One of the oldest projects in the market is about to have one of its biggest overhauls to date. In this post, I explain why I think Maker is primed for a period of strong growth and why MKR is my next altcoin investment.
Key Takeaways
- Maker will soon undergo one of its biggest upgrades, dubbed ‘Endgame’, since launching eight years ago.
- Included in this four-phase upgrade is the launch of two tokens, the names of which will be revealed soon. MKR and DAI holders will be able to convert to these new tokens upon launch.
- Holders of these new tokens will get access to ample farming and yield opportunities as Endgame progresses, starting this quarter.
- I’ll buy a material amount of MKR this week. When able, I’ll upgrade my MKR to the new token and use it to participate in farming opportunities. I plan to sell my entire position in this new token later in this bull market.
Contents
Successful Project, Cursed Coin
Maker has long been one of the most fundamentally strong crypto projects, with a proven ability to generate meaningful amounts of profit in bull and bear markets. As of this writing, the protocol’s annual profit is estimated to be $98M, as per makerburn.com. In recent months, it has consistently brought in $200K–$600K in daily revenue, as per DefiLlama.
However, in a market where attention often trumps fundamentals over the short- and medium-term, MKR has underperformed for several years alongside its DeFi counterparts. I believe there are two main reasons for this underperformance:
1. Boring project lacking ‘unknowns’. The popular view of Maker is that it’s an established project that has achieved everything it initially set out to achieve. In other words, there are little to no ‘unknowns’ with Maker. Crypto investors tend to love unknowns. The more, the better.
2. ‘Expensive’ token price. MKR’s relatively small total supply means that its token price is significantly higher than the vast majority of cryptocurrencies. It’s no secret that unit bias affects many investors’ decision-making. I can’t imagine how many investors have ignored MKR over the years because of this.
Endgame: The Reason I’m Buying MKR
In an effort to reinvigorate the Maker ecosystem, co-founder Rune Christensen has spent the past couple of years devising a multi-phase plan called ‘Endgame’. Last May, he formally proposed Endgame to MakerDAO, which it approved. (We covered the precursor to this last March, before updating members on Endgame’s progress this January.)
Endgame is why I’m buying MKR, which I expect to outperform the market over at least the next few months, starting from now (i.e. April 3). While this comprehensive upgrade interests me for many reasons, purely from an investment perspective, what caught my attention is the sheer amount of financial incentives and airdrops that will accompany Endgame.
I’m buying now because Phase 1 of Endgame, dubbed ‘Launch Season‘, should start this quarter, the first release of which will be a month-long brand reveal. During this time, “early adopters can sign up for a launch bonus that will increase their yield when the new tokens become available.”
While MKR’s price has started to outperform in recent weeks—not long after we invested in February—I think this is just a preview of what awaits MKR in this bull market. I expect things to really heat up once Launch Season is announced.
About the new tokens
Endgame will introduce two new tokens to the Maker ecosystem. For now, these are codenamed NewGovToken and NewStable. Of note, MKR and DAI will continue to exist as legacy assets, but holders of these tokens will not be able to access the farming and yield opportunities detailed as part of Endgame.
For NewGovToken, its supply will be redenominated compared to MKR, with 1 MKR being upgradable to 24,000 NewGovToken. If we assume 100% of MKR is upgraded, all else being equal, the price of NewGovToken will be $0.157. This should help Maker become more accessible to those who would otherwise currently ignore MKR due to unit bias.
About the financial incentives
Endgame will involve ample farming and yield opportunities, which are detailed in Christensen’s updated plan linked above.
The bulk of these incentives will come through something called the Lockstake Engine (LSE). See the below excerpt for a breakdown of the incentives offered to those who ‘lockstake’ their MKR or NewGovToken.
The first subDAO of MakerDAO will be SparkDAO, which will go live shortly after Endgame starts. SparkDAO—which will launch its SPK governance token—will be the DAO behind Spark, a project that was initially funded by and spun out of MakerDAO last year. (SparkDAO will be the only subDAO launched in Phase 1 of Endgame, with another six planned for Phase 2.)
Its main product is SparkLend, a non-custodial liquidity protocol where users can participate as suppliers, borrowers or liquidators. The protocol went live on Ethereum mainnet last May, followed by Gnosis Chain in October. Already, SparkLend has amassed $2.77B in TVL, ranking it 12th among all DeFi protocols, as per DefiLlama. (Of note, a nontrivial amount of SparkLend’s usage is likely attributable to those taking advantage of the pre-farming SPK airdrop. Organic demand for SparkLend will become easier to assess over time.)
The Risks
Of course, MKR may not perform as I expect it to. Below are two particularly noteworthy risks or reasons why this could happen. Ultimately, I still think the opportunity with MKR is enough to warrant taking on these risks.
Negative market sentiment towards DeFi
Even with Endgame shaking things up for Maker, it ultimately will still belong to DeFi, a much-maligned sector among crypto investors. Indeed, DeFi has been one of the worst-performing sectors in recent years, hampered by regularity uncertainty and threats of enforcement action by U.S. authorities.
Competing for limited investor attention
Never have I seen so many new projects launching and existing projects upgrading or expanding to new verticals. While this is fantastic for the space, when it comes to my MKR investment, it is possible that Endgame fails to drum up the excitement I expect.
Recap & My Plan
Maker is one of the most fundamentally strong crypto projects that is preparing to overhaul its tokenomics as part of its multi-phase Endgame upgrade. Certain aspects of Endgame—specifically, the launch of two new tokens and ample farming opportunities—are why I am buying MKR this week.
I plan to upgrade my MKR to NewGovToken and participate in the farming opportunities once they start. At this stage, I plan to sell my entire NewGovToken position by the end of this bull market. Deciding when to sell will be determined by Endgame-specific factors as well as factors related to market sentiment and attention. Later in this bull market, I intend to post about how I am approaching my NewGovToken sell strategy.
Disclaimer: I currently do not own any MKR but intend to buy it this week. This holding will be added to the Trust & Transparency page on Friday as part of our weekly update.