MakerDAO, the company behind the stablecoin DAI, knew from the start that Asia would be an important market for its success. They even wanted to initially focus on the region. The name for its stablecoin, Dai, which is backed by a capitalized decentralized credit system, is a Chinese word meaning ‘to write capital for a loan.’ The project ultimately decided to first focus on the west, including Latin America. Ever since, the MakerDAO team has pondered the right time to enter Asia. Now’s that time.
MakerDAO tweeted yesterday that the Maker Foundation had sold $27.5 million worth of MKR, the utility token, governance token and recapitalization resource of the Maker system, to VC funds Dragonfly Capital Partners and Paradigm.
“The mission of the MakerDAO products and the Maker foundation is to create an unbiased currency for the world, which of course means for everyone all across the world,” said Rune Christensen, founder of MakerDAO. “A large portion of all the people in the world live in Asia. But, if you look at the crypto industry, how it’s evolving right now, it is actually really centered around Asia as the hub, when it comes to infrastructure and interest of regular people into crypto.” For Maker Foundation, it is important that the project has a strong presence with well-connected and knowledgeable partners, for China is a central player in the blockchain market.
“It’s really the country that, other than the US essentially, is like running the entire crypto space when it comes to things like trading volume and just really adopting and actually using in real life the new technologies that are possible with blockchain. This was known even in the early days of Bitcoin, [which] only got really big once it started getting traction in China. It was a very sudden and massive escalation of interest. That’s how technology is adopted in Asia versus the more organic growth that happens in the West typically.”
Christensen moved to China when he was 18, and later had a small business there for a couple of years. His wife is Chinese, and he speaks the language. “I actually have a very close personal relationship with China, specifically,” he said.
MakerDAO already had a presence in China, as most of the traffic to certain user interfaces into the Maker protocol comes from the country. MakerDAO’s China lead, Chao Pan, is one of the company’s oldest employees, and very popular in the Chinese crypto community. They call him Teacher Chao there. “For about a year now, we’ve already had people on the ground in China, South Korea, Japan and Singapore, which we see as some of the most important centers for the crypto industry in Asia.”
When Dragonfly, a cross-border crypto asset investment firm, came to the project, MakerDAO had just launched multi-collateral Dai functionality. Christensen calls it “the most important upgrade we’ve done to the system yet.”
Maker Foundation receives a lot of inquiries about parties interested in buying the limited supply of MKR tokens. “We are not really looking to sell to just anyone,” said Christensen. “What’s very important for us is to find partners that actually believe in the project longterm and actually want to contribute to the vision of a decentralized financial system, rather than just buying some tokens to speculate on the value or something like that.”
Borrowing on MakerDAO’s Oasis platform.
The project, therefore, spends a lot of time vetting potential partners. “After having been in talks with Dragonfly and Paradigm for a very long time, we decided that they were the real deal, and they had what it would take for us to make this kind of of successful push into Asia, where we’d be able to navigate all the challenges.” Partnering with Dragonfly gives the project access to connections and insider knowledge to help MakerDAO navigate the new jurisdictions and cultures.
The next step for Maker is to build on top of its base in Asia through more partners and more integration with technology. The appetite is there, says Christensen. MakerDAO partnered with OKEx, one of the largest exchanges in China and Asia, on the Dai Savings Rate, a new feature of the Dai stable coin. Users get a low risk return on their crypto. When a user’s Dai is in the Savings Rate contract, the Maker protocol automatically allocated Dai equal to the variable Savings Rate.
“When you look at something like our integration of Dai, and the Dai Savings Rate on the OKEx platform, that should really drive a lot more users on the Dai demand side, a lot more stablecoin users into the protocol,” said Christensen. “[This] could then mean that, because there’s more demand for the stablecoin coming from the market, the response by the governance of the protocol might be to reduce the rates in the system and also make it cheaper to generate Dai so that this new demand can be met with new Dai, so that the system ensures that the price stays stable around $1.”
Another Asia-based integration partner, imToken, is one of the most popular Ethereum wallets in China. Christensen credits the wallet with driving a lot of users to the MakerDAO protocol over the past year.
The MakerDAO founder said the biggest challenge the company faces is an opaque Chinese regulatory environment. “As an example, a couple of months ago there was this big proclamation that the blockchain is a new thing and China wants to lead it,” he said. “And then a few months later, there’s a crackdown and there’s like crypto exchanges having to delist coins and a lot of exchanges shutting down.” This is the history of Bitcoin and blockchain in China.
“There’s even a joke,’ says Christensen, before reciting it. “Every three months, China bans Bitcoin in the space. And it is basically because the regulatory environment is constantly in flux.”