MakerDAO Co-founder: UST and MIM are Ponzi schemes, will go to zero when the market returns to reality

MakerDAO co-founder Rune Christensen fired shots at the popular public chain Terra's stablecoin UST and the stablecoin MIM in the DeFi 2.0 concept, stating that they are both Ponzi schemes.

MakerDAO Co-Founder Speaks Out

Rune Christensen stated that UST and MIM are both Ponzi schemes. While people may see good returns from them, their design is not meant to withstand crises, and they will go to zero once the market returns to reality. He further urged developers to stop deceiving those who are seeking stability.

Supporters of UST or MIM, such as Terra founder Do Kwon, fired back below. Some supporters argue that MIM has $6 billion in collateral to support $3 billion worth of MIM, whereas stablecoin DAI provided by MakerDAO is backed by $17 billion in collateral to support $9 billion worth of DAI, with some collateral being DAI-USDC LP. In fact, the collateral ratio of MIM is higher. Why then call MIM a Ponzi scheme?

Difference in Collateral Quality is Key

However, the former MakerDAO risk manager responded stating that the quality of assets backing the two is completely different, with one being a multi-collateral borrowing and re-collateralizing, while the other mostly isn't. Although DAI also supports LP token DAI-USDC, it is not yVault tokens or collateral repeatedly borrowed from other protocols, so relying solely on collateral ratio is insufficient.

Online analysis of MIM collateral lending:

Currently, the DeFi 2.0 concept seems to compromise on decentralization and increase risk tolerance, such as protocols holding liquidity and high-risk collateral to offer users high interest rates and capital efficiency. Users should ideally not be harmed in stable market conditions, but Rune Christensen may be more concerned about the domino effect in adverse market conditions that could harm users.

Nevertheless, data shows that UST and MIM remain popular stablecoin options. According to CoinGecko, UST's market cap has surpassed DAI, with MIM following closely behind, indicating MakerDAO's tension towards these types of stablecoins. Rune Christensen also expressed that he does not want to argue with the community, as people have the right to choose, and he does not intend to condemn Ponzi schemes or high-risk assets.