Crypto analysts AlfaBlok has published a study that claims the number of circulating Dai volition need to increase by more than 70% each yr in order for MakerDAO (MKR) to maintain its electric current capitalization of close to $350 million.

According to AlfaBlok's modelling, published May 5, the supply of Dai will demand to exceed several trillion by 2040 — up from the current supply of roughly 100 million.

The analysts said they had conducted "a fundamental analysis on this decentralized business concern based on discounted earning flows" and concluded:

"The bottom line is that the electric current valuation implies very aggressive growth rates, of over 70%+ Dai apportionment increase per year reaching trillions of Dai in circulation, in guild for current valuation to make sense."

DAI will demand supply of several trillion

AlfaBlock said that this is possible, just challenging:

"Demand for Dai has clearly been there so far. So much and so, that it's been difficult to keep the peg shut to $one. The big challenge remains to increase in supply in a structural way that allows it to reach hundreds of billions of Dai in apportionment over the next decades."

In order to accomplish a circulating supply that large AlfaBlok speculates that real estate, presumably tokenized, may need to get an accepted form of collateral.

"At that place is over $170T worth of real manor in the earth today, and so this should exist mechanically feasible," the report states.

Alternatively, the report discusses the possibility of the protocol breaking its peg and operating with under-collateralization.

Under-collateralization triggers debt sale

MakerDAO is the decentralized finance protocol that generates the Dai (DAI) stablecoin.

DAI are created when a user deposits Ethereum (ETH), Basic Attending Token (BAT), USD Coin, (USDC), or Wrapped Bitcoin (WBTC) into a Maker smart contract.

The deposited funds are entered into a collateralized debt position called a 'vault,' with a sum of DAI equal to that of the deposited crypto assets minus a maintenance margin being created. Users are then able to earn interest or lend funds from their Vault.

The collateralized crypto can just be accessed after the respective Dai are repaid and destroyed, and can be auctioned off to recapitalize the Maker system should its value fall beneath that of the outstanding loan.

AlfaBlock concluded the written report by proverb that Maker was breaking new ground for DeFi projects:

"MakerDAO is a very of import project for DeFi - non only is information technology a critical Lego piece, it likewise is a model for how DeFi DAO-based orgs can operate. We're all going to learn much from how this will all unfold."