Governance and Risk Meeting: Ep. 53 (September 19 - 2019)¶
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| # / 00:00:03 | Richard Brown | Hello, everyone. Welcome to the September 19th edition of the scientific governance and risk meeting at MakerDAO. My name is Richard Brown. I am the head of community development at Maker and the... I forgot. I'm also the interim governance facilitator. Right. I guess I should add that to my resume. |
| # / 00:00:23 | Richard Brown | Today, we are going to mix up the agenda slightly. We have some conflicts that we need to route around. We also have some special guests and this is going to be fairly exciting because we have some heavyweights in the room today. Fluidity is here and they're going to talk about their Tokenized Asset Portfolio mechanism that they released to the community. There was a blog post that went out recently, a paper that went out. There was some very high level discussions that went along with that post. In my mind, not enough discussions, so, because it was worthy of more investigation than it received, and so hopefully we can dig into some of the details today. |
| # / 00:00:59 | Richard Brown | We have a fairly committed and fairly smart crowd here, so I'm looking forward to the questions we might get. I am going to skip governance until, like I said, the second half of the call. We'll start off with risk and then ... But before we get into that, let's talk about the standard preambles that we've all heard 53 times before, if you're an active listener. |
| # / 00:01:21 | Richard Brown | We are intensely interested in dealing with issues in the community and answering questions as they arise and hearing what this group is interested in, what it's been up to. So if you have a question or a comment, please feel free to interrupt us. If you have a microphone, just jump right in and ask your questions. If you do not have a microphone, find wherever the button happens to be on the UX that you're looking at, type your question into the side. David or I or someone else will find that question and we'll read it out for you. We're really interested in getting feedback from as many people as we possibly can. |
| # / 00:02:01 | Richard Brown | There's also a forum thread that goes along with this call. I'm posting a link on the side. Just beat David to it. I saw him scrambling for it. If you have a question that doesn't get answered, please ask it there. Follow that thread too because in the forum is where governance happens in earnest at MakerDAO. |
| # / 00:02:22 | Richard Brown | There is a tremendous number of very weighty and important discussions happening right now, there. We'll also be posting a summary of this call at some point today with video, audio and transcripts, depending on David's schedule. Perhaps tomorrow. Soon we'll be publishing a summary of this call. Transcripts will arrive soon afterwards as well, possibly by Monday. So keep an eye on the forums. |
| # / 00:02:48 | Richard Brown | I am going to turn it over immediately to Vishesh for the state of the peg and he can show us graphs. I've asked him to put large bold letters of good and bad with arrows on his graphs so I can follow them along a little bit better, but I'm not sure whether we'll see that today. Vishesh? |
| # / 00:03:08 | Vishesh Choudhry | And I've refused to put good and bad anywhere in any data because we're not doing that. |
| # / 00:03:13 | Richard Brown | [crosstalk 00:03:13] editorialized. Tell us what to do to Vishesh. |
| # / 00:03:19 | Vishesh Choudhry | How about I show you some data instead? All right. |
| # / 00:03:21 | Richard Brown | All right. |
| # / 00:03:21 | Vishesh Choudhry | So yeah, just to kind of cap what's been going on ... I'll actually start with this. The highlight is, DAI supply is up a fairly significant amount. Collateral value locked also at a reasonable level. But the main thing is that some refinancing, some just re-uptick in activity given what's been going on lately with ETH price. You know, we kind of called this shot in the sense that as the stability fees lowered, if ETH price is doing reasonably or people are feeling reasonably bullish, you will see sort of this re-uptick in leveraging activity. |
| # / 00:04:04 | Vishesh Choudhry | Good news is, it's not been so much just a tremendous amount of risk with very little collateral added; it's been kind of a little bit of both. So we're just sort of recovering some of that lost interest in CDP activity before. So overall, I think a rather positive week is a good way of looking at it. What's really interesting is, this happened without sort of crashing DAI, which you know ... We can talk about that in just a second. |
| # / 00:04:33 | Vishesh Choudhry | So yeah, brass tacks, the DAI supply started ticking up around the 15th — it was four days ago — with a pretty significant amount of DAI drawn out, roughly about four and a half million on that day, and very little DAI being wiped during that same time period. |
| # / 00:04:56 | Vishesh Choudhry | What we also saw was you know, a bit more collateral being added. So it looked like about 63,000 ETH. So keeping the collateralization ratio roughly ... overall, for the system, around 350%, which is a pretty reasonable level. As far as longterm trends, so basically, it's a very short timeframe blip, so it's not really going to show in the longterm trends just yet. But essentially, the pace of the amount of DAI being locked has started to tick back up again so we can keep an eye on that, and the amount of collateral being freed, still pretty flat. And then, same with draws and wipes, respectively. |
| # / 00:05:46 | Vishesh Choudhry | So that's pretty reasonable. That's what you expect when you see more of that leveraging behavior. What is also interesting to note is, on some of these secondary lending platforms, so ... and you'll have to forgive the data sync was interrupted here, but essentially, when that 12.5% stability fee drop occurred, for at least a few days, there wasn't much of a change in activity. And so actually, that weighted average borrow rate for dYdX and Compound was above that stability fee, which meant that it was cheaper to open your positions on Maker during that timeframe, which is fascinating when that happens. That generally hasn't happened in a while and should get ... you can think of it as ARB'ed away by refinancings. |
| # / 00:06:40 | Vishesh Choudhry | And so let's look at some of those volumes. They started to dip around the 15th. We need to track where this is at in the last couple days but essentially, the idea is that the borrow volume, it kind of slowed and started to dip as more positions were opened on Maker itself and some of those utilization rates started to dip as well. So we'll resync this and- |
| # / 00:07:12 | David Utrobin | So Vishesh- |
| # / 00:07:12 | Vishesh Choudhry | ... and get an update on it. Yes. |
| # / 00:07:15 | David Utrobin | I have a quick question. So on the 15th, wasn't it like one single CDP or very large loan that just refinanced from Compound to MKR that was basically the majority of that blip? |
| # / 00:07:27 | Vishesh Choudhry | Yes. Generally, it's one or two large positions. But what was really interesting is it's not just the refinancing; it's also ... not necessarily new positions being opened, but at least old positions being reopened through new CDPs on Maker. So in addition to what's going on in the secondary lending platforms, which was basically just an ARB of those rates, there was also legitimately new DAI being issued and new activity on Maker. So yes, as far as the refinancing, but that was how it happened the first time as well, right? So we saw ... when there was that, you know, uptick in activity on Compound through InstaDApp and a large amount of refinancings from MKR to Compound. About four and a half million moved in one day, primarily through one or two large positions. So it's basically a flipping back, is the way that I see that. |
| # / 00:08:28 | Vishesh Choudhry | But in addition to the flipping back, which is more about the stability fee change, there is also this more recent uptick in activity. So basically, this DAI supply around the 16th was about 8.3 to 8.4 ... or sorry, 83/84 million. But in the last couple of days, that has ticked up further to about 86 million. So there's an additional like, 3 million worth of activity that's not necessarily represented here. |
