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MakerDAO Is The Most Expensive DeFi Protocol To Run, Requires Millions

Dalmas Ngetich 2023-06-01 23:45

MakerDAO, a decentralized money market on Ethereum for users to borrow and lend assets, including ETH, spends $27.66 million annually to keep the protocol running, DeFiLlama data on May 31 shows.

This sum of money is utilized to cover expenses such as taking care of the 97 individuals responsible for maintaining the lending and borrowing protocol and ensuring that the code operates smoothly without any issues.

MakerDAO Has Big Expenses

As of May 31, MakerDAO had spent slightly over $10.6 million in DAI to meet mounting expenses in 2023 alone. DAI is the algorithmic stablecoin minted and managed by MakerDAO, tracking the value of the USD.

<a href=DAI Chart On May 31| Source: DAIUSDT On OKX, Trading View--showing MakerDAO annual expenses" width="1225" height="595">

It differs from other popular fiat-pegged stablecoins like the USDT or BUSD, minted by a centralized entity demanding each token in circulation to be backed by an equal amount of fiat currency, primarily the USD.

Thus far, $10.6 million in DAI has been spent. Of this amount, 2,048,873 DAI was allocated for Protocol Engineering, and 15% of the total expenses were used for Sustainable Ecosystem Scaling.

385,875 DAI has been used for strategic finance, 537,448 DAI for growth, and 811,704 DAI for Oracles. Another 903,459 DAI has gone to developing and improving the user interface.

Employees get remunerations and other benefits from funds allocated to the Protocol Engineering Unit. The current monthly budget is 624,165 DAI and is forecasted to drop to 475,089.13 DAI.

Specifically, MakerDAO has approved 396,895.13 DAI monthly for employee compensation and benefits. Only 2,072 DAI has been consumed by travel and other entertainment.

However, besides expenditure on employee salaries and additional benefits, the DAO approved 75,250 DAI as payment for professional services.

The Protocol Engineering Unit doesn’t work with an external auditor. For transparency, they must submit an Expense Report for the MakerDAO community to assess and approve monthly. 

Under “Development and User Interface,” software expenses have notably increased, exceeding the forecasted amount. In the last month, MakerDAO spent 8,635.78 DAI to keep their servers at Amazon Web Services operation, exceeding the budget by 2,976.68 DAI.

LidoDAO Requires $16.81 Million Every Year

Funds used to keep MakerDAO running is roughly $10 million more than what’s required to maintain Aave and Lido. Data shows that Aave and Lido need $19.2m and $16.81m operational.

The difference could be because of headcount since MakerDAO has 97 recognized employees while Lido has 83. Aave employee headcount remains private.

Still, Lido, a staking liquidity protocol, is the largest DeFi protocol by total value locked (TVL). As of May 31, LidoDAO had a TVL of $13.13 billion, twice that of MakerDAO, and nearly triple the TVL of Aave, which stood at $5.33 billion.