Title: What Will the Future of MakerDAO Look Like After the Clearing Out of Major VCs?

Author: TechFlow Cleaners, Deep Tide

As a DeFi OG, MakerDAO has returned to the center of the crypto stage this year with the narrative of RWA.

What we are seeing, however, is a peculiar sight: MakerDAO's core investor, Silicon Valley legendary venture capital firm a16z, continues to sell MKR, while at the same time, MakerDAO founder Rune Christensen continues to increase his holdings, buying MKR. This has led to a showdown between the project's founder and investors.

Since November 2022, Rune has been selling LDO to repurchase his own tokens, and in the last two instances, he used ETH and DAI to purchase MKR. As of July 17, his two addresses currently hold a total of 123,893 MKR, accounting for 12.6% of the total circulating supply of MKR (977,631 MKR).

Now, the selling off by major VCs has come to an end.

Recently, a16z finally sold off its remaining balance in MakerDAO. With this, a16z, Paradigm, and Dragonfly have finally unloaded their tokens, relieving MKR of the burden of VC holdings.

According to crypto researcher 0xRamen's statistics, these three VCs collectively held about 11.5% of Maker tokens, as follows:

a16z:

• Purchased $15 million in September 2018;
• Accounted for 6% of the total supply;
• Average price: $250.

Paradigm + Dragonfly:

• Purchased $27.5 million in tokens in December 2019;
• Accounted for 5.5% of the total supply;
• Average price: $500.

Dragonfly was the first to start selling its tokens in January 2021, with the majority of sales occurring in April 2021 when MKR was near its high of $6,000.

Results: The average selling price was $3,800 per MKR, which was 7.6 times their initial investment, demonstrating outstanding performance, and slow sales during price increases.

Paradigm was the last of the three VCs to start selling. Starting from March 2023, they sold 80% of their MKR tokens at prices above $800. The remaining tokens were recently sold at around $1,100.

Results: The average selling price was $900 per MKR, which was 1.8 times their initial investment, essentially selling at low prices.

Up to now, a16z has conducted three waves of sales:

• March 2021: Started selling 20% of their holdings;
• August to September 2021: Sold 26% of their holdings;
• July 2023: Sent the remaining 32,000 MKR to exchanges for sale.

Results: The average selling price was $1,800 per MKR, which was 7.2 times their initial investment.

a16z's 32,000 MKR, combined with Paradigm's recent sales, amounted to nearly $40 million in selling pressure. Despite this, the price of MKR has still risen by over 30%.

So, why are a16z and others eager to clear out their MKR holdings now?

One important reason is that a16z opposes MakerDAO founder's "Endgame" plan.

In June 2022, MakerDAO founder Rune proposed the Endgame Plan, which includes four main points: establishing complete decentralization of MakerDAO; increasing Dai liquidity and stabilizing its interest rates; enhancing protocol sustainability and reducing system risks; and improving decentralized governance and DAO operations.

Rune plans to decompose MakerDAO into smaller, supposedly more decentralized units called MetaDAO, and aims to incorporate real-world assets such as bonds and government securities from Maker reserves into MetaDAO, separating them from protocol decisions.

The initial Endgame plan is to launch six MetaDAOs, each of which will issue Sub Tokens.

Although this proposal received support from over 80% of the community members, investment firm a16z strongly opposed it. Previously, a16z held a large amount of MKR tokens, giving them voting rights and influence over the final approval of proposals.

a16z partner Porter Smith stated in a memo that they advocate for MakerDAO reform to increase decentralization while not hindering growth and compliance with current legal and regulatory environments, rather than decomposing the protocol's governance structure into smaller units called MetaDAO.

"The core unit structure may already be decentralized legally, and introducing MetaDAO may not change that, nor would it lead to more organizational flexibility from a strict legal perspective."

The conflict between MakerDAO founder and VCs has been fully publicized in 2022 and has played out as a governance war.

In June 2022, a governance vote was held on whether to approve the establishment of the Maker Loan Oversight and Venture Entity (LOVE).

Approximately one-third (about 294,000 tokens, worth about $300 million) of the circulating MKR chose to approve LOVE, and the first three "yes" votes were all from VCs, a16z, Paradigm, and ParaFi.

The "no" side ultimately won with about 60% of the votes, which was the camp led by founder Rune.

In the Maker community, this struggle has been described as a carefully planned coup by a group of risk-taking venture capitalists, and in the end, with the joint efforts of Maker's founder and community members, they successfully defeated the VCs and achieved a comprehensive victory for decentralization.

This description seems simple, but the governance war behind MakerDAO has also become a stumbling block to its development. Now that major VCs have cleared out, what will the future of MakerDAO look like?

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