Episode 147: June 24th, 2021
01:13: Governance Update
03:40: GovAlpha Core Unit update
05:22: Forum at a Glance
08:13: Protocol Engineering Team Update
20:18: Oracles Team Update
25:47: Risk Team Update
28:03: Real World Finance Update
35:42: Growth Core Unit Update
41:10: Content Production Core Unit Update
45:16: Sustainable Ecosystem Scaling Update
49:39: MIPs Update
59:47: Introduction to dUX
1:06:19: Open Discussion
Agenda and Preamble
- Hello everyone, and welcome to the MakerDAO Scientific Governance and Risk meeting number 147, taking place on Thursday, June 24th at 17:00 UTC. My name is LongForWisdom. I am the Governance Facilitator at MakerDAO.
- We like people to get involved and ask questions or comments, so please, do not be shy if you have something to say.
- Please vote for the currently ongoing Executive Poll.
- We may consider skipping this week’s Executive because there is only one piece of content that can be bundled into something else next week.
GovAlpha Core Unit update
GovAlpha Weekly Update
- We are working on our Quarterly Review, which is halfway complete.
- LongForWisdom and Payton Rose had initial meetings with several GovAlpha applicants. Meetings have tended to go well, and we’re getting new people working on some starter tasks.
- The launch timeline for delegation is becoming firm; we do not have an exact date but will share details soon. If you are interested in being a delegate for MakerDAO or GovAlpha, please get in touch.
Forum at a Glance
- It’s been an active week with some interesting discussions happening on the forum.
Forum at a Glance for June 18th - 24th
- Revenue down, but morale is up. The recent rates change is targeting more DAI creation outside of stablecoin facilities.
- Over 6M DAI worth of Collateral was successfully liquidated last week without any loss events for Maker.
- While still in an impressive range, the slippage for trading DAI has increased the last couple of weeks, with slippage trades below 30,000 DAI at or above 0.1%.
Protocol Engineering Team Update
- We had some carryover work from last week that includes SushiJoin adapter and CropJoin, gas optimizations, improve manager contract implementation, and the D3M is in the final round of clean up.
- In vote delegation, we added 1-year expiry to the vote delegation process. in the contract optimization, a gas bug will cause the worst-case to consume max block gas. If you want to fall back to a version before the LP tokens, we will fix that and will be pushed shortly.
- In the reviews and documentation, Kurt put together a really good document defining magnitudes and ranges for all Dss parameters and quantities.
- We did some risk scenario analysis around oracle tail risk outside of the oracle domain. Once we ingest oracle prices, there are some for defense in depth; there are additional safeguards that we can provide. The info is not yet public, but we will post it once we make it more formal. Also, we’re doing DSR entity-relationship and system modeling with BlockScience, and we are also reviewing the Optimism DAI Bridge.
- The PE team is looking for pivoting off most of the projects we’re looking at by focusing on collateral onboarding, this doesn’t mean we will be abandoning L2, but we’re thinking about ways within the short term to try and get the Dai supply up. We’re thinking and prioritizing with other mandated actors and Governance by looking at this concept of institutional Vaults and even permissionless versions of that, such as conditional Vaults based on the parameters decided. We’re looking at stETH and doing technical analysis of this and SushiJoin and CropJoin stuff, to which we will add additional supply and LP tokens. Sam is reviewing gUNI, which is Gelato aggregated LP token for Uniswap V3.
- Instead of working on DssGov or one of the other MIPs with higher priority, we’re thinking in the short term, we need to focus on non-USDC styles of collaterals to help balance the collateral risk.
- Kris Kaczor: We’ve been working on the L2 risk framework docs describing different architectures of L2s, such as scaling solutions and outlining the risks for Maker. For example, what would be the worst-case scenario if we decide to deploy Dss on such a solution? Eventually, Governance can make an educated decision on this. We’re working closely with the Optimism Standard Bridge, but today we found a rough edge that we need to fix. We’re also working on the UI integration side and testing things like cross-chain spells. Finally, there is some work related to Arbitrum, which is now finalizing their Standard Dai Bridge; we will help work with them.
- Christopher Mooney: We have two new team members; First is Julien Martin.
- Julien Martin: Hello everybody. I’m a developer from France. I have a master’s degree in cryptography with experience in the financial sector. I am excited to be here!
- Christopher Mooney: Thanks, Julian. The second new team member is Talbaneth.
