Coinbase Proposes to Hike MakerDAO’s Revenue by Millions, Here’s How

Crypto exchange Coinbase is looking to transfer MakerDAO's $1.6 billion (roughly Rs. 12,780 crore) in return for increasing the latter's revenue by roughly $24 million (roughly Rs. 190 crore). The amount of $1.6 billion makes for 33 percent of MakerDAO's ‘Peg Stability Module (PSM)' and Coinbase is asking Maker to transfer this into its Prime custody account. In recent times, Coinbase has found itself struggling with financial losses and operational snags. Hence, the company is trying different ways to bring back business.

MakerDAO is the creator of the Ethereum-based Dai stablecoin. The platform allows depositors to earn interest on the DAI they keep in Maker's bank. Its PSM allows users to swap a given collateral type directly for DAI at a fixed rate, rather than borrowing DAI.

Maker's current PSM allocation may be invested to check if it is “highly underinvested”. If this turns out to be true, it would reduce DAI's attractiveness as a stablecoin, a report by The Block explained.

If Coinbase's proposal passes, Maker will have to pay no fees on its PSM deposit to Coinbase, enabling the free mint, burn, withdrawal and settlement of its allocated USDC through Coinbase Prime.

As per The Block, this proposal is a strategic move that will generate revenue on idle assets within MakerDAO's balance sheet.

Coinbase, on the other hand, is trying new business strategies to help its business re-gain operational stability.

In August, for instance, Coinbase announced the introduction of a new liquid staking token called Coinbase Wrapped Staked Ether or "cbETH". The cbETH is an ERC-20 utility token and shall be available to customers who stake Ether on Coinbase.

The development had come in the same month when Coinbase Global reported a larger-than-expected quarterly loss as investors worried by this year's rout in risky assets shied away from trading in cryptocurrencies, sending its shares down 6 percent after the bell on Tuesday.

Trading volumes at the cryptocurrency exchange more than halved to $217 billion (roughly Rs. 17,25,130 crore) in the second quarter, with retail participation sinking 68 percent and institutional trading falling 46 percent.