MakerDAO, which oversees the Maker Protocol, has experienced a sharp drop in revenue during the third quarter of 2022. This decline is attributed to a decrease in loan requests and minimal liquidations, while the organization’s expenses have remained significant.
As shared in a tweet on Oct. 13 by Johnny_TVL, a Messari analyst and co-author of “The State of Maker Q3 2022,” MakerDAO’s revenue in Q3 plunged to slightly over $4 million, marking an 86% decrease from the prior quarter.
Consequently, MakerDAO has encountered its first net income loss quarter since 2020. The analyst has attributed this decrease in revenue to limited liquidations and weak demand for loans.
The primary revenue generators, Ether (ETH) and Wrapped Bitcoin (wBTC), faced challenges in the last quarter, with revenue from ETH-based assets dropping by 74% and revenue from BTC-based assets falling by 66%.
Borrowers typically utilize these cryptocurrencies as collateral to secure loans in the Dai (DAI) stablecoin, mitigating volatility risks common in crypto markets at the expense of paying interest on the loans.
The analyst noted a reduction in MakerDAO’s collateral ratio, indicating a decrease from 1.9 to 1.1 compared to the same period last year.
Despite these challenges, the analyst highlighted that expenses have remained high, reaching $13.5 million in the quarter, demonstrating only a 16% decrease from the previous quarter.
In a bid to enhance the return on collateral assets, MakerDAO recently proposed investing $500 million in treasuries and bonds to garner low-risk additional yield for the protocol.
A positive development for MakerDAO was the expansion of Real World Asset (RWA) backed loans, which now contribute to 12% of its overall revenue. An important milestone was the successful introduction of the largest RWA-backed loan to Huntingdon Valley Bank (HVB) during the third quarter of 2022.
This initiative involved creating a vault containing 100 million Dai, establishing a new collateral category within the Maker Protocol to boost revenue through vault stability fees and DAI minting.
The integration with HVB enables the bank to effectively increase its legal lending capacity, and MakerDAO anticipates that other banks will follow suit if the integration proceeds smoothly.
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