Charles St. Louis
- All right, this is the last weekly MIPs update for the year. It’s been a fantastic year with a lot of progress. Before I get into the fun stats, I wanted to mention two new proposals in the conception phase. They will be transitioning into the RFC phase. Just making some comments on the proposals in terms of the formats and structure; The first one is MIP31, which is for active reserve based on the Uniswap V2 contract. Then there’s MIP32, which is the PSM for Compound MIPs exposure. This proposal proposes to provide an extension for the PSM. The extension allows the PSM to leverage USDC via DAI using CD. It also converts this USDC to cUSD using the same joint adapter. These two proposals were proposed by Alexis.
- We have 8 proposals in the request for comment phase, and I’ve gone over them a few times already. Still, there are a few new ones that I have yet to mention. Those are the sub proposals for domain team onboarding for smart contracts. That is from SamM, which is really awesome to see. Additionally, an onboard risk proposal from SebVentures. We also have the proposal to onboard Juan as the domain support facilitator to work with Amy, who was onboarded during the last governance cycle. We have the governance communication declaration of intent; if it were to pass, it would display the intention of MakerDao to onboard. Or it would welcome a proposal from a governance communications domain team. Lastly, we have the Maker protocol cover with Nexus Mutual, which is also a declaration of intent. If that passes, MakerDao will welcome the proposal for Nexus Mutual to cover maker protocol.
- The prenup discussions which are always being discussed are the Throttled Surplus Buffer, The Delegation of Authority, Real estate tokenization protocol, and the PSM based on cDAI.
Charles St. Louis
Collateral Onboarding Review
- In terms of our collateral onboarding updates, we had three governance pools for collateral onboarding that all passed. The executive vote to onboard UNI and renBTC went live on December 11th and executed on December 14th, adding them to the Maker protocol. We have 5 collateral types awaiting the executive vote. That’s the RWA-001, 6S, AAVE, Uniswap LPs for USDC, ETH, DAI-ETH, and PAXG. As the other domain teams mentioned, we will be seeing the executive onboard AAVE and UNI-V2-DAI-ETH LP token tomorrow. Lastly, we have the community green light polls for December published on Monday running until December 28th. This is for the DPI index, wrapped FileCoin, and wrapped Zcash. Go and vote and provide your input on those over the holidays.
- I wanted to get into some stats about the progress we’ve made over the last 7 months. This is pretty incredible, with two more to be added before the end of the year. It’s been great to see all the involvement of every team throughout the year. We have seen 78 MIP6 applications for collateral onboarding. Since launch in May, we’ve seen 33 MIPs proposed with 20 of them accepted. 44 sub proposals came through with 37 of them accepted and some in progress. At the very least, decentralization is hot right now. I’ve been speaking to many community members, and the forums are as active as ever. We’re going to have a really great 2021. So with that, I just wanted to leave it in a happy holiday. Thank you, everyone, for the great work.
MakerDAO Year in Review
- I’m Guy Brandon. I work with the Marcoms team. I came on to the team at the beginning of the year. I mainly work on blogs at the moment. I dropped a link to our annual review. I’m going to give some edited highlights of developments. Only a few things are of interest to the Maker ecosystem. It’s been a rough year, but it was a whole rubicon year for crypto and DeFi. Arguably, MakerDAO was the largest beneficiary of that. At the beginning of the year, multi collateral DAI was a little over 6 weeks old. Within about 3 weeks, the amount of DAI had reached the 100 million mark. That changed dramatically later in the year. We know that DeFi has been a massive driver of DAI adoption but what we’ve also seen is DAI finding its niche in various different sectors. You can look at the blog post about DAI gaming initiative, which launched in March. One of the critical use cases that we’ve identified is that DAI is a very attractive currency for gamers for various reasons. We’ve also seen DAI gain traction in the NFT space, which is growing really fast at the moment. This includes a lot of digital arts and other collectibles. It’s carving out a role as a currency for the digital art and culture market, which is really cool. Coronavirus pandemic caused very heavy volatility across the global markets in March, including crypto. That market downturn served to prompt several community discussions around various improvements to the Maker protocol, which have come about in the following months and will continue. There have been a few immediate and medium-term changes. The liquidation system is one of the big ones. We saw liquidations 1.2 launched in September. In