Paxos, a stablecoin issuing platform, has recently presented a proposal to MakerDAO (a decentralized finance protocol). The stablecoin issuer has persuaded the DeFi protocol to promote its stablecoin’s use within the ecosystem of MakerDAO.
Along with this, Paxos has also proposed to increase the stablecoin’s ceiling. The stablecoin being discussed is the Pax dollar (USDP). The proposed amount of ceiling for the stablecoin is 1.5 billion USDP.
Paxos Presents a New Proposal to Promote USDP and Increase Its PSM
As mentioned in the proposal, Paxos persuaded MakerDAO to increase the Peg Stability Module (PSM) of USDP on the DeFi protocol’s ecosystem. The present PSM of USDP is $450M on MakerDAO.
Paxos has suggested that this figure should be increased to $1.5B. The PSM is considered the MakerDAO system’s component. It assists in maintaining the price of its stablecoin DAI. The DAI stablecoin is pegged to the United States dollar’s value.
As per the proposal, Paxos would recompense a regular marketing fee. The respective charges would be anchored to the forty-five percent of the Effective Federal Funds Rate (EFFR).
At present, the respective amount is standing at a per-annum 4.3% rate. Paxos would just recompense the fee if the USDP’s debt ceiling touches the $1.5 billion mark or moves beyond it at any time.
The peak threshold of the respective amount would expectedly rise to $2B USDP tokens in 2024, as noted in the proposal. By elevating the debt ceiling of the stablecoin, the complete PSM of USDP would be permitted to provide a revenue of almost $29 million for MakerDAO per year, as mentioned in the proposal.
Apart from creating additional revenue, raising the debt ceiling would assist in decreasing the DAI stablecoin’s exposure to another stablecoin titled USDC.
At present, the DAI stablecoin’s 30% collateralization is credited to USDC. The USDC stablecoin is additionally utilized to create approximately forty percent of the new DAI tokens. Hence, the proposal labeled this step as a practical and secure method to minimize the dependence of DAI on USDC.
USDP is known as a stablecoin pegged to the USD. The stablecoin is one-to-one supported by cash as well as cash-equivalent debt instruments issued by the US government, as per the autonomous attestations.
The credit for regulating both USDP and Paxos goes to the New York Department of Financial Services (NYDFS) – the chief financial regulatory organization of the state.
Efficiently, Paxos would deliver a proportion of the revenue generated on the government-issued bonds supporting the USDP stablecoin to MakerDAO. The proposal is included in the twin endeavor of MakerDAO to minimize its hefty dependence on USDC (the stablecoin issued by Circle).
As a result of this effort, the income of the protocol will be boosted by investment in government bonds as well as diverse investment strategies.
MakerDAO Community Favors Keeping GUSD Stablecoin
This would pave the way for making up to $7B worth of digital assets to be stored in MakerDAO’s reserves. The proposal from Paxos is witnessed after an abrupt voting in which the MakerDAO community eventually supported keeping GUSD (Gemini USD) stablecoin as a reserve asset for DAI. Currently, MKR (the native token of MakerDAO) is trading at around $721.87.
This shows that the altcoin’s value has increased to a great extent recently. Data taken from CoinMarketCap signifies that the token’s price has grown by approximately 41% on a year-to-date level.
The MKR token has beheld mounted accumulation since the start of the year. An evaluation of the token’s performance on regular basis indicated that the purchasers have had the market’s control since the 7th of January.