Maker, Now Rebranded to Sky, Draws Ire From DeFi Community on Controversial Stablecoin Change

It’s been noted that the newly introduced token, USDS, contains a code segment which enables the issuer to lock or freeze the associated assets from a distance, according to various observers.

These prominent centralized stablecoins, such as Circle’s USDC and Tether’s USDT, have a built-in mechanism that allows them to block assets linked to illegal activities upon the request of government agencies. Last week, for instance, Tether assisted the U.S. Department of Justice in seizing $5 million of USDT for the benefit of fraud victims.

On the other hand, this characteristic contradicts the decentralized philosophy that MakerDAO established at its inception, causing unease among advocates of decentralized finance (DeFi).

As an analyst, I can confirm that Rune Christensen, one of the founders of MakerDAO, acknowledged the presence of a “freeze” function within their system’s coding. However, he clarified that this feature will not be activated upon the token’s launch next month. Instead, it remains an option that may potentially serve as a safeguard in future circumstances.

He also added in a separate post that “upgrading to USDS is optional, and it is only USDS that will have a freeze function.”

“Dai is an immutable smart contract and cannot be altered,” he said.

According to AJ Scolaro, a senior analyst at the cryptocurrency research company Messari, the worries about this particular aspect are exaggerated because it’s already known information and essential for a US Treasury-backed stablecoin to achieve widespread usage.

“The sudden USDS fud [fear, uncertainty, despair] is funny,” he said. “We knew about the freeze function several months ago; it’s 100% necessary to safely scale an RWA-backed stablecoin.”

He also mentioned that an effective decentralized stablecoin should not only be managed by its users, but also capable of adhering to the laws of various jurisdictions. In other words, PureDai aims to be a suitable choice for those who are hesitant, providing a reasonable alternative.

Previously, Christensen proposed the idea of creating a stablecoin called PureDAI, which would be entirely supported by cryptocurrencies and function in a decentralized manner.