GFX Labs Delegate Platform

GFX Labs

Key Info

Delegate Address: 0xf60D7a62C98F65480725255e831DE531EFe3fe14
Forum: @GFXlabs
Email: [email protected]
Meet Your Delegate Video: Expected Nov 17

Delegate Statement

GFX Labs is committed to helping protocols grow and evolve. The current landscape of protocols, DAOs, and protocol governance is extremely nascent.

While MakerDAO has been on the bleeding edge of debt management, stablecoins, and governance there is still much to improve. Our team is comprised of heavy defi users, regular governance participants, and core community members of various protocols. While our predominant experience has been in Compound and Uniswap, we are excited to expand our efforts further into MakerDAO. We look forward to applying our learnings from other protocols to MakerDAO and build cross-protocol relationships.

GFX Labs isn’t a fund. We don’t hold positions. We are a team of builders who love DeFi. Our participation in governance is rooted in a desire to see DeFi overtake legacy finance. We promise to be active participants. We’ll explain not only when we agree, but most importantly, when we disagree. As first-hand participants in governance know how frustrating it is to work on a proposal, receive limited comments, only to have the proposal shot down at launch. Our door will always be open to those who share the passion for DeFi that we have.

Conflicts of Interest

GFX Labs may from time to time be engaged as a delegate on other protocols. All governance participation is public and done through the same wallet.

GFX Labs has read and agrees to abide by the Delegate Code of Conduct.

8 Likes

GFX Labs Recommendations

6 Polls Closing This Thursday:

Direct-AAVEV2-DAI Parameter Adjustments (closes Thursday)

Summary This is the DAI Direct Deposit Module (D3M). These parameters would raise Maker’s maximum debt ceiling (DC) to 50 million DAI from 10 million DAI, and increase the amount debt can be increased in a single transaction from 10 million to 25 million. This poll also is to lower the targeted borrow rate on Aave for DAI from 4% to 3.9%, as a precaution to increase liquidity for withdrawals should borrowing increase substantially.

Recommendation: Vote yes. Over time, it may be preferable to target an amount of DAI and not a rate, but it is fairly small and currently borrow rates for DAI on Aave are at 5.4%.

Increase the wstETH-A Debt Ceiling (closes Thursday)

Summary Increase debt ceiling to 50 million DAI from 5 million DAI for Lido’s staked ETH.

Recommendation: Vote yes. This ilk has high demand and the first 5 million filled up quickly. While staked ETH bears more risk than ETH, it also generates substantially higher fees (currently 4% vs 2.5% on ETH-A). 50 million is also a good cap before extra due diligence and risk assessment, as mentioned above.

Recognised Delegate Compensation Increase (closes Thursday)

Summary: Increase the maximum annual compensation parameter from 48k to 144k DAI for the current 3-month trial period of paying delegates.

Recommendation: Vote yes. Delegation requires compensation to provide the time and effort required to make informed votes.

NS-DROP Covenant Modification (closes Thursday)

Summary: This would alter the (informal) covenants of Maker’s only real-world borrower of any size. New Silver finances fix-and-flip loans, and this financing is done through the Tinlake platform at Centrifuge. These parameters would allow New Silver to increase the amount of the DROP tokens used as collateral to Maker from 75% of the total pool to 85% as long as New Silver has at least 50% of the junior tranche (TIN tokens).

Recommendation: Vote no. New Silver has a current debt ceiling of 20m DAI and currently uses about 10m of that. GFX Labs generally does not think their request is unreasonable, but Maker entered into the current cohort of Centrifuge deals without any legal review, and subsequent review highlighted areas that needed improvement. It seems wise to limit any additional exposure (in total or by adjusting risk parameters) to any asset from the Tinlake platform until the legal structure is upgraded. Our understanding is that this is still in progress.

GUNIV3DAIUSDC-A Parameter Adjustments (closes Thursday)

Summary: This raises the DC for Gelato UNI DAI-USDC LP tokens from 50 million to 500 million DAI. Also decreases the liquidation ratio from 105% to 102%, and stability fee from 1% to 50 bps.

Recommendation: Vote yes. These changes are all part of viewing this collateral type as safe and performing as expected. These LP tokens should in theory act similarly to the USDC PSM (Peg Stability Module) with regards to steadying the DAI <> USD peg, though not in real time. They have the added benefit of generating ongoing fees, though, and put at least some of the USDC blacklisting risk at arm’s length over at Uniswap.

