[Discussion] Maker and the (de)central bank meme

Hello everyone!

It’s been a minute since I brought some (mostly) unfiltered musing to the forum, so I hope this reflection is welcomed and gets some discussion. Happy to take feedback on better ways to present these thoughts if you have them, just shoot me a DM.

Maker the meme: a decentralized, central bank

Whether you personally feel Maker should be inserting itself as a “decentralized, central bank,” it’s hard to argue that this perception isn’t already saturated in the crypto space. People looking for a phrase to describe the protocol often lean on this description. Despite the linguistic oddity of being both decentralized and a “central” bank, this description is at least partially accurate as an issuer of DAI. If you do not agree, I suggest checking out Seb’s Crypto Banking 101 explanation as it makes a good case for how “money layers” function.

So bearing in mind our perception (meme) as the (de)central bank, I began to wonder how me might be able to step into this role in the crypto space for more profits and notoriety. It’s our brand so why not own it?

DAOs helping DAOs

Admittedly, my first thought re: Maker as a central bank was in connection to “bailouts” for lack of a better word. We already have experienced a positive situation where Yearn was able to borrow against their treasury token to make users whole after an exploit.

This event not only helped stabilize the greater DeFi ecosystem, but resulted in some positive press from Maker. However in this situation we were fortunate, YFI was already added as a collateral type and had plenty of available DC for the team to make users whole in a permissionless way. If that wasn’t the case, would we have been able to raise the DC in time for Yearn to utilize our bank?

Exploits will happen in crypto and more often than not, capital is needed if a project wishes to gain back the trust of their users. Is there a way to safely capitalize during a crisis and grow both Maker revenues and brand through partnering with other organizations? DAO to DAO is a pretty nice starting point in my mind and there is likely to be a bit more understanding about the speed of progress and the difficulty of making an agreement that has to be approved by token holders.

A raising marketcap lifts all tokens… or something like that

While other crypto projects necessarily represent competition for attention, capital, and often user solutions, we are not playing in a zero-sum game. Helping other organizations gives us the chance to increase DAI, SFs, and Maker awareness all across the crypto ecosystem.

Huge thanks to @juanjuan who put up with a far worse rant on this subject. Despite not liking the idea of bailouts (feel free to slam me if I’m mischaracterizing :wink: ) Juan made an excellent point that organizations could mint their token and borrow against it to fund growth, without dumping on the market. This would be a far safer scenario for Maker and wouldn’t require urgent judgement calls on the solvency of other crypto projects. Yet how many DeFi protocols have tried to take advantage of this? One neat (and potentially uncorrelated) follow-up with Yearn is that they are now utilizing the YFI-A vault more healthily for YFI yield strategies. Could opening up our central-bankness lead to further integration and utilization?

This growth case seems like a better deal for Maker as the positon would be opened during a far less volatile moment, but it too is just one example of how embracing our meme could lead to more DAI generation.

Considerations and Next Steps

Any push to take on more collateral is going to involve risk. New collaterals and tokens currently under attack ratchet up that risk pretty severely. Not to mention the amount of work (due diligence, SC, governance drafting etc.) that is needed to make changes to the protocol. At the end of the day it’s quite possible that it’s not worth investing in our meme. We can continue to drive growth and not worry what opportunities and exceptions are circulating around us, but I think the general Maker ethos is one that is willing to pull back the curtain and explore the possibility that we could be functioning much better.

Here are some ideas I had on how we could explore this topic further:

  • Working group to explore crypto “bailouts”
  • (de)Central Bank Core Unit: a cross section of talent exploring further profits through traditional finance practices
  • Expanding Gov Coms, Marketing, or Growth Core Units to focus on DAO to DAO (or B2B) communication.
  • Media blitz highlighting how other projects can use Maker to fund growth, respond to a crisis

I think I’m on the cusp of a valuable thought here and I’d like to leverage the collective intelligence of the community to see if there really is an opportunity or if it’s just an exercise in exploring different use-cases for vaults.

If you’ve taken the time to read this your opinion is super valuable and I’d appreciate your comments and concerns! How do you feel about the Maker as a (de)central bank meme?

I agree with this post and would like to see it implemented. A B2B relationship worth pursuing is CrescoFin (wCRES). They have a great product and they have lots of room for growth. Onboarding them would be a net positive for everyone involved.


So I’m not sure I entirely agree with everything said above – I’ll have to let it marinate.

But about the “bailouts” – I think the way to think about this would be less of Maker doing the government-style recapitalization money drops and more like what a shrewd investor with liquidity does in such a crisis. Identify beforehand which assets have value (which is already being done with onboarding various collateral), and then have some kind of idea of what the hypothetical “Maker Put” would be. That is, what extremely favorable terms would be acceptable to take on the role of recapitalizing another project? And how would that look different from simply collateralizing into a normal DAI loan now?


Lots of interesting ideas here!

@Davidutro raised the topic of DAO to DAO communications as a potential responsibility for GovComms last week and while I’m not sure how I feel about encouraging the use of the Maker Protocol for bailouts, I do like the idea of having a team or individual responsible for maintaining communication with other DAOs.

As far as the bank meme goes, I hope @juank will eventually be able to give us a better sense of where that could become problematic but I do think we should embrace it and I like the idea of a group exploring what that means. I don’t know that it needs to be a Core Unit but I think a working group would be helpful.

I have a similar sense there could be some highly valuable opportunities once RWA scales but I’m not sure exactly what that looks like and would like to have the conversation.

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Big opponent here of labeling Maker as a “Bank”-- once you take on that label you open yourself up to too many things. Personally I prefer it to let it be what it is. Smart Contracts doing some super funky thangs.