| # / 00:08:58 | Vishesh Choudhry | In addition, the DAI price. So this is particularly interesting. Just load this. So the DAI price in the last 24 hours ... Volume is actually kind of low, which is really interesting, so not as much DAI being traded. So these are legit, just new positions being opened. Not so much people then going and dumping that DAI immediately. Not as much people, you know, buying up DAI, which makes sense because when you have new positions being opened, there's not necessarily a ton of appetite for reacquiring DAI. |
| # / 00:09:37 | Vishesh Choudhry | But usually, we do see large volumes in the other direction of selling DAI. So that's particularly interesting. It may still come down the pike in a couple of days, or over the next couple of days, but it is fascinating to see that that has not sort of cratered the DAI price. |
| # / 00:09:56 | Vishesh Choudhry | And just looking in the slightly longer timescale, so this is the seven days. Seventeen million, pretty reasonable volume for seven days. Slightly higher than we normally see lately. But overall, that price was just below or at a dollar. So again, not a huge depressive effect on the price of DAI that we might generally expect or worry about. Yeah. Sorry, I'm going to be kind of quick today, but we'll kind of open it up to questions or things that people want to double-click on. |
| # / 00:10:45 | Richard Brown | I think you might be in the clear, this one ... for this one, Vishesh. |
| # / 00:10:46 | Vishesh Choudhry | [crosstalk 00:10:49]. |
| # / 00:10:51 | Richard Brown | Thanks for that. You get off scot-free. All right, so let's keep the momentum up. So Fluidity is here and this is fairly exciting. It's a great team. They're doing a lot of really interesting things and they have a long history in this space. So it's a great opportunity for us to start asking some deep questions and a great opportunity for me to try and understand what their paper was all about. All right, so Fluidity, who's going to be speaking for you today? You want to do some introductions? Let us know who we're talking to. |
| # / 00:11:20 | Mark Fernandes | Yeah, we'll do some quick introductions. We're all going to be presenting different components, so we'll just share. So I'm Mark Fernandes. I'm on the product team here at Fluidity. I've been in the digital asset space for a few years now. Prior to this, worked at a company called Noble, which was a bank that was facilitating settlement for OTC transactions in this space. |
| # / 00:11:44 | Britton Overall | Hi, I'm Britton Overall. I'm on the product team as well here at Fluidity. Prior to this, was at American Express, launched Amex personal loans. And before that was a consultant at Accenture. |
| # / 00:11:56 | Jeff Amico | And I'm Jeff Amico.I'm the company's legal counsel. Before this, was a corporate and securities lawyer at Cravath, Swaine & Moore, here in New York. |
| # / 00:12:07 | Mark Fernandes | Well, so let me just share here. Yeah, so thanks again for inviting us to present on this call. I think it's a really good opportunity just to share what we've been seeing in the decentralized finance and overall credit spacey think-through and present our ideas on what we think would be a really good inclusion to the MakerDAO system. |
| # / 00:12:40 | Mark Fernandes | So just a little bit of background before we get into Tokenized Asset Portfolios, which we'll present in detail is .... Wanted to give a little background on who we are. So as you may know, Fluidity is the company behind the AirSwap project. AirSwap is one of the leading decentralized exchanges. For those who are not familiar with it, I encourage you to check it out. It's an absolutely beautiful product and I think it's one that's adding a lot of value to the decentralized finance community. |
| # / 00:13:13 | Mark Fernandes | When we launched AirSwap, it really allowed us to step back and think through how we can build technology to really widen the impact of decentralized finance and really integrate more traditional aspects of finance that have come about historically, throughout the last several decades. And we basically turned our focus to how we can integrate capital markets into decentralized finance. And so for the past year we have focused on what applications and technology we could build to facilitate that. |
| # / 00:13:49 | Mark Fernandes | So we've done things like ... in the past year, we did a tokenization of a real estate debt issuance. We actually integrated the use of DAI to for pay the interest to investors and actually allow investors to invest in DAI to buy security tokens. That was the first example of that actually ever occurring. |
| # / 00:14:16 | Mark Fernandes | We've also just tried to build mind share around the capital markets and decentralized finance community. So we've hosted several events. We had one earlier this year, which is our biggest event, called Fluidity Summit. And actually, during that event, the MakerDAO Foundation presented the plan around MCD, and Greg from the team presented his views, and we actually incorporated a lot of those views into the Tokenized Asset Portfolios that we'll present. |
| # / 00:14:48 | Mark Fernandes | So we, as Fluidity, we're very invested in seeing decentralized finance as a movement and a technology grow. And as we've tracked this over the last several months and years, really, is we've really seen that DAI becoming a cornerstone of decentralized finance. And we think that for us to grow as a firm, we want decentralized finance to grow. And in order for that to grow, we want DAI to grow as well. |
| # / 00:15:18 | Mark Fernandes | So we've started to focus on how we can build mind share within the community and specifically do our part to help DAI grow. And so we released Tokenized Asset Portfolios earlier this year under the intention of allowing synthetic assets to be used in MCD. And we think that's really going to be a way for DAI to grow significantly beyond what it already has grown to now and what it will be when MCD launches. |
| # / 00:15:51 | Britton Overall | Yeah, and as Mark mentioned, you know, one of the things that MakerDAO has, recognized is the need to bring in synthetic assets to really grow ... to grow DAI. And one thing that we've really focused on, as he mentioned, was how we can bring some of the first assets into the system. And one of the things that we've noticed that could be major challenges to that are ... the two main things are the oracles that will be needed to monitor the price and position data for any assets that's introduced, and also, all the mechanisms that are in place to ensure that the liquidation process can occur seamlessly, and that keepers are ensured that they're going to get the proceeds of their liquidations. |
| # / 00:16:41 | Britton Overall | So we introduced the Tokenized Asset Portfolio as a way to help solve that, and what that is is essentially a structure that covers both the legal operational tech and it brings together one framework to be able to introduce that asset into the ecosystem and for that asset to be used throughout the process. We can probably go to the next ... |
| # / 00:17:15 | Britton Overall | We introduced that, as Mark mentioned, in July, and we released a white paper along with that. That can be found at tap.fluidity.io. We'll also give a little more [inaudible 00:17:29] that that here in a bit, on exactly what that is. |
| # / 00:17:35 | Britton Overall | We used this structure in July in a pilot that we did with US Treasuries, and we used US Treasuries for a number of reasons. Mark will go into a little bit more of why we chose US Treasuries and why we think that's a good fit later. We put this through the TAP structure and essentially went through a process of mimicking how this would work end to end in the MakerDAO system, in the test environment. |
| # / 00:18:06 | Britton Overall | And we broke this down into really three main stages. One was ... and the first being the pledging process, so we bought treasuries and held that through a broker and custodian and created tokens to represent those treasuries or that TAP, that portfolio of treasuries. We then pledged that token to initialize a DAI credit line and we drew test DAI. |
| # / 00:18:34 | Britton Overall | We then created oracles to mimic what the MCD system would have in place to monitor the pricing position and monitor that throughout the course of a few days and confirm that the treasuries were in fact held still with the custodian and that the price had fluctuated in such a way that it was still above the OC ratio. And then we went through the process of withdrawing the DAI. So we returned the test DAI and closed out the CDP, and then sold the treasuries and burned those tokens. All of this we did over the course of a few days. There's a lot more detail of each one of these steps in the white paper, at tap.fluidity.io. |
