In-depth analysis of MakerDAO RWA layout, how DeFi protocols integrate real world assets

Analysis of MakerDAO's use of real world assets in DeFi protocols.

Cryptocurrency researcher RyanCiz.eth explains the reasons why MakerDAO adopts real-world assets, and how DeFi protocols and DAOs use real-world assets to achieve stability, higher yields, and risk diversification.

1) The governance and operation of DAOs are not necessarily more efficient than traditional corporate structures. MakerDAO incurred high costs to establish a legal structure for the trust form in order to achieve “DAO purchase of government bonds.” The cost of purchasing the first 500 million government bonds in January 2023 alone was 2.1 million US dollars, and it was for an ETF that did not even include the 0.07% management fee. The project executor, Monetalis, extracts 0.15% of the total amount each year (only 1.9 million US dollars per year for this project, and the company only has three people). MakerDAO cofounder Rune is one of the investors behind it.

2) Comparatively, it is more efficient for DAOs to purchase RWA tokens that are issued by professional/compliant asset issuers and tokenized on the chain. Centrifuge issues assets, and MakerDAO purchases them in a structure with a one-time cost of 0.4%, which is paid by the borrower. The counterparty risk is the borrower. This structure’s overall cost is much lower than that of a trust structure. Tokens can directly exist in a Safe multisig, and the community can directly supervise them, without the need for a so-called project manager to report to the community.

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3) The first products to emerge on the chain are fixed-income products, which come from treasury management demand. For “companies,” fund management must balance returns, risks, and liquidity, and traditional fixed-income products are the best fit. They have been a good practice in traditional finance for many years.

Reference: https://twitter.com/ryanciz233/status/1679069596375216128

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