MakerDAO recorded a fall in revenue in the third quarter of 2022 because of a drop in loan demand and a few liquidations amid high expenses. Its revenue fell to just over $4 million in Q3, down around 86% from the previous quarter.
Johnny_TVL, a Messari analyst and co-author of “The State of Maker Q3 2022”, highlighted a few liquidations and weak loan demand as the reasons for the drop in revenue. He said Ether and Wrapped Bitcoin (wBTC) performed poorly in the last quarter, with revenue from ETH-based assets falling 74% and revenue from BTC-based assets falling 66%. It should be noted that borrowers use these cryptocurrencies as collateral for loans of the Dai stablecoin. It provides some security from the volatility often seen within cryptocurrency markets.
The analyst pointed out the fall in the collateral ratio of MakerDAO – fall from 1.9 to 1.1 at the same time in 2021. Johnny said expenses are not so elastic as the report showed that expenses remained high in the quarter at $13.5 million, falling only 16% from the previous quarter.
Moreover, the MakerDAO has taken steps to boost the return on assets it holds as collateral. It started a proposal to invest $500 million in treasuries and bonds to provide the protocol with low-risk additional yield. Despite a drop in revenue, MakerDAO saw growth in Real World Asset (RWA) backed loans, which account for 12% of its total revenue after it successfully rolled out its largest RWA-backed loan to Huntingdon Valley Bank in Q3 2022. The loan involved the creation of a vault with 100 million DAI. It constitutes a new collateral type in the Maker Protocol to help generate additional revenue through vault stability fees associated with maintaining the vault and minting DAI.
