[Agenda/Discussion] Scientific Governance and Risk #161 - Thursday, September 30 17:00 UTC


The zoom waiting room will be on, and a password is set to: 748478, please ping us in the #governance-and-risk chat if you aren’t let in from the waiting room. This Agenda will be updated over the following week leading up to the call as people make me aware they want segments.


Continuing with our adjusted format this week in an attempt to curate a more engaging and deliberative meeting.


Governance Round-Up

Selected Updates / Discussions

Other Discussions and General Q&A

  • (Time permitting, after general Q&A) - Nothing specific planned.

An anonymous Question Box is now available! Leave your question here and we’ll do our best to address it. Comments on the new meeting structure are welcomed and encouraged!


G&R #161 Snippet

This snippet includes Governance, MIPs, forum updates, and Core Unit team discussions from the MakerDAO Governance and Risk Call #161.

General Updates



  • Collateral Onboarding and Offboarding, PSM DC-IAM changes - Passed & Executed
  • Tomorrow’s executive will include:
    • Auction Parameter Adjustments
    • L2 (Optimism and Arbitrum tests)



Weekly MIPs Update #55

  • Ratification Polls closed, and all proposals have passed!

Forum at a Glance

Forum at a Glance: September 24th - 30th

Team-led Discussions

Market Making

Growth CU: Nadia Alvarez

  • Thinking about Market making to bootstrap Dai on other networks.
  • Need to figure out if we want to begin market making.
    • Then decide on how we should do this.
  • Jonathan Chan: Introduces Wintermute for market-making MKR and DAI.
    • Wintermute is market-neutral across bid-ask and reduces risk impacts.
    • Can provide great inventory and pricing for trade execution on MKR.
    • Ask for a protective MKR call option attached to loan amounts.
    • Have a strong OTC market, which can be useful for RWA deals.
    • UK regulated entity, which will require complete KYC for onboarding assets.
    • Have large amounts traded on many DEXs.
    • Committed to a specific spread across all the exchanges and pairs that MKR and DAI token is traded on. The algorithms work 24/7, supported by experienced traders, and we do not charge fees.
  • Nadia: A market maker will help with low-liquidity tokens.
  • Without LinkPool and the Foundation, it is important to have a professional market maker.

Self-Insurance Fund

SES: LayerZero

  • Opens discussion to:
    • Who will be covered?
    • Which jurisdictions should be covered?
    • What risk level should we begin with?
1 Like

Episode 161: September 30th, 2021


  • 00:00: Introduction
  • 01:20: Votes and Polls
  • 02:37: MIPs Update
  • 06:35: Forum at a Glance
  • 09:56: Discussion: Market-Making
  • 35:49: Discussion: Self-Insurance Fund




Agenda and Preamble



  • Hello, welcome to the MakerDAO Scientific Governance & Risk Meeting #160 on Thursday, September 23rd at 1700 UTC. My name is LongForWisdom, and I am one of the Governance Facilitators 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.
  • We have our newly improved agenda, which will open to discussion around certain topics following our general updates.

General Updates





  • Executive:
  • Collateral Onboarding and Offboarding, PSM DC-IAM changes - Passed & Executed
  • Tomorrow’s executive will include:
    • Auction Parameter Adjustments
    • L2 (Optimism and Arbitrum tests)




Weekly MIPs Update #55

  • Ratification Polls closed, and all proposals have passed!

Forum at a Glance

Artem Gordon


Post: Forum at a Glance: September 24th - 30th

Video: Forum at a Glance

Team-led Discussions

Market Making

Growth CU: Nadia Alvarez


  • Hello to everyone. Today I invited Jonathan Chan from Wintermute. I have been talking with him because when we were at the foundation, we worked with different neutral market makers to increase volume in different markets of MKR and Dai. Now that the foundation is gone, this is an important discussion that we should have inside the community to understand first if we want to do it and why we should or should not do it. I do not have the answers for that. I have been thinking about it; I have been reviewing the MKR token in different markets. The volume is not the optimal volume that it should have. It could be a problem, for example, if the bonus is vested for all the Core Units and if someone wants to sell their MKR, I hope they are not, but you never know; that could be an issue. It is important to discuss this topic and between everyone understand what we should do. If we decide that this is something that the DAO should do, the next step will be to think about how we will manage that. Usually, how market makers work is we give them a loan of MKR or Dai so they can do this neutral market-making in different markets. We can help them decide which markets we want them to be more focused on and listen to their suggestions. Although Wintermute could be one, I chose them because they are the most important market maker for crypto. The idea will be to open this opportunity to all other market makers interested in working with us. If we decide that we want this, we should consider a new type of proposal to give these types of loans and understand their conditions to help us with this.

