• Paxos has proposed a partnership with MakerDAO that will increase the Paxos dollar (USDP) backing for the DAI stablecoin issued by the Maker protocol.
• The collaboration seeks to increase the volume of USDP in the PSM and generate marketing revenue for the DAO.
• If approved, MakerDAO will earn up to $29 million in annual revenue from the USDP in the PSM vault.
Paxos has recently announced a proposal to enter into a collaboration with MakerDAO, the leading decentralized finance (DeFi) protocol, in a bid to increase the Paxos dollar (USDP) backing for the DAI stablecoin issued by the Maker protocol. This partnership will benefit both MakerDAO and Paxos and is likely to have a positive effect on the crypto market as a whole.
The proposed collaboration seeks to increase the volume of USDP in the Peg Stability Module (PSM) and generate marketing revenue for the MakerDAO Decentralized Autonomous Organization (DAO). The PSM is a mechanism by which MakerDAO is able to mint DAI in exchange for collateral submitted by users. The PSM also ensures that DAI maintains its peg to the US dollar such that 1 DAI is equal to $1. Paxos has called for an increase to the USDP debt ceiling to 1.5 billion USDP ($1.5 billion) as part of the partnership. This is intended to reduce the DAI’s exposure to the USDC stablecoin issued by Circle, which currently accounts for 30% of the collateral backing the DAI and for 40% of all new DAI tokens minted on the Maker protocol.
If the partnership is approved, MakerDAO will be able to earn up to $29 million in annual revenue from the USDP in the PSM vault. The proposal has been submitted to the MakerDAO governance forum and is currently being discussed by the MakerDAO community. The proposal seeks to explore the pros and cons of the partnership and determine if it is beneficial for MakerDAO to move forward with the collaboration.
The collaboration between MakerDAO and Paxos is an exciting step forward for the DeFi space. It is a testament to the power of collaboration and the potential for two projects to form a mutually beneficial partnership in order to benefit the entire crypto ecosystem. If the partnership is approved, it could lead to more stablecoins being backed by USDP, which could provide more stability to the crypto market.