| # / 00:19:27 | Jeff Amico | Yeah. So this is Jeff. So maybe I'll just briefly walk through some of the legal mechanics, both in the version that we set out in July and then some of the kind of revisions that we've made since then. So it's critical, in our view, in introducing synthetic assets, to ensure a few things. One, that you need to ensure that the underlying collateral is not being repledged, it's not being re-hypothecated, it's not being sold offchain in a way that the MCD system can't detect. |
| # / 00:20:01 | Jeff Amico | And then, in a liquidation, you need to be able to minimize the counterparty risk of the sponsor essentially defaulting and not allowing the keepers or the system to be made whole in a safe and efficient way. And so we introduced, as Britton mentioned, the white paper in late July. And that was really an effort to start the conversation about introducing synthetic assets in a serious way. And it was a serious effort to really design the legal technology necessary to facilitate synthetic assets being introduced to MCD. |
| # / 00:20:42 | Jeff Amico | And so, as I kind of mentioned, the feedback that we got from the Maker community, from the Ethereum community, and really from the broader legal and financial community, was terrific. And since then, we've been in the process of incorporating that feedback such that we could really bring to market an application for MCD that was as strong and robust as possible. And so maybe if we ... Yeah, Mark going to switch it over. |
| # / 00:21:16 | Jeff Amico | So this is kind of a high-level overview of the proposed flow. And I think really the takeaway for this, at least at an initial glance, is that a counterparty who is using this system to borrow from the DAI system against their traditional assets, like treasuries, would begin with depositing those assets into the account of a regulated trust company. |
| # / 00:21:49 | Jeff Amico | And so, we think that the way to ultimately address some of the concerns around synthetic assets regarding ensuring the safety and the integrity of the collateral and also facilitating liquidations, we think that in the near term, that the best way to address those is to introduce a regulated and chartered trust company to facilitate that piece of the workflow. And so- |
| # / 00:22:23 | Richard Brown | Can I interrupt for just one second, for a question? |
| # / 00:22:24 | Jeff Amico | [inaudible 00:22:25]. |
| # / 00:22:27 | Richard Brown | Obviously, it's ... Interacting with the real world involves trust, unfortunately. It's something we might have to accept. How is that trust ... or how is the transparency managed there? Is the recourse here regulations and the law, essentially? The custody has to be maintained in a way that's compliant, or is there some kind of mechanical oracle, like, onchain mechanism that proves that the existence of these assets- |
| # / 00:22:53 | Jeff Amico | Right. Yeah, that's a good question, Rich. So it's a few things. I think, first, you have an oracle that will connect to the trust's custody account at all times such that the MCD system will know that the securities are being held there and that they haven't been transferred to a different brokerage account, for instance. And then ... So that's kind of how you ensure provenance while the CDP is open. |
| # / 00:23:21 | Jeff Amico | And then, in the event that a liquidation does occur, some of the feedback that we got when we introduced the white paper was, " Well, how does a keeper know that they're going to be made whole in the event that the CDP liquidates?" If for instance, a sponsor could enter insolvency, declare bankruptcy and put a stay on all of the assets. The way that we're addressing that is by designating the keepers, so the holders of token that are being issued by the trust, those holders will actually be the legal beneficiaries of the trust account. |
| # / 00:24:03 | Jeff Amico | And so that entity will have a legal obligation to maximize the value and to kind of turn that value over to the keepers, even in the event that Fluidity, or whoever the sponsor is, has become insolvent, nonresponsive or non-cooperative. So it's a combination of both the kind of onchain oracle mechanism as well as some kind of traditional legal safeguards as well. |
| # / 00:24:32 | Richard Brown | Yeah, it feels like there's a rabbit hole here that we could go down endlessly, though. But if it had to go to the courts, so there was only legal recourse here, who would be the representative [inaudible 00:00:24:43]. So who would be in charge of accepting those payouts from whatever settlement occurred? |
| # / 00:24:53 | Jeff Amico | Well, so I think the introduction of the trust really should eliminate the need for a keeper to say sue Fluidity or a different sponsor in a bankruptcy court, because, like I said, this trust account will be bankruptcy remote from Fluidity. And so- |
| # / 00:25:12 | Richard Brown | I see. |
| # / 00:25:14 | Jeff Amico | ... once a liquidation happens, the trust will have instructions to liquidate the collateral, to hold the pool of money in its account, and then, once the keepers who have purchased the token from the CDP ... once they bring those tokens back to the trust by depositing them in the trust's wallet, then the trust will simply give them $1 for every token that they've deposited. So it comes to resemble some of the other ... or sorry, asset-backed stable coins that are currently in the ecosystem. And I think that allows the Maker community to have comfort that there is always |
| # / 00:26:00 | Jeff Amico | It's a sufficient amount of collateral backing the token, and the liquidation could happen in a seamless fashion, even if Fluidity had disappeared from the picture. |
| # / 00:26:10 | Richard Brown | All right. So I think I understand now. So the trust is an independent third party whose existence is just to ensure that recourse happens effectively. |
| # / 00:26:18 | Jeff Amico | Exactly. |
| # / 00:26:19 | Richard Brown | Okay, thank you. |
| # / 00:26:21 | Alex Evans | I have a quick question here. I don't know, I can't see if anybody else was talking, so if somebody else has something to say I can wait. |
| # / 00:26:27 | Jeff Amico | Yep, go ahead. |
| # / 00:26:28 | Alex Evans | Okay, sure. So I want to make sure I understand the redemption process. One of the features that I really like in particular about the Maker system, in its current composition, is the permissionless-ness of the keeping process. In other words, that anybody, a piece of software, anybody in the world can participate and be a keeper, and do so on par with everybody else insofar as they have access, at least weather to exchange, offload DAI, whether that exchange be onchain or not. So is it the case here that the redemption flow that you just described is open to anybody, no matter where they are, or are there restrictions to which types of persons or legal entities can participate in that redemption process? |
| # / 00:27:11 | Jeff Amico | Yeah, so the way that we're envisioning this, and I would say that this portion is still being hammered out, but the way that we envision this is that for participants who want, sorry for keepers who purchased the token and want to kind of permissionlessly just receive DAI in return, there will be a way for them to do that by interacting with Fluidity. And assuming that Fluidity is in the picture, is solvent, then we'll happily just simply, return an equivalent amount of DAI for every token that's deposited. The trust mechanism that I just described is really a last resort, and that's simply there in the event that Fluidity is no longer in the picture and the keepers need some way to get value back for the tokens that they purchased. Because it's a regulated trust entity, they're going to need to do regular way KYC on the participants who are bringing that token back. |
| # / 00:28:21 | Jeff Amico | And so any transaction would need to comply with applicable laws that they're subject to, but we don't really envision that materially restricting the type of people who could bring a token back, so long as they weren't sanctioned or on any sort of traditional AML lists that would restrict our trust from transacting with them. So outside of that small edge case within an edge case, this system should be open to anyone who wants to redeem the token from us in liquidation. |
