Introduction: The MakerDAO Upgrade
On November 18, 2019, MakerDAO activated its Multi-Collateral DAI (MCD) upgrade on the Ethereum mainnet—a highly anticipated milestone for DeFi's largest project.
Previously, users could only borrow SAI (Single Collateral DAI) by locking ETH as collateral. Post-upgrade, the system expanded to support multiple collateral types (e.g., ETH, BAT) for borrowing DAI. SAI holders could migrate 1:1 to DAI, though SAI remains active pending governance votes to sunset it.
Key Upgrades:
- Stable Fees in DAI: Replaced MKR-denominated fees, with unpaid fees accruing as debt.
- DAI Savings Rate (DSR): Allows DAI holders to earn interest by depositing into a smart contract, balancing demand-side monetary policy.
Success Metrics and Data Insights
DAI Adoption
- Within a month, 50% of circulating SAI migrated to DAI.
- BAT became the first non-ETH collateral, though WETH dominates (~$355M vs. BAT’s $4.5M locked).
MKR Token Dynamics
- Governance & Profit Utility: MKR holders vote on collateral types and pay fees (burning MKR).
- Supply Reduction: 11,000 MKR burned (current supply: 989,000). Post-upgrade burn rates spiked.
- Holder Concentration: Top 3 addresses hold 38% of MKR (e.g., MakerDAO governance, team multisig, a16z).
CDP Statistics
- SCD Platform: 154,000+ CDPs opened; 19,609 closed.
- Largest CDP (#3088): 178,720 PETH collateral ($15M excess), 828K SAI debt.
- Collateralization Ratio: System-wide average >300%, meaning ETH price would need to drop below $80 to trigger mass liquidations.
Migration Process
- Smooth Transition: 97% of SAI (99M) migrated within two months.
- Challenges: Remaining SAI holders (top 100 addresses hold 75%) and inactive CDPs (~30% untouched in 6–12 months).
Market Impact
Liquidity Shifts
- SAI Trading: Activity fell sharply; Uniswap/Kyber handle ~$250K daily.
- DSR Dominance: Absorbed DAI deposits from Compound/dYdX, reducing their market share.
Secondary Lending Markets
- DAI Debt: Down to 15% of supply (vs. 46% pre-MCD), attributed to MakerDAO’s lower stability fees.
On-Chain Activity
- Daily Active DAI Addresses: ~2,000 (10% drop from SAI’s peak).
DSR Participation
- Growth: Accelerated when Compound routed idle DAI to DSR and rates rose (2% → 4%).
- Plateau: Further rate hikes (6%) didn’t increase inflows; utilization dropped as DAI supply grew 45%.
Conclusion
The MCD upgrade exemplifies DeFi’s maturation, with strong community adoption and governance flexibility. Remaining steps:
- Sunsetting SCD to finalize migration.
- Addressing inactive CDPs (~$11.5M debt).
MakerDAO remains a pioneer in on-chain governance, setting precedents for DeFi’s future.
FAQs
Q1: What’s the difference between SAI and DAI?
SAI is Single Collateral DAI (ETH-backed), while DAI supports multiple collaterals (e.g., ETH, BAT).
Q2: How does DSR work?
Deposit DAI into a smart contract to earn interest, with rates set by MakerDAO governance.
Q3: Why migrate from SAI to DAI?
MCD offers better capital efficiency, diversified collateral, and DSR earnings.
👉 Explore DeFi innovations with MakerDAO
Data sources: Block Analitica, Etherscan, MakerDAO governance reports.
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