the context of major upgrades, I think we can also include the DS Chief upgrade which we saw very recently mitigate the risks of flash voting. It’s also worth mentioning the voting portal upgrade, which has made it a lot easier for people to vote. Throughout the year, this process of decentralization that was already well underway has continued and accelerated. At the end of March, there was the transfer of MKR token control to Governance. A major action was the approval of the MIPS framework in April. This was massive step forward for decentralization. I think some of the things that people have shared shows that confidence was not misplaced. The community has been entirely responsible for changes to the protocol since. June was when DeFi adoption really started to accelerate. Then July saw that spill over to the Maker protocol, and that’s when we saw total value locked and DAI generation really take off. TVL and DeFi have increased by 2000% this year. A significant milestone for DAI was reached 5 weeks ago when the amount of DAI reached 1 billion, which is a pretty cool milestone. Check out that infographic on the blog if you haven’t already. It’s well worth mentioning that ETH 2.0 has officially launched a few weeks back. That is going to be a very long process to complete the set of upgrades to that network. but that will have pretty huge implications for ETH, Maker, and DeFi as a whole. The last thing worth mentioning is that Tomorrow’s vote around real-world assets is an unprecedented and breakthrough development.
- A few key stats, thank you, Amy, for yours; these are just some edited highlights. Roughly this time last year, we’ve seen the DAI supply increase about 15 times. We have 9 times more collateral types. There was a mistake on the blog, which will be updated because we finalized that text before the last text was approved. TVL is up almost 8 times. We have 6 times the number of vaults. The last one is the number of integrations has nearly tripled. It has been a pretty impressive year.
- LongForWisdom: Thank you, Guy; quick correction, the real-world assets spell is being pushed to January. That brings us to the end of our scheduled agenda. Any questions?
- LongForWisdom: Maybe we can discuss tUSD a little bit. I know that’s been a hot topic on the forum recently. To give us an overview of what we’re talking about. A couple of days ago, Shane posted a thread relating to an announcement from the tUSD team talking about how they have been acquired by another group and would be running it. They’re going to continue running tUSD, but they will have different owners. The CEO left a comment in the forum reassuring users that there wouldn’t be any profound changes. Any thoughts for discussion?
- Christopher Mooney: Has anyone figured out who the Asian consortium is at this point?
- Gregory Di Prisco: It’s Tron; they just use that as a cover.
- LongForWisdom: It’s not entirely clear, but there was a similar language used when the same consortium acquired Poloniex, which did increase Tron related content on that site.
- SamM: If we want to take the route of unwinding exposure, there are two ways to do that. We could wait for liquidations 2.0 and turn them on. That could work. Another alternative is to liquidate the current tUSD vault into the tUSD PSM when we add that in and then maybe set the out fee to 0% to clear it out as fast as possible.
- Christopher: I think it would still stay on the books. There’s probably an alternative liquidation where we create a custom liquidator that can be called. It gets the collateral that the liquidator then cycles on the market for something like USDC, gUSD or PAX-USD and then puts that into the PSM. Thereby getting the DAI back and paying the position. If we would do that, then whatever delta exists on the market for those pairs will be accrued as a loss. It’s going into the collateral buffer or the system surplus buffer. Those are options.
- LongForWisdom: Any option that involves liquidation potentially upsets a subset of users. Although we assume that those vaults have been abandoned, there’s a good chance that some of them haven’t, right? Especially now that the stability fees are 0%. There’s a good chance that some of the creators of those vaults are just holding them.
- Gregory Di Prisco: Is it possible to turn on stability fees so that the large ones are under 101% at least?
- Christopher: Almost the entire thing. It’s as though 51 million tUSD is already underneath the collateralization ratio. Almost the whole lot can be liquidated.
- Gregory: Those users wouldn’t have much reason to be upset.
- LongForWisdom: Well, they may because they knew there were liquidations enabled when they set up the vaults. Maybe it would be fine, but I would expect someone to be annoyed.
- SamM: We definitely need to give fair warning about that, but I mean, we are going to need to introduce a stick to these vault holders at some point; otherwise, they’ll just hold at 0% fees indefinitely and get a no-risk short position on DAI.
