Another good piece of news as far as my CPD loan is concerned.

Maker has finally lowered interest rates from the outrageous 19.5% to 9.5% and now to 5.5%.

5.5% is still high.

When I first learned about Maker and started using it (June 2018), the interest rate never deviated from the 0.5% baseline. Those were the days. It was much easier to hype up this product back then.

The interest rate should be low (if not zero)

Why should we have to pay interest on a loan that we are over-collateralizing by 300%? Ideally, we shouldn't. However, the MakerDAO has zero competition. If another product pops up that adds healthy competition to the space then the MakerDAO will be forced to adapt. (I still have to write a post about how Steem could be the first to do so.)

Conflict of interest.

The MakerDAO runs like a corporation (much like Binance's BNB). The coin is centralized to several key players, and the price action of the network is clearly highly regulated internally to lower volatility.

The major conflict is that interest payments are forced to be paid in Maker tokens. Those tokens are destroyed, making Maker a truly deflationary network (unlike POW coins that just cut inflation in half). The only way more Maker can be created is if the system fails and the network gets forced to buy back bad debt.

Therefore, it's not exactly an ideal situation that Maker token holders control the interest rate that increases the value of the underlying token. That's crypto governance for you.

In any case, every time there is a MakerDAO vote to manipulate interest rates some kind of big argument arises. This time was no different. Even though everyone pretty much wanted interest rates reduced, MakerDAO centralization rears its ugly head once more.

Ideally, voting is supposed to be open, collaborative and for transparency, done on-chain through the Governance Dashboard. But in the last voting, an anomaly was observed where one large MKR whale placed a single vote pushing the number of submitted votes from 2,489 to 44,539 votes, drawing criticism on MakerDAO’s governance.

Hm yep...

A single vote pushed the interest rates down 4%,

and people are like 'wtf?', rightfully so.

Now what I found interesting about this is that:

This voter has moved 41,900 MKR to vote. They own 75,516 MKR (7.5% of total supply ; $40M).

They received 108,956 MKR in Aug-2018. This is more than a16z (6%). Actually the biggest MKR holder. At the end day, that is governance and they have significant skin in the game!

Good to know.

I didn't realize there was a bigger holder than a16z (Andreessen Horowitz).

I am personally happy to own a single coin.

That ownership represents more than one millionth of the platform. Only a million coins were created and interest payments are burning them off slowly.

Wow, check out this little rabbit hole!

In checking to see how much Maker has been burned I came across this Reddit post:

how_much_maker_has_been_burned_so_far/

October 18, 2018 (one year ago)

This is the burner contract here. You can see that it currently has 88.769 MKR. None of the MKR has actually been burnt yet, but there's no way for it to leave the burner contract. The only function that can be called is to destroy the MKR.

Maker Burner Contract On Etherscan.io

One year later, we see that the burner contract has a whopping balance of 4,766. Hiking those interest rates has really done the trick eh? In addition, there are plenty of open CDP loans that have an outstanding interest balance and simply haven't been paid yet (including mine).

Interesting.

This means that anyone who has a CDP loan that wants to unlock their Ethereum will need to burn Maker. If they haven't already purchased the Maker to do so, this could create a liquidity issue during the next big bull market.

0.5% of all Maker appears to have already been burned in just a year. However, another 0.5% may just be waiting out there in the form of outstanding CDP loans. Unfortunately I don't know how to acquire this exact information even though it's all on the ETH blockchain.

Back to the centralization of Maker.

Do I think it's a bad thing? Sure, centralization is 'bad'. Unless of course the people in charge are trustworthy (which is rarely the case). However, I still continue to make the claim that big players in the cryptosphere have something to prove. You can't sellout on a product that hasn't gone mainstream yet... well you can, but if you think the network has a shot it would be foolish to do so.

There are many advantages to centralization. MKR and BNB are showing this first-hand. Their price action graphs have fully diverged from Bitcoin's dominance on the market and they look totally different. The BNB and MKR markets are being manipulated internally by BNB and MKR whales (quite obviously).

There are Bitcoin whales out there that bought at $1. Projects like Maker and BNB have no whales that can dump onto the market for a x9000 gain.

Therefore, if you trust the centralized whales of a given chain to manipulate the market in a good way (buy low, sell high, make money, reduce volatility) then the centralization of these projects is actually a good thing.

Centralization isn't bad; people are bad.

Decentralization is a process. Not everything about decentralization is good. Organization, leadership, and direction of a network become much more unpredictable. Decentralization is a journey, not a destination. It slowly trickles into the economy and adds much needed healthy competition.

Maker continues to be the top ERC-20 token delivering actual results.

#shill

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