U.S. Treasury Bonds Are So Appealing! MakerDAO Proposal to Purchase Another $750 Million, Generating Over $3 Million in Annual Revenue

The decentralized stablecoin issuer MakerDAO, after passing the governance proposal to invest $500 million worth of stablecoin DAI in U.S. Treasury bonds last year (MIP65), has generated over $2 million in revenue for MakerDAO since the proposal's implementation. Recently, the proposer of MIP65 has once again suggested increasing the investment amount, proposing to raise the initial $500 million to $1.25 billion.

MakerDAO to Invest Funds in Real-World Assets

MakerDAO's MIP65 proposal has been in effect since October last year. From October to December, approximately $500 million DAI will be invested in U.S. Treasury bonds, with 70% allocated to bonds with a maturity of 0-1 year, and the remaining 30% to bonds with a maturity of 1-3 years.

As of now, this initiative has generated around $2.11 million in stability fees income for MakerDAO, with an internal rate of return of about 2.18%. Although the returns are not exceptionally high, the funds were initially idle, and by combining them with real-world assets, MakerDAO not only earns additional income but also reduces the risk of asset concentration within the protocol.

Note: Bond returns are approximately $4.664 million, with various expenses totaling $2.55 million deducted, resulting in an overall income of about $2.11 million calculated until 1/31.

Recently, Monetalis, the asset management company behind the MIP65 proposal, suggested increasing the amount invested in real-world assets from the original $500 million to $1.25 billion, an increase of $750 million. This funding will be divided into 12 tranches of $62.5 million, to be invested every two weeks in U.S. Treasury bonds maturing in 6 months and continue in a cycle, aiming to create income for MakerDAO in a cost-effective and efficient manner.

The estimated annualized yield of this strategy is 4.5-4.6%, bringing MakerDAO approximately $1.3 million in income every two weeks: $750 million x 4.5% x 2/52 = $1.3 million.

Currently, MakerDAO seems to be benefiting from the returns of real-world assets, and partner Monetalis has received substantial advisory income of $0.985 million, accounting for 38% of MIP65 expenses. This is why there is an active proposal to significantly increase the scale of investment in real-world assets. However, this plan is still in the discussion stage and will require governance and voting execution by the community.