- BrianMcMichael: There’s no economic reason to come back for that anyways unless they buy DAI for a low price, which we haven’t seen in months.
- Christopher: In general, we should give a fair amount of warning and create a custom liquidator in the next year that lets people know that okay, this is going to start liquidating people, and as it liquidates them, it moves those positions over into the PSM. They can top up or pay their positions down if they need to. I think that’s the right approach. It lets them keep their short position if they want. Otherwise, they have to pay it back.
- Lev: Since we’re doing so much for the stable coins, it would be very useful to have a
flipper module that sells stuff at a DS value over a private price that we could swap into situations like this where governance would say they’re happy to get rid of the tUSD or on 1 basis point below the dollar. Thereafter, you can put that on and see how long it takes to clear. It’s basically a PSM for liquidations, and it would be simple to implement.
- LongForWisdom: Yeah, that’s a good point.
- Primoz: No need to rush today, but we need a plan. There may still be some unwinding. I’m just looking at the vaults, and 10 million vaults are positive. If they unwind when PSM is enabled, there should be a small profit. Maybe we see some unwinding. I think that if someone starts blacklisting tUSD at Maker tomorrow, the whole acquisition becomes worthless. Still, of course, if something wrong happens, we need a plan before it happens. Suppose we need to wait for liquidations 2.0. In that case, I think we can focus on the one Lev proposed where we adjust the
flipper and set some sort of price to measure the cost for Maker. The benefit will be higher because those vaults have some additional value of over 100%. The PSM idea makes sense to me.
- LongForWisdom: It’s worth mentioning that no one necessarily decided that we need to get rid of tUSD right? That’s the whole debate.
- Juan: It’s good to speak about a plan for any collateral type we may have in the future. We need to make sure that we have a decent plan, including communicating to the vault holders. Preparing for any emergency doesn’t mean we need to pull the trigger after we know the plan.
- LongForWisdom: Good point.
- brianmcmichael: Regulators are going to push even harder in 2021 and beyond. Stablecoins can potentially provide an existential risk to the protocol because of the blacklist risk. A lot of people think that won’t happen. Still, there are talks in the process that it might.
- LongForWisdom: Good perspective there. We need to have some sort of plan in place to deal with stablecoin related issues.
- Joe Quintilian: Just an idea. At some point while we transition to the full DAO here, perhaps somebody can come up with a MIP where we have a governance relations person that works for the DAO. That way, we’re included in the conversation with USDC, PAX and everyone else.
- Juan: You looking for a job, Joe?
- Joe Quintilian: I have enough already, but that’s just an excellent point that’s been brought up.
- Juan: We need to have a plan or at least some guidelines that we know there, and we can follow when it happens. Brian has a great point.
- Joe Quintilian: I still think they’re going to be worked out. I think we’ll see an explosion of growth with stablecoins next year. Our most significant role is managing the risk. Yesterday on CNBC, Glen Hutchins, the former head of the NY Federal Reserve, came out and said stablecoins are exploding and will continue to do so.
- LongForWisdom: Thanks, Joe. You’re always welcome to comment.
- Gregory Di Prisco: I want to point out that there’s a potential alternative to taking on stablecoins to maintain the peg, which is to set up a structure as Matt has with MIP21. To have a trust where we can potentially send DAI with the express intent of that trust selling DAI and holding dollars in a bank account. At least that way, the beneficiary of that trust is the Maker holders, and there’s no blacklist risk.
- Sebastian: You could be blacklisted by the government.
- Gregory De Prisco: They would have to go through the judicial system to freeze them. They couldn’t just click a button.
- Mathew Rabinowitz: The issue with stablecoins is that Circle has the sole and absolute authority to do it by themselves at their discretion. People have recourse if they do that. But it is up to them if they decide to do that. Something like that could work, but the challenge is that the deposits are only secured up to a certain amount with the FDIC. The next follow on is if that account has an investment and adviser. You were allowed to buy U.S. treasuries with it. Now you’ve taken it one step further where it’s backed by treasuries at this point, which is the full faith and credit of the U.S. government.
