The Incident/Update
As October 2019 entered its third week, the decentralized finance ecosystem found itself at a crossroads defined by two competing visions of stablecoin supremacy. MakerDAO, the Ethereum-based lending protocol responsible for creating the first decentralized stablecoin, had just announced that its long-awaited Multi-Collateral DAI upgrade would go live on November 18, 2019. The announcement, made during Ethereum’s Devcon 5 conference in Osaka, represented the culmination of over two years of development and governance deliberation. Meanwhile, Tether (USDT) continued to dominate global cryptocurrency trading volume, processing $3.8 billion more in daily volume than Bitcoin itself on October 20.
The stablecoin landscape in late October 2019 was a study in contrasts. On one side stood Tether, the centralized stablecoin that had become the backbone of crypto trading despite persistent questions about its dollar reserves. On the other side was DAI, the decentralized alternative backed by Ethereum collateral, preparing for a transformative upgrade that would fundamentally alter its risk profile and utility. Between them sat a small but growing cohort of competitors including USDC, PAX, and BUSD — all vying for a piece of the rapidly expanding stablecoin market.
The backdrop for these developments was a cryptocurrency market still reeling from a sharp sell-off. Bitcoin had dropped from near $10,000 to approximately $8,222 over the preceding weeks, with the broader market capitalization hovering around $220 billion. Ethereum traded at $175, down 5.4% over the prior week. The Crypto Fear and Greed Index registered 37 — a state of fear, though significantly improved from the extreme fear reading of 11 recorded in August.
Technical Post-Mortem
MakerDAO’s Multi-Collateral DAI upgrade was technically ambitious. The existing Single-Collateral DAI (SAI) system allowed users to open Collateralized Debt Positions (CDPs) by locking ETH as collateral and minting DAI against it. The multi-collateral version expanded this model to accept multiple collateral types, starting with Basic Attention Token (BAT) alongside ETH, with plans to add additional assets through governance votes.
The upgrade introduced several key technical innovations. First, CDPs were renamed to Vaults, reflecting their expanded functionality. Second, the DAI Savings Rate (DSR) was introduced, allowing DAI holders to earn a yield simply by locking their tokens in a smart contract — a feature that would become a cornerstone of the protocol’s value proposition. Third, the migration from SAI to DAI required a carefully orchestrated process in which existing single-collateral positions would be gradually transitioned to the new system.
The technical complexity of the migration cannot be overstated. Every CDP in the system — and there were thousands — needed to be accounted for in the transition plan. The MakerDAO team developed migration contracts that would allow users to seamlessly convert their SAI positions to multi-collateral DAI, but the process required careful coordination between the protocol’s governance apparatus, development team, and the broader community of CDP users. Any failure in the migration logic could result in collateral being locked or improperly valued, potentially triggering a cascade of liquidations.
At the same time, Tether’s technical infrastructure was undergoing its own evolution. Originally launched on the Bitcoin blockchain via the Omni Layer protocol, USDT had increasingly migrated to Ethereum’s ERC-20 standard. By October 2019, the ERC-20 version of USDT had surpassed the Omni version in transaction volume, reflecting the broader shift of crypto activity toward Ethereum’s smart contract platform.
Governance Impact
MakerDAO’s governance community was deeply engaged in the multi-collateral transition throughout October 2019. The MakerDAO community had debated collateral onboarding criteria, risk parameters, liquidation ratios, and stability fees for months. Each new collateral type required its own risk assessment, conducted by the MakerDAO risk team and reviewed by MKR token holders through on-chain governance votes.
The introduction of the DAI Savings Rate added a new governance lever to the protocol. MKR holders could now adjust the DSR to influence DAI demand — raising the rate to encourage holding and reduce circulating supply, or lowering it to stimulate spending and liquidity. This mechanism gave MakerDAO a monetary policy toolkit that in many ways mirrored central bank interest rate decisions, albeit executed through decentralized governance rather than committee deliberation.