| # / 00:29:01 | Alex Evans | Got it. Is it the case that [inaudible 00:29:04] should be open and relatively open except for, as you mentioned, some edge cases. Is there a difference in cost in order to participate in that system? Or is it the case for instance, that a U.S. person, with a U.S. entity, with a U.S. Bank account can be KYC'd by a U.S. bank, can participate in this process more cheaply than a person that is on no list that happens to be let's say, Korea or China or somewhere else in the world? |
| # / 00:29:28 | Jeff Amico | No, there wouldn't be a difference in cost as far as performing KYC or anything like that. |
| # / 00:29:37 | David Utrobin | I have a quick question. |
| # / 00:29:39 | Jeff Amico | Yep. |
| # / 00:29:40 | David Utrobin | What is the anticipated time duration of any given recourse? Let's say CDP gets liquidated, how long before the keeper actually gets paid? |
| # / 00:29:57 | Mark Fernandes | Yeah, so I think part of this is one of the reasons why we selected treasuries to be introduced as an asset type to be used as collateral is the introduction of MCD. As Jeff mentioned, part of the process in liquidation would involve the keeper bringing the token to Fluidity or the trust that would then be able to provide them with DAI or USD in return for that token. That presumes that that entity, either the sponsor Fluidity, or the trust was able to liquidate the underlying collateral. We think that treasuries... We have a slide on this in a little bit, we think that treasuries are in fact one of the most liquid assets, the market depth for treasuries is enormous. And so we think that it would be very feasible for any sort of entity that needs to liquidate the underlying assets to do so in a very timely fashion. So we think that that could happen all in the same day. We don't think that the process would be much more lengthy than say ETH. |
| # / 00:31:04 | David Utrobin | So would you say that the process is optimized to minimize slippage by trying to keep the spread of time between liquidation and actually liquidating it, the actual underlying assets, minimal? |
| # / 00:31:18 | Mark Fernandes | Yeah, we think that's the case. We also think that there would be safeguards to prevent this from getting to liquidation. As the manager of the assets and the trust, Fluidity would be basically maintaining the fact that these assets are getting close to liquidation and we would be able to maybe facilitate any actions that need to be done in preparation for a liquidation. So it's sort of active monitoring, but if that was to happen, we think that this could be liquidated very quickly and avoid slippage or minimize slippage as you mentioned. |
| # / 00:31:58 | David Utrobin | Cool, thank you. |
| # / 00:32:00 | Speaker 5 | I have a quick question before you move on. It looks like there's a lot of middlemen here. There's the custodian, there's the trust, there's the exchange. So doesn't all of this leave less of a profit margin for the end users? And is there a way to get rid of some of these middlemen? |
| # / 00:32:17 | Jeff Amico | Yeah, so it's a good question. I think that it's ultimately a balance between reducing intermediaries and potentially, as you mentioned, increasing margins, but also on the other hand, using a system that is robust and kind of can maintain the integrity of the DAI system even in the event of a liquidation. And so the introduction of things like custodians and trusts, while perhaps not optimal from a margin perspective, I think is ultimately necessary perhaps for the entirety of the synthetic asset segment, but certainly at least for something like this in our opinion, to really give the system assurance that in the event that a CDP, that was backed by an asset like this liquidated, that the keepers would be made whole. And it really kind of, the introduction of those intermediaries is designed to eliminate some of the counterparty risk that is inherent to introducing synthetic assets. And so while it's not optimal, I think it's probably necessary. |
| # / 00:33:39 | Mark Fernandes | So I think we could jump forward here. We talked through the liquidation process at a high level here, what we want to talk through now is the introduction of a new questionnaire to supplement synthetic assets. |
| # / 00:33:56 | Britton Overall | Yeah, back in July when we ran the pilots, it was around the time that the community had posted the onboarding guide, collateral onboarding guide. And we had taken a look through that and it was really comprehensive, it really helped guide a lot of the questions that we needed to ask ourselves in that process. But one thing that we noticed was that there were some some room for improvement after we'd gone through the process that we thought could be added for synthetic assets, and some important questions that we thought could be raised there. I'm posting a link in the group chat to a post that we did actually this morning about some of these additions that we are proposing for that, and we really bucketed these into three categories. One is around the risks that the particular asset is introducing, and some of the considerations that would be needed there to make sure that a particular asset is not too risky for the Maker system. The second is Oracles, so it's very important that any asset that gets introduced, that the position or that asset is held, can be confirmed. And then also that there is a data feed that has accurate pricing to know the value of that asset at any time, to make sure that it's falling within the collaterization ratio and the system as a whole is collateralized, and then all of that data is available. The third is liquidation, and I know we spent some time already talking about that, but the right structure needs to be in place for that to make sure that all of the scenarios that could happen in that process are buttoned up and the right mechanics are there, legal rights are in place. So we've posted some questions we could probably flip over just to show the post, won't go into all the details but essentially everything is the same on the tech section and the original financial section. We've added some other items which can be seen there in bold that we think are some additional questions that we might want to ask if there are other synthetic assets that are introduced. So feel free to take a look there, we welcome any feedback from the community on those. And again it's just our recommendation of some things and I'm sure there'll be many more questions that come up along the way as as more folks introduce synthetics. |
| # / 00:36:35 | Richard Brown | What is the primary reasons for augmenting that checklist? Is it because synthetic has so many real world interactions, as opposed to straight crypto? |
| # / 00:36:45 | Britton Overall | Yeah, exactly. Since there is, I know like when Jeff went over with introducing a trust and some of these outside third parties, making sure that that charge is in place and that the asset that being introduced can fall into those structures correctly. That's one of them. And then you know, given that a lot of this data is not going to sit on chain, it's going to set off chain, and need an Oracle to bring that on. Then all the details on how, how that data is generated and the availability of that data. It's important to know. |
| # / 00:37:24 | Cyrus Younessi | Just to provide a tiny bit of context there. When we were originally designing that guide, we specifically designed it for crypto assets because we, at the time, we weren't expecting this level of demand from off chain assets this early in the process. Our original version actually had some sections on security tokens, but we thought that there was sufficiently unanswered questions that we weren't even sure how to structure it, so we structured it for crypto assets specifically. But this is great. We're definitely happy to have a kind of a first pass at what the process might look like for synthetic assets, so thank you for that and we'll be sure to give it a look. |
| # / 00:38:09 | Jeff Amico | Yeah, absolutely. |
