Charles St. Louis
- Given that we don’t have an active governance cycle this month, this review will just be an overview of all the current proposals in conception and RFC and some active pre-MIP discussions, followed by an overview of some collateral onboarding updates.
- Ignore the ones awaiting an executive vote. Those are the ones from last week.
- LongForWisdom: Thank you, Charles. The next greenlight polls will be up on Monday. They will be up for two weeks and not three days.
- Charles: Yeah, they’ll be up for two weeks and end on March 1st. At the beginning of the March governance cycle.
Risk Team Update
- Regarding collateral evaluations, we’re posting another two UniLP evaluations this week, which are renBTC-DAI and AAVE-ETH. We posted this week’s DC instant access module parameters for smaller vault types. This should go into the on-chain poll next Monday. If confirmed, we should have all vault types using this module apart from UniLPs. We plan to propose these parameters very soon. For stablecoins, we’ve already suggested that this vault type module wouldn’t be applicable due to DAI liquidity crunch reasons, etc. Lately, we’ve been monitoring the growth of ETH-A debt exposure. The Rates group may propose another rate increase on ETH-A because the last one hasn’t been implemented yet. However, it should be this Friday if confirmed. The idea is to try to lower the pace of debt growth. We’re also doing simulations on ETH-C vault types, the newer vault type with a higher liquidation ratio. The idea here is to stimulate ETH-A vault users to migrate toward safer vault type, such as ETH-C or new DAI minting from ETH to be done on ETH-C. The strategy could be a bit questionable because it doesn’t seem that borrowers are very rate sensitive at the moment. It remains unclear what the spread between ETH-A and ETH-C would be needed for users to move to a vault type that’s less capital efficient and cheaper. We also made a report on auctions this week using this year’s data. In summary, there were 150 auctions this year. Maker collected all penalty fees, which is about half a million. Vaults were getting the appropriate amount of collateral return. Still, there was one auction where Maker didn’t collect the total amount of the penalty fee, which was the DAI-ETH Uni LP vault that was liquidated. There was only one keeper at the time, which raises concerns about how many people bid Uni LP auctions. This is important to know if we increase the DC on Uni LP after the oracle audit. We are thinking of raising the minimum bit increase parameter, called back, and potentially the penalty fee. Hopefully, this would attract more keepers because, on the one hand, there’s a higher incentive for keepers to bid due to higher back and minimum increase. If there’s a higher penalty fee, vault owners might be more cautious with not getting liquidated. Additionally, we’ll also try to do a bit more PR about this potential change around DeFi. We’re primarily focused on liquidations 2.0 and doing our regular related risk work.
- LongForWisdom: Thank you Primoz, looking forward to seeing what sort of parameters come from risk in terms of liquidations 2.0. That should be interesting.
Real World Finance
- Three points this week:
- we’re continuing to work with legal to improve the infrastructure of RWAs, which will be a long-term process.
- We are working on eight collaterals for the next few months. It’s not something that will be quick. We still have three collaterals waiting in production. We are easing the onboarding process for asset originators because they don’t understand all the MIP and DeFi stuff. Now we have a sheet explaining all the processes. This will be on the forum very soon.
- We are continuing to discuss with a company that was greenlighted long ago to provide something that may be better suited for both parties. We began to work on the implication of term loans. We are lending for a fixed rate for a given amount of time. That’s something that was posted in the forum with YFI-DAI. It also speaks about implications; if you promise to lend for a long time at a fixed rate and the DAI supply decreases, there can be a liquidity issue. Research should be done in this direction to if it’s a significant risk. If there are any risks, what are their limitations?
- LongForWisdom: Thank you, Seb.
Operational Support Update
- We started posting our updates on the forum. You can see them in the thread using the links, and it’ll give you the highlights. For the KYM, we did the Keg last Friday. Then we did the long-term lending module by Alan from yield protocol, and Levwho co-wrote it. The collateral onboarding happening next Wednesday included Fortunafi, the yield and lending protocol for tokenized real-world cash flowing assets.
- we’ve been working on the core unit, beginning with the community call, which included Frank, Juan, Imeo, and Prose. In this call, they broke down the unit and answered questions. A second section consists of a few MIPs and sub proposals. Therefore, the core unit framework itself, risk, Governance, real-world finance, suggests leaving comments and reading through it one final time before it goes into a frozen period at the end of next week. Please check it out and leave comments. We have two new core unit drafts: the growth core unit by Nadia and then a marketing core unit by Seth. We have a few that are still in draft that was recently posted. We have the smart contracts and front-end, both written by Derek. Then we have strategic communications PR and marketing by Kathleen. We have Seth, who commented that it’s not supposed to be competitive to Kathleen, but instead is a different kind of approach. Therefore, if you see a core unit created, it doesn’t mean you can’t do, create, or propose that core unit. However, it is recommended that you check out whether someone else has written or spoke about that core unit. Check for redundancies or overlaps.