Add WBTC-B as a new Vault Type (closes Thursday)

Summary: This creates a WBTC-B ilk similar to the ETH-B ilk. It is intended to target more risk-seeking borrowers, and all parameters are listed through the link (there are a lot, since it’s a new ilk). The important ones are a stability fee of 5%, liquidation ratio of 130%, DC of 500 million DAI.

Recommendation: Vote yes. This is a copy of the ETH-B ilk (vault type), except with a lower debt ceiling (DC). The ETH-B ilk has performed well under all major stress periods this year, and liquidations are robust under the 2.0 system. Note that when they perform as expected, Maker receives a 13% liquidation fee on top of debt being repaid, so there is substantial buffer in even extreme conditions before the debt itself can go bad.

2 Polls Closing Next Monday:

Community Greenlight Poll - OHM (Olympus DAO) (closes Monday)

Summary: This vote is merely to gauge sentiment. The margin of Yes/No in theory is supposed to influence how high of a priority a given collateral is to onboard given limited developer resources.

Recommendation: Vote Abstain. In practice, it is not clear that these polls alter the order in which collaterals are onboarded. Unless there’s a compelling reason, voting Abstain is probably the easiest move on any “greenlight” poll – it doesn’t onboard a collateral and there has not yet been any kind of risk assessment at the time of polling.

Community Greenlight Poll - MDI (MD Irradiance LLC) (closes Monday Nov 15 at 11 am Eastern)

Summary: This is a real-world company specializing in late-stage solar project finance. It is headed by one of the Real World Finance (RWF) Core Unit’s contributors, Christian Petersen.

Recommendation: Vote Abstain. See previous.

4 Likes

GFX Labs Recommendations:

8 Polls Closing Monday Nov 22:

Ratification Poll for Adding the Deco Fixed Rate Core Unit (DECO-001)

Summary: This would add a new core unit (CU) that would integrate the Deco Protocol with Maker. An in-depth explanation of the proposal and ensuing community discussion can be found here.

The gist is that when a vault is used to generate DAI, the final repayment of that debt can be thought of as Principal + Interest. Deco splits those two obligations into a zero-coupon tokenized obligation for the principal and a yield token for the stability fees (interest). Maker can and does adjust rates, so all Maker vaults are effectively overnight lending that people roll over by default unless they become undercollateralized.

Deco allows for an effective fixed rate by selling the user back their yield token (which represents the variable-rate interest they will pay until time X) for a fixed price up front. This provides their vault with an effective fixed rate until the yield token matures at time X.

A possible secondary use case is that these yield tokens or zero-coupon principal repayment tokens can be sold or traded on the secondary market, allowing for hedging, speculation, etc.

Recommendation: Vote no.

This is a really novel product for crypto and has a lot of applications. That said, the price tag is quite high. The Deco CU would be paid a floor of 1.8m DAI. There is also an MKR vesting component of 1500 MKR over three years for the core unit.

After Maker had recouped those expenses of DAI and market price of MKR, Deco CU would then get a 15% revenue share of further sales of the yield token.

Given the unclear demand for fixed-rate crypto financing, this would be a fairly expensive experiment where even if it paid off, 15% of all profits would go to the Deco CU. Regardless of outcome, the Deco CU would also receive 1500 MKR (market value $4.7m at the time of writing). The run rate can be roughly estimated at $3.36m, assuming no price appreciation in MKR over three years.

This operation of separating the principal and interest is also well known in traditional finance. Unfortunately, this means this could be interpreted by aggressive regulators as a security, and its issuance to the public or being unencumbered on secondary markets could attract unwanted attention.

Supplement to Collateral Onboarding Application (MIP6c3-SP1)

Summary MakerDAO currently uses a single one-size-fits-all collateral application template for interested parties to propose new collaterals for the Maker protocol to accept. This template has not been updated in some time, and also was created before real-world assets (RWA) were a focus for Maker growth. This proposal provides a RWA-specific set of questions that are more relevant to non-crypto native collaterals.