- Talbaneth: Hello, everyone. I’m an embedded software engineer and manager. I’ve worked in Kyber Network as an SC Engineer with experience in projects like wBTC, AMN, hybrid EOS contracts, and more. I also worked with liquidations and arbitrage contracts. I am very happy to be here, thanks!
- Christopher Mooney: Regarding the legal risks being considered for things like stETH in collateral prioritization framework stuff. Currently, we have a broad set of teams that take a look and do a gut check to get that initial score. I don’t know if the legal risk is added there, but we can add a column.
- Frank Cruz: Any TBD for Optimism? This was supposed to happen in July.
- Kris Kaczor: We might have intermediate deployment as with SNX where anyone would be able to move Dai once it’s public.
Oracles Team Update
- We started doing the production rollout of a tool called gopher that we’ve been working on last year. This will be a big improvement because the prices from exchanges and other sources will be pulled locally and cached to prevent blocking behavior.
- In the coming weeks, we’re going to roll out a tool called spire which is an alternative network to scuttlebutt; these two networks will be running parallel and add an extra layer of upper density, so if there’s ever an issue with scuttlebutt then price messages can be grabbed from the spire and vice-versa.
- Concerning the Oracles CU, we’re finding ways to legally structure things and prioritize roles for projects and hiring, stuff that is behind the scenes.
- We’ve been reviewing the stETH oracle code. We’re going to use their contracts and deploy our instances of those contracts because they are upgradable for the Maker Protocol.
- Matthew Rabinowitz: Have you looked at integrating CME real-time index data for ETH price as a potential feed compared to the gopher project?
- Nick: That’s a good point. One of the first things we want to do is update all of the BTC, ETH, and others data. What we plan to do will fall within the subject that you mention.
Risk Team Update
- We worked on two collateral evaluations, MATIC and stETH from Lido; the descriptive part is almost done, but we’re still running some simulations and adding relevant data and simulations to the risk dashboard because stETH has the main market on Curve. We need to find a way of collecting that data. These reports will be published soon.
- We’re working on a direct Dai deposit module risk assessment relevant to our platform.
- We’re also working on few things which are not visible right now, namely address labeling. As a result, we will have a better picture of Vault users and their applications to open the Vaults and then know whether they are protected by protocols such as DeFi Saver.
- Last week, we worked on adding centralized exchange trading volume. Previously, we only had one aggregated chart, but now we’ve two more charts aggregated by exchanges and trading pairs.
Real-World Finance Team Update
- I have published the post mortem on the notification issue concerning NewSilver. They also now have an independent director.
- We will begin the Centrifuge structure next week. They now have audits of the lending side of the teammate contracts. They will make improvements. The landing site was changed a little to be integrated with Maker.
- Next month, I will ask about an increase in NewSilver DC, which is currently 5,000,000. They are using 70% of their DC. They want to continue a business relationship with us using a higher DC.
- The next Centrifuge batch includes four assets, which are still delayed until finished adding the independent director. They will also include the new notification system.
- SolarX may also be delayed due to a large amount of paperwork.
- Christian worked on solutions on the legal side involving Caymen Islands. The solution will be to use the Cayman Foundation, which is similar to the Maker Growth Foundation. It will take orders from the DAO, making it a legal entity that we can use for many things and direct it from the DAO itself. However, there needs to be some economic substance in the Cayman Islands; maybe having somebody living there and giving them a job to show up to the office. Our quiet presence there will be an expense as well.
- We now have three law firms working with us. One is in the Cayman Islands, and the other two are international.
- We made a small improvement on the Dune Analytics dashboard; We now have the revenues per collateral, which shows us that RWAs are 0.1% of the total assets of Maker and generating 0.2% of that revenue. In addition, we began creating on-chain data providing more analytic information so that we can eventually not use Dune Analytics.
- Lucas: How much can we scale this as interest rates are decreasing in crypto collateral? I expect this scale very well.
- Sébastien Derivaux: We want to have no tail risk above the surplus buffer, which would reduce our risk as we begin with these new legal structures. This may significantly delay the scaling to achieve two billion. Chris or Brian mentioned that the issue we have is that the USDC-PSM is great for liquidity to redeem Da, but if you use them in RWAs, there may be some lag and delay to redeem that USDC back on-chain. There are questions to be answered before we can move RWAs above one billion.
- LongForWisdom: Are there any updates on 6S?
