MakerDAO produces a stablecoin pegged to the US dollar, called Dai. What makes Dai different from other stablecoins is that it is not backed through a third-party account, but instead by Ether held in an executable distributed code contract (EDCC), or smart contract. Dai is price-stabilized through a somewhat complex (but so far inarguably effective) governance and algorithmic structure, both of which involve MakerDAO's second cryptocurrency, called MKR.
Investment firm a16z crypto has purchased 6 percent of all of MakerDAO's MKR tokens, according to a post yesterday by MakerDAO on Medium.
According to the article, a16z crypto and MakerDAO will both benefit from the partnership. Andreessen Horowitz's a16z crypto will not only benefit from the growing value of the MKR token but will also be allowed to make decisions related to the governance of MakerDAO – and the Dai credit system – "as it becomes the first decentralized autonomous stablecoin organization."
In return, MakerDAO will reportedly receive operating capital for the next three years and "operational support" from the more than 80-person a16z crypto team. According to the Medium article, this includes support in the areas of marketing, technical talent, and operations. Apparently, adoption of the Dai stablecoin and how to regulate it are among the top priorities.
Speaking directly to holders of MKR tokens, in the press release MakerDAO wrote:
"This is an exciting time to be part of the community. a16z crypto will act as a peer, helping us build strengths, solve problems, and drive momentum. As MKR holders, a16z crypto has responsibilities like every other MKR holder. With their point of view as active governors, they will provide insight and participate in critical conversations with other MKR holders."
Stablecoins Matter, Especially Now
The ever-changing value of cryptocurrency has been a hot topic as of late.
Stablecoins, unlike their counterparts, are intended to be immune from the wild price fluctuations seen with bitcoin and Ether. Instead, these particular digital assets are backed by fiat or collateral, or even stabilized through mathematical algorithms.
Although the idea of allowing investors to participate in the cryptocurrency industry without having to deal with the volatility of its value seems good in theory, these stablecoins have been met with suspicion by investors and regulators.
In January, Tether announced the cancellation of an audit concerning its stablecoin. The audit, which was initiated due to concerns that it was not in fact backed 1:1 by the US dollar, had the potential to put these fears to rest. But, by canceling the audit – ostensibly over concerns that the team conducting the audit was being too detailed and taking too long – Tether only fueled the fires of speculation.
Earlier this month, the Winklevoss brothers' company, Gemini Exchange, announced its stablecoin, the Gemini dollar. The Winklevoss brothers have made great strides to operate aboveboard, so their company's claims that the Gemini dollar is backed 1:1 by the US dollar may be legitimate.
Yet not everyone in the crypto community is wild about regulatory oversight. MakerDAO offers the relative certainty of price stability without much regulatory oversight. Now, it also has growing support from the crypto investment community. It remains to be seen if the lack of regulatory oversight will be its biggest strength, most striking flaw, or just an awkward compromise.
An earlier version of this article stated that a16z would benefit from the rising value of Dai. This is a contradiction in terms, as Dai is a stablecoin. Further, a16z crypto purchased MKR tokens, not Dai.