MakerDAO's MCD could tackle future collateral risks for DeFi ecosystem - AMBCrypto
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MakerDAO’s MCD could tackle future collateral risks for DeFi ecosystem

Biraajmaan Tamuly

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Source: Pixabay

Ethereum’s Devcon 5 conference was a successful event, with many important announcements made during the event. One of the most discussed developments was the launch of MakerDao’s Multi-Collateral DAI [MCD], with an official date for the same set for 18 November.

Clayton Roche, Head of DeFi for Mosendo, hosted a panel discussion on the future of MCD with the likes of Rune Christensen of MakerDao, and Kyle Kistner of BZX.

MakerDao’s MCD is aimed at adding new collateral to DAI, other than Ethereum, so that the virtual asset could be collateralized by a stable set of assets, backed by a DAI stablecoin.

Kistner, however, failed to see an upgrade on the current single collateral DAI. He clarified that an MCD would be followed by a number of challenges and risks. The BZX Co-Founder suggested that the Maker Foundation is already working extremely well for the ecosystem,  progress highlighted by the fact that other projects can now be built upon it. Therefore, the addition of an MCD would increase the complexity of the system.

Kistner remained unconvinced by the diversification that will be achieved from the introduction of MCD, adding that it won’t outperform the novel functionality of the current system with DeFi. He said,

“If MCD comes and then it’s like 95% ETH that is still collateralizing DAI and we added all this complexity that I’m wondering, you know, was that worth, after all.”

In response, Christensen claimed that the development of MCD in the space would make the DeFi ecosystem less susceptible to future problems. The Founder of MakerDAO added that it is necessary to think 10 to 20 years ahead of the current functionality with DeFi, in order to reduce overall risk.

Additionally, Christensen reiterated that if the DeFi space continues to scale at its current rate, the existence of a single collateral DAI will not be safe from an economic standpoint in case of a financial crisis.

Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.