Makerdao’s Single Collateral DAI Shutters, Users Can Redeem Staked Funds in ETH

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MakerDAO’s ambitious Single Collateral DAI (SAI) project has been shut down after a community consensus favoring the move on May 12. 

R.I.P SAI

SAI was first launched in 2018 as a means of cheaper DAI pooling and user onboarding. The protocol was backed by ETH in locked funds, earning interest for users, and ensuring liquidity in the DAI ecosystem.

But DAI’s upgrade to a multi-collateral platform meant SAI had to go. In late-2019, the former protocol started accepting BAT and USDC alongside ETH, offering users with more interest-earning collateral options. The update even saw the launch of DAI Savings Rate, a protocol that pays out users in a variable percentage of staked funds. 

SAIs shutdown was planned and open to voting since early-2019, even as most users believed it to be a well-functioning system. But MakerDAO’s $4 million setback in March 2020, which saw “zero-bid” auctions as cryptocurrency prices fell 45 percent, intensified a move to a stronger protocol backed by multiple digital assets for collateral. 

As of today, all remaining SAI tokens were converted to ETH at market prices. However, the migration portal is still active for any conversions to ETH, apart from a link to withdraw any assets.

Derek, a core developer at Maker, explained how the conversion from SAI to ETH would work:

“[Sending] USDC to the MCD protocol, puts us in a unique position to allow USDC collateral holders to mint DAI, and exchange this Dai for Sai, thereby draining the Sai migration contract by burning Sai for ETH.”

He added the conversion would be complete once the newly-acquired ETH was staked on multi-collateral DAI to “pay down the original USDC position.”

Mixed Reactions

On March 30, 2020, the Maker Foundation started a now-concluded Governance Poll to determine whether to initiate the shutdown. Consensus hinged towards a SAI shutdown, and a “grace period” until May 12 was announced to users to transfer their positions to multi-collateral DAI. Services like Uniswap also helped users in this step.

A Signal thread reveals SAI users faced liquidity issues, with hundreds of thousands worth of ETH considered as “debt.” Comments called for a “quick shutdown” of SAI, even as some stated the protocol could continue functioning if risk issues were patched. 

Meanwhile, a thread on Reddit’s Ethereum sub-forum seemed to mourn the end of SAI. Users commented the protocol was resilient, save the March crash, and a “great concept” that could have found a place in a multi-collateral system.

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