How will MakerDAO fare when major VC firms exit?
Original author: TechFlow Cleaners
As a DeFi OG, MakerDAO returned to the center of the crypto stage this year with the narrative of RWA.
What we see is a peculiar scene: the core investors of MakerDAO, Silicon Valley legendary VC a16z, continuously selling MKR, while MakerDAO founder Rune Christensen continues to buy MKR, initiating a long and short battle between the project founder and investors.
Since November 2022, Rune has been selling LDO to repurchase its own token, and in the last two transactions, Rune purchased MKR with ETH and DAI. As of July 17th, the two addresses currently hold a total of 123,893 MKR, accounting for 12.6% of the total circulation of MKR (977,631 MKR).
Now, the selling by major VCs has come to an end.
Recently, a16z finally sold its remaining balance in MakerDAO, and thus a16z, Paradigm, and Dragonfly have finally sold off their tokens, relieving MKR from VC burden.
According to crypto researcher 0xRamen's statistics, these three VCs collectively held approximately 11.5% of Maker tokens, as follows:
a16z:
Purchased $15 million in September 2018;
Accounted for 6% of total supply;
Average price: $250.
Paradigm + Dragonfly：
Purchased tokens worth $27.5 million in December 2019;
Accounted for 5.5% of the total supply;
Average price: $500.
Dragonfly was the first to start selling its tokens in January 2021, but most of the sales occurred in April 2021 when MKR was nearing its high point of $6,000.
Result: The average selling price was $3,800 per MKR token, which was 7.6 times their initial investment, a remarkable performance, and they slowly sold as the price increased.
Paradigm was the latest of the three VCs to start selling, beginning in March 2023, selling 80% of their MKR tokens at prices above $800. The remaining tokens were recently sold at around $1,100.
Result: The average selling price was $900 per MKR token, which was 1.8 times their initial investment, essentially selling at a low price.
Until now, a 16 z has carried out three waves of selloffs:
March 2021: Started selling 20% of its holdings of tokens;
August to September 2021: Sold 26% of its holdings of tokens;
July 2023: Sent the remaining 32,000 MKR to the exchange for sale.
Result: The average selling price was $1,800 per MKR, which is 7.2 times the initial investment.
The 32,000 MKR from a 16 z combined with Paradigm's recent selloff is equivalent to nearly $40 million in selling pressure. However, despite this, the price of MKR has still risen by over 30%.
So why are a 16 z and others eager to liquidate their MKR at this time?
An important reason is that a 16 z opposes the MakerDAO founder's "Endgame" plan.
In June 2022, the MakerDAO founder, Rune, proposed the Endgame Plan, which includes four main objectives: achieving full decentralization of MakerDAO; improving the liquidity and stabilizing the interest rate of Dai; enhancing the protocol's sustainability and reducing system risks; and improving decentralized governance and DAO operations.
Rune plans to decompose MakerDAO into smaller, supposedly more decentralized units called MetaDAO, and aims to incorporate real-world assets such as bonds and government securities from the Maker reserve into MetaDAO, separating them from protocol decision-making.
The Endgame plan initially prepares to launch 6 MetaDAOs, each of which will issue Sub Tokens.
Although this proposal has received support from over 80% of the community members, investment firm a16z strongly opposes it. Previously, a16z owned a large amount of MKR tokens, giving them voting rights and influence over the final approval of proposals.
a16z partner Porter Smith wrote in a memo that advocating for MakerDao reform to increase decentralization without hindering growth and complying with current laws and regulations is preferable to breaking down the protocol's governance structure into smaller units called MetaDAOs.
"The core unit structure may already be legally decentralized, and introducing MetaDAO may not change that situation or lead to more organizational flexibility from a strict legal perspective."
Not only the Endgame plan, but also the conflict between MakerDao founders and VCs has become fully public in 2022 and has witnessed a governance war.
In June 2022, a governance vote was held regarding the approval of the establishment of the Maker loan supervision core department, known as LOVE.
Approximately one-third (about 294,000 tokens, worth about $300 million) of MKR in circulation voted in favor of approving LOVE, and the first three "for" votes were all from VCs, a16z, Paradigm, and ParaFi.
On the other hand, the "against" camp ultimately won with about 60% of the votes, led by founder Rune.
In the Maker community, this battle has been described as a well-planned coup by a group of risk-averse VCs, and ultimately, with the joint effort of Maker founders and community members, they successfully defeated the VCs and achieved a comprehensive victory for decentralization.
This description may seem simplistic, but the governance war behind MakerDAO has also become a stumbling block to its development. Now, with major VCs exiting the scene, what new horizon awaits MakerDao in the future?
