DAI Stablecoin to be replaced by a new one. What you need to know

MakerDAO, the issuer of the largest algorithmic stablecoin DAI (capitalization is more than $5.3 billion, ranks third among all stablecoins on the crypto market) will implement a freeze function in its flagship stable token USDS, writes RBC Crypto.

The MakerDAO project will replace the DAI stablecoin with USDS and change its name to Sky as part of its rebranding. The issuance of new tokens will begin on September 18. The old and new tokens will remain in circulation and will exist in parallel. DAI can be exchanged 1:1 for USDS.

DAI is an algorithmic stablecoin. It is issued only against the collateral of crypto assets. The platform uses software smart contracts to automate operations. A smart contract is a computer program running on a blockchain that automatically issues tokens.

The new USDS stablecoin potentially introduces more centralized features, including the ability to freeze and restrict access for users in the UK and US, as well as any other groups of people.

While DAI, the project’s previous stablecoin, had no freezing features, being considered a decentralized cryptocurrency, plans to move to USDS have raised concerns in the crypto community.

Additional earnings

The freeze is likely necessary to safely provide users with passive income tools secured through the purchase of US government bonds, even if the trades are conducted on secondary markets. Cinneamhain Ventures partner Adam Cochran suggested that it would be impossible to safely achieve these goals without a freeze feature and a blocker for “unwanted” jurisdictions.

MakerDAO is known to invest in instruments that involve the purchase of US government bonds. In 2023, the amount of funds in such assets amounted to more than $1.1 billion, according to The Defiant. And in July 2024, the project presented a plan to invest in tokenized US bonds, which include BUIDL from BlackRock, Superstate and Ondo Finance, wrote Coindesk.

“The industry needs to make a compromise decision because it cannot take advantage of the U.S. trading system without the rules it sets,” Cochran said in X.

Fighting crime

Although some market participants believe that the measure to implement the freezing function is not only intended for additional income options. The freezing capabilities may have an impact on reducing the interest of criminals in using the stablecoin in the future.

“It’s definitely a step toward making it less attractive to criminals,” DL News quotes Michael Lewellen, head of solutions architecture at cryptosecurity company OpenZeppelin, as saying.

“This is a step that could prove decisive for the longevity and security of the ecosystem,” said Grzegorz Trawinski, an auditor at blockchain security firm Hacken.

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Source: Cryptocurrency

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