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MakerDAO’s Revenue Drops 86% on Ether and BTC Trouble Wrapped

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MakerDAO, the governing body for the Maker protocol, saw its revenue fall sharply in the third quarter of 2022, due to lower loan demand and fewer liquidations, while expenses remained high.

according to To an Oct. 13 tweet from Johnny_TVL, a Messari analyst and co-author of “The State of Maker Q3 2022,” Decentralized Autonomous Organization (DAO) Its revenue saw a slight drop to just over $4 million in the third quarter, down 86% from the previous quarter.

One result of this has been MakerDAO’s loss of net income in the first quarter since 2020.

MakerDAO Value Statement as of September 30, 2022. Source: Messari

The senior research analyst Al-Masari pointed out that the lack of liquidations and weak demand for loans are among the reasons for the decline in revenues.

Its biggest return, ether (ETH) and encapsulated Bitcoin (wBTC), underperformed last quarter, with revenue from ETH-based assets declining by 74% and revenue from BTC-based assets declining by 66%.

Borrowers use these cryptocurrencies as collateral for Dai loans (DAIA stable currency, which provides some safety from the fluctuations that often appear in the cryptocurrency markets at the expense of the interest paid on loans.

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Maker quarterly revenue by escrow code. Source: messari

The analyst also noted a decline in MakerDAO’s collateral ratio, indicating that the ratio had fallen to 1.1 from 1.9 at the same time last year.

However, the analyst said, “expenses are not very resilient,” as the report showed that expenses remained high in the quarter at $13.5 million, down just 16% from the previous quarter.

Related: Nexo-branded title withdraws $153 million in BTC wrapped from MakerDAO

Meanwhile, MakerDAO recently took steps to increase the return on the assets it holds as collateral, after it began proposing to invest $500 million in Treasuries and Bonds. MakerDAO believes that this will provide the protocol with an additional, low-risk return.

Another positive for MakerDAO is the growth in Real World Asset (RWA) backed loans, which now represent 12% of its total revenue after successfully rolling out its largest RWA backing. Huntingdon Valley Bank loan (HVB) in the third quarter of 2022.

The loan, which included the creation of a 100 million DAI vault, forms a new type of collateral in the Maker protocol, which could help it generate additional revenue through vault stabilization fees associated with vault maintenance and DAI minting.

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HVB is still able to benefit from this integration as it allows banks to effectively increase the statutory lending limit, and MakerDAO hopes that if all goes smoothly, other banks will follow HVB.