- Matthew Rabinowitz: Two administrative items are remaining, along with the transfer instructions with the broker-dealer. We are expecting the red lines within the next 24 hours.
- Lucas: Matt, I understand that enforceability opinions need to be done on the final documents. Are those the final documents for a specific deal or the overall setup? What’s the process for getting the first deal complete?
Matthew Rabinowitz: The trust structure is mixed with 6S Capital, which doesn’t change because it’s one set of enforceability opinions. Every single transaction that happens downstream from 6S Capital to would-be borrowers each has its own enforceability opinions, which are done during every single deal.
- Sébastien Derivaux: What is the timeline for the trust structure or legal opinion?
- Matthew Rabinowitz: It is when we close.
Growth Core Unit Update
Growth CU Weekly Updates
- The Risk CU and us had a conversation with Circle following up on the forum discussion regarding us investing our USDC. Circle offers a yield account but requires an entity to sign the agreements and pass through their KYC and compliance processes. We discussed a potential opportunity to lend them one billion USDC; would they offer a different yield due to our high volume. They said they are not worried about the yield because they are also working with Genesis handling enormous volumes of money. Therefore, their yield should be fixed. Please, go to the forum and engage in the conversation about whether we want to incorporate and invest USDC in Circle. However, this does imply a risk for the protocol. Please consider this risk and give us your opinions.
- We spoke with Syndicate Protocol, who are working with traditional companies to start DAOs. They are using VC funds to hire the best legal teams to create legally compliant DAOs to invest those funds. Syndicate is now offering their services to DAOs and are interested in Maker. They will be posting on the forum within the following weeks. They believe they can help us diversify our treasury, USDC, to use and invest in traditional financial instruments such as bonds. This is interesting for us and is something to consider. I invite other CUs interested in incorporating their business to speak with Syndicate for help.
- We launched our Growth CU Twitter account! Follow us!
Content Production Core Unit Update
Content Production Biweekly Updates
- We are excited to welcome some new hires! We onboarded a video producer and a writer. We are going to work through the backlog of content that’s been amassing since our mandate. You’ll begin to see a lot more content released from us within the coming weeks. It will mostly be on YouTube and Reddit.
- We continue to have conversations with CU regarding what they would like to see in the Community Portal. The plans are becoming clearer, but we are currently having an issue with Gatsby communicating with Github pages. If anybody has experience with React, please reach out.
- We’ve begun outlining storyboards for requested educational videos. If anybody has video content they plan to upload regularly and want help with editing or MakerDAO branding, please reach out.
- We are looking for one more writer. We also made an offer to a community manager. Overall, we are continuing to onboard new team members.
- We will be announcing details on the art content to decide between the dragon and capybara as a mascot for MakerDAO.
- Wouter: I read something about Maker Radio in one of the lists of wanted CUs. Is that connected to the CP CU or somebody else?
- Seth Goldfarb: I believe so. We have an account set up through Anchor to distribute audio to podcast platforms. It may be called Voices of MakerDAO now. But yes, we will be publishing the audio from our videos on there. We are brainstorming on appropriate content and getting things going with that. If anybody is interested in publishing podcasts or relatable content, please reach out.
Sustainable Ecosystem Scaling
Weekly MIPs Update
- Brian McMichael: Regarding the DssVest, it’s not just a solution for Maker vesting, it’s the plan right now for Dai payments for all CU teams. Going forward, the streaming solution is more lightweight than the keg. I noticed that it’s not getting enough votes to meet the threshold. Please, vote or provide an alternative.
Presentations and Other Discussions
Introduction to dUX
- Hello, I am a developer from the dUX CU. dUX stands for Development and UX. We began last week as a port of the CS incubation program. Currently, we are a team of five developers and one designer. Our focus will be the MakerDAO Governance portal and voting. One of our first processes is to add voting delegation functionality to the Governance portal.
- We are in the process of hiring a full-time project manager to help us manage our work more efficiently. If anyone is interested, please reach out.
- You can learn more in-depth about our CU by watching last week’s presentation with SES.
- We collaborated with GovAlpha on the UX and design, which is now approved.
- This is the prototype for vote delegation. We split the deliverable between three sections; MVP, Version 1, and Version 2.
- We are currently working on the MVP, fetching the recognized delegates’ information with a mix of Github repository that handles the profile picture, name, and description. We are showing a brief walkthrough of the delegation functionality by delegating some amount of MKR from a transaction. For example, we can delegate to a user, access that user’s profile, and show some information.
