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ETH/BTC Rallies Again as MakerDAO Announces Major Upgrade in Osaka


Ethereum Price: $182.70
Ethereum Price (BTC): 0.022087BTC
Market Cap: $19.76B
ETH Network Dominance*: 70.50%
7 Day Candle**: $176.93 / $197.99 / $176.51 / $182.70

The price of Ethereum rallied to a high of $197.99 last week in the lead up to the Devcon V conference in Osaka, Japan. Ethereum performed strongest against BTC, which saw the ETH/BTC market pair set a 1 month high of 0.023129. While the rally against USD was short lived, Ether’s performance against BTC held firm, creating further distance from its 1 year low of 0.016080.

The latest price developments came during a flurry of updates at Devcon V, which saw a sleepless Vitalik Buterin publish a series of ETH 2 research pieces and the Andreessen Horowitz-backed MakerDAO platform announce November 18th as its launch date for Multi-Collateral DAI. Joe Lubin also launched an initiative to attract 1 million developers to Ethereum while prediction market platform Augur released more details about their V2 launch in 2020. And that’s just the start of it. “Big Four” accounting firm continued with their support for public Ethereum in a talk on their privacy protocol, Nightfall and back in the USA the CFTC Chairman announced his view that Ether, like Bitcoin, will be regulated as a commodity – opening the way for ETH futures and financial derivatives.

Of all these developments in the space, the most immediately impactful would be MakerDAO’s launch of Multi-Colletaral DAI (MCD) on November 18th. Currently, the stablecoin DAI is collateralized solely by ETH (Single-Collateral DAI or “SCD”) – for every ETH deposited a percentage of its value can be withdrawn as the USD-pegged DAI stablecoin. Under SCD, the minting of DAI has been relatively modest; a total of $85 million tokens have so far been minted compared to over $4 billion USDT and $400 million USDC. This slow growth is in part due to the current SCD setup, which requires holders to lock ETH and pay a stability fee – a fee that has been as high as 19.5%pa. Yet despite this cost, DAI has been enormously popular among decentralized applications; unlike USDT or USDC, DAI is created and destroyed using smart contracts and its backed by decentralized collateral. On the other hand, USDT, USDC and others are all backed by dollars in a bank with censorship and blacklisting baked into the terms and conditions. A decentralized stable currency cannot be underestimated, yet the current stability fee levied for creating DAI has been holding back its growth. Until now…

With MCD a new DAI savings rate (DSR) will also be introduced, generating an income on all circulating DAI. Unlike Coinbase’s recently announced USDC interest rate (1.25%pa), the DSR is expected to generate significantly higher (but variable) returns and will be income-generating for coins stored anywhere, not just in a specific wallet. The DSR will increase demand for DAI, allowing Maker voters to reduce the platform’s stability fee and increase supply, retaining the $1.00 peg. New collateral types for MCD (of which seven are currently being considered) will also bolster the creation of DAI as well as its security.

While ETH will no doubt remain the dominant collateral type, other tokens such as Augur REP and BAT are likely to have significant use too. It is also possible that we will eventually see BTC being ported to Ethereum in the form of “Wrapped Bitcoin” (albeit in a more trustless way) and being used as collateral for generating DAI.

Depending on what the DAI Savings Rate ends up being, it is very possible that even greater sums of ETH are locked into the Maker system. Not only that, but the creation of what is essentially a risk-free rate could well attract attention from farther afield.

– Nick, Owner

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