MIR-39┃Add MKR as paUSD collateral on Ethereum

Summary:

This proposal aims to add MKR as paUSD collateral on Ethereum.

Rationale:

MKR is the governance token of the Maker DAO ecosystem. MKR token holders govern the Maker Protocol, the smart contracts that power DAI.

The Maker Protocol, also known as the Multi-Collateral Dai (MCD) system, allows users to generate Dai by leveraging collateral assets approved by “Maker Governance.” The MKR token—the governance token of the Maker Protocol—allows those who hold it to vote on changes to the Maker Protocol.

In addition to its role in Maker Governance, the MKR token has a complementary role as the recapitalization resource of the Maker Protocol. If the system debt exceeds the surplus, the MKR token supply may increase through a Debt Auction (see above) to recapitalize the system. This risk inclines MKR holders to align and responsibly govern the Maker ecosystem to avoid excessive risk-taking.

Here is the documentation / whitepaper about MakerDAO.

Project Presentation:

Protocol name : MakerDAO

Token requested : MKR

Token contract address : 0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2

Audit(s) links : https://security.makerdao.com/audit-reports

Chain requested : Ethereum

Relation with the project : none.

Website: https://makerdao.com/

Github: https://github.com/makerdao

Twitter: https://twitter.com/MakerDAO

Discord: https://chat.makerdao.com/

Token metrics & Risk assessment:

• Smart Contract risk: A-

The MakerDAO operates as a fully decentralized organization and has been audited by Trail of Bits, PeckShield and Runtime Verification. There is no admin mint function in the Token smart contract, so the team can’t mint token. There are currently 98k holders on Ethereum.

• Counterparty risk: B+

Maker DAO has over $7.45B in TVL and is ranked second on Defi Llama TVL rankings. The Maker Protocol is only deployed on the Ethereum network. There are currently 2,1M transactions on Ethereum.

• Market Risk: B-

MKR has a market capitalization of approximately $1,8B. The Total Value Locked (TVL) in MakerDAO is about $6.09 billion., and "The combined average daily trading volume, encompassing both CeFi and DeFi, amounted to $50M. We consider the market capitalization to be justifiable for listing purposes. Although the relatively modest trading volumes indicate a lack of liquidity in the markets, totaling around $60M, this issue can be mitigated through the implementation of supply caps, debt ceilings, and borrowing limits.

• Chain Risk : A

Ethereum had 0 outages over the last 6 months. (https://etherscan.com/chart/blocks)

• Liquidity Risk of paUSD on Ethereum: C-

The paUSD/wUSK/USDC pool on Balancer has $245k liquidity composed of 17,8% USDC, 27,67% wUSK and 54,53% paUSD. The paUSD/wUSK pool Uniswap (Bunni) has $17k liquidity.

This provides the following price impact on the following trade sizes:

1000 USDC → paUSD: 0.12%

10000 USDC → paUSD: 0.29%

25000 USDC → paUSD: 0.48%

50000 USDC → paUSD: 0.68%

• Overall Risk : B+

The Overall Risk is the average of the points mentioned above.

Means:

• Human resources: Multisig DAO signers will need to sign and execute transactions to add MKR as paUSD collateral on Ethereum.

• Treasury resources: There is no cost for the treasury to add MKR on Ethereum.

Technical implementation:

1. Set the chainlink oracle related to the MKR: MKR/USD into PriceFeed Contract
2. Add MKR in the ConfigProvider Contract with all parameters decided by the Parallel governance.

Voting options:

• Add MKR as paUSD collateral on Ethereum
• Against MKR as paUSD collateral on Ethereum
• Abstain

Authors: @starny & @Jeanbrasse from MimoLabs