- brianmcmichael: Uniswap LP tokens are going to help a lot. We can put tokens in USDC and USDT pairs, and they’re both black-listable on their own. It’s possible that the Uniswap exchange could get blacklisted. However, we can still extricate the tokens from our system, and they’ll be dealt with in the greater DeFi ecosystem. There is a lot of access to liquidity there, which is a lot safer for the protocol.
- SamM: I see a trend as protocols keep building on top of each other. This blacklist is going to turn into you blacklist all of DeFi and less of blacklisting specific addresses. Circle will probably not want to ax all DeFi USDC. We either go down together or we don’t. That would be a death sentence for their currency.
- Mathew Rabinowitz: They’ve already done it once or twice under totally justified circumstances, and there are mechanisms to help offset stablecoins. One of the benefits of doing the PSM model, in general, is that we’re going to know this is how much we need to displace continuously and with precision.
- SamM: Yes.
- Christopher: It’s actually my favorite aspect of the PSM.
- LongForWisdom: It’s something I think is really cool as well.
- Christopher: We have moved off from the original topic, but does anyone have other opinions about tUSD, its change of ownership, and possibly whether Justin Sun and Tron are in control of it?
- Juan: I think Greg brought up excellent points in the forum about the custody of the tUSD changing and then if the blacklisting function will go towards the so-called consortium. The date is what should give us a sense of urgency or not. Regardless, we should work towards something, but the urgency is not clear right now.
- Christopher: So we don’t have a date yet?
- LongForWisdom: No, the CEO said several weeks. I asked him to be more specific, but we may not get an answer.
- brianmcmichael: Maker is a risk protocol, right? Every token that we take on gives us some amount of risk, and the idea is that we offset that with the stability fees. That’s the insurance premium, right? We might decide the risk premium for tUSD is too high for anyone to actually use it, and then at that point, we may have to delist it. I don’t think we should completely throw it out. We just need to manage the risk now that it has changed.
- LongForWisdom: Yeah, that’s a way of putting it.
- Matthew Rabinowitz: If we just take the central bank’s corollary to a banking model, banks cannot change hands without receiving consent from a central bank. In this context, it happened without consent. By looking at the numbers, a party could decide to mint DAI based on it. I agree with what you just said about the risk parameters and the risk premium associated. Still, in parallel to that, my personal vote would be to lower the debt ceiling immediately to inhibit taking on additional risk until we quantify that in parallel to raising stability fees. If the tUSD that’s outstanding is potentially already underwater. It’s more about limiting the damage as much as possible.
- Sam: The debt ceiling is going to zero in the PSM vote.
- LongForWisdom: On their list, it would be Friday, but potentially maybe Monday or Tuesday.
- Matthew: That’s making the assumption that those things pass in sequence.
- LongForWisdom: Yes, you’re right. that is not guaranteed, obviously.
- Frank Cruz: With regards to the consortium of tUSD, would it be a vote of confidence if a16z stays on board? Speaking of a16z, Horowitz got named to the Coinbase board of directors. I think that is a vote of confidence for DAI, in my opinion. Just wondering what you guys think of that if they stay with the consortium. I know they invested in tUSD. What is their thinking behind going to Tron? It would be nice to know are they doing it because they don’t see the scalability in Ethereum. They want to go to Tron, and maybe they’ll go to Algorand next. These are questions that we just don’t know yet.
- Lucas Vogelsang: I don’t know about tUSD, but a lot of the other US Dollar backed stable coins are shipping versions of their token on every blockchain out there. I think the change of ownership is more of just them doing a token for Tron and seeing how others act. I know quite a few other token projects in the Polkadot ecosystem and so on.
- Frank Cruz: Lucas, in your opinion, if a16z sold their stake in tUSD, How do you view that?
- Lucas Vogelsang: I wouldn’t weigh it that much, to be honest, because most of these VC funds don’t actively manage their portfolio. Certainly, if they write off a project, they won’t care about trying to sell it. Of course, maybe they would but not because a particular VC fund sells or doesn’t sell. They’ve made a bunch of other bad investments. I think that’s not a vote of confidence.
- LongForWisdom: Cool, alright, if no one has anything else to add, we’ll end the call here. There will be no meeting next week.
Links from Chat
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.