| # / 00:38:12 | Mark Fernandes | Cool. So our goal with this application and working with the larger Maker community, is to ultimately submit an application for treasuries using the TAP structure to be introduced as a type of collateral in the MCD system. Our position is that treasuries would be an essential or at least very, very important type of collateral to have within MCD. We think that in order for DAI to scale, it really requires users to be confident that DAI is backed by a sufficient amount of collateral, and you can really increase that confidence with DAI holders by backing DAI with a collateral that has a low likelihood of liquidation and we think that because DAI... Because treasuries are extremely stable, the likelihood of liquidation is very low. For example, in the 90... If you look at the 95th percentile of a one day movement of three month treasuries, it's less than 10 basis points. When you compare that to something like ETH, it's 16% so we think that treasuries are very, very stable, presents a very low liquidation risk and therefore maintains the integrity of DAI. However, as we've somewhat alluded to before, there may be scenarios, hopefully never, but we think there could at some point be a scenario where these assets, the underlying collateral needs to be liquidated and in such a scenario it is really important as we mentioned, for the underlying collateral to be liquidated. As I mentioned before, the depth of the market for treasuries is extremely large. The U.S. Treasury market is around $15 trillion worth of treasuries, and a substantial amount is traded every day, so we do not think that there would be any issues in liquidating treasuries in a scenario of a CDP liquidation, relative to potentially other synthetic types of collateral which may present some liquidity issues. And then finally we think that when we introduce treasuries as a type of collateral, the Maker community will actually gain a lot more control over the supply of DAI and therefore be able to increase the control of the peg of DAI to a dollar. |
| # / 00:40:42 | Mark Fernandes | Now this really stems from the fact that treasuries are a fixed income product, meaning that they have a fixed rate of return. When there's a fixed rate of return, CDP users can really easily assess the economics of if it makes sense to open up or close CDPs because they have an understanding of what the rate of return of treasuries are relative to the stability fee. |
| # / 00:41:09 | Mark Fernandes | This is really different from an asset like ETH, where it's unclear what the return on ETH would be. There's a lot of speculation, there's a lot of volatility, and therefore it's tougher to make a judgment if it makes economic sense for you to open up or close your CDP. When you have a very stable asset, like treasuries introduced to this system which has a fixed rate of return, it makes that evaluation a lot more direct and a lot clearer. So the process of trying to maintain a peg of DAI to a dollar or some other peg is very, very... It's a lot more straight forward a process. So we think for these reasons, and there are probably some others where we think these are the most important, we think treasury should be introduced as a type of collateral. |
| # / 00:41:58 | LongForWisdom | Can I interrupt with a question here? |
| # / 00:42:01 | Mark Fernandes | Yep. |
| # / 00:42:03 | LongForWisdom | So you make the point that the, because the treasuries have a fixed rate return, it's very easy to see when that return exceeds or is less than the stability rate, right? |
| # / 00:42:14 | Mark Fernandes | Yes. |
| # / 00:42:15 | LongForWisdom | So would that not just lead to the entire collateral pool for treasuries, either disappearing or reappearing based on when it crosses that fixed threshold? |
| # / 00:42:26 | Mark Fernandes | Yeah, we think that there would be some users that have positions that are based on their loans of DAI that they can't immediately get out of, and so there won't be like an immediate action to close CDPs. But we think that based on how users are using their DAI to get a return elsewhere, there may be a need to close the CDP, if the stability feed is too high. Let's say if they opened up a CDP in order to access DAI, and that DAI is really the only type of collateral that is used in another system to get a return, maybe it's important for them to keep their CDP open, even though the rate is high. |
| # / 00:43:10 | LongForWisdom | Right, I see, thanks. |
| # / 00:43:17 | Mark Fernandes | [inaudible 00:43:17] So what we aim to do in the next several months is really work with the larger Maker community to really see that MCD goes live in a smooth fashion and that we incorporate collateral types that will allow DAI to scale. As we mentioned, as a company, Fluidity is very tied to the success of decentralized finance, and that means we're really tied to the success of DAI. So we really want to see this move forward and or we're open to working the community to really push Tokenized Asset Portfolios forward and enhance the system. So with that we'll... We can open it up for questions or turn it back to you, Reg. [crosstalk 00:44:04] |
| # / 00:44:05 | Alex Evans | If you don't mind here, I know you have your agenda, so we got to move on. |
| # / 00:44:08 | Richard Brown | Nope, no jumping Alex [inaudible 00:00:44:10]. |
| # / 00:44:14 | Alexander Evans | So just a little bit on one philosophical point, let's say his framework gets adopted by the Maker community for issuing tokenized assets as asset portfolios. And let's say, for the sake of argument, some significant portion of our collateral is generated in this process. Let's say that percentage is 80, 90% for the sake of argument. What then do you think differentiates the Maker's system for creating DAI from let's say Tether, or any other Fiat-collateralized stablecoins team, insofar far as a lot of the recourse and mechanisms start to look a little bit similar in this model, why do you think Maker continues to be a better left, more trust, minimize alternative to those systems in that role? |
| # / 00:45:03 | Jeff Amico | Well, I mean ultimately users are still, or they have the option to still open up CDPs in the way that they do now and a fully permissionless way. Even as I mentioned, even if treasuries do make up a substantial portion, that doesn't restrict the ability of other users to continue in the kind of current status quo method of a opening up CDPs against Ether or against other types of crypto native assets and so it's ultimately just a different option for potentially a different user of the system. |
| # / 00:45:44 | Mark Fernandes | Additionally, the mechanisms by which the risk is monitored and controlled for synthetic assets remains the same, so a stability feed over collateralization rate, that is still completely decentralized and voted upon by the Maker community, so even if treasuries are included as part of the system, it's different from these other types of stablecoin projects in that the decision making is still decentralized across a wider base, which has control over the risk and managing in a way that really benefits the entire community. |
| # / 00:46:25 | Alexander Evans | One of the things there that's interesting that we don't need to open up a whole composition for that, as some of those mechanisms around overcollateralization, about Oracles have to do with some of the collateral that we're using is volatile. Let's say they were to adopt a similar scheme so instead of treasuries we'd just have... Literally be all sitting in a bank account or in a trust or in some very old [inaudible 00:46:52] some of those mechanisms kind of become unnecessary insofar as we know that DAI has a target of a dollar and it's backed by dollars [inaudible 00:47:01] then some of those members who aren't fully [inaudible 00:47:07] of us to really [inaudible 00:47:08] how many dollars should be backing each DAI in that world. |
| # / 00:47:16 | Alexander Evans | So I guess that's a long way of saying of... Let's say it wasn't treasuries, let's say it was dollars and again the same question. Let's say the majority of the system relies on a system like this, or at least the majority of collateral is based on systems like this and only a minority is based on ETH. Now it's true, I grant you the point that we have access to other options, but it is defacto the primary way through which DAI is issued. How do you think a few... A third party looks at DAI and the asset from a risk perspective? I think it starts looking more similar to something like USDC, or do you think because... Do you think it's mainly the option having different forms of collateral? |
