MakerDAO, a crypto collateral platform, has revealed that its blockchain network and stablecoin have been directly benefited from the ethereal price crash, which has been ongoing for the past few months.
Like most stablecoins, MakerDAO's COME ON offers crypto holders a reliably-priced investment in the face of this sort of market volatility. Accordingly, MakerDAO was able to make the most of the Ethereum crash … but can MakerDAO replicate that success in the future?
How the Crash Helped
Over the course of 2018, the price of Ethereum rapidly declined, falling from roughly $ 1400 to $ 100 in less than twelve months. After a few brief recoveries, the coin suffered a steady decline beginning in May. Ethereum's bad luck continued in the fall, and MakerDAO states that the events of November were particularly beneficial to its own efforts.
During November, MakerDAO saw a surge in DAI generation, address creation, and overall network activity, all of which correlated with the Ethereum's price drop. By mid-November, 1% of the total ETH supply was locked up as collateral on MakerDAO.
The trend persisted: just two months later, 1.5% of the ETH supply is locked up as a collateral, indicating that MakerDAO may continue to grow as a minor platform.
The Appeal of MakerDAO
This raises the question of why some investors flocked to MakerDAO-after all, other stablecoins such as Tether provide similar protection against volatility. The most probable answer is that the MakerDAO is unique in one important way: COME ON tokens are backed by cryptocurrency, not by fiat currency.
Mostly stablecoins are backed by a central reserve of U.S. dollars, DAI tokens are backed by the investor's own crypto holdings and generated by the investor. This approach gives investors a significant amount of control, because they do not have to sell their original tokens.
Essentially, investors can simply lock up their ETH tokens on MakerDAO and redeem them as needed, while MakerDAO will automatically sell off their ETH tokens under set conditions. This approach is highly experimental, but MakerDAO seems to have proven its appeal-largely thanks to Ethereum's own troubles.
Is MakerDAO On a Roll?
Even though MakerDAO owes many of its recent accomplishments to Ethereum's market problems, at least some of its success was achieved by improvements in design. MakerDAO's sudden November growth is undoubtedly due due to its new easy-to-use interface, which was introduced at the end of October. Of the state of the market.
More, Ethereum was the only one token supported by the MakerDAO, which means that the platform has been solely focused on the attracting Ethereum users. That said, support for other cryptocurrencies will soon be added. Whether MakerDAO's initial success can be replicated with other coins remains to be seen, but there is good reason to be optimistic.