Wintermute: Jonathan Chan


  • Hello to everyone. I am Jonathan Chan. I work at Wintermute. I also have Yuri, our head of DeFi, joining us in the call. Thank you very much for having us. It is quite an honor to be on the call. I could give you a brief introduction about Wintermute and what we do if some members have not heard about it. The core of the business is a trading firm in a market-neutral capacity. Currently, we are trading across 60 different venues. This is across CeFi and DeFi. We are very good at trading a lot of assets across centralized exchanges. The shine and allure of Wintermute is the fact that we trade a very good amount on decentralized exchanges. Probably a vast majority of Ethereum chain volumes flow through our vaults. That is the one thing that we could help out with. As Nadia said, we can never guarantee values or movements or the price appreciation of any asset we trade. We are market neutral, where we layer our quotes equally on both sides across the bid and the ask. We reduce those price impacts on the way up and on the way down. Because Wintermute is very DeFi focused, we can trade across centralized and decentralized exchanges very efficiently. This means for your users that we can generate more fees and more rewards on the dexes. Because Wintermute trades a significant amount on centralized exchanges, we will provide more liquidity for users on those platforms. On top of that, we have a robust OTC desk. At this point, whether that is via manual telegram chat or over the phone, but also through our VR API. If we were to add a sufficient inventory to our trading vaults, we could ping the counterparties that we trade with that we can provide a good amount of inventory and very good Vest, very good pricing on the trade execution Maker. Those are some of the aspects that Wintermute does as a whole. Trading is very vanilla. But the allure of Wintermute is the work that we do on the DeFi side. Generally, our upper rate is on a loan basis where Wintermute asks for a certain amount of a loan, and we fund the complete another side of that loan. The ETHUSDT, USDC the BTC, on Coinbase, EUR GBP, we are the only market maker that funds that side of the currency league. There are no fees associated with us, but we ask for a call option attached to that loan amount. The call option is to protect us and hopefully reap the benefits of the project’s success, but we are market neutral. I want to emphasize that we cannot control the price movements on each asset that we trade. We have standardized our commercials on the projects we have partnered with, but this case is more strategic. It is a reputation where we want to build and help Maker out, so we have moved our commercials completely to the other end where we just want to work together. We want to propose that the community vote as we want to be flexible to work with and promote the project.


16:51 - Nadia Alvarez

  • What you mentioned, Jonathan, about the OTC is super interesting. I do not know if Seb is here; that will be super useful for all the real-world asset deals in the pipeline.
    • Jonathan Chan: For every project that we partner with, we offer our OTC desk as a service for free in a capacity where we need to fully KYC and onboard the individuals or entities that we trade with because we are U.K. regulated and we are a fully regulated entity. After that, whether you want to buy or sell, that is confidential information that we keep to Wintermute, can if they are looking to buy, provide those counterparties with very good pricing. If we do not have enough inventory and we do not trade the asset, we cannot do that, and technically, most likely, they would not buy because it is poor pricing. On the flip side, if they are looking to sell to take some of their gains, we can provide a very good price to protect the coin price and reduce slippage. Because we have inventory and can hedge out that risk across all the venues that we trade on. That is via the manual process, but also OTC, we group it. Together we can stream Maker through the institutional counterparties that we trade with, and their internal trading desks or their clients can use their discretion and how to trade it. If they do not have inventory, they generally go one way.


  • David Utrobin: Will Wintermute be participating or barring itself from participation in Maker governance with the lent MKR?
    • Jonathan Chan: This is strictly for liquidity provisions, and we do not yield farms with this. We want to be very clear that this is only to help the liquidity provisions of Maker—nothing else.