These changes are mostly related to legal structure, funds flow, jurisdictions, and other housekeeping that is more necessary for RWA financing. It also asks more relevant questions about risks, mitigations for those risks, risk monitoring, and the applicant’s compliance program (among other things).

Recommendation: Vote yes. These changes were proposed by a project finance attorney who has been a part-time contributor to the Real World Finance (RWF) CU. The questions are certainly an improvement over more technology-focused ones that are more relevant to crypto collaterals. Even if this template turns out to be insufficient, it can be easily iterated upon.

Ratification Poll for Immunefi Security Core Unit (IS-001)

Summary: This proposed CU would include 1 MakerDAO contributor + Immunefi (a private company) to manage bug bounty program, opsec, and emergency response. This appears to be mainly a combination of a passive bug bounty, ongoing risk assessments throughout MakerDAO CUs’ technical infrastructure, and on-call security services.

Total annual cost is around 489k DAI + 21.92 MKR ($68,620 at time of writing) for a total estimate of around $557k assuming no appreciation/depreciation in MKR price.

Recommendation: Vote no, but with the strong recommendation to resubmit based on the recommendation below. It is not entirely clear that this is strictly an area not owned already by the Protocol Engineering (PE) CU, but the price tag is relatively small and anything offloaded from PE is generally good, as their time is expensive and their resources are often the bottleneck to getting new features shipped and new collaterals onboarded.

However, there is a strong need to move away from CU-based MKR vesting and to a contributor-based MKR vesting. As will be discussed further down in the budget polls, there is a tendency for CUs to be overly optimistic about their ability to fill vacant positions. While this is fairly easy to correct in cash/DAI budgets, it is harder to correct for MKR vesting when done for an entire CU. The current practice is to “stream” MKR to a CU’s multisig, which can be called by that multisig once vested.

The practical outcome of this is that unfilled positions are accruing MKR, and the Maker protocol will require facilitators to bear the burden of accurate record-keeping and returning all excess MKR. As positions are not filled or vacated all at once, this also means churn will make it difficult to calculate the actual MKR due to be delivered to a CU.

GFX recommends that MKR vesting plans that are approved on the basis of headcount & salary also be tracked at the protocol level individually. If the CU as an entity is requesting vesting based on a formula other than headcount/individual compensation, then accruing at the CU level may be appropriate.

Real-World Finance Core Unit MKR Compensation, RWF-001 (MIP40c3-SP38)

Summary: This proposal is to establish MKR vesting for contributors of the RWF CU. It is for an annualized total of 560 MKR for 7 full-time equivalents (FTE). As of writing, that is a market price of $248k/person/year in MKR.

Recommendation: Vote no, with a strong recommendation to resubmit. See the above argument about avoiding MKR vesting to the CU rather than to individual contributors.

Modify Core Unit Budget RWF-001 (MIP40c3-SP39)

Summary: This is a continuation of the previous RWF CU budget of 1.86m DAI annually. No increase has been requested from the 2021 budget.

Recommendation: Vote yes. The RWF CU is currently under budget due to being unable to meet their target of 7 FTE contributors. Should budget surpluses continue for this CU, then that can be addressed in the future.

Modify Core Unit Budget COM-001 (MIP40c3-SP40)

Summary: This is a slight increase over the prior budget (from annualized 486k DAI to annualized 515k DAI) for the GovComms CU. Most of the change is due to an increased travel budget to events attended by MakerDAO contributors.

Recommendation: Vote no, with a strong recommendation to resubmit. The GovComms CU, like many, has overbudgeted consistently (or come in under budget consistently). This is usually due to fully funded, but unfilled positions. The proposed budget seems reasonable, but there is a substantial cash surplus already on the books for this CU.

At time of writing it has 30k DAI that has not yet been claimed from its previous budget in addition to any off-chain cash assets. October expenses are not yet available to the public, but August and September had large (~40k DAI) combined surplus, so there is presumably a healthy cash position off chain.

As part of an effort to harmonize CU budgets with actual outlays, GFX Labs recommends this budget be resubmitted in the following governance cycle, as it appears to have more than a month of surplus cash. There is also a 121k DAI emergency fund that can be tapped in the event of budget shortfalls between now and a resubmitted budget.

Modify Core Unit Budget MKT-001 (MIP40c3-SP33)

Summary: This is proposed 6-month budget for around 425k DAI (annualized 850k) for the Content CU.

