MakerDAO Approves Gnosis’ Proposal To Use GMO Token As Collateral To Issue DAI
A proposal submitted to Maker’s DAO by the Gnosis has been approved in a community vote. The partnership will see Ethereum-based Gnosis Chain collateralize its GNO token in a vault on the Maker protocol to mint DAI stablecoins.
MakerDAO Delegates Approve GnosisDAO Token As DAI Collateral
The decentralized autonomous organization (DAO) governing Maker protocol has approved a proposal by GnosisDAO to add platform token GNO to the MakerDAO vault system for DAI stablecoin. In September, GnosisDAO entered into a partnership with MakerDAO to handle most of its borrowing on Maker’s DeFi platform and submitted a proposal that was voted ‘Yes’ by the community.
MakerDAO allows several blockchain networks to create vaults and collateralize their native assets on the Maker protocol to mint DAI stablecoins.
Earlier this week, Maker got a 91% approval from its community to accept GNO as collateral for minting new DAI tokens through the creation of a GNO vault. The vault will have a maximum debt ceiling of 5 million DAI ($5 million) which refers to the maximum amount of DAI stablecoins that can be issued using GNO tokens as collateral, and a debt floor of 100,000 DAI ($100,000) that signifies the minimum amount of DAI that can be minted on the vault.
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Other terms approved by the DAO includes, charging a stability fee of 2.5% that will be used to maintain DAI’s dollar parity while balancing the risk of minting using GNO as collateral, and a liquidation ratio of 350% which represents the minimum collateralization required to prevent liquidation of the vault.
Beginning next year, GnosisDAO will mint 30 million DAI using GNO as collateral from its $631 million treasury. The newly issued DAI will be used by the company to support development of several initiatives : Gnosis chain – an EVM (Ethereum Virtual Machine) compatible payments blockchain, the multisignature SAFE wallet that will be used by Maker to manage assets, and the Cowswap DEX (decentralized exchange).
According to the terms of agreement, Gnosis will collateralize high-value assets like Ether (ETH) and staked Ether (stETH) to conduct 75% of its DAI borrowing activities. Maker has also asked GnosisDAO to utilize its $5 million debt ceiling as soon as possible. The partnership is beneficial to Maker protocol because DAI is the official stablecoin of Gnosis Chain and is used to pay transaction fees on the network.
Earlier this month after assessing current market conditions, Maker’s security unit made a proposal to the DAO asking permission to reduce the debt ceiling for collateral vaults of certain assets. The Risk Core Unit’s proposal suggested reducing the debt ceiling for Polygon (MATIC), Chainlink (LINK), Yearn Finance (YFI), Decentraland (MANA) and renBTC. The proposal submitted for approval will reduce the number of tokens that can be promised as collateral by the networks in order to mint DAI. Maker’s security division has said that they will be making further changes to the parameter based on market updates. The decision was made after the debt ceiling for the listed assets went too high.
At the time of writing, Maker’s MKR token trading at $649.19 is up by 0.5%, while Gnosis’ GNO is trading at $86.20, rising by 3% since yesterday.
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