A significant investment has been made by Andreessen Horowitz in a project of cryptocurrencies which will use the algorithm to adjust and monitor the supply of crypto coins so that the value of the same remains stable.
With the $300 million crypto investment, a16z, the American firm of venture capitalists, which previously invested in other crypto-startups like OpenBazaar and Cryptokitties, invested and owned 6% of the entire MKR tokens supply. They marked their $15 million purchase as a strategic one. This investment will help in having a governing right on Maker DAO and Dai Credit System. This organization will be first to be a decentralized autonomous enterprise for stable coin.
The notion of Dai Credit System is to organize a decentralized stable coin which is known as Dai. It will be done by using ETH Blockchain smart contracts. This platform of self-monitoring will help in building durable tokens when users try to collateralize assets for having a mortgage loan. Dai will become the main cryptocurrency to measure and indicate the amount of credit which will be equal to the US dollar amount of collateral assets submitted.
The a16z made a statement regarding this entire process stating that anyone with a connection of internet and usable collateral can create Dai without any reliable intermediaries. This will be enabled by the bunch of autonomous smart-contracts which will run and link the Maker system. He also commented that there would be a connected group of market makers who will be paid incentives for loan liquidation process if the risk of the loan becomes higher than its collateral security. This, in turn, will help in removing the oversupply and creation of Dai and maintain the circulation of the same in control as per the amount of collateral.
Katie Haun, the general partner at Andreessen, stated that decentralized stablecoins are the future of the economy. Being the federal prosecutor in the past who explored two of the major high profile cases of criminal activity in the crypto world – Silk Road and Mt. Gox, Haun has recognized MakerDao as the first enterprise to step forward into the prospering stablecoin sector.
He has shown to have great faith in the MakerDao’s project majorly because of the usual inefficiencies that plague the conventional crypto world, especially with the instability in the price movements. The recent blog post by a16z, have arguments from Haun regarding the volatility of the cryptocurrencies and the reason portrayed is mainly adoption rate which is being ignored. Haun with Jesse Walden, co-author, mentioned lending in particular and said the MakerDao is working primarily on it. They also stated that long-term Bitcoin loans would not be feasible practically because of two significant discrepancies.
Firstly, repayment of the loan is unavoidable, and secondly, the price that would fall or rise for Bitcoin during loan maturity is unknown.
In whatever way or manner, Dai tokens are Ethereum backed, the crypto which lost 4/5th of its percentage to US dollar. To make sure that only one crypto is not used for pegging, MakerDAO is planning to introduce a complete basket with lots of diversity according to the types of collateral, and this would include stablecoins which are backed by Fiat money and equities which are tokenized.