For the first time since 2020, MakeDAO has crashed in its quarterly net income. The DAO is an autonomous community that controls the Maker Protocol. The project is based on the Ethereum blockchain and supports the lending and lending of crypto assets without any third parties.
MakerDAO has seen a huge drop in its revenue for the third quarter of 2022. The decline in its earnings is linked to a decline in credit demand and some liquidations. However, despite the pathetic situation, the community has high expenses within the quarter under review.
A Messari analyst and co-author of ‘The State of Maker Q3 2022’, johnny_tvl, informed about the situation. In his tweet, the analyst noted that The DAO experienced a revenue decline of over $4 million in Q3.
In addition, he said that the value has dropped by 86% since the second quarter. One such revenue loss to MakerDAO is recorded in the community report in the first quarter of 2020.
Possible reasons for the fall in revenue
According to analysts, some liquidation in the system has led to the fall in revenues. Also, he said weak credit demand is a contributing factor.
The research analyst highlighted Ether and Wrapped BTC as the biggest earners of the protocol. However, he said he did poorly in the third quarter. While BTC-based assets declined 66%, ether-based assets declined 74%.
Typically, lenders provide other crypto assets as collateral for DAI loans. However, the analyst noted a decline in MakerDAO’s collateral ratio from 1.9 to 1.1 within the same period last year.
Also, expenses are considered within the quarter, which are not flexible. The report indicated higher costs in Q3, a decline of only 16% from the previous quarter to reach $13.5 million.
Stepped Growth and Expansion for MakerDAO
MakerDAO is taking some steps towards the development and continued stability of the Maker protocol. First, the DAO focused on Real World Asset (RWA) backed loans. Following its goals, it launched its largest ever RWA-backed loan to Huntingdon Valley Bank (HVB) in the third quarter of 2022.
Cooperation with HVB is a win-win for both parties. The bank leverages loans to increase its legal lending limit to create opportunities for greater expansion. MakerDAO believes that more banks will follow once its partnership with HVB goes smoothly.
Currently, RWA-backed loans represent up to 12% of Maker Protocol’s total revenue. The loan involves the creation of a vault with 100 million DAI tokens and a new collateral type added to the protocol. In addition, it can generate additional revenue through vault maintenance and vault stability fees from DAI mining.
Additionally, the DAO has taken steps to improve its return on assets held as collateral. For example, it attracted an investment offer of about $500 million in treasuries and bonds. The aim is to ensure that the protocol has an additional yield associated with a lower risk.
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