- We have some progress on how to define the vote delegate information of users. We created a Github with files, which we transfer to GovAlpha and another repository. This here shown is only for test purposes. We are already rendering this and crossing it with mock information to organize the UI. We will share a demo when we have more completed.
- We have a Discord Channel that you can join. Please, provide any suggestions and ideas.
- Nik Kunkel: Should there be limitations on eligibility requirements for delegates? There could be a conflict of interest, such as CU facilitators who also want to be delegated.
- LongForWisdom: We will have GovAlpha create some suggestions. We haven’t worked on this yet and probably won’t be part of the UI.
- Nik Kunkel: It’s something we need to do sooner rather than later. We should make this clear from the get-go. It doesn’t matter what we decide; we just need consensus on who can and cannot be a delegate.
- LongForWisdom: That’s a fair point. We will consider it before launch.
- Payton Rose: The contract itself will be permissionless. It’s just a say on who the showcase delegates are.
- LongForWisdom: Yes, there isn’t a way to enforce someone or a group not to be delegated. The best we can do is not highlight it on the UI.
Delay Onboarding Stablecoins into PSM
- Nadia Alvarez: I want to let everyone know about the conversations we have with Binance, Paxos, and Gemini. It’s now relevant since we are thinking of including stablecoin in the PSM.
- Mariano: We are speaking with those companies. They are interested in being part of the PSM. We want to use that power of power as a negotiation tool. For example, Paxos is extremely interested in being part of the PSM. They have one of the biggest and most regulated infrastructures in the business. We are still reaching a form of agreement regarding things they can provide to the protocol. If we can delay the stablecoin voting into the PSM, it could help us be in the best position when negotiating with these companies.
- Nadia Alvarez: We want Paxos to include Dai in their APIs.
- Mariano: We ask them to implement Dai in all of their products like itBit, APIs, and Crypto Brokerage. Paxos are the service provider for PayPal and other big wallet institutions. The idea is for them to have access to Dai in their system; they can mint PAX and send it to the PSM to get Dai ready for their clients. We sort of had something similar with USDC in the PSM, except USDC does not directly own it. Instead, we are asking to own the entire process with PAX. Thereby, we can leverage their sets of APIs and their client base. We are in conversation with Binance with BUSD regarding the Binance Card and Binance Pay. We want to integrate Dai into these products. We know that negotiations with Binance took a lot of time. But they want to be part of the PSM. It would be really good if he had some time to negotiate this.
- Christopher Mooney: You want Governance to hold back on voting on-chain or in the signal polling?
- Mariano: On-chain so that we can have some time to negotiate and get a better deal for the protocol.
- LongForWisdom: I’m not sure the negotiation position is strong given that the community has already indicated that they want the stablecoins voted in.
- Mariano: Yes, but we have been clear that essentially it’s the on-chain vote that matters. They understand the process and are willing to follow the process. These companies see DeFi as something very interesting. They know we are practically the creates of DeFi with Dai. So we have a win-win situation, but we want to get the best deal possible.
- Brian McMichael: What does it mean when they want to own the whole process? Is there a forum post about that?
- Mariano: Not yet. We are still discussing it. If Paxos is accepted in the PSM, they can mint Dai, right? It also works the other way around: If they can receive Dai, send it to the PSM, get the PAX, the client can send USD. This is powerful because we don’t have something like this available. I don’t know any company that directly sells Dai by minting it through the PSM.
- Frank Cruz: Paxos is a charter bank, correct?
- Jen Senhaji: Yes, it’s a trust company.
- Mariano: Paxos is also working on different things related to traditional finance, such as bonds, stocks, etc., which can be collateralized PAX. This can be used to indirectly onboard RWAs.
- LongForWisdom: The signal process to on-chain process is looser than some of the other processes we have. Schuppi, since this is your signal request, do you believe this is a reasonable request to delay the onboarding of the stablecoins into the PSM?
- LongForWisdom: Okay, I will talk with Schuppi to see if we can do another signal.
- Mariano: Regarding the prediction that Christopher Mooney put in the chat, I think that the DC plays a big role. USDC could have done the same thing with all the USDC we have now in the PSM.
- Christopher Mooney: To clarify, the idea would be to create a PSM for GUSD or PAXUSD, which allows them in one transaction to mint a bunch of PAXUSD, tuck it into the PSM, get a bunch of Dai, send that Dai through the USDC-PSM, get a bunch of USDC and take custody of that USDC to start a redemption process where the newly minted PAX is backed by the USDC, which ends up in their bank account. Bridging to L2 has the same attack vector.