Recommendation: Vote yes. Under the PaperImperium/Field Technologies flag, this budget was voted down in the previous month due to a large surplus accumulated from overbudgeting. It has some minor changes, but most importantly the unfunded month allowed for Maker to effectively claw back some of that surplus.

As stated elsewhere, there is a need to offer this and other CUs which regularly overbudget some assistance in how to forecast budgets. In particular, there needs to be more attention paid to fully funded positions that never get filled in budgets.

Ratification Poll for Sidestream Auction Services Core Unit (SAS-001)

Summary: This is a proposed CU to maintain and monitor the auction services (such as for liquidations and MKR burning).

The annualized proposed budget is 1.13m DAI + 243.79 MKR ($755k in market price at time of writing) for an estimated annualized expense of $1.88m assuming no MKR appreciation. There is also a 245k one-time seeding of an emergency fund. Notably, the MKR vesting is retroactive to June 21st, when this core unit was first incubated within the Sustainable Ecosystem Scaling (SES) CU.

Recommendation: Vote no, with a strong recommendation to resubmit. The price tag is high, but technical staff never come cheaply. The mission of monitoring the keeper ecosystem is definitely important, as is a dedicated unit to bring auctions to L2s. A number of initiatives are already proposed for this CU to begin work on, including unifying auction UIs, extending auction functionality with features such as notifications and Twitter bots. The roadmap and work to date looks good.

The main impetus for the vote no is identical to the reasoning laid out above in other recommendations that MKR vesting that is justified by headcount/salary should be tracked individually on chain.

Retroactive MKR vesting should probably be avoided when possible. It is better than losing productive members, but is not ideal. Please take notice.

6 Likes

9 (1 Updated, 7 New) Polls:

Closing Nov 17:

UPDATE: Modify Core Unit Budget COM-001 (MIP40c3-SP40)

Summary: GFX Labs had recommended a vote No on this due to the core unit consistently coming in under budget and presumably having ample cash reserves.Today, the Sustainable Ecosystem Scaling CU was providing standardized synopses of budgets throughout the DAO. GovComms’ facilitator has now posted (correctly) that due to an error their stream of DAI from the protocol was misconfigured, and the GovComms CU has been accruing approximately 10,000 DAI/month less than budgeted for.

Recommendation: Vote yes. The reasoning for recommending No previously was to allow excess cash to burn off. Due to a technical error, this core unit has accrued 30,000 DAI less than expected over the prior few months. This leaves their current stream on schedule to accrue around 46,000 DAI by Dec 31st. The GovComms monthly budget is currently 40,500. Cash stockpiles within the core unit should be within acceptable ranges given that it has received less funding than budgeted. That this occurred for months and was only caught now by another core unit does reinforce the need for standardized reporting by core units, and access to basic accounting resources on the part of facilitators who may need assistance in budget forecasting.

Local Liquidation Limit Adjustments for ETH-A, ETH-B, ETH-C, WBTC-A, and wstETH-A

Summary: This would increase the local liquidation limit (ilk.hole) parameter in the following manner:ETH-A from 40m DAI to 65m DAIETH-B from 25m DAI to 30m DAIETH-C from 30m DAI to 35m DAIWBTC-A from 25m DAI to 40m DAIwstETH-A from 3m DAI to 7m DAI This parameter sets the maximum lot size of a given collateral that can be simultaneously auctioned for liquidation.

Recommendation: Vote yes. This is designed to shorten liquidation settlement time, and is recommended by the Risk Core Unit. That lowers tail risk of being unable to liquidate safely because prices fall faster than auction throughput.

Rates Proposal – Nov. 15, 2021

Summary: This would increase WBTC-A stability fees from a rate of 2.5% to 4.0%, and fees for the as-yet-unimplemented WBTC-B ilk from 5.0% to 7.0% (WBTC-B will offer more leveraged exposure similar to ETH-B).

Recommendation: Vote yes. The on-chain liquidity of WBTC <> DAI is less than half that of ETH <> DAI. MakerDAO is also the largest holder of WBTC collateral as of writing, and has slower liquidation procedures than major lending platforms, suggesting that liquidity could be exhausted to the point of major slippage if significant amounts of WBTC have to be auctioned off. The increased riskiness suggests it deserves a higher risk premium than ETH.

