Episode 50: August 29, 2019
00:00: Intro from Rich Brown
12:54: Recap of Forum Topics from LongForWisdom
20:00: Recap of Risk Team Mandate from Cyrus
30:49: Analysis from Vishesh
01:12:32: Discussions on Governance processes
Summary & Introduction 00:00
- We are trying to make these calls more dynamic. There is always room for improvement.
- We will be alternating the order of these calls. This week, we will begin with Governance as usual, but next week we will start with Risk.
- Give us feedback about the call.
- DISCUSSION HAPPENS IN THE FORUM
- We have two active forum polls around the mandates for Risk Teams and the Governance Facilitator.
- Delegation MKR voting is the highest requested feature in our Governance ecosystem.
- Open Questions for the Governance community:
- What is consensus in the context of MakerDAO?
- When has consensus been reached?
- How much consensus is enough to trigger a Governance Poll?
- and many more
- Help us refine the Signaling guidelines thread.
- Decisions made through Governance are not permanent. If we make a move, we can always go back and change things if they don’t work.
Forum Activity Recap 12:54
Risk Team Mandate brief recap 20:00
- The risk team mandate is a proposal for a structure around Risk Teams and how they are onboarded into the governance system and what kind of documentation MKR holders can and should expect from them.
- Certain areas were kept intentionally vague since a lot of governance is hard to predict, and we don’t want to be very hard on our stance around these processes. We always want to be open to iteration.
- The Risk Team mandate will be an ongoing topic of conversation for the coming weeks and months.
- Around how we hire individual people within risk teams, do you see people having an issue with doing that publicly?
- The first impulse is to say I don’t think so. But it ties into another question I want to address: are there risk teams behind the scenes, what’s the status of that? There aren’t any unknown risk teams behind the scenes.
- We envision trying to lean on community outreach. For example, collateral partners may recommend individuals to help with risk assessment efforts. I see my role as a facilitator to collaborate with the collateral partner in the search for an independent risk team that can work on the assessment of these assets.
- This of course needs some sanity check by people who are not affiliated with the collateral partners themselves.
- In regards to the original question about public hiring, it might make sense to outsource this work to a professional firm. Though in either case, I feel it might be okay. Perhaps in some edge cases, it might not work. But the larger question is, to what extent can all MakerDAO processes be public? We may run into this issue with data sets that contain sensitive or private information.
- Do you have a sense of who will be the first example of outsourcing advisors from collateral partner communities?
- REP may be a good first example. Perhaps someone from the Augur community would advise as a professional on the technical risk side of Augur.
- We’ve had other crypto assets that were not on the asset priority list submit onboarding applications. This is also a practical first example.
Dai Analytics 30:49
Santiment Maker Data
Graphs about Maker
Graphs about DeFi Loans
DAI 24hr VWAP Graph
State of the Peg
- Last 24hrs, pretty significant Dai trading volume at around 7MM. The VWAP is about 0.01 above $1.
- Over the last 7 days, roughly 0.01-0.02 above $1. However, on average, it is looking healthy.
- In the last day or two, we’ve seen more Dai removed than created.
- Collateral was added as we saw the ETH price falling; this is now expected behavior.
- Liquidations did happen, but not at the same scale as when ETH dipped two weeks ago.
- People seem to be managing risks better, so we’ve seen less liquidation amounts in price downturns than last year(see image below).
- Looking at the cumulative graphs: The amount of collateral being locked in the system was consistently growing. The amount of collateral being removed from the system voluntarily was being outpaced initially in the first part of 2019, has picked up pace in mid-2019, and has now flatlined. This makes sense since while ETH price was rising, re-leveraging was happening, and now with the drop, it’s become flat. ETH price movement correlating with collateral behavior is a pretty well-observed phenomenon at this point and is predictable.
- In the last couple of weeks the wipe rate has slowed down, and so for the last few weeks, we’ve seen a relatively stable Dai supply as a result.
