MultiCoin News

This VC firm is the the Melvin Capital of Zcash

Article from feb 2020

Coming from the same VC who thinks centralized blockchains can "scale naturally without any extra thought and to worry about higher level problems." Maybe they should run for government instead and put to use their incredible gaslighting skills.

https://twitter.com/KyleSamani/status/1378767300799651841

In today's MultiCoin Capital email newsletter, Tushar Jain made the "biggest problem" comment (full comment below).

Could someone ELI5 this to me?

If demand for DAI increased, wouldn't DAI price rise above $1 providing an aribtrage opportunity / incentive for CDP-creators to create more DAI? That was my understanding but I'm no DAI expert so may I misunderstand the mechanics...

Let’s consider another example: MakerDAO. The single biggest problem in the MakerDAO system is that the supply and demand curves for DAI do not intersect. Or in other words, as demand for DAI increases, there is no organic reason why CDP-creators will create more DAI.

Again, there’s an opportunity for long-term investors to create alpha through crypto-native operations. An investor in MakerDAO can generate DAI by creating CDPs, and then sell the DAI for a stablecoin like GUSD or USDC. By doing this, the investor increases the supply of DAI without taking on the market risk an organic CDP creator would take, and creates additional liquidity on DAI trading pairs, encouraging exchanges to list DAI pairs and liquidity providers to make markets.

A MakerDAO investor can also serve as a ‘Keeper’ – an entity which helps maintain the Dai peg by bidding on collateral being liquidated from insolvent CDPs. This requires significant work which a disinterested 3rd party would not want to do in the early days of the network when the arbitrage opportunities are too small in an absolute dollars basis to justify the investment of not just capital, but effort. The net effect of this is that there’s more DAI available for DAI-based apps and there is more trust in the DAI peg, which further accelerates DAI’s network effect and increases the value of MakerDAO.

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