MakerDAO, the governing body of the Maker Protocol, has seen its revenue plummet in the third quarter of 2022, caused by a fall in loan demand and few liquidations, while expenses have remained high. 

According to an Oct. 13 tweet by Johnny_TVL, a Messari analyst and co-author of “The State of Maker Q3 2022,” the decentralized autonomous organization (DAO) saw its revenue plunge to just over $4 million in Q3, down 86% from the previous quarter.

One of the results of this has been MakerDAO’s first quarter of net income loss since 2020.

MakerDAO value statement as of September 30, 2022. Source: Messari

The Messari senior research analyst has pointed to few liquidations and weak loan demand as the reasons for the drop in revenue.

Its two biggest earners, Ether (ETH) and Wrapped Bitcoin (wBTC), have performed poorly in the last quarter, with revenue from ETH-based assets falling 74% and revenue from BTC-based assets falling 66%.

Borrowers use these cryptocurrencies as collateral for loans of the Dai (DAI) stablecoin, providing some security from the volatility often seen within cryptocurrency markets at the cost of interest paid on the loans.

Maker quarterly revenues by collateral token. Source: Messari

The analyst has also pointed to a fall in the collateral ratio of MakerDAO, suggesting the ratio has fallen to 1.1 from 1.9 at the same time last year.

However, “expenses are not so elastic” said the analyst, with the report showing that expenses have remained high in the quarter at $13.5 million, falling only 16% from the previous quarter.

Related: Nexo-labeled address withdraws $153M in Wrapped BTC from MakerDAO

Meanwhile, MakerDAO has recently taken steps to increase the return on assets it holds as collateral, having commenced a proposal to invest $500 million in treasuries and bonds. MakerDAO believes this will provide the protocol with low-risk additional yield.

One other positive for MakerDAO was the growth in Real World Asset (RWA) backed loans, which now accounts for 12% of its total revenue after it successfully rolled out its largest RWA-backed loan to Huntingdon Valley Bank (HVB) in the third quarter of 2022.

The loan, which involved the creation of a vault with 100 million DAI, constitutes a new collateral type in the Maker Protocol, which can help it generate additional revenue through vault stability fees associated with maintaining the vault and minting DAI.

HVB is still able to benefit from this integration as it allows the bank to effectively increase its legal lending limit, and MakerDAO hopes that if all goes smoothly other banks will follow behind HVB.