Home / Crypto Currency / Andreessen Horowitz Invests $15 Million in MakerDAO’s Algorithmic Stablecoin

Andreessen Horowitz Invests $15 Million in MakerDAO’s Algorithmic Stablecoin

marc andreessen


Andreessen Horowitz has made a major investment in a cryptocurrency project that algorithmically adjusts the supply of coins to keep their value stable.

The American venture capital firm, which has invested in crypto startups like CryptoKitties and OpenBazaar in the past, purchased 6 percent of the total supply of MKR tokens through its $300 million crypto fund, a16z. The fund committed a total of $15 million to the MakerDAO project and marked their investment as a “strategic purchase.” Holding MKR tokens will offer a16z the rights to govern MakerDAO and the Dai Credit System as it becomes the first decentralized autonomous stablecoin organization.

The Dai Credit System proposes to handle a decentralized stablecoin called Dai using smart contracts on the Ethereum blockchain. The self-governing ecosystem creates the durable token when people collateralize their assets to secure a loan. Dai becomes the central cryptocurrency to denote the loan amount that is equivalent to the USD value of the collateral deposit.

“A set of autonomous smart contracts coordinates and runs the Maker system, which means that anyone with an internet connection and collateral can create Dai without the need for trusted intermediaries,” a16z stated. “To ensure the system remains solvent, a network of market makers is incentivized to liquidate loans that risk becoming undercollateralized, thereby removing excess Dai from circulation and keeping the balance of Dai to collateral in check.”

Katie Haun, general partner at Andreessen Horowitz, said in a press statement that the future economy would belong to decentralized stablecoins. The former federal prosecutor, known to have led a probe into Mt. Gox and Silk Road, two of the most high profile criminal cases in the crypto industry’s history, recognized MakerDAO for being a “first mover and innovator” in the burgeoning stablecoin industry.

Haun’s confidence in the MakerDAO project could be attributed to the general inefficiencies of traditional cryptocurrencies, mainly price instability. In a16z’s recently-published blog post, Haun argued that crypto volatility had been to blame for their dismissive adoption rate. By particularly mentioning lending, one of the critical working areas of MakerDAO, Haun, along with co-author, Jesse Walden, said that making a long-term loan in bitcoin would not be practical because of two underlying risks such loans pose.

“First that the loan would be repaid, and second, whether the bitcoin would be worth more or less at the time the loan came due,” they wrote.

However, the Dai token is itself backed by ether (ETH), a cryptocurrency that has lost 80 percent of its value against the U.S. dollar this year. To ensure the pegging does not rely on only one cryptocurrency, MakerDAO plans to introduce a diverse basket of collateral types, which would include tokenized equities and fiat-backed stablecoins.

Featured Image from TechCrunch/Flickr

Follow us on Telegram or subscribe to our newsletter here.
Join CCN's crypto community for $9.99 per month, click here.
Want exclusive analysis and crypto insights from Hacked.com? Click here.
Open Positions at CCN: Full Time and Part Time Journalists Wanted.
Read more

Check Also

Bull Gone: Bitcoin Price Forming Doji to Signal Potential Trend Reversal

Bitcoin price on Tuesday reached a session high on Coinbase at $3,586 but remained in the fears of a potential reversal action overall. Ahead of the US session so far, bitcoin’s opening and closing positions today have remained very close to one another, as indicated by the small candlestick. Called a Doji candlestick formation, this The post Bull Gone: Bitcoin Price Forming Doji to Signal Potential Trend Reversal appeared first on CCN

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Disclaimer: Trading in bitcoins or other digital currencies carries a high level of risk and can result in the total loss of the invested capital. theonlinetech.org does not provide investment advice, but only reflects its own opinion. Please ensure that if you trade or invest in bitcoins or other digital currencies (for example, investing in cloud mining services) you fully understand the risks involved! Please also note that some external links are affiliate links.