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Multi-Collateral Dai: What’ll it look like and how will it affect you?

Multi-Collateral Dai: What’ll it look like and how will it affect you?

As you probably know, at the moment you can only use ETH as collateral for Maker CDPs. You’re probably wondering if and when you’ll be able to use different tokens. This change may be coming sooner than you think as Maker progresses towards Multi-Collateral Dai. And if you’ve been around long enough, you’ve been hearing about Multi-Collateral Dai (MCDai) for years now.

If you haven’t read our previous articles about opening a CDP and MakerDAO’s stability fee, I’d recommend you go ahead and read those to get caught up to speed. Also, you might check out Maker’s recent blog post, which aims to satisfy your curiosity about the when, where, and how of MCDai. In this article, we’d like to explore the recent update to MakerDAO roadmap.

Multi-collateral Dai

Sneak peek of the MCDai CDP portal

Are you technically inclined and can’t wait for MCDai? You can actually play around with it on the Kovan testnet today. However, be aware that the software remains a work-in-progress. Still, you can get a feel for it. As the Maker team puts it: “In terms of existing functionality, it is currently limited to opening new CDPs and viewing what a CDP would look like — however, it currently uses dummy data.” And if you’re interested in more updates, you are in luck: the Maker team plans to roll out frequent updates and guides on how to participate in Multi-Collateral Dai. Expect increased functionality soon!

The rest of you probably want me to get down to brass tacks. How will this change affect Maker CDPs and the price of Dai?

Multi-Collateral Dai could help solve the community’s problems

Most notably, Dai’s value has started to drift lower than the US dollar. As a result, the stability fee on your CDP has been raised. In a nutshell, that change is intended to incentivize CDP holders to burn Dai to pay down their CDPs. Thus, you should help bring the price of Dai back to $1 by burning your extra Dai. However, as Dai’s price continues to resist returning to its USD peg, some members of the MakerDAO community worry that only MCDai will reestablish the peg.

Certainly, a higher stability fee should theoretically push users away from opening CDPs. But when you consider that many CDP owners generate Dai to go long on Ethereum, things start to become clearer. Simply put, if you think ETH might double in value, you probably wouldn’t think twice about paying a +7.5% annual fee.

And here lies the problem that MCDai might help with. When Multi-Collateral Dai gets going, you’ll likely see all sorts of tokenized assets added to Maker including fiat, precious metals, and maybe even property. Once you’re able to deposit a variety of assets as collateral, the risk becomes less concentrated, and Dai’s price won’t rely solely on the collective optimism of ETH holders.

What do you think?

Excited about MCDai? Worried about Dai’s peg? Come share your thoughts in the Concourse Open Community Discord or talk to us on Twitter!