  • Nadia Alvarez: Andrew, if you are here, I know you were always worried about MKR price and low volume, seeing the exchanges, etc. Maybe you can jump into the conversation.
    • Andrew Burban: I know that we have been rather illiquid for a while. One person’s selling knocks the price down; one person’s buying knocks the price up. Greg floated some ideas of having a market maker. He did not necessarily mention Wintermute but some other players that I have mixed feelings about their ethics. I do not think I have ever heard anything too negative about Wintermute, so I would be more than happy to see Wintermute be our market maker.
    • Jonathan Chan: I want to be clear again that we are market neutral trading firm. If our quotes get hit on the buy-side, we are doing vice-versa to hedge out our risks somewhere else to what our algorithms and the marketing conditions are at that point. I have been asked this many times; we cannot influence the price of the coin.


  • Andrew Burban: I do not think that Wintermute should be pushing the price one way or the other, and I think you would mute the market movements.
    • Jonathan Chan: That is correct. The good thing about your coin is that it already trades on a decent amount of venues. Not specifically for Maker but for some other assets that we partner with, we try to help those tokens get listed on other centralized exchanges. This is not necessarily the case for Maker because it’s already listed on many venues. Because we have access and are integrated with so many different venues across CeFi and DeFi, we can reduce that impact if there is one large seller or buyer on one venue and aid in price discovery across all the different venues that we trade on. I am not saying anything bad about any other market-making firm or trading firm; they are all good in their respect. One big thing about Wintermute is that it is really good on DEXs. We trade a very large volume on all the decentralized exchanges, so we can aid in price discovery and generate rewards for your users on those platforms.
  • Andrew Burban: Having a more liquid market is important.


  • Nadia Alvarez: Answering Nicolas’ question. Yes, when we talk about an exchange, it is important to have a market maker helping us. It is the same situation as we are now having with the collaterals. If we have collateral that is not profitable, we want to offboard that collateral. It is something similar happening with exchanges. They are looking for listing pairs that are profitable for them. If they have a low liquidity token in their exchange, it is hard to maintain that one. That is why when we talk with exchanges, we have to commit to providing them a market-making service or work with their market makers. When we were at the foundation, we used to do that in-house with LPL. Now we do not have LPL, and we do not have a foundation. It is important to have other participants in the DAO doing that. Wintermute could be one. After that, we could start working with others.


  • David Utrobin: Is the goal to start market making on new markets where we want Dai to start to get a mode? Or is the idea also to market make on existing markets for more depth? I am curious about the sizing of these activities. How much MKR and Dai is a recommendable amount to give per market maker?
    • Jonathan Chan: This, at first, would be for Maker. I have Yuri on the call which is our head of DeFi. We have been working with Dai for a couple of years now. Yuri could get to some technical aspects that, even behind the scene, we were doing to help promote it before this call has happened. With our market-making agreements, we have standardized it to a certain amount. I do not want to say it is a specific equation, but market cap volumes and venues traded are given because we need sufficient supply. If the treasury can only give us five million dollars equivalent worth of Maker, it will not impact. If someone on our OTC desk, an institution on our OTC desk, asks for ten million dollars worth of trade, we will not be able to facilitate that trade for them. On top of being able to layer all the quotes and the different venues that we trade on. A sufficient supply is A: we need to do our jobs properly. Then to touch base on the call option, we ask for around 10 or 20 percent, a higher price than when we receive assets. In this case, we are very willing to work with the team and go a hundred percent above asset price when we get Maker’s delivery. I do not think we have ever done this before; this is more strategic sense. We want to work with you.


