MakerDAO, the decentralized autonomous organization behind the creation of Dai ($DAI), the first Ethereum-based decentralized stablecoin, has entered into a partnership with Gelato Network, a blockchain automation infrastructure developer.
The partnership sees the integration of Gelato Network’s G-UNI Uniswap V3 as collateral into MakerDAO’s protocol, allowing users token holders to use wrapped Uniswap V3 positions for minting DAI. This integration means that traders can now leverage these liquidity positions, at the same time, it allows developers to make use of Uniswap V3 liquidity positions as collateral in a decentralized finance project such as MakerDAO.
“MakerDAO is a pioneer in this space, and integrating the G-UNI token within the protocol is a monumental achievement for Gelato, and will greatly benefit the larger DeFi sector. The USDC / DAI G-UNI pool is only the first step, as we plan to explore integrations with more potential pools in the near future.” shared Hilmar Maximilian Orth, co-founder and Legendary Member of Gelato Network.
According to Sam MacPherson, Protocol Engineer at MakerDAO, the pool should “initially start at a test debt ceiling of 10M” and notes that once it passes the testing phase, it could potentially become the largest pool in Uniswap V3. MacPherson further explained how Gelato Network’s G-UNI was a response to Uniswap V3’s singled out support for NFT positions.
We opted to start with the DAI-USDC pool as we do not need to worry about moving the LP ranges. Uniswap V3 bucket granularity is approximately the range enforced by the PSM. This means we don’t need to worry about actively managed LPs. Everyone is approx in the same bucket.
3/8— Sam MacPherson (@hexonaut) September 21, 2021
The novel solution to this impasse in decentralized finance quickly garnered praise. Hayden Adams, CEO of Uniswap Labs and inventor of the Uniswap Protocol, described the integration as “Money legos in action.”
🤯 Incredibly cool integration@MakerDAO is using a custom @Uniswap v3 USDC/DAI position (ft @gelatonetwork) to replace the PSM (peg stability module) and earn LP fees, which will be used to buy and burn MKR!
🚀 Money legos in action https://t.co/yCx2gbFmhA— hayden.eth 🦄 (@haydenzadams) September 21, 2021
The integration indeed comes as a substantial development for the decentralized finance sector, effectively positioning the USDC / DAI pair on Uniswap on the top spot for liquidity among active decentralized exchanges. As MacPherson explained, the integration of G-UNI into MakerDAO will enable liquidity providers (LPs) from Uniswap V3 to earn up to 100x of their usual fees earned by leveraging their initial liquidity position on Uniswap v3’s USDC / DAI pool. Now, with the integration, LPs can do so without the requisite up front capital, essentially replacing the peg stability module (PSM) from Uniswap V3.
Gelato Network is the first protocol to create automated smart contract executions on Ethereum and other compatible blockchains. Its integration with MakerDAO as collateral will potentially shift parts of the current 54% USDC collateral held on MakerDAO and allows this to be utilized in G-UNI pools, causing a reduction in the individual counter-party risk of encountering frozen assets on the MakerDAO protocol.
The Gelato Network has several integrations and partnerships in its product roadmap, with upgraded functionality and use cases that would build out the underlying infrastructure for reliable and trustless automation flows on top of the Ethereum standard. MakerDAO, meanwhile, has disclosed that it has additional initiatives to follow through this latest integration, with plans to onboard the Aave D3M, Lido stETH vaults, Institutional Vaults, stETH/ETH Curve LP tokens, fixed-rate vaults, as well as additional stablecoins and real world assets.