| # / 00:48:02 | Jeff Amico | Yeah, I mean it's a fair point. I think another distinction though that should be raised against some of the U.S., Like USDC is the option to obtain leverage in DAI, which is not available in the kind of a USDC, at least within its own kind of operation. You can of course borrow something like USDC or lend it on something like Compound, but it doesn't offer you the option to obtain leverage on the same way that the Maker system does. So I think that is something that continues to distinguish DAI from the other stablecoins and the fact that you can do that permissionlessly and that the kind of the rates, and the thresholds, and the ratios are all set by, and will continue to be set by the community. I think we'll continue to distinguish this from something like USDC. |
| # / 00:48:59 | LongForWisdom | I think the question might be more from the user's point of view. So the point of view from the person deciding whether they want to put their savings in USDC or DAI or something. The more oh yes, treasury is somewhere [inaudible 00:49:10] that come in to DAI, the more it starts being similar to USDC, TUSD, whatever. |
| # / 00:49:18 | Mark Fernandes | Yeah, we think that there's probably going to be in the ecosystem several different options. We think that may be, there are certain applications that are really only focused on one type of stablecoin, only focused on accepting transactions in DAI. So it may be advantageous for you to open up your CDP in DAI. So I think as there are...There's growth in the ecosystem and there are use cases for DAI that the use cases increased for DAI, there may be reasons for you to use DAI over other stablecoins. And so this would provide you with a mechanism to do so, as an alternative. |
| # / 00:50:02 | David Utrobin | Is there anything to say about the fact that there's a counterparty risk for centralized, like fiat-backed stablecoins that backdoor risk that DAI doesn't carry, at least doesn't carry directly. I know if it's backed by, let's say some stablecoin or something that does have a sort of counterparty risk attached to it, like it's [inaudible 00:50:25] or something, right. That risk does end up being part of DAI but maybe not as explicitly to the user. Right. I don't know. I'm thinking out loud. |
| # / 00:50:33 | Jeff Amico | Yeah, no, it's a good point. I guess I would say two things. I think one, I think that there's always a... There's always some degree of theoretical regulatory shutdown risk, if you want to call it that, the kind of back-door risk and while it may not be as explicit with the kind of non-synthetic version of MCD, there are still regulatory choke points that I think could be exploited if a regulator truly wanted to throw a wrench into the Maker system and really even the broader kind of a theory, of a crypto system if they truly want it to. So I guess that is the first one. There's always that kind of risk that's present. |
| # / 00:51:23 | Jeff Amico | And I guess the second point would be that relatedly, there was just a balance and a kind of a trade off that is present here. And we think that the value of increasing the demand for DAI potentially significantly so, and doing it in a trusted and kind of stable fashion like we're proposing, is greater than the increased backdoor risk, if you will. But I do agree that there is a trade-off there, |
| # / 00:52:00 | Jeff Amico | ... But we ultimately think that the trade off is worth it. |
| # / 00:52:10 | David Utrobin | Chris is actually asking you [crosstalk 00:52:13] point. |
| # / 00:52:13 | Richard Brown | [crosstalk 00:52:13] question. Do you have access to a microphone? |
| # / 00:52:18 | Richard Brown | Did we just lose him? |
| # / 00:52:21 | David Utrobin | I could read it out. |
| # / 00:52:22 | David Utrobin | So Chris Smith wrote, "Perhaps I missed this. What are the use cases for treasuries for users outside of collateral and MCD. I.e. other than to make a CDP, why would a user want to hold a TAP?" |
| # / 00:52:37 | David Utrobin | To extend this question, are TAPs going to be something of just a basic investment vehicle for anybody that can legally own one? |
| # / 00:52:46 | Jeff Amico | No, we're actually designing these for the specific use case of collateralizing CDPs. They're not meant to be a general purpose stablecoin, or a security token, or anything like that. It's purely a receipt, who's sole purpose is to sit inside of a CDP, and to reflect the value of the underlying treasuries that are held in the trust account. |
| # / 00:53:16 | Jeff Amico | And so it's a technology that allows a traditional participant to access leverage against treasuries from the Maker system. |
| # / 00:53:28 | David Utrobin | Got it. |
| # / 00:53:31 | Richard Brown | I have a question as well. There's a lot of moving pieces here. How much of this mini-ecosystem that you've designed, how much of it has been built? And how far are you from launching this? |
| # / 00:53:47 | Jeff Amico | I'll leave the tech build question to Mark and Britton, but we're pretty far along in conversations with trust partners, who understand the structure that we're talking about, who think that they can handle things like liquidations, and managing redemption of tokens and things like that. |
| # / 00:54:12 | Jeff Amico | So the overall structure, we're pretty confident, from a legal standpoint, works. And maybe I'll turn it over to you guys to otherwise address ... |
| # / 00:54:20 | Britton Overall | Yeah. |
| # / 00:54:22 | Britton Overall | You can see a lot of this in our white paper, but we've built out the contracts, and inherently the tokens, that would be pledged, along with the accessory scripts that were using to interact with MCD. |
| # / 00:54:37 | Britton Overall | And we also built Oracles off of one of the custodians we're working with in the pilot. And all of that has been published, is out there on GitHub. Obviously with some of the updates, that have been made, there will be some new build required to interact with the trust. And probably build in more comprehensive Oracles, once the risk team is, on the Maker side, really want to integrate those Oracles. |
| # / 00:55:06 | Britton Overall | But a lot of this has been built, and is ready to go, pending the community's approval. |
| # / 00:55:15 | Richard Brown | All right. That's exciting stuff. Thank you guys for your time. We're at the top of the hour now. So traditionally we wrap things up for people, who actually have other work to do. Because apparently there are things other than Maker in this world. |
| # / 00:55:29 | Richard Brown | People who do have some free time though, we're able to stick around for 15, 20 minutes, and just have a general Q&A session. So Fluidity, feel free to stick around if you want to, or feel free to bounce if you have to. But thank you for the presentation, it was very enlightening. A lot of really interesting questions, I'm looking forward to seeing how it integrates in the future. So thank you, guys. |
| # / 00:55:50 | Jeff Amico | Thanks, Rich. |
| # / 00:55:53 | Richard Brown | All right, as I just alluded to, it's the top of the hour, so if you do have to bounce, feel free. We are going to stick around and do some general Q&A. We also need to get to some of our regularly scheduled parts of the call, which are related to governance. |
| # / 00:56:11 | Richard Brown | I'm probably going to see if there's free time for me to talk about what I was going to speechify I on. But LongForWisdom, if you wanted to give us a review of what's happening in the forums. |
| # / 00:56:21 | LongForWisdom | I can do. I actually had one more question for Fluidity, if they're still here and around. |
| # / 00:56:28 | Richard Brown | Sure. Yeah, grab them before they're gone. |
| # / 00:56:31 | Jeff Amico | Yeah, go ahead. |
| # / 00:56:33 | LongForWisdom | Yeah. So I believe you said that the keepers wouldn't be required to KYC in order to take part in collateral auctions, is that correct? Was I understanding correctly? |
| # / 00:56:44 | Jeff Amico | Yeah. In the event, in the 99% of scenarios of a liquidation, where Fluidity is performing, then they could simply deposit the token, and would receive an appropriate amount of DAI in return. And would very likely not need to get KYC'd or anything along those lines. |
| # / 00:57:06 | Jeff Amico | It's really only in the case where they're interacting directly with the trust that they would need to go through the KYC. |
| # / 00:57:13 | LongForWisdom | Okay. So my question was an extension of that, in that, is if we were forced to do global settlements, if Fluidity is still around, can they then redeem those tokens for all holders of DAI, or previous holders of DAI? |
| # / 00:57:28 | Jeff Amico | Sorry, what do you mean by global settlement exactly? |
| # / 00:57:31 | LongForWisdom | So if the system shuts down, and DAI becomes a voucher to get a share of the collateral that was in the system, would Fluidity be able to redeem that collateral for any DAI holder? |
| # / 00:57:47 | Jeff Amico | Yeah. I don't see why not. Mark or Britton, if there's anything that springs to mind. |
| # / 00:57:57 | Mark Fernandes | Yeah. The structure we built is that anyone who comes to us, that has a TAP token could redeem it for the value of that. In a global settlement, is there a specific scenario that's different? Sorry. |
| # / 00:58:23 | LongForWisdom | The scenario is that the DAI credit system is shut down completely, right? Everyone holding DAI gets a share of the collateral that's backing the system? |
| # / 00:58:33 | Mark Fernandes | Right. The holders who end up with the share that's TAP token, would then be able to come to Fluidity and/or the trust, and redeem that for the value of that. |
| # / 00:58:48 | LongForWisdom | Is it also tradable? So if every single DAI holder doesn't want to do this, can they trade to someone else, who then can redeem it? |
| # / 00:59:01 | Jeff Amico | Theoretically, yes. But it would ... I think the short answer is, yes. But it should be pretty straightforward for a keeper to simply redeem for the equivalent amount of DAI. And so I imagine that that's what most keepers would do. But theoretically, yes. |
| # / 00:59:26 | LongForWisdom | In this case, people are trying to get rid of DAI, rather than keep DAI, right? DAI is no longer stable, and is not wanted. They want the collateral behind DAI. |
| # / 00:59:35 | Mark Fernandes | Yeah. So in that case, they would come to us. We would have the treasuries sitting in the trust. We would liquidate the treasuries and be able to give them back US Dollars, as an example. |
| # / 00:59:48 | LongForWisdom | Okay. Great. Thanks. |
| # / 00:59:49 | Alexander Evans | And if, of course, Fluidity isn't a going concern, or is bankrupt, for some reason, or is required by some government, or some entity, to do KYC on those users, then in the event of global settlement every DAI holder would have to find a way to transfer that DAI to somebody who did have access to the ability to redeem, because you would not retain the ability to redeem that DAI. [crosstalk 01:00:16]. |
| # / 01:00:16 | David Utrobin | At the same there's also a different scenario where DAI holders, instead of redeeming for underlying collateral, can just sell their DAI on an exchange for their desired collateral. And then really the ones who actually do the redemption of DAI for underlying collateral might be the bigger keepers, who are established KYC'd entities, who have a lot of float, who have the capacity to actually deal with that. |
| # / 01:00:42 | David Utrobin | But, again, it's kind of conceptual. I don't know how it will work in practice. |
| # / 01:00:50 | LongForWisdom | So that's what I'm trying to confirm, is the token fungible? Can it be traded between users? |
| # / 01:00:53 | Britton Overall | Yeah, there would be no transfer restrictions. So if the keeper were to acquire that, and then let's just say in the rare event that Fluidity was insolvent, then if they wanted to transfer that to someone else, who then [inaudible 01:01:06] the KYC process with the trust, and redeem those for the proceeds, they could do that. |
| # / 01:01:13 | LongForWisdom | Great. |
| # / 01:01:14 | Richard Brown | Just to double confirm. The trust is a separate entity from Fluidity, completely independent? Or is it a wing of Fluidity? |
| # / 01:01:23 | Jeff Amico | It's a totally separate entity. And it's a chartered trust company. So it has a charter that is essentially the same as a banking charter, so highly regulated. |
| # / 01:01:34 | Richard Brown | And sheltered from Fluidity and [crosstalk 01:01:35]? |
| # / 01:01:35 | Jeff Amico | Yes. |
| # / 01:01:35 | Richard Brown | Okay. |
| # / 01:01:35 | Cyrus Younessi | [crosstalk 01:01:35]. |
| # / 01:01:35 | Cyrus Younessi | I have a quick question. My internet cut out for the last five minutes, so this may have been asked already. |
| # / 01:01:49 | Cyrus Younessi | From my perspective, it seems like the majority of the questions are generally regulatory in nature. Kind of the risk aspect of the underlying asset, the treasuries, is pretty well understood. It's been asset that's been trading for quite some time. |
| # / 01:02:05 | Cyrus Younessi | So my question is, what are your guys's thoughts, and the community's as well, on bringing in some independent legal focused risk teams to evaluate the structure of the whole process, and put some answers to some of these questions? |
| # / 01:02:28 | Cyrus Younessi | Obviously I'm sure you guys have done enormous amounts of due diligence on this, but how can we bring some third party external counsel to help evaluate with some of these questions. |
| # / 01:02:45 | Jeff Amico | Yeah, it's a good question. I think, to some extent, the process has already ... We've gotten a significant amount of feedback, informally, following the release of the white paper, which has been incredibly helpful in rounding out the legal mechanics here. And in parallel with that, we've also been working with external counsel on structuring this, and getting assurance that it complies with all applicable regulations. |
| # / 01:03:18 | Jeff Amico | But of course would welcome further feedback from the community. And whether that's just informal, or through more formalized legal structures or panels, or things like that. Ultimately we want to get this right, so we're looking for as much feedback as possible. |
| # / 01:03:38 | Cyrus Younessi | Yeah. Because one thing, and this is just my impression, is that there's just a fair amount of regulatory uncertainty in the crypto industry as a whole, right? |
| # / 01:03:50 | Jeff Amico | Yeah. |
| # / 01:03:50 | Cyrus Younessi | I feel like plenty of the crypto lawyers are just waiting for more guidance from the relevant agencies. To what extent should that risk be mitigated by just, for example, waiting for more clarity or ... Because are there any ... What counsel is able to even to give the necessary opinions, or give any sort of useful guidance for the MKR community at this point? |
| # / 01:04:28 | Jeff Amico | There are pretty significant law firms who are counseling clients in this space. As I'm sure you guys know. As far as the risk, I think an agency like, say the SEC is pretty ... They play it pretty close to the vest. |
| # / 01:04:48 | Jeff Amico | That said, I think they do provide some guidance as to certain structures that they think are okay. We think that, at least with respect to those regulations, that this instrument complies with their frameworks. And we've also examined this under other regulatory regimes, and feel that it complies as well. |
| # / 01:05:17 | Jeff Amico | All to say, there's always, in any kind of new emerging technology, there's always going to be regulatory gray areas. And so you just develop technologies that sometimes develop and grow faster than the rules do. So it's just a matter of the rules playing catch up, and evolving as necessary. |
| # / 01:05:46 | Jeff Amico | But we, I think, have done the best job possible in structuring this, along the lines of what the SEC, and other regulators have established as their view on this industry. And so there's ultimately a balance that needs to be struck, but we think that we've come out on the right side of it. |
| # / 01:06:11 | Cyrus Younessi | Okay. Thanks. |
| # / 01:06:13 | Cyrus Younessi | On the heels of that answer, maybe the community should think about discussing how they can seek some independent opinions from relevant law firms regarding all this. |
| # / 01:06:34 | Richard Brown | That would be an interesting exercise in self organization. [crosstalk 01:06:37]. That would be interesting. |
| # / 01:06:40 | Richard Brown | Chris Smith, you had another comment. Did you find your mute button yet? Did you want to ... |
| # / 01:06:46 | Chris Smith | I did. I was just adding to the global settlement conversation. With Fluidity holding DAI under normal circumstances, that as I understand it, to redeem for TAP holders, Fluidity itself would end up with a DAI reserve during global settlement that they would have to cash in, and redeem for their proportion of the collateral that goes through global settlement, which would then potentially be useful for cashing out any remaining TAP collateral against the collateral taken from global settlement without having to liquidate the trust. It's not a question, Rich. I was just adding to the end of that conversation. |
