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MakerDAO completes "de-VC-ing": a16z, Paradigm, and others have cleared their holdings of MKR.

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With major VCs exiting, what new landscape will MakerDao face in the future?

Source: TechFlow Cleaner from DeepTech

As a DeFi OG, MakerDAO returned to the center stage of the crypto world this year with the narrative of RWA.

What you see is a strange sight: MakerDAO's core investors, Silicon Valley legendary venture capital firm a16z, continue to sell MKR, while MakerDAO founder Rune Christensen continues to buy MKR, leading to a long and short battle between the project founder and investors.

Rune began selling LDO for buybacks of its own token starting from November 2022, and in the past two times, it used ETH and DAI to purchase MKR. As of July 17th, the two addresses under its control hold a total of 123,893 MKR, accounting for 12.6% of the total circulating supply of MKR (977,631 MKR).

Recently, a16z finally sold its remaining balance in MakerDAO. With this, a16z, Paradigm, and Dragonfly have finally sold all the tokens they held, and MKR has unloaded the burden of VC.

According to the statistics of the encryption researcher 0xRamen, these three VCs collectively held approximately 11.5% of Maker tokens. The details are as follows:

a16z：

Purchased $15 million in September 2018.

6% of the total supply;

Average price: 250 US dollars.

Paradigm + Dragonfly：

In December 2019, purchased tokens worth $27.5 million.

5.5% of the total supply;

Average price: 500 US dollars.

Dragonfly was the first to start selling its tokens in January 2021, but most of the sales occurred in April 2021 when MKR was approaching its high point of $6,000.

Result: The average selling price of MKR is 3,800 US dollars per unit, which is 7.6 times the initial investment. It has performed well and is slowly sold when the price rises.

Result: The average selling price is $900 per MKR, which is 1.8 times the initial investment and is basically sold at a low price.

Up to now, a16z has conducted three waves of sales:

March 2021: Started selling its 20% held tokens;

August to September 2021: Sell its 26% token holdings;

July 2023: Send the remaining 32,000 MKR to the exchange for sale.

Result: The average selling price is $1,800 per MKR, which is 7.2 times the initial investment.

a16z's 32,000 MKR plus Paradigm's recent sell-off equates to nearly $40 million in selling pressure. Despite this, the price of MKR has still risen by over 30%.

So why are a16z and others eager to sell MKR in a clearance-style manner right now?

One important reason is that a16z opposes the "Endgame" plan proposed by MakerDAO's founder.

In June 2022, Rune, the founder of MakerDAO, proposed the Endgame Plan, which includes four main objectives: establishing complete decentralization of MakerDAO; increasing the liquidity of Dai and stabilizing its interest rate; improving the sustainability of the protocol and reducing system risk; and enhancing decentralized governance and DAO operations.

Rune plans to break down MakerDAO into smaller, supposedly more decentralized units called MetaDAO, and aims to incorporate real-world assets such as bonds and government securities from Maker's reserves into MetaDAO, separating them from protocol decision-making.

Endgame plan is preparing to launch 6 MetaDAOs in the early stage, and each MetaDAO will issue Sub Tokens.

Despite receiving support from over 80% of the community members, investment firm a16z strongly opposed the proposal. Prior to this, a16z held a large amount of MKR tokens, giving them voting rights and influence over the proposal's final approval.

a16z's partner Porter Smith once stated in a memo that he advocates for MakerDao reform to increase decentralization while not hindering growth and complying with current legal and regulatory environments, instead of breaking down the governance structure of the protocol into smaller units called MetaDAO.

"The core unit structure may already be decentralized in legal terms, and the introduction of MetaDAO may not change this situation, nor lead to more organizational flexibility from a strict legal perspective."

Not only the Endgame plan, but also the conflict between the founder of MakerDao and VCs has been completely exposed in 2022 and staged a governance war.

In June 2022, a governance vote was conducted on whether to approve the establishment of the Maker loan supervision core department (referred to as LOVE).

Approximately one-third (about 294,000 tokens, worth about $30 million) of the circulating MKR supply chose to approve LOVE, with the first three "yes" votes coming from VC firms a16z, Paradigm, and ParaFi.

The side that chose "no" ultimately won with about 60% of the vote, which is the camp of the founder, Rune.

In the Maker community, this struggle is described as a carefully planned coup d'état by a group of venture capitalists who eat meat without spitting out bones. In the end, with the joint efforts of Maker's founder and community members, they successfully defeated the VCs and achieved a comprehensive victory for decentralization.