Maker’s Rebranding as Sky and the Launch of USDS: A Controversial Stablecoin

Maker’s Rebranding and Launch of New Stablecoin USDS

In a recent move, Maker, now rebranded as Sky, unveiled a new version of its widely recognized stablecoin, DAI, valued at $5 billion. However, the reaction from the cryptocurrency community has been less than enthusiastic. The newly introduced token, named USDS, has sparked concerns due to a particular piece of code that grants the issuer the ability to freeze the asset remotely, a feature that observers have pointed out.

This freeze function is not novel; it exists in the largest stablecoins from centralized issuers, including Circle’s USDC and Tether’s USDT. These entities often exercise this capability to freeze assets associated with illegal activities upon request from government authorities. For instance, Tether recently assisted the U.S. Department of Justice in seizing $5 million worth of USDT linked to fraud victims.

Such capabilities, however, clash with the decentralized ethos that MakerDAO championed at its inception, causing unease among many decentralized finance (DeFi) advocates. Rune Christensen, the co-founder of MakerDAO, acknowledged the presence of the freeze function in USDS. He clarified that this option is embedded in the code but will not be activated upon the token’s launch next month. Furthermore, he emphasized that “upgrading to USDS is optional, and only USDS will possess a freeze function,” reassuring users about the immutability of DAI, which cannot be altered.

AJ Scolaro, a senior analyst at the crypto research firm Messari, asserted that the concerns surrounding the freeze function are largely exaggerated. He noted that the feature has been publicly disclosed for months and is essential for a stablecoin partially backed by U.S. Treasuries to achieve widespread acceptance. “The sudden USDS fud [fear, uncertainty, despair] is amusing,” he remarked. “We have been aware of the freeze function for several months; it’s crucial for securely scaling a real-world asset (RWA)-backed stablecoin.”

Moreover, Scolaro expressed that a prominent decentralized stablecoin should be governed by its users while also being able to comply with existing legal frameworks. He pointed out that “PureDAI will serve as a reasonable alternative for skeptics.” Christensen has previously hinted at the development of a purely crypto-backed, decentralized stablecoin, tentatively named PureDAI.