- Juan and I are also working on our core unit. I always encourage people to check out Imeo’s core units I wish existed. This is where all the brainstorming comes together to say I wish something like this had existed. I encourage you to reach out to your network. Maybe you want to become a facilitator or build a team around one of these core units. We all need to all work together and pull together our network to ensure we have all the bases covered.
- We have a call coming up with Opolis in two weeks. It will be the Tuesday community lead by David. Details will be coming soon. that will be another kind of employment service provider. I like to think of it from an employee’s perspective versus the accountable perspective proposed by Dennis. We had a few interesting conversations on the core units and topics concerning facilitator responsibilities. Some questions included inquiries such as the expected facilitator responsibilities as a high-level. The answers to this are written out in the core unit frameworks. The main thing to know is that you’d be responsible for the budget even if you have someone doing accounting for your company. If something like half a million goes missing, you’re going to be the person who has to communicate and get details on that. Another responsibility is the expectation of communicating with Governance by being with the facilitators and things like that. It’s essential to communicate the monthly reports. Stuff like that would be considered the responsibility of a facilitator. That being said, depending on how you structure your team and how it’s organized, you can be a PM and also a facilitator. You’re the person responsible. Keeping in mind that there are responsibilities of a facilitator. If you have a busy role, you might not always be able to cover both. You might have a facilitator who’s responsible for communication. They don’t have to be two separate roles. If you’re torn between two, but feel like it all folds in can do both, then you can be both. It doesn’t make sense to have two separate budget line items, such as a facilitator budget and then a PM budget, because you would be playing both roles. Any comments or questions on that?
- LongForWisdom: I’ll sort out something. The other key part of the core unit structure is the core unit mandate. That’s the place where facilitators can define any extra responsibilities they want to take on or commit to in terms of what the core units could be doing for Governance and the DAO.
- Amy: Yeah. A good example of that is SebVentures, who hosted his monthly report. He gave a January monthly report of what that team has been doing. in your core unit, you can decide what you want to be responsible for. One of the things that operational support spoke about was giving a quarterly report of all the core units. Long said it’s dependent on your mandate as well. The second interesting conversation that’s been brought up is facilitator salaries. LongForWisdom and his governance budget kicked this off. You should check out that thread. Generally, there’s been conversation around the expected transparency and what expectations a proposed core unit or salary that someone decides to be public could involve regarding other future core units or facilitators that go into it. I should add that some teams would rather have that more loose. They might say this is the general amount that we’re going to spend on people, and that’s okay. We see different structures. I would open the floor up now if people wanted to bring up any questions or thoughts.
- Amy: Juan, would you like to experiment with something?
- Juan: No. I think that each core unit should choose the level that they want. You can go for super transparent, where everything is public. Some companies are doing it in the open. The fact that it’s the blockchain and everything is transparent should not trick you into thinking that that’s required. Nick brought the point that sometimes it’s harder to negotiate with different peoples or attract talent if everything is public. I tend to agree with his point of view. However, Brian brings up another important point: privacy. If you’re a developer making half a million, that could be a security issue at some point.
- Chris: Yeah, that’s my recommendation for almost everybody thinking about this. Everyone can make their own choices. However, I would highly recommend that you scope the budget at the domain team level that this sort of utopia of radical transparency is a giant dangerous security trap. You do not want people knowing how much you make because the tokens that we get paid out in the space are bearer assets. You should think carefully about the operational security and whether or not you want to have everyone’s salaries transparent.
- Matthew Rabinowitz: Agreed. The beautiful thing about this core unit aspect is that it has the danger of spiraling into a bureaucracy. There’s an aspect to whatever period frequency of having a unit present, whatever the status, whatever it was done in the previous month or quarter, and outlining the historical and forecasted budget.
- Amy: If something feels off, it could be in a positive way. Let’s say there’s this massive budget, and we say ‘that seems kind of low.’ we wouldn’t be able to say how it feels low if it wasn’t vaguely broken down. Maybe it’s the people that are too low, or the people are too high, or whatever it is. I should bring up that for the governance budget and why that was also brought up. While the discussion was initiated around the individual’s value, It is a positive opportunity. People can say, ‘hey, I think you’re being undervalued.’ We need that kind of commentary in the community to ensure that we have fair pay; otherwise, if no one says anything, people will be undervalued, and people who are undervalued seldom speak up or represent themselves.
- Matthew Rabinowitz: I’m not even trying to say people shouldn’t be paid. It’s quite the opposite. I want to make sure that it stays efficient.