  • Planet_X: What is the target amount that you are asking for or the target liquidity? Sometimes you have coins with little liquidity, and it can be argued that some coins have too much liquidity. There is a sweet spot somewhere, and you probably made those calculations already.
    • Jonathan Chan: I do not know if a coin can have too much liquidity. There are advantageous for your users to have a lot of liquidity. When they enter a trade, whether it is in or out, they are more confident of getting the price that they would get. I tend to disagree on having too much liquidity, especially in cryptos. To go back on how we standardized our market-making agreements, generally, we ask for around one to two percent of total supply, and the call option is pegged to around ten to twenty percent higher value when we receive assets. In this case, we could go for a lower loan amount, and as I mentioned before, we want to work with you guys, so we are going for a hundred percent higher for the call option premium than when we receive assets. We have never done that before, but this is a different case where we are willing to work to make something happen.


  • MakerMan: Are you talking target liquidity of ten to twenty thousand Maker with a hundred percent upside price option?
    • Jonathan Chan: That is correct. Ten to twenty is probably higher than what I was looking for. Initially, when I spoke to Nadia, we were looking at around seventy-five hundred.
  • MakerMan: You say that having lots of liquidity is good. With governance, with Maker, you have to realize that a certain amount of Maker can come and float an executive. There is an inherent concern that too much liquidity groups into the market, which can happen too quickly. You KYC your clients, and we know who that is in principle. It was why I asked the question. Thank you for the answer, by the way. What is the downside to that? I mean, someone is going to buy, so you want an option from us at a hundred upside risk. But what if somebody wants to sell twenty thousand like a16z. Are you going to take that buy, or are you going to float it back to us?
    • Jonathan Chan: This is all principal capacity. What that means is that we are taking that risk. If a large holder maker wants to sell via our OTC desk, we will give them a price. Theoretically speaking, because we have sufficient inventory, we give them a pretty good price. Then we hold on to that risk, and then we hedge out that sell-order across all the venues or algorithms, say at that point or whatever time frame that it needs to be hedged out in. That is our risk. We do not pass it back out to you.
  • MakerMan: Let me follow up on that. Are you saying that you are going to take the cash downside and hedge it out? But you want to have an option for the hundred percent upside if you need to source liquidity? Is that the deal?
    • Jonathan Chan: No. The call option is only European style. It is only exercisable after twelve months. Theoretically speaking, let’s say the price was 22.50 when I last looked, so call it 4500 is the exercisable call option that Wintermute has after twelve months. We would be able to purchase the loan amounts at 4500 dollars per token. Although that being said, because we are a market-neutral trading firm, we would rather continue the relationship by rolling this loan at a higher call strike if it were there because we do not want to be exposed to the price movement of your coin. If we were to own and not borrow a coin, the price goes down; we lose money, the price goes up. We make money. We do not want that at all. We want to make money by trading the coin. Price agnostic is the business of Wintermute.
  • MakerMan: What are you asking us is for that call option to hedge your risk?
    • Jonathan Chan: Yes! It is to capture the upside, and we need the loan to trade. In any asset that we trade, we do not go out in the open market and purchase it, and we do not want to be exposed to the price movement of any coin that we trade.
  • MakerMan: How does Maker make money off this?
    • Jonathan Chan: It is a Domino effect. There is not. I am not trying to sell you anything. It is a liquidity provision service that we provide and also our OTC desk as well. Your users can have a sense of confidence that they can execute their pricing, whether it is a buy or sell order at a certain level. Once we add the asset that we have sufficient inventory to our OTC desk, our institutional OTC counterparties that we trade with can be confident that they could trade through us. I do not know how Maker makes money on that. It is for the general health of Maker and to have more exposure to the users.


  • LongForWisdom: You mentioned a few times that you were excited to work with Maker and that it was going past what you would usually do. Why are you excited to work with Maker as opposed to other firms?
    • Jonathan Chan: Maker is such a big name, and I will pass this on to Yuri and some of the technical side that we have already done with Maker and Dai.


  • Yuri: Hello to everyone. It is a good question about why we want to work with Maker? We are one of the few market makers in the space with a DeFi team onboard, and Maker is a protocol that has been alive in DeFi for a very long time. It is probably one of the biggest and one of the most trusted protocols out there. On top of that, we have been working with Dai and trading Dai and Maker for a very long time now, over two years. At this point, it is for us something that we would love to do rather than a business deal that we get from any other project.


  • Primoz: Is this loan uncollateralized? I assume it has zero interest?
    • Yuri: Yes, it is an uncollateralized loan and zero interest.


