With Real-World Assets being on-boarded hopefully soon as collateral, the community needs oversight of the off-chain lenders and be a proxy for confidential information that cannot be shared in a public forum. Ideally not only one Maker Representative per lender, ideally more. MKR’s governance and risk, needs you !
Real world assets are coming as collateral to the MakerDAO protocol.
With each transaction where DAI is minted for an off-chain transaction, the community can only assess the true risk of the transaction (and price the capital accordingly) if the risks are known. Further, unlike “traditional” crypto transactions, the real-world has legal complexities and sequencing that make a huge difference to determine compliance.
Further, unlike a crypto transaction governed by code, off-chain lenders must follow the agreement between the parties. As Maker is a DAO (literally), it cannot inspect a transaction. It must rely only on information being reported back to the DAO. While off-chain lenders can do this with the confines of what they are allowed to share publicly, the community needs to elect “one of its own” and new folks to interact with off-chain lenders and report back.
For virtually all of these transactions, reputation is built with time. The risk to Maker is largely front-loaded, especially for a new off-chain lender. An annual audit of the financial statements is useful, but getting started the community should push for earlier spot inspections.
Specific to 6s’ LendCo structure, not only do I request a Maker Representative, I invite it, encourage it, and clamor for more oversight from a cohort of Maker Representatives. Depending on the community turn-out, 6s’ LendCo may only have one.
Having many Maker Representatives serves three purposes.
- MakerDAO distributes the trust across many Maker Representatives to have better comfort and insight and ensure compliance.
- Maker Representatives gain more credibility within the community the more each attests in a similar manner in concert.
- LendCo diversifies its risk as it looks “better” the more compliance it demonstrates.
Subject to the community approving the MIPs that I have put forth, the remainder of 2020 will largely be reserved for administrative setup with hopefully time for a deal or two. During the course of 2021, the gloves come off, and 6s turns-on the deal machine.
MakerDAO needs Maker Representatives. LendCos need Maker Representatives. I will be volunteering to be one (for other off-chain lenders) if the community grants me this role.
What a Maker Representative needs to do:
Execute a non-disclosure agreement with an off-chain lender
Review lender’s legal setup and construct
Review lender’s transactions on a spot and quarterly basis
- Independent Financial Statements and confirm they were delivered timely
- No operations outside of approved scope
- No loans above portfolio threshold issued
- Equity requirements for all loans in compliance
- All loans issued are either performing or under construction
- Report back to the community the abstracted summary of the above:
- Fully Compliant
- Compliant with minor comments.
- Material Breach - Not in compliance.
Note: The Community can easily replace Maker Representatives !
This role builds your credibility within the community and could evolve into either a community compensated role or a LendCo compensated role. (TBD)
6s (as a LendCo) will be indemnifying any Maker Representative for his / her role. Further, at the Maker Representatives discretion, a legal entity may be used to serve this role as well to provide further legal protection.
An initial list of candidates that I would like to be nominated as a Maker Representative:
(1*) He may be conflicted as he works at or w/ the Maker Foundation, though he does have significant business background that the community should want.
The above list is not set in stone. If you are interested, please feel free to volunteer below. We need folks from the community to step-up and help !
UPDATE: Based on the below thread, the below is the current list of folks volunteering.
Given that this role is an administrative oversight role for the benefit of the community, I recommend the community appoint all of them as Maker Representatives with a known requirement that a Maker Representative must recuse himself / herself should their be a clear conflict (e.g. I should not be a Maker Representative “assigned” to my own project, but that doesn’t mean I shouldn’t be a Representative one day).
(hit the limit of user mentions!)