- Brian McMichael: I don’t want to cause any alarm, but the smart contracts team lost several developers to better opportunities last year. That needs to be rearranged.
- Juan: I agree. Also, if you are using a pseudonym such as Long is, it’s easier to be transparent. We all trust him, and we want to keep him doing his job. I mentioned this several times in the forum. Not being pseudonymous may cause issues that you might not be aware of today but can happen in the future.
Community Development Team Update
- David hosted an informative call with some community members. Here is a link if anyone’s interested to learn more about core units as well as the various questions discussed. Some contributors in community development are also writing core units and sharing them in Rocketchat. There will be more updates in the coming weeks, but for now, everyone is working on core units and community development.
- Matthew Rabinowitz: Regarding the budget, are we planning to have an aggregate view of what the contemplated budget would be for all the units at some point?
- Juan: That’s the minimum detail that you need to include in a core unit. There’s the budget implementation, which is the number that the protocol will payout. That’s the minimum that you have to disclose. Then there’s the budget breakdown in which you can go as detailed as you want. Some aggregation is fine, for example, saying salaries or expected salaries are okay. You don’t have to use the whole budget that’s assigned. I hope that clarifies the issue.
- Matthew Rabinowitz: That’s when you submit it into the forum. What would we want as a collective to see regularly? Each individual, sure, but at some point, will we have an aggregate slide that says what we’re currently spending, similar to what Seb put in the last presentation. I’d love to see what our expenses are going to be in aggregate.
- Juan: Yes.
- Amy: One of the quarterly reports that I had mentioned. There are two phases: One would be the budgets coming in. We would have two months to understand how much we would be required to spend. The second would be to see what we’re spending currently.
- Juan: Wouter also says he would not want to be in a hiring interview for three engineers who know the three budgets. But you can say, hey, we’re planning on growing ten engineers. When you hire a couple, you can start doing the math, but there are buffers. You’re considering various things, and it’s not a hundred percent transparent or visible if you don’t want it to be.
- Frank Cruz: I was going to change the subject if that’s okay because something interesting came up this week with Seth Goldfarb. He brought up the code of conduct. I’m sure some of you heard about Blockfolio. It became a hot mess for them where the founder, Sam, had to go on social media and try to answer some serious questions. How do we handle the code of conduct for core units? Is that something each facilitator should set a precedent for? or is it something someone from operations will provide with an outline? How does that work in a DAO?
- LongForWisdom: That’s a good question. If we don’t set up something in advance, then we will handle it as we go. I think the best practices will evolve from that. It’s something everyone has to deal with.
- Frank Cruz: We have many really good people here, so I’m not worried about that. As we grow, we should take it step by step.
- Christopher Mooney: I think Bill and Ted said it best: be excellent to each other. It’s not a complex problem.
- LongForWisdom: There was a discussion earlier about gas. Someone brought up the ip1559 in the chat. I’m curious as to whether or not anyone has any opinions on that.
- BrianMcMichael: It’s buyback and burns, which is what we do, right? Sounds good to me.
- LongForWisdom: I know none of our devs are experts on consensus or the Ethereum protocol itself, but does anyone have any thoughts on what it’ll deliver in terms of gas prices?
- BrianMcMichael: Does everyone know what the ip1559 is, to begin with?
- LongForWisdom: That’s a good point. Let’s start with that. Does anyone want to give an executive summary?
- BrianMcMichael: There are two components. They’re going to increase the block size a little but then change how the fees are managed. There will be a base fee, which is the minimum amount you need to spend on a transaction, and then there will still be a market fee. Everything over that base fee will be a tip to the miner. Still, the base fee for each transaction will get burned and therefore reducing the supply of Ethereum. This will turn Ethereum into a deflationary token. The miners will still get a profit. Nonetheless, they’ll get the tips above and beyond the base fee.
- SamM: Is there an opcode for the base fee?
- LongForWisdom: I wondered that too because I think it has implications for your Dss.chron module or something, right?
- SamM: It would be nice if there were. It would allow us to determine whether somebody’s paying a competitive gas price or not.
- BrianMcMichael: I don’t know how it’s implemented in the protocol yet.
- LongForWisdom: The general goal is to bring stability to gas fees rather than drastically lowering them.
- Matthew Rabinowitz: Is there any approximate timing on when that is going to happen? I’ve heard estimates.
- LongForWisdom: As far as I am aware, the plan is before proof of stake. But I am not sure.
Links from Chat
Common Abbreviated Terms
MCD: The Multi-Collateral Dai system
CR: Collateralization Ratio
DC: Debt Ceiling
ES: Emergency Shutdown
GF: Governance Facilitator
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.