Offboard AAVE-A Vault Type

Summary: Encourage offboarding of AAVE-A with the following parameter changes:

  1. Increase AAVE-A liquidation ratio linearly over 30 days such that all vaults are liquidated by the end of 30 days.
  2. Lower AAVE-A debt ceiling to 0 DAI.
  3. Lower AAVE-A liquidation penalty to 0%.

Recommendation: Vote abstain. This vault type is not profitable. It has only 18 active vaults and a total outstanding DAI debt of less than 1.2m DAI. Estimated revenue is less than 12,000 DAI per year. Oracles are roughly estimated to cost $200,000/year. There may, however, be strategic reasons to maintain such a vault, making the value of off boarding unclear and an informed decision difficult.

Offboard BAL-A Vault Type

Summary: Encourage offboarding of BAL-A with the following parameter changes:

  1. Increase BAL-A liquidation ratio linearly over 30 days such that all vaults are liquidated by the end of 30 days.
  2. Lower BAL-A debt ceiling to 0 DAI.
  3. Lower BAL-A liquidation penalty to 0%.

Recommendation: Vote abstain. This vault type is not profitable. It has only 3 active vaults and a total outstanding DAI debt of less than 172,000 DAI. Estimated revenue is less than 2,000 DAI per year. Oracles are roughly estimated to cost $200,000/year. There may, however, be strategic reasons to maintain such a vault, making the value of off boarding unclear and an informed decision difficult.

Offboard COMP-A Vault Type

Summary: Encourage offboarding of COMP-A with the following parameter changes:

  1. Increase COMP-A liquidation ratio linearly over 30 days such that all vaults are liquidated by the end of 30 days.
  2. Lower COMP-A debt ceiling to 0 DAI.
  3. Lower COMP-A liquidation penalty to 0%.

Recommendation: Vote abstain. This vault type is not profitable. It has only 4 active vaults and a total outstanding DAI debt of less than 504,000 DAI. Estimated revenue is just over 5,000 DAI per year. Oracles are roughly estimated to cost $200,000/year. There may, however, be strategic reasons to maintain such a vault, making the value of off boarding unclear and an informed decision difficult.

Change of Covenants for P1-DROP (Peoples Company Series 1)

Summary: This is a Centrifuge asset related to the purchase of farmland that was approved in the spring, but with an initial debt ceiling of 0 DAI, as the applicant was not yet ready to accept financing. The requested change of covenants: expand the geographical limits to a total of 9 states (Arkansas is the newly included state) and increase the maximum acquisition price from $1.5m to $2.85m for a single underlying asset.

Recommendation: Vote no. This was one of the Centrifuge assets that was approved prior to obtaining a legal review. Maker is still awaiting completed upgrades to the initial legal structure. The lack of clarity whether the actual farmland (asset under management) is actually collateralizing the tokens — rather than simply revenues derived from them — is not particularly reassuring. Even under a fully enforced liquidation scenario, the borrower would have up to 5 years to liquidate underlying assets.

Considering that the 2% proposed Stability Fee is fairly low, the likely unsecured nature of the tokens used as collateral, and the duration risk for Maker, GFX Labs (as a new governance participant who has not previously weighed in on the original deal) recommends a vote against.

2 Polls Closing November 29:

Greenlight Poll for SolidBlock Red Frog Digital Coin (SB-frOGI)

Summary: This is a proposal to onboard as collateral the frOGI coin, which represents an interest in Red Frog Digital Series LLC. The LLC will fund the development of Red Frog Beach Island Resort & Spat, to be owned by Blue Sea Holdings LLC (parent company appears to be Panamanian).

Recommendation: Vote abstain. As discussed elsewhere, these polls do not seem to have an impact on actual prioritization, except in the event of a No vote. No risk assessment has yet been done and no significant discussion has occurred, so it is also difficult to make an informed decision.

Greenlight Poll for Monetalis Wholesale SME Green Growth Lending (MONETALIS)

Summary: This is a proposal to onboard as collateral Monetalis as a real-world asset. They are requesting a line of 400m DAI against senior secured credit as collateral. Monetalis plans to deploy the funds to finance green economic initiatives in the UK.

Recommendation: Vote abstain.
As discussed elsