Other Presentations and Updates
Kleros/Maker Fellowship Introduction to Marvin
- Marvin: It’s nice to be here and around some intelligent people; thank you for having me! My name is Marvin, I’m going to share my video. I am lucky and feel the immense burden of contributing to this community to build out this infrastructure for real-world assets. A bit about myself, I’m originally from the Bahamas, a small island in the Caribbean. I’m based primarily in Nairobi, Kenya, I’m currently in Ethiopia, I travel around the African continent. One of the things I do and am passionate about is Raise, which we started two years ago. The goal is to build security tokens and real-world assets. If you know the Bahamas, you know it’s the offshore entity tax haven; we don’t call it tax evasion; we call it the offshore financial center. That’s the fancy way of saying it. We thought 2019 would be all the rage for real-world assets, but we were very wrong. We decided to build a platform that simplifies diligence of real-world assets; we’ve been making it for the past 2 years. It’s finally in the right place now, and I’d love to show it. We bided our time to build out infrastructure to do due diligence on companies before they would launch to eventually create a database oracle that would link to smart contracts. It seems like we’re finally here, so that’s what I do and how I spend my time. Otherwise, I’m a securities lawyer by trade; I’ve built out and designed legal systems in the past. I also spend a lot of time in the crypto community, and I’m happy to be here. Let me know if there are any questions. I’d be glad to share the platform on the screen for a couple of seconds, so you get a sense of what I do daily.
- LongForWisdom: We can share your screen briefly.
- Marvin: What we build at Raise is securities infrastructure for the African continent, which is where we focus on time and energy in the capital markets here. You’re looking at a live version of the Raise platform. Two years ago, when we started out, the first thing we said was how does someone build out security token real-world asset infrastructure. The answer was evident to us. First, you have to digitize this stuff. Many people are talking about real-world assets, but many things don’t even exist digitally; deeds are still paper-based, especially in Africa. The first step we started out with was digitizing it. You’re looking at a live version of Raise; there are three components to the platform. We have one that’s focused on organizing corporate structures and subsidiaries. I can find out an annual return for subsidiaries, documents, and board members we can track. We can see who is on the board and who is not on the board. Most notably, we structure asset data for private companies to see a list of shareholders and all of the different assets stored here.
- For Yele Alade, as an example, we’ll store his common shares; we know exactly how many common shares he has. Each shareholder is tied to an email, and we create an electronic share certificate for each of the different certifications. This visual representation of what you see in a centralized database stores asset data programmable assets for private companies. So we create for each one, and we store all of the rights and preferences. Basically, we digitize an entire corporate structure. What we started building out this year is basically a security token issuance platform.
- This Cap Table that you see here is connected to something that we call a Deal Room. From this Deal Room, what we do for a company is we structure all of its diligence data. I can change up the different terms and add that it’s convertible debt; since the Cap Table data is connected to the actual Deal Room, investors can simulate exactly what their investment can look like in the future. This is based on actual company data and all of the diligence data. The Cap Table is organized and structured in this deal room. From this deal room companies and documents and all this stuff that I can go on forever about, you can invite investors, and those investors come in.
- After you’ve invited them, they can invest in the company directly through the platform. When they invest, we update the Cap Table here and issue an electronic certificate. That’s what the platform is currently to get a sense of. That is the context in which I think I will be a helpful fellow. We have a team that only thinks about securities all day; all I think about are real-world assets all day and hopefully how they will not disrupt the crypto and MakerDAO community’s financial freedoms. I hope that was an excellent introduction to Raise and myself. Glad to meet everybody; thank you again for the time and the kind messages.
- LongForWisdom: I am looking forward to seeing the outcome of the fellowship. We are grateful to have you here. Thank you.
The State of the Peg
MCD System Stats
MCD System Stats Alt
DAI 24hr VWAP Graphs
Maker Vault Stats
- All right, we’ve crossed over a billion DAI. Still around 430 million from ETH-A. We’re up to almost 10 million from ETH-B. That’s pretty much capped out. 3 million from BAT-A. 420 million from USDCA. A tiny amount from USDC-B. Up to 113 million from WBTC. 52 million from TUSD-A. Smaller amounts from KNC, ZRX, and Mana, and then 18 million from PAX-A and smaller amounts from USDT-A, COMP-A, LRC-A, 5.7 million from LINK-A, and 17 million from YFI.
- Just to touch on where the DAI peg is and has been. We’ve seen this consistent long-term price around $1.01 for a while. This has come down in the past month compared to two months or three months before, say, $1.06-$1.07. The peg has moved a little bit during specific time frames. We’ve seen instances of a few large trades executed at significantly elevated prices. These are particular instances that warranted double-clicking on.
- This one, in particular, is interesting. It turns out there is a particular transaction; the short answer is arbitrage. Still, a specific transaction is part of the series of transactions that exchanged many trades in the process. It exchanged 90 million DAI on Curve for USDC and then basically trading back that DAI. The top-level in this trade was a rather large flash loan and swap, which is basically a pure arbitrage opportunity that the trader was seemingly trying to take advantage of. Ultimately, that’s something to double click on further if people are curious, but the long and short of it is that’s what these blips are.
- If we look, however, at the last 14 days or so. You’ll see that this price has been fairly consistent, around $1.007. The other thing to note is that the volumes on that have been slightly higher in the last couple of weeks relative to a month ago.
- There’s been some amount of uptick in trading activity there. It’s also a bit more distributed onto multiple different sources than prior or is a bit more dominated by Uniswap and then the secondary, DYDX.
- What you see here is still the lion’s share. Obviously, it’s Uniswap, but we also see this decent chunk full of SushiSwap. DYDX seemed like a slightly diminished proportion of the trades. Then, Coinbase sees a very slight uptick even though it’s a small amount overall for the DAI-ETH trades. The USDC graph echoes these price movements but with the trading dominance occurring on a curve.
- If we look at some of these vaults, we see that for ETH, the largest liquidation wall right now is around 418 dollars with roughly 120 million DAI. If you see here, the largest single chunk of the ETH portfolio is 103 million, and that is roughly around 200 percent collateralized. Therefore, you see the most extensive ETH vaults; 56 million are the largest at 320 percent collateralized, 18 million at 380 percent collateralized. At least for this, the 70 million chunk at the top of the sheet (references both the 18 and 56 million vaults) is reasonably well collateralized. The highest risk scenario in the top few is this 17 million vault with 200 percent collateralization and at least two 13 and 11 million, respectively, at 200 percent collateralization. Beyond that, it’s a bit of a long tail aggregation of vaults adding up to this column here (signals big middle column in the first chart).
- For ETH-B, now we’re actually seeing some traction in this. 2.6 million is the largest ETH-B vault with collateralization around 190 percent. It makes sense that we see lower collateralization ratios in this bucket. Still, there’s kind of a curvature, which is interesting, and then there is a slight wall at around 380 dollars per ETH. That’s a projected liquidation of 7.7 million. Nothing too crazy there, but there is clearly an appetite for these lower collateralization ratios.
- Additionally, if we look here, you can see that there’s a projected liquidation amount with a price of 1.00 or slightly above a dollar. The nuance of that is if we look at these vaults as has been discussed prior, you have a lot of vaults that are basically at a distribution of 100.1-100.8 percent collateralized. Some of these most enormous chunks, you can see from the table basically that even the top five to seven vaults there are added up, that’s roughly 200 million DAI with 100.1 or 100.2 percent collateralized. And then, that continues throughout the smaller vaults. This is a situation that everyone is very clearly aware of. The total amount of DAI that is below 101 percent collateralization is roughly 400 million at this point. That is a continually growing situation, as was discussed over the last couple of months. I would say that the due date for crossing 100 percent collateralization is ever rapidly approaching.
- As for WBTC, we see a chunk liquidation of 78 million at a 14.2 thousand price. This is just something to keep an eye on, especially as markets were a little more volatile in the last week or two. If there is a significant downswing, you could see large amounts of liquidations all at once. Part of the risk scenario is that there has been some rebalancing of collateralizations as the nominal prices of assets have risen. Obviously, people like to book profits, etc. There’s been some perceived stability in those prices, so I think people have felt a little more comfortable adjusting accordingly. If it drops back down, then that’s your massive liquidation risk scenario. Those nominal amounts of liquidations are huge in that the ratio of issuance versus market liquidity is probably very high right now.
- For YFI vaults, this is dominated by one large vault. Most people are aware that’s 10.2 million that’s roughly 220 percent collateralized. That’s your projected liquidation wall of 11.6 million at a price of approximately 19.9 thousand. That’s something that could get liquidated very soon.
Questions and Comments
- Frank Cruz: Hey, Vishesh, I guess we have an idea who these large votes are for the WBTC-A and the YFI. In other words, I would imagine there are large institutions, VCs, hedge funds, or crypto Twitter influencers that can load up, and it wouldn’t matter if gas prices are 1000?
- Vishesh: In terms of gas prices, we know that some of the usages of WBTC, for example, are managed positions through protocols, large companies, DeFi company issuance, etc. However, if the question is, would a potential crash event creating a bottleneck on gas cause issues with liquidations in WBTC or ETH? The answer is; it’s possible. Especially if you consider the state of the market right now and consider that multiple different collateral portfolios have seen tremendous amounts of issuance in the last 90 days or so. You can also consider that gas prices are pretty high in nominal terms. If you adjust for inflated ETH price, those gas prices are lower, but that’s been a discussion that’s been had on crypto Twitter as well. The end result is in a crash scenario. If there is a crunch on gas, then yes, there is the risk of running into issues. Also, individual positions being managed positions doesn’t necessarily mitigate that entire issue. For example, we saw for ETH, though a few large positions fall into some of these buckets. Actually, some of those larger positions are the better-collateralized positions. So you can see there’s a mix. Some large positions are at 200 percent collateralization, but others are significantly higher. There would be a significant amount of DAI liquidated if there was a market crash. I think if that occurred, there would be a crunch on gas prices, and yes, you might run into some issues. So, that’s something to consider.
- Frank Cruz: Part of that question was if do you have confidence yourself, and this is your opinion of course, and no one else’s, do you have faith that some of these large holders can find the courage and deposit more collateral?
- Vishesh: I do not know these large owners, and so I couldn’t say.
- Frank Cruz: Got it, okay, cool. I guess my thinking is if Mnuchin wakes up on the wrong side of the bed tomorrow morning and decides to do some funky stuff, I think you said we could have a flash crash. I’m just hoping that these guys can man-up and deposit some collateral.
- Gregory DiPrisco: I would just keep in mind that we have the litter box set to 15 million DAI. Even if one of those large vaults were liquidated, the maximum amount of DAI that could get bid in that period is 15 million.
- LongForWisdom: That would be an exciting 24 hours.
- Vishesh: The realistic outcome you would expect long term is the same amount of sales you have to deal with. However, the initial impact is probably that if there was such a mass liquidation event, you’d basically just have a bunch of stalled liquidations.
PSM Implementation Update
Since last week, Primoz submitted his risk analysis as expected. On the smart contract audit front, Quantstamp has agreed to give us an express audit with a target end date of the 18th or the 19th. Hopefully, it will be the 18th. If all goes according to plan there, we should be good to push things out next week. Primoz also set up some risk parameter polls. Currently winning is the one with a 500 million debt ceiling for USDC only to start, and we add in some of the others later on in 2021. These polls don’t close until tomorrow, so people can change their votes now. USDC has at least 50% of the weight in PSM deployments. Nonetheless, the spell is ready, the contracts are on Kovan, and we should be good to launch next week as expected. Any questions?
LongForWisdom: If 500 million or 750 million debt ceiling were chosen, we might consider reducing the debt ceiling on other stablecoin vaults?
- SamM: Yes, Primoz put that up on contingent on over 500 million winnings. We would zero out the debt ceilings of the current stablecoin low collateralization ratio vaults. Makes sense to me. The PSM is strictly better.
- LongForWisdom: Cool, alright, any other questions?
Sam: One thing I forgot to add. When it gets deployed, an additional module called the LARP module will move the tin parameter from 1% to .1% over a week so we can maximize fee collection as arbitragers pick that up as it goes down.
Gregory: How exactly does that work, by the way?
- Sam: When the executive spell is crafted for next week, it will launch the LARP module, which anybody can call. Depending on how far it is from the launch date, it will set the tin parameter lower and lower until we hit our target value of .1%.
- Gregory: Got it, thanks.
LongForWisdom: I’m pretty sure we’d see market makers keep that relatively up to date so they would pay fewer fees using the PSM.
- Sam: Whoever is arbitraging on this will want to code that in as they’re arbitraging. The LARP is going through the audit as well.
LongForWisdom: Alright, one question that Greg brought up earlier was that we could potentially consider delegating the ability to do oracle whitelisting to the Oracle Team. I am not sure if we have time for a full discussion on that now, but if anyone wants to create a forum, I think Nik and I discussed it a few months ago at one point. If Nik is still here and has any thoughts, maybe he could briefly share them.
- Nkunkel: I reserve judgment until the future.
LongForWisdom: Fair enough! Cool, we’ll leave it there then. If anyone wants to continue discussions, feel free to do it here. Thank you, everyone, for coming!
Common Abbreviated Terms
MCD: The Multi-Collateral Dai system
CR: Collateralization Ratio
DC: Debt Ceiling
ES: Emergency Shutdown
EV: Executive Vote
GF: Governance Facilitator
GP: Governance Poll
SF: Stability Fee
DSR: Dai Savings Rate
MIP: Maker Improvement Proposal
OSM: Oracle Security Module
LR: Liquidation Ratio
RP: Risk Premium
RWA: Real-World Asset
- Artem Gordon produced this summary.
- David Utrobin produced this summary.
- Denis Mitchell produced this summary.
- Jose Ferrari produced this summary.
- Everyone who spoke and presented on the call, listed in the headers.