Maker made history in 2017 as the first blockchain-based protocol to launch a major automated cryptocurrency-lending platform, helping to initiate a boom in what’s known as decentralized finance, or DeFi.

Now Maker is paving the way for what might become another source of growth in the now-$60 billion DeFi industry: lending against trillions of dollars of “real-world” assets like residential properties, in competition with banks and other financiers. In this case, “real world” refers to collateral other than cryptocurrencies. Even the giant U.S. bank Citigroup is writing about Maker.

Holders of the project’s maker (MKR) tokens have been rewarded with a 55% price increase in the past week, the second-most among the 46 cryptocurrencies with a market capitalization of at least $3 billion. The token has gained nearly six-fold this year to a market value of about $4 billion.

The MKR token’s price surged above $4,000 on Wednesday for the first time as members of the MakerDAO community – the decentralized organization that governs the project – passed an executive vote to allow an ERC-20 token representing an ownership stake in a pool of real estate assets as collateral.

The proposal, passed April 14 and executed two days later, allows the Tinlake blockchain protocol to serve as a bridge between New Silver, a real estate loan company, and MakerDAO. Two tranches of interest-bearing tokens will be issued under the Ethereum blockchain’s ERC-20 token standard – DROP and TIN – against non-fungible tokens (NFTs) based on individual deposits from New Silver.

“This is DeFi taking on traditional finance,” Sébastien Derivaux, a community member of MakerDAO, told CoinDesk in an email. Initially, the project will finance loans to renovate houses in the U.S., he said.

Maker, known for its stablecoin dai, is the biggest DeFi protocol, with $9.5 billion of system collateral, according to the website DeFi Pulse.

The MKRs are categorized as “governance tokens” for MakerDAO, giving holders voting rights to amend the protocol’s rules as well as a stake in the project’s success.

There’s a built-in incentive for the community not to approve loans against the dodgiest collateral.

“Should the collateral in the system not be enough to cover the amount of dai in existence, MKR is created and sold onto the open market in order to raise the additional collateral,” according to a November 2017 article by Gregory DiPrisco, identified on the MakerDAO website as head of business development for the Maker Foundation. “This provides a strong incentive for MKR holders to responsibly regulate the parameters.”

During the “Black Thursday” sell-off in cryptocurrency markets in March 2020, a sharp drop in the price of ether (ETH), the dominant cryptocurrency used as collateral in Maker for collateralizing dai loans, forced the protocol to issue new Maker tokens into the market. The dilutive event sent MKR’s price tumbling.

Derivaux says MKR also faced selling pressure last year from the project’s early investors, including Polychain, Maker Foundation and Andreessen Horowitz.

Since the dislocation in March, the MakerDAO community has tried to maintain dai’s peg to the U.S. dollar during a highly volatile market. Recent efforts included tinkering with the protocol’s USDC vault and the introduction of peg stability module (PSM). 

The latest move to add real-world assets “greatly increases the addressable market for collateralized loans,” said Jack Purdy, an analyst at the cryptocurrency research firm Messari. Such increases in turn should help to increase the supply of dai, “preventing the price from consistently exceeding the peg.”

The market capitalization of dai is now over $3 billion, after tripling this year, reflecting exploding demand, according to the cryptocurrency data provider Glassnode.

According to data from The Block, Maker is also the most profitable DeFi protocol by far.

“Many people have dismissed Maker because it moves slow and isn’t the most exciting project,” Ryan Watkins, another analyst at Messari, told CoinDesk. “But it is the most widely integrated protocol in DeFi, produces the most tried-and-trusted decentralized stablecoin and generates the most earnings for token holders in all of DeFi.”

Derivaux said that more “value investors” from traditional finance are now coming to Maker, on the heels of its token burning commitment. 

Notably, Citigroup wrote about the report last week, calling referring to MakerDAO as “the decentral bank.” An instant rally ensued in Maker’s price.

Derivaux wrote this week in a post that Maker could onboard two packages a month of “real-world” collateral, starting in May, eventually increasing to about 10% of the protocol’s overall assets.

He also dismissed other stablecoin competitors’ criticism of dai’s overcollateralization.

“There was a narrative that dai can’t scale because it has to be overcollateralized,” Derivaux said. “Well, we are still overcollateralized, but the collateral space is now multi-trillions.”