  • Nadia Alvarez: It is important to understand that they are providing a service to the DAO, and they need the capital to start deploying that capital in different exchanges, centralized and decentralized. They are going to earn something doing this with the call option after twelve months.



  • Jonathan Chan: There is a time constraint on everyone. I will drop my telegram handle and e-mail if you want to ask me any questions. I will be happy to jump on another call and to assist and walk through the process. I understand it is something relatively new. We do have a decent amount of relationships and partnerships with other DAOs in the market-making capacity. You do not need to take my word for it. I will shoot some here, and you will see how their relationship is with us and their experiences.

Self-Insurance Fund

SES: LayerZero


  • Good afternoon to everybody. We are working on an SES project about an important legal issue we have in SES. A special working group deals with legal and regulatory topics. We are working on several projects, and this is the first one that we want to share with the community. It is about the creation of a legal self-insurance fund for MakerDAO.



  • MakerMan: Who insures on this kind of stuff? What do the insurance agreements would look like? Who would take the secondary side of this with a high deductible? What do those things look like?
    • LayerZero: Reinsurance companies can take the excess of loss. Regarding the structure, there are specialized legal advisors in the insurance industry that help structure these funds. We should hire one of these. When we decide what our priorities are, the next step is to go to one of these law offices specializing in insurance and structuring these funds. The first step is to structure the fund, get a quote and say how large the fund is and how much it costs to structure it. Then we can find in the reinsurance market how to cover the rest of the risk. The first layer is to cover this first part.
    • MakerMan: Seems reasonable. Thanks for bringing this up, and it will lead to some interesting discussions.


  • LongForWisdom: Is self-insurance not that we keep a pool of money to pay for these things? Are there insurance providers involved?
    • LayerZero: It will work like a deductible. Deductibles are a way of self-insurance. You take the risk up to a certain amount, and the insurance covers the excess of this amount. It will be something similar. We set aside, pay for this first layer of risk, and look for products in the insurance market that can help us transfer the rest of the risk. There is a way of transferring the rest of the risk. We have to deal with it now that we are in a vulnerable position. If somebody sues somebody in the Maker ecosystem or a regulator investigates somebody, we have the risk of legal costs and damages, and fines. These risks are not covered yet, but it is possible to do so. The first condition is to have one of these self-insurance funds schemes ready.


  • MakerMan: Are you implying that we need to have a fund with the capital inside it, or a Vault can draw against that amount?
    • LayerZero: Both could work. We do not know in which frequency they will come. Maybe it will be enough if we can get funds if there is a large case. That is something we have to decide. What would be the best structure to do it if we use this special purpose fund? Who will manage the multi-sig? There are many questions. Suppose we need a trust or some type of legal structure to handle this situation in the legal world. In our case, I do not know yet. First, we have to decide on the scope and the coverage and then see how we can restructure it.


  • LongForWisdom: One of the things you were introducing before was settlements and paying out—the kind of results of these little cases. I do not know the technology. Do you worry that will increase the risk? If there is big money that is there to pay for trust payings. If we are successfully sued, do you think that will increase people’s frequency or likelihood of suing?
    • LayerZero: I see this risk. In the traditional world, you would keep all of these things very confidential. We have to wait. Transparency is in the DNA of Maker. On the other hand, we do not have to publish all the details publicly. We should be cognizant about what part of this question should be held publicly. If we promote and publicly know that we have an “X” million fund, it could eventually go against us. I would keep details more confidential about the amounts and the coverage or assign permissions only for DAO members.
    • LongForWisdom: The first idea is great. This will fund legal defense, making it less likely that people will sue someone because there has been a massive fund that will protect them. Maybe the sentiment part is something that, if possible it should be left less explicit.
    • LayerZero: Yes. That is a good idea.