- Mariano: According to them, they aren’t able to back PAX with USDC.
- Christopher Mooney: I’m sure they will solve that.
- Mariano: Another situation is this - Let’s say we can negotiate a good deal, and we want to replace some of the USDC we have on the PSM. They can deploy 100M PAX into the PSM to get Dai exchanged for USDC, which they can sell for USD. Another operation can be to send the USDC to them, which can be sold for USD to mint for PAX, which will be sent to the PSM to provide collateral back. They told us that those dollars would be invested into T-bills, which have revenue that they can share with the protocol.
- LongForWisdom: To be honest, that kind of attack would benefit us because we charge fees on money going in and out of the PSM.
- Mariano: We are preparing a post right now. Keep an eye out on the forum to continue this conversation.
- LongForWisdom: What are your estimates in terms of time required to conclude these negotiations?
- Mariano: According to what we discussed, it should take two to three weeks.
- LongForWisdom: Maybe we can determine a middle ground where we onboard them with a 0 DC.
- Mariano: That is more risk-related. Judging by their stance with the PSM, they want to be in it and start exchanging USDC. This could be an option, but it may take a lot more negotiation power if we already have them in the PSM.
- LongForWisdom: Okay, we will give it some thought.
Conflict of Interest for Delegates
- Wouter: I was trying to understand better the concern that there is. Maybe Nik can elaborate a bit more?
- Nik Kunkel: My concern is, let’s say that I am the Oracle coordinator facilitator and also a delegate who amasses 15,000 or 20,000 MKR. I can do a budget increase and start voting for my self-interest.
- Wouter: If there is transparency with the facilitator of the CU, the expectation should be that you vote in favor of what the CU wants to see. As long as there is transparency, people would not delegate to you if they believe that is a risk. It’s not necessarily bad to delegate as a facilitator is because we can move towards a model where CU will do exactly this; they will run an operation that figures out where capital should be efficiently allocated by using their delegation power to push the vote in that direction. This can even kickstart more representative voting rather than this plutocracy voting.
- Christopher Mooney: I share Nik’s concerns. Wouter may be correct with transparency, but there is an overlooked problem that we may have with liability. Nobody on the PE team has any power where they are delegated crazy amounts of MKR. They can implement something but only as free speech where Governance gives guidance. You can’t lay anything on the CU teams regarding liability. They don’t have any power. Then you have teams with delegates at the head, which become more powerful actors and can lay a lot more liability at their feet. This is a caution to any teams participating who will put themselves as a delegator.
- Wouter: Liability is a good point, but it is separate. I believe that we have to move towards a more delegation model in terms of capital allocation. I agree that there is a challenge on a legal level, primarily why I haven’t been more outspoken about it. Nevertheless, this is something we need to explore. We need CUs that specializes in capital allocation rather than assume that MKR voters will continue to micromanage.
- LongForWisdom: Nothing stops us from having a capital allocation CU present a proposal that the delegates can consider. It doesn’t have to be the same people proposing to be voting for it.
- Kurt Barry: Wouter is making a fundamental point about the engineering limiting we have of the throughput of the human brain. At a certain point, one person can’t vote knowledgeably for every proposal and parameter change.
- Wouter: What we see with the complexity of the RWAs shows that many people don’t get properly understandable. This also goes in the other direction where we are a DAO with many discussions about Maker’s vision. If we are truly decentralized, there will be multiple visions and opinions that will lead to different choices on capital allocation. Essentially, this doesn’t move us from being decentralized, theoretically speaking.
- LongForWisdom: You’re right. Capital allocation will eventually become a thing. However, I still have to consider this over the next few weeks concerning the current status of everything. Let’s discuss this more during the next meeting.
Common Abbreviated Terms
CR: Collateralization Ratio
DC: Debt Ceiling
ES: Emergency Shutdown
SF: Stability Fee
DSR: Dai Savings Rate
MIP: Maker Improvement Proposal
OSM: Oracle Security Module
LR: Liquidation Ratio
RWA: Real-World Asset
RWF: Real-World Finance
SC: Smart Contracts
CU: Core Unit
- Artem Gordon produced this summary.
- David Utrobin produced this summary.
- Sai Teja produced this summary.
- Everyone who spoke and presented on the call, listed in the headers.