I also get a bit confused with regards to how ETH Heads feel about “Banks”–you have the Bankless Podcast–who are proponents of getting rid of the middleman, banks --and you add to the equation that most folks totally dislike banks and the entire banking system and can’t wait to get rid of such. So, not sure why would anyone want to label themselves as a “bank”

Best NFT I’ve seen in the last 5 days:


Good reflection here (and made me lol), what should we do, if anything, about this perception of Maker as a bank? To people familiar with finance (but not necessarily crypto) I lean on the phrase “credit facility” to help bridge the gap. If we want to avoid being associated with banking, I’m wondering where we bridge the understanding gap and redirect our explanation for the protocol to our vision. Perhaps this hesitancy to be associated with a bank would be particularly relevant to Project Compass.

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We in LATAM always show MakerDAO to “normal people” as a pawnshop, when you say Bank, maybe ppl get a little bit in a defensive mode. We always give an example of a very expensive watch that your grandpa gave you (this is ETH as collateral), so you go to the pawnshop an get some dollars (this is DAI) for do whatever you want.

But in cryptospace maybe pawnshop sounds weird (or maybe boomer). Something new like Lending Powerhouse can fit good :grin:


A little concerned about the “bailout” rhetoric, though maybe this is merely a figure of speech and I’m just getting triggered by my own interpretation. Small loans to enable short-term access to capital as is the case for YFI makes sense. Size is limited by the liquidity/risk characteristics of the collateral. This makes sense for the Maker Protocol to engage in and is a win-win. This is not how I would define a bailout.

At the risk of sounding alarmist and creating mountains out of mole-hills in a thread that is about memes, I’d like to engage in this discussion around bailouts so humor me.

What frightens me is a bailout where the Maker Protocol extends more credit than a collateral token can safely secure, thereby transferring risk to MKR token holders. The extreme example of this scenario is a protocol diluting their token supply to use as collateral in the Maker Protocol to take out a substantial amount of Dai.

Recapitalizing “broken” companies is something central banks do out of necessity, not because they “want” to. The Maker Protocol should be extremely careful about the purpose of emulating this behavior. In particular if we find ourselves in the scenario where the Maker Protocol feels it “needs” to bailout a DAO because of the Maker Protocol’s existing exposure to that DAO on our balance sheet. This is a sign that the Maker Protocol already suffered from overexposure to said DAO, and not a good argument for “doubling down” to avoid realizing short-term losses. This a slippery slope. What can seem like clever and prudent financial engineering in the short-term is really just increasing the size of the problem and kicking the can down the road.


I raised this concern in another thread, and think it needs to be thought about carefully. Is there a cap in place on what % of a token’s circulating float can be locked up in Maker? I worry at some point the markets will be developed enough that someone can borrow a token, lock it up for DAI, and use that as a way to short that token with no intention of reclaiming their collateral that they can buy cheaper on the open market.

I’m just thinking that this is exactly what I would do if I had a high degree of confidence that a token would depreciate by 50%+ due to some kind of insider information or even the keys to some token that was being traded in exchanges.

That’s for the risk team to advise the community on. Usually based on market liquidity and past volatility as well as existential factors.


Memes aside (I think @NikKunkel covered this quite well already), I believe that this is the key:

We’re already doing “it”. It’s a matter of where you draw the line (in terms of risk).

Maker should focus on growing the demand and supply of Dai, while remaining safe.
If the risk is worth the growth, then we should explore it.

I don’t want us to focus on a meme and go for high-risk-low-rewards opportunities.


Optimistic Ethereum seems to be worth the risk of potential exponential growth.

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I like the way you think, and I hope you continue doing it.

I think the real danger at the moment is lots of opportunities and finite resources to pursue them, so it’s a matter being smart about what to focus on.

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No doubt we only have so many resources to pursue opportunities, but given how much gas fees suck I think getting on L2 ASAP is top of the priority list. With Chainlink, Synthetix, Uniswap, and MakerDAO on Optimistic Ethereum DeFi summer 2.0 would be truly epic.

This is an interesting post and I enjoyed reading it and the responses. I am fairly new to the Forum and have been lurking and voting on some signal requests thus far.

I’m really interested in the Core Unit you propose. I’ve had an idea around this for a while. Please bear in mind I am not a coder so am not sure how difficult the following would be.

I imagine MakerDAO could be a combination of the S&P500 and a broker. Imagine the DAO selecting indices across a wide range of crypto and tradFI (once adopted to the ETH ecosytem). For example a MKR50 where we choose 50 projects to index by market-cap and end-users can pay DAI in exchange for an ERC-20 representing the underlying assets. The DAI could then be used by the protocol to buy the assets on DEXes and add to an asset pool controlled by the DAO. The protocol could then charge a management fee for these assets a la Vanguard and open up a new revenue stream. We could even have multiple indices - for example a staked ETH index which included stETH, rETH, bETH etc, all weighted by market-cap, all making it easier for retail investors to stake and smoothing out smart contract risk for individual users. Other examples: uniswap LP index, a DEFI token index (essentially DPI but controlled by a DAO).

While this is undoubtedly a complex endeavour I feel if MakerDAO is really about banking the unbanked and becoming the premium DeFI protocol we need to make bold steps like this to diversify income streams, it would also hopefully boost demand and usage of DAI if this is how deposits are required.

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So those are definitely interesting and intriguing ideas, but I’d rather see Maker dominate its core competency before launching into other things. Unless it’s perhaps a euro-DAI, I think making DAI as useful and seamless as possible should occupy all attention and resources