  • Nathan Vandy: It’s great to join my first governance call. I work for a non-profit organization in Belgium where we support DAO with law and governance on operational and policy levels. As part of this fund, have you looked at the assessment of whether it will be good to look at the individual jurisdictions on a corporate law level and see which members of MakerDAO are currently exposed and see if there could be some sort of education with the legislators about why certain members of an open protocol should not be held liable in any issues. For example, developers of open-source protocols do not have any liability in most jurisdictions unless they act out of bad faith and create bad code. The same can be applied for contributors in open source protocols such as MakerDAO, which provides services for this open post-call that anyone can join. Was a portion of the self-insurance fund set aside to examine whether the measure was less reactive and more proactive?
    • LayerZero: Yes, that is thinkable. We can structure it tailor-made to what we need, and developers are more exposed in a DAO than in a company context. The DAO does not exist as a legal entity, and somebody has to be the official provider of a service that appears in the terms and conditions. Sometimes that needs to be the developer or the company of a developer. There is a higher exposure to risk, and that could be thinkable. That is not only reactive but also proactive. We could implement that.
    • LongForWisdom: It sounds like something worth looking into, and I did not think I heard that point of view on any of the legal stuff before.


  • PaperImperium: I have seen the idea that personal risk is something we compensate people more highly for in the DAO. Would this fund take away that premium? Is that something that contributors want? Personally, if I were a contributor, I would rather have increased compensation, so I feel confident that I do not have to petition the DAO to rescue me if something goes wrong.
    • LayerZero: We could stack it that way. If somebody has to pay for legal defense, we can use this fund to refund that payment. You do not have to ask somebody in the DAO to defend or pay, and you have to pay upfront and solicit reimbursement for the legal costs. Is that what you mean?
    • PaperImperium: There is always a choice for somebody for the DAO to decide not to reimburse you or not to defend you out of this fund. If you have a higher income baked into your salary, is it possible to do it that way? What are the trade-offs? There must be some premium baked into salaries where you are compensating that risk right now.
    • LayerZero: In some form, yes. Probably a compensation in MKR above the market average, and they include some type of risk premium. I agree with that. On the other hand, personal liability risk is the most important legal risk at the DAO. That could ruin somebody. We need not only to protect our labor force but also to attract new talent. Suppose you have a solid risks management framework for limiting this liability risk. The damages could be huge and ruin a business or a person. The salaries premium that we may have at Maker does not compensate for all the hidden liability risks that could arise. If something goes wrong in the protocol, whom would they go after if there is no foundation? They will go after somebody that they can sue, and that is publicly identifiable. Theoretically, with no legal entity in many world jurisdictions, the default entities are a general partnership. This implies that anybody could be held liable for the whole liabilities of the project. That is more like a theoretical risk, but it can happen. Maybe the legislation that we have is not advanced enough to generate on the legal side, on the law, more liability protection for the workers of DAO. DAO is very new. We must have something until we have new legislation. I think this will come, and there are some frameworks in Wyoming, in DAO limited liability companies, limited liability wrappers for DAO, etc. We are investigating at SES some of these hybrid organizational models. Those are experimental topics. We need something practical that we could implement in the next three to six months. This is something practical, and that has been used in the legacy world.
    • PaperImperium: From a practical perspective, the program’s funding should be done through people paying for it. You mentioned that the employees pay into these insurance pools.
    • LayerZero: We can consider that.


  • David Utrobin: When an employee leaves, do they get their contributions back? What is the standard for this kind of thing? This is the first that I have never heard of.
    • PaperImperium: No one can claw back insurance premiums.


  • Sébastien: Why do we need a fund? What happens if today someone is suing anyone from MakerDAO? If someone, like SEC or someone else, sues someone from the DAO, at which point would we decide not to help this person?
    • LayerZero: We have to be compliant. We have a large exposure to real-world finance, and they can get us to many places. Not acting is not viable. Not only for the person involved but for the project itself because we want to go and serve the economy of the real world. We have to be very careful with what happens with the actions of regulators.
    • Sébastien: Does this fund is in the real world, and all the members of the DAO will have a contract with this fund to be sure that they are reimbursed at some point?
    • Someone: We need some type of legal agreement or trust or structure.
    • Sébastien: It’s on-chain.
    • LayerZero: Yes, it has a part of the chain. We have to pay the lawyers, and somebody has to decide a rule for managing the claims. There are many implementation issues, and we need some type of structure in the real world.
    • LongForWisdom: That does not help people anon for legal defense if they need to have signed a contract in advance.