- The variability of Dai price has been lower now than in the past.
- We saw significant variability earlier in the year.
- Dai is relatively stable, but it is stable slightly above $1 for the last week.
- The SF adjustment downward to 18.5% didn’t push the peg down to $1, and also didn’t increase variability.
- There was not a ton of movement in the Dai supply in response to this change.
- The fear of a lower SF, causing more leveraged behavior to drop the Dai price hasn’t happened.
Questions & Discussion on Monetary Policy
41:35: Regarding urgency
- Flashback to July, where the urgency was highest. We are actually not in a scary situation right now. I don’t see anything right now that should prompt worry that price is too high.
- I don’t think Dai has been trading too consistently above a dollar for too long. I don’t think there’s any huge imbalance going on right now.
- The real question is about magnitude and frequency of SF changes
- From a process management standpoint, consistent small changes is a better practice than infrequent large changes.
- small&frequent > large&infrequent
51:30: Discussion about frequency
- The actual changes to the system don’t happen consistently, even though we poll and vote on a regular cadence.
- You talk about isolating variables, would it be easier to isolate different variables to get a better understanding of the effects of SF adjustments?
- Vishesh: It wouldn’t be easier to isolate magnitude over frequency.
- Matthew R: The more time goes on it might be easier to see the data in terms of calendar years. Right now the system is still very early and statistical significance is harder to pinpoint.
55:53: Discussion about how this related to the idea of changing to exponential rate stepping in the SF adjustment polls. Can we create a better cadence based on the current past data?
- Vishesh: I think right now there is a lack of history. But from a common sense standpoint, if you are basing your decision on one week of market data you might not be making the right decision or at least you should have a low confidence in the correctness of your decision.
1:00:22: Do we see evidence that MKR holders are happier to raise rates than to lower them?
- Vishesh: It seems to be that there are different voices in the community that take over at different times. There are sets of people that advocate for each in different contexts. I don’t see any clear evidence.
- Vishesh: Smaller magnitude changes lower your risk of mis-managing the system. This is the recommendation that I will most often stick to.
01:04:18: Discussion around MKR voter and community member motives for advocating SF adjustments
- Stability seekers vs competitiveness of rates vs etc.
- Vishesh: In the chats, what’s being discussed is a combination of all of these things. There is certainly an element of doves seeking competitiveness of rates. We even see this vocalized in calls when we hear people say, “since there is no crisis can we try lowering the rates?”
- Matthew R: It seems like there is “Monetary Inertia” for directional trends of SF changes.
Questions and Discussion on Governance
01:12:32: Referencing the thread on Parallelism, why wait too long, why not put up Governance Polls more quickly to gather soft consensus on many points of discussion?
- Rich: The reason we don’t yet is because it just started, and we’re too busy. The flood gates have been open, and we are preparing to do all of the things we’ve been planning to do for the past few months.
1:17:10: I want to avoid the situation where we get a majority in the forum for something, and we move it on-chain thinking it’s ok, then having a whale shutting down the whole thing.
- It is a valid thing to happen, but may be very distressing for people who are voting in forum polls.
- Rich: we need to reiterate that the forum polls are just a weak signaling method and that ultimately it is MKR holders who decide on changes. Forum polls are not Sybil-resistant, they don’t even check for whether people have skin in the game (own MKR) or don’t.
- We need to move into the mode of pushing the community to do their best to educate about and campaign for the decisions they think are best for the system. Smaller holders and the governance community as a whole need to “convince the whales” or create a movement amongst a group of smaller voters to represent what they want in the voting system.
01:23:00: How long would a Governance Poll for the mandates reasonably last? 3 weeks? 4 weeks?
- We have no idea what the communities appetite is for this. The rough guess is 2 weeks for discussion, 1 week for polling. I think after the first try we will change the duration in the future if there is need for it.
- LFW: There are other solutions to be explored.
Links from the Chat