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MakerDAO partners with GnosisChain: Revealing the strategic intent behind it.

Haotian

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Why is Ethereum Layer 2 not the optimal solution for MakerDAO?

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Original author: Haotian

Originally thought that MakerDAO's Newchain plan had "cooled down" under a wave of public opinion, but unexpectedly, Spark Protocol, a lending protocol under MakerDAO, passed Gnosis Chain's proposal a day ago, and even called it the Kick-off of a multi-chain strategy. It seems that MakerDAO's Endgame expansion, which may be the road to "defection," has officially begun?

GnosisChain is a mysterious entity. According to official explanations, it is an independent public chain built on xDAI, equivalent to EVM chains such as BSC and Avalanche that aim to kill Ethereum. During the critical period when everyone was discussing MakerDAO's escape from Ethereum, Spark Protocol chose to deeply bind with an obscure competitive chain of Ethereum, fearing that Vitalik would once again crash the market by dumping MKR.

So, what are the motivations behind the partnership between Spark Protocol and GnosisChain? Why isn't Ethereum layer2 the optimal solution for MakerDAO? Why doesn't MakerDAO implement a multi-chain strategy like AAVE? Next, I will try to briefly analyze these questions for your reference:

Why choose Gnosis?

It's not so much that MakerDAO chose Gnosis as it is that Gnosis successfully rose to power through the entanglement between MakerDAO and Ethereum. According to DefiLlama data, Gnosis has a TVL of only $77 million across 50 protocols on the entire chain, while Spark Protocol has a TVL of $427 million on just one protocol on Ethereum. It seems like MakerDAO's choice of Gnosis is a bit of a self-deprecating move to cater to them. So why Gnosis? Simply put, Gnosis was originally named xDai Chain with the goal of using the world's first algorithmic stablecoin DAI, being compatible with and expanding Ethereum, and attracting Ethereum users, especially MakerDAO users.

It is not difficult to see that Gnosis is a chain designed for MakerDAO (riding on it). Now that the backup has finally become the mainstay, is it just because it has fast transaction speed, low fees, and good cross-chain interaction? I believe that this is a signal released by MakerDAO's execution of the Endgame plan: unwilling to be trapped in the framework of Ethereum. Gnosis is included in the strategic plan, which really feels like "when immortals fight, mortals gain."

Ethereum Layer2: Why is it not the optimal solution?

In my previous article, I analyzed that Ethereum's layer2 expansion is a limited expansion (you can refer to the highlights article on the homepage). As the father of DeFi, MakerDAO has a bit of pride and arrogance to break through higher performance, limited by the carrying capacity of the mainnet rollup contract. However, lending and borrowing and other digital banking businesses are low-frequency scenarios, and performance is obviously not the core consideration. MakerDAO's ambition is to have a secure and controllable chain with the power to make hard forks. To achieve this fundamental goal, it cannot rely too much on layer2.

In fact, if we look at the layer2 development strategy of its competitor AAVE, we can also find some reasons why MakerDAO dislikes layer2. AAVE has deployed 9 chains, and the majority of TVL is still on layer1 main chains. Arbitrum only has $145 million, while GMX's TVL is $422 million in the same period. Although it is somewhat subjective to define that layer2 is not suitable for the development of lending protocols based on this, considering the sidechain nature of Layer2, which is biased towards centralization, and the core position of lending in layer1 chains, it is not difficult to see that Layer2 cannot bear the grand vision of lending platforms.

And, to add another piece of news, after MakerDAO announced a deep collaboration with Gnosis, it also quietly proposed a deployment to zkSync. MakerDAO did not have much action in the two major OP-Rollup camps, Arbitrum and Optimism. Perhaps this can be interpreted as MakerDAO not valuing the security of OP-Rollup? If choosing layer2 and only choosing the ZK-Rollup track of zero-knowledge proof, it is difficult not to associate it with this. Even I have seen many people calling for MakerDAO to be able to land on the Base chain in the Maker forum. It may be unknown, but with MakerDAO's current security requirements, it is a bit difficult.

MakerDAO's multi-chain strategy endpoint is what?

Based on current data, MakerDAO's CDP has a TVL of up to 4.68 billion US dollars, surpassing AAVE's deployment on 9 chains. If we add Spark Protocol's 427 million US dollars, MakerDAO is definitely the leader in DeFi. In AAVE's TVL of 4.56 billion US dollars, non-Ethereum chains only account for 500 million, indicating that AAVE has already demonstrated the potential of multi-chain expansion for MakerDAO. From a data perspective, the temptation of a comprehensive multi-chain strategy is not significant, and MakerDAO's multi-chain approach is definitely more than just protocol coverage on various chains.

Because if MakerDAO simply wants to pursue a multi-chain strategy, Avalanche, Polygon, and other layer1 solutions are also good options. But by choosing an unknown backup chain and ignoring well-known layer1 and layer2 solutions, isn't their intention unclear? It's precisely because of Gnosis' affinity with MakerDAO and their ability to satisfy MakerDAO's multi-chain expansion strategy without sacrificing control that makes them a good fit.

Of course, for the Gnosis chain, this will be a good thing. After all, this is MakerDAO's embrace. Gnosis' layout on RWA may also be a key attraction for MakerDAO. However, overall, Gnosis is just a piece on MakerDAO's chessboard. I roughly looked at Endgame and actually planned five stages. MakerDAO's multi-chain, cross-chain, and even the launch of the NewChain application chain all confirm one thing: MakerDAO does not want to be limited by any single chain. In the future, it wants to seamlessly integrate into various financial application scenarios and ultimately achieve a highly autonomous financial service community composed of multiple SubDAOs.

Although born on Ethereum, developed on Ethereum, and flourishing on Ethereum, Vitalik and everyone hope that MakerDAO will always focus on Ethereum. However, the fact proves that while Ethereum is solid as iron, MakerDAO is fluid as water, and MakerDAO does not want to be limited by any framework.

Finally, let me share some obscure knowledge. The entrance to MakerDAO's official app has been changed to Spark Protocol, which is obviously to redirect users to Spark. If users want to participate in CDP lending, they have to find Oasis trade, but Oasis changed its name to Summerfi a month ago. Not only did they change their name for no reason, but the entrance is also very difficult to find for ordinary people.