  • LayerZero: There is a second-order effect. It may impact salaries, not by having people pay out of their salaries, but by creating competitive pressure as the risk perception of working for the DAO. If that improves, one would assume that more new joiners would be willing to work for more market-competitive rates. That should be the mechanism that we aim for. Taking it from people’s compensation is not a good idea.


  • Nathan Vandy: To follow up on that. With these situations, leaving one individual exposed is not ideal, especially when working in open-source spaces where you are collaboratively trying to build something together. That creates the attitude of every man for himself. This whole industry is about the exact opposite. Further, when it comes to liability issues that cover working in a DAO, we did coverage on organizations such as MakerDAO. Under the majority of jurisdictions, they are going to be considered as unincorporated joint partnerships. That means that it is not an individual that will be taken on just their risk. An individual might be taken on the whole risk for multiple parties, and that is the main issue as well on top of the attitude and orientation needed regarding this. A few options that might need to be considered. It sounds like there have already been certain steps taken forward, such as having limited liability companies when working with the DAO so that the individual personal assets are protected, and it is just the company’s assets that can be protected. Maybe some more investigation needs to happen in this direction for the members to understand those risks more clearly and get more education.


  • Wouter: In our incubation program, we are working with the different teams explaining the liability risks and encouraging people to incorporate and have a limited liability shield in case something happens. There are some education efforts on that front going on, and they should be expanded and improved.


  • MakerMan: Are you suggesting everybody that works with Maker to have their limited liability, at least in the U.S., an LLC?
    • LayerZero: We are suggesting for incubus that incorporated legal entities is one of the ways of limiting liability risk is not for everybody, but it is one of the main purposes of incorporating. The legal entity should be more at the periphery at the DAO and then more at the center. It limits to a certain extent the liability risk, but that it is not enough. Suppose an important C.U. is a lawsuit target and goes insolvent because it has to pay huge damages that could not be a problem for the C.U. That could be a problem for the protocol itself. That covers part of the risk. We have to analyze which part is already covered at a C.U. or an individual level and what risk is left out. Use this self-insurance fund to cover the risk that right now is not covered.


  • MakerMan: The painful jurisdiction is maybe the U.S. You could have the protocol engineering break into a unit that is U.S.-based and non-U.S. based. If one part of the C.U. comes under attack, the other core part of the C.U. can still operate. It is something to think about how we continue to operate if some unit comes into trouble in a jurisdiction.
    • LayerZero: Exactly. Redundancy and parallel work is part of the strategy. If a Unit gets impacted and is involved in some legal trouble, we have to isolate the risk and not spread it through the DAO. One way to do it is having parallel teams working on the same topic.
    • MakerMan: This is information that we would like to keep private. We want our workers to work through encrypted connections via VPNs. You start putting barriers between any element of trackability. Certain people at the front on this publicly do not do that, but it brings me back to that model, back in the old days when bitcoin was considered the dark web. Smart people were putting up barriers between them being found, starting with Satoshi Nakamoto, whoever that person was. The old days of crypto.


  • Nathan Vandy: It is a very slow process getting legal clarity regarding a lot of these matters. Some lawyers and academics are involved in working alongside policymakers and regulators to attempt to do this. It is necessary to facilitate the clarity for people to move into the space without worrying about things that people in the traditional finance industry do not have to worry about.
    • LayerZero: Legislation has to evolve. That would be part of a different call, part of our advocacy and public policy efforts. It is someplace that we want to go, but it would exceed the scope of this call to discuss all of this.



  • Thank you, LayerZero, for your presentation earlier. I will talk to you next week, if not before. Thank you all for coming.

Suggestion Box

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

Liq: Liquidations

CU: Core Unit


  • Artem Gordon produced this summary.
  • David Utrobin produced this summary.
  • Kunfu-po produced this summary.
  • Zainab Nisa produced this summary.
  • Everyone who spoke and presented on the call, listed in the headers.

This full call is now available on the MakerDAO Youtube channel for review: