The self-rescue path of established DeFi projects: An analysis of the MakerDAO Endgame transformation plan

Author: Fu Ruhe, Odaily Planet Daily

Recently, MakerDAO announced the launch of new tokens NewStable and NewGovToken. Among them, MKR holders will be able to upgrade their tokens to the new governance token (NewGovToken, with an exchange ratio of 1:24000), which is the new governance token within the ecosystem, while the stablecoin Dai (DAI) can be converted into the new stablecoin (NewStable). (Odaily Note: The names of the two tokens have not yet been revealed)

It is not uncommon for established projects to launch new tokens, mostly seeking change and looking for new growth points. However, the impact of such actions by well-known projects like MakerDAO cannot be ignored.

According to the MakerDAO official forum and recent updates, the news of the new tokens was released as early as last year, and the issuance of new tokens is an important part of the first phase of the Endgame transformation plan.

The Endgame transformation plan was approved through governance voting in August 2022, and has been continuously updated and discussed until the recent official announcement of the new tokens to be launched this summer. It is reported that Endgame is a major update for MakerDAO, aimed at improving efficiency, resilience, and participation, with the goal of expanding the supply of Dai to 100 billion or more. A key feature of Endgame is to make the ecosystem more prosperous through sustainable SubDAO token yield mining, where SubDAO is a DAO ecosystem that utilizes MakerDAO's infrastructure while maintaining flexibility and autonomy. There will be a SubDAO suitable for different groups, allowing Dai users to simply choose their preferred SubDAO and start mining the corresponding SubDAO tokens.

Odaily Planet Daily will start with the basic overview of the new tokens to elaborate on the current phase of MakerDAO's Endgame transformation plan.

Step One: Launch New Tokens, Followed by Building a DeFi Ecosystem Centered on SubDAO

A month after the unveiling of MakerDAO's new brand, the new stablecoin (NewStable) and new governance token (NewGovToken) will officially launch, at which point Maker's new ecosystem will operate using the new tokens. Before this, the Dai and MKR tokens will remain unchanged, and users will have the option to upgrade to NewStable and NewGovToken; if they do not upgrade their tokens, they may not be able to participate in the new ecosystem features. The official description states that Dai will focus on crypto-native use cases, while the upgraded NewStable will focus on mass adoption.

NewStable will still operate as a stablecoin, and can be converted with Dai. After its launch, NewStable can be mined for the new governance token NewGovToken (not open to VPN users and users in the U.S.).

NewGovToken can also be converted with the pre-upgrade MKR token. Compared to the limited supply of MKR, the supply of NewGovToken will be expanded, with the disclosed exchange ratio being 1 MKR for 24000 NewGovTokens. This move can lower the price of the governance token, expand the governance scope, and attract more new users to participate in community building, thereby increasing the project's degree of decentralization.

In addition to issuing new tokens, the subsequent Endgame will introduce the Lockstake Engine (LSE) staking protocol, allowing users to stake MKR and NewGovToken in the LSE to mine NewStable and the upcoming SubDAO tokens (including SPK tokens from Spark SubDAO).

It is worth noting that 30% of all protocol surplus income earned by the protocol will be distributed as NewStable rewards to LSE users who choose to receive NewStable earnings. Additionally, the NewGovToken and MKR tokens locked in the LSE will incur a 15% exit fee when unlocking their tokens; this fee will be burned by the protocol and deducted from the initial Lockstake principal. (Odaily Note: The Lockstake Engine is not open to U.S. residents and VPN users)

After the launch of the Lockstake Engine, NewBridge and Spark SubDAO will be introduced successively to achieve the goals of the first phase of the Endgame transformation plan.

Among them, NewBridge will connect NewStable, NewGovToken, and other Maker ecosystem tokens from the Ethereum mainnet to L2 (currently pending). NewBridge will support users in native mining on L2, providing users with low-cost access channels.

Spark is a SubDAO within the MakerDAO ecosystem. Spark operates as an independent community with autonomy and a unique business model. SparkLend is Spark's main product, a lending platform where users can use crypto assets as collateral to generate Dai at predictable interest rates and generate NewStable in the future.

In addition to SparkLend, Spark will also offer some new business capabilities:

• RWA: Spark will utilize the RWA infrastructure established by MakerDAO to deploy funds into real-world assets for yield and improved risk-adjusted returns.
• Perpetual Swap Yield: In addition to RWA, Spark will also earn from the crypto perpetual swap market, providing users with low-risk yield opportunities.

The total supply of Spark tokens SPK is 4 billion, primarily sourced from NewStable users staking on the Ethereum mainnet and (pending) L2. The circulation trend of SPK will be 1 billion tokens in the first two years, followed by halving every two years until the total supply is reached in 10 years.

Spark Governance: Spark has a community governance mechanism controlled by SPK token voting, which will autonomously operate all activities over time within the framework of the Maker SubDAO ecosystem.

According to disclosures from the official governance forum, the Endgame transformation plan will also unfold in three subsequent phases:

• Phase 2: Scale Expansion: After all ecosystem components are launched in the first phase, Phase 2 will expand the scale and application of the ecosystem to grow its size.
• Phase 3: NewChain: Phase 3 will introduce an independent Layer 1, hosting the core token economics and governance mechanisms of Maker Core and SubDAO, and connecting RWA, DeFi, and public chains through the NewBridge system.
• Phase 4: Final Endgame: The final Endgame is the moment when all technical and foundational governance mechanisms are completed. When the final Endgame is activated, all foundational governance mechanisms of Maker Core will be immutable, realizing the ultimate vision of Endgame.

Governance Reform Guides Ecological Prosperity, A New DeFi Ecosystem is About to Emerge

From MakerDAO's Endgame transformation plan, it is not difficult to see that as early as 2022, the MakerDAO community began to "self-rescue" in response to the development bottlenecks in the current DeFi sector. As an established project, MakerDAO understands that stagnation equals "chronic death," and it will eventually be surpassed.

However, the path of transformation chosen by Maker differs from other DeFi projects—previously, dYdX sought development by migrating from Ethereum to Layer 2, and even later building its own dedicated chain, focusing on performance and user volume.

The Endgame transformation plan presents a DeFi ecosystem centered on community governance. On the surface, the Endgame transformation plan aligns with dYdX's development path on the underlying public chain, transitioning from Ethereum to building L1 (MakerDAO has disclosed that it will not shut down functions on Ethereum), but the core is to attract different needs and preferences of users to participate in MakerDAO's governance through different SubDAOs. This will segment different areas within MakerDAO's own ecosystem, allowing the stablecoin Dai or the upgraded NewStable to circulate comprehensively within the ecosystem, thereby enhancing the prosperity of the ecosystem.

According to the disclosed roadmap, the Endgame may take several years to realize. However, in the first phase launching this summer, there will be various mining and yield acquisition channels, and the DeFi ecosystem may welcome a new wave of enthusiasm. Odaily Planet Daily will continue to follow up.