Strategic MKR Token Buy Up: Two VC Firms Go Long on MakerDAO

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MKR, the governance asset of the MakerDAO ecosystem which counts the Dai stablecoin as its keystone, now has two new crypto-native investment firms as supportive “whales” among its token holders.

On December 19th, the Maker Foundation, a non-profit organization that backs the fledgling Maker project, announced that noted crypto investment firms Paradigm and Dragonfly Capital had made strategic purchases collectively totaling $27.5 million USD from the foundation’s MKR token reserves.


That buy up, which roughly accounted for 5.5 percent of the current sub-1,000,000 MKR token supply, will allow these firms to “actively participate in the decentralized governance of the Maker Protocol” — for example, in voting on an ongoing basis to help determine the Dai Stability Fee (DSF), the Dai Savings Rate (DSR), and further token additions to Multi-Collateral Dai (MCD) system.

“MakerDAO represents the promise of decentralized finance. The mechanism is an innovation in enabling global, permissionless access to credit … We look forward to participating in this community,” Paradigm’s Charlie Noyes said.

Toward Boosting Dai in Asia

Notably, the Maker Foundation said the new war chest raised by the investments will be put toward boosting the presence of the Dai stablecoin in Asia, where the token’s footprint has no shortage of room to grow.

To that end, the organization also said that being able to lean on “Dragonfly’s and Paradigm’s expertise in the Asian market” will be hugely beneficial going forward.

“The support … of Dragonfly Partners and Paradigm will give Dai an unparalleled advantage in driving innovation and adoption in Asia,” Maker Foundation chief executive officer Rune Christensen said.

Dragonfly managing partner Alexander Pack echoed those remarks on the news, explaining of the Dai’s potential beyond the West:

“Asia is the most important market for crypto in general. It is also home to the largest concentration of the unbanked and underbanked around the globe, which we believe represents enormous pent-up demand for decentralized financial products. Dai has quickly become the market leader in decentralized finance and we look forward to helping it grow and extending its leadership in Asia and the rest of the world.”

We’ve Seen a Big MKR Buy Up Before

Paradigm’s and Dragonfly Capital’s strategic MKR purchase isn’t unprecedented.

Indeed, last fall the Maker Foundation sold 60,000 MKR — or approximately 6 percent of the token’s entire supply — to the crypto arm of Andreesen Horowitz (a16z), one of Silicon Valley’s most respected private venture capital outfits. The deal saw the firm pay $15 million for the tokens, and thus the sale offered a 25 percent discount from market prices at the time.

That move was the first of its kind in the cryptocurrency space, and as a16z general partner Katie Haun explained on the heels of the investment, it came after the firm’s leadership concluded that the Maker project had plenty of runway for further growth.

“MakerDAO’s technology, ecosystem and talent have put theory into action to deliver a decentralized stablecoin that we believe will help drive the future of the crypto economy,” Haun said.

One year and a few months later, that conclusion has increasingly ripened as the Dai stablecoin has achieved further adoption heights, seen a growing number of dApp embraces, and successfully weathered a major technical evolution in the Multi-Collateral Dai transition from last month.

As such, it’s seemingly that same conclusion — namely that Dai “will help to drive the future of the crypto economy” going forward — that has similarly guided Paradigm’s and Dragonfly Capital’s decision to put major skin in the game where Maker is concerned.

Moreover, it’s become easier in recent months for institutions to participate in MKR governance votes, so these new whales can now more readily help steer the Maker project.

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William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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