| # / 01:07:36 | Richard Brown | It was an interesting addition. |
| # / 01:07:38 | Richard Brown | All right. We're going to talk about governance at a glance, but that doesn't mean that we're not going to ask questions. So if people still have some things they want to clarify, or they have something [inaudible 01:07:51] over the next five or ten minutes, feel free to type the question in the chat, or interrupt us. |
| # / 01:07:55 | Richard Brown | But I would like to get an opportunity to see what's been happening. Because I know that there's a few interesting things happening in the governance world right now. |
| # / 01:08:02 | Richard Brown | So LongForWisdom, if you want to take it over. |
| # / 01:08:05 | LongForWisdom | Yeah, sure. |
| # / 01:08:06 | Richard Brown | Thanks. |
| # / 01:08:10 | LongForWisdom | Not been too many new discussions this week. The main one has been around stablecoins as collateral. So [inaudible 01:08:19] derail things too much. There's been some discussion on that. Rune shared his thoughts on the value of stable coins as collateral. Basically useful for market makers. And a couple of other people made some comments on the downsides. |
| # / 01:08:34 | LongForWisdom | This all tied into the TUSD onboarding application. |
| # / 01:08:41 | LongForWisdom | The other discussion that's been continuing is the discussion on the DSR, and the initial values that Cyrus prompted last week with his blog post. So, again, just everyone is talking about that, trying to figure out where we should start DSR. Generally people seem to think between zero and five percent, which is a pretty big range. I'm sure we'll narrow it down. |
| # / 01:09:01 | LongForWisdom | So then the other interesting things that have been going on are the signal request threads. So the exponential rate setting threads is coming to what looks like an end. It looks like that's moving onchain soon. |
| # / 01:09:19 | LongForWisdom | Rich, do you want to comment at all? |
| # / 01:09:24 | Richard Brown | I could. I was hoping that you would do it for me, though. Here we go. There's a very long thread, a lot of interesting things happened there. |
| # / 01:09:34 | Richard Brown | We're slightly out of time, so I'm going to dig up a link in one window, while I'm talking. And another one for people to review. |
| # / 01:09:45 | Richard Brown | There's a summary I posted in that thread about the journey that we went on over the last couple of months to get to the decision to introduce exponential rate stepping to the stability fee. There's some interesting takeaways that we could possibly derive from this, around levels of debates, what we feel adequate consensus actually is. How do we measure majorities? All kinds of other interesting, or exhausting, philosophical questions that we've been wrestling with for a long time now. |
| # / 01:10:17 | Richard Brown | So it's worth a review. The short version of this story though is that the community has self-organized, established process, polled, debated, and come to a conclusion. Which is amazing. It's actually astounding. |
| # / 01:10:31 | Richard Brown | So what's happening now is the forum poll succeeded. The contents of the governance poll has been determined. And it's now in the queue. So on Monday, Maker token holders will have the opportunity to change the way we determine, the way that we poll, for stability fees in the future. It's no longer linear, from negative four to positive four, of the current stability fee. It is exponential. |
| # / 01:11:04 | Richard Brown | So people will have a range from, I believe, .25 up to four to alter the fee every time. So it gives us a finer grain tool for adjusting stability fees. It gives us the same latitude that we have in the existing linear world that we lived in. It also, and this is what I'm most excited about, gives us the opportunity to get rid of that .5 off the stability fee. Because that's a lot of typing week after week after week. |
| # / 01:11:32 | Richard Brown | So perhaps the community will align just to clean up the floats that we have laying around in these governing systems. |
| # / 01:11:41 | Richard Brown | So that's the takeaway there. The community, also, is applying this same work ethic to the cadence question we have around stability fee. Do we need to vote every week on this thing? The community is discussing that now. And there's a new thread in the forum, I would encourage people to take a look at, and make your voice heard. |
| # / 01:12:01 | LongForWisdom | Yeah. So just a bit of a note on that. |
| # / 01:12:04 | LongForWisdom | There's currently, I think, four days left on the initial stage. And currently it looks like people want to maintain the current cadence. So if you're one of the people that believes strongly that we should move to two weeks, or three weeks, or a month, or anything other than one week, go to that thread and vote, and discuss and share, and try and convince people that we should go to two weeks. Because otherwise, I think [inaudible 01:12:25]. |
| # / 01:12:26 | Richard Brown | We're still in this process of figuring out how much debate is adequate. And that's a hard one. There's no algorithm for determining that kind of stuff. So we're feeling it out. Whether the community, we, the royal we, arrives at the decision that everybody gets a week to figure this out, and if you miss that bus, then it's too bad, it's going through a governance portal anyways. That's one world we could live in. |
| # / 01:12:52 | Richard Brown | There other one is, maybe after the conversations tail off long enough, somebody can stick a fork in it, and then we start the countdown timer, there's only one week left to complain. |
| # / 01:13:02 | Richard Brown | So there's interesting questions that still need to be answered around how much debate is enough, how much consensus is enough, how do we determine whether consensus exists, how do we adequately poll for opinions? There's interesting questions still to be answered. |
| # / 01:13:18 | Richard Brown | So if you're interested in the future of MakerDAO, if you're interested in governance, please check out those two polls, and get involved with the signaling process, because it's going to have some outside effects on the future. |
| # / 01:13:31 | LongForWisdom | So there's one last signal request, which I created just recently. That's referring to the debt ceiling. So this kind of came up before, and we discussed it a bunch. This was before we figured out a little more concretely what the process should look like. Basically a couple of people have said, both in the forum and in the chat, that it might be good to do a formal discussion, and signal request, relating to increasing the debt ceiling. So I've put that up in the forum. |
| # / 01:14:03 | LongForWisdom | So if you have an opinion on that, then go share it. |
| # / 01:14:08 | Richard Brown | Yeah. That's another big one. That's another slow burn conversation that has a tendency to disappear and reappear, depending on market forces. |
| # / 01:14:15 | LongForWisdom | Yeah. |
| # / 01:14:17 | Richard Brown | And another potentially earth shattering ... Am I being too dramatic? Significant. How about let's just go with significant. Significant question that the community needs to answer about how much DAI are we allowed to have in circulation. So that's an opportunity for people to speak on that as well. |
| # / 01:14:35 | Richard Brown | All right. Thanks LongForWisdom, that was great. |
| # / 01:14:38 | Richard Brown | Standard reminders apply. Join the forums, and get involved with governance. |
| # / 01:14:44 | Richard Brown | If there's any more questions for Fluidity, we could people a 30 second window to make themselves heard. Otherwise, I think it might be a good point to wrap things up. |
| # / 01:14:57 | Richard Brown | Yep. Okay. It's a good point to wrap things up. |
| # / 01:14:59 | Richard Brown | Thanks, Fluidity, for joining us. That was great. Thanks, Vishesh. I think you probably left, but thanks for the numbers. |
| # / 01:15:05 | Richard Brown | Thanks for LongForWisdom for governance at a glance. |
| # / 01:15:09 | Richard Brown | And thanks everybody for joining us. That was a great call. |
| # / 01:15:10 | David Utrobin | Yeah. Thanks everybody. |
| # / 01:15:14 | All | [crosstalk 01:15:14]. Thanks [crosstalk 01:15:16] |
| # / 01:15:14 | Richard Brown | All right. Bye. |
| # / 01:15:14 | Jeff Amico | Bye. |