of Maker’s DAI stablecoin as it is now largely backed by a centralized stablecoin.