The governance dynamics surrounding the multi-collateral launch also highlighted a growing tension within DeFi: the influence of large token holders on protocol decisions. MKR token distribution was relatively concentrated, with a handful of large holders controlling significant voting power. This concentration raised questions about the degree to which MakerDAO’s governance was truly decentralized versus being an oligarchy of early adopters and institutional investors.
TVL Shifts
MakerDAO’s total value locked in October 2019 exceeded $400 million, making it the dominant DeFi protocol by a wide margin. The protocol accounted for roughly 80% of all value locked across the emerging DeFi ecosystem. At the time, the total DeFi TVL across all protocols stood at approximately $500-600 million — a figure that would grow to over $100 billion within two years.
The DAI supply in circulation hovered around 85 million tokens in October 2019, each theoretically pegged to $1. The stablecoin had maintained its peg with reasonable success throughout the year, though periods of market stress — such as the September 24 flash crash — had temporarily pushed DAI slightly below its target. The multi-collateral upgrade was expected to strengthen the peg by diversifying the collateral base beyond ETH alone, reducing the protocol’s exposure to any single asset’s volatility.
Tether, by contrast, had a circulating supply of approximately $4.1 billion in October 2019 — nearly 50 times larger than DAI’s. USDT captured the majority of global trading volume across virtually every digital asset pair, with its 24-hour volume exceeding $19 billion on some days. The volume disparity between Tether and DAI illustrated the vast gulf between centralized and decentralized stablecoins at this stage of the market’s evolution.
Long-Term Prognosis
The October 2019 period marked the beginning of a new chapter in the stablecoin wars — one that would dramatically reshape the competitive landscape over the following years. MakerDAO’s multi-collateral DAI launch in November 2019 would prove successful, establishing a template for how decentralized stablecoins could evolve beyond single-asset collateralization. The DAI supply would eventually grow from tens of millions to billions of dollars, cementing its position as the dominant decentralized stablecoin.
However, the competitive dynamics that were visible in October 2019 would intensify far beyond what most participants anticipated. Tether’s dominance would not fade — instead, USDT supply would explode to over $80 billion, becoming the most widely used stablecoin in crypto. USDC, launched just one year earlier, would grow into a $30+ billion stablecoin backed by regulated financial institutions. And new entrants like FEI, FRAX, and algorithmic stablecoins would emerge to challenge both the centralized and decentralized models.
For DeFi specifically, the stablecoin question would become existential. Every lending protocol, every decentralized exchange, every yield farming strategy ultimately depended on stablecoins as the unit of account and medium of exchange. MakerDAO’s November 2019 upgrade was not just a technical improvement — it was the moment when DeFi began building its own monetary foundation, independent of both traditional banking and centralized crypto infrastructure. The stablecoin wars of October 2019 were just the opening salvos in a conflict that would define the future of decentralized finance.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research before making any investment decisions.
USDT doing $3.8B more daily volume than BTC and people still called it a ‘stablecoin risk’. the market had already voted
USDT doing more volume than BTC and still getting called a risk in 2019. the tether FUD aged poorly honestly
darkfork_ tether doing 3.8B more than BTC daily and people were still calling it a risk. market voted with volume, the FUD was always political
multi-collateral DAI was the real unlock. single collateral was too fragile for serious DeFi
Nov 18 launch date. remember the governance debates about which collateral types to whitelist? those were the days
the governance debates about BAT and other collateral types were heated. the community was genuinely split on risk appetite
single collateral DAI was held together with scotch tape. multi-collateral launch saved the entire maker ecosystem
degen_timelord single collateral SAI was literally pegged with hope and duct tape. the MCD launch with BAT and USDC collateral options saved maker from a black swan
Devcon 5 in Osaka was peak Ethereum energy. so many shipped features came out of that week
multi-collateral DAI launching at Devcon 5 while ETH was under $200. that upgrade quietly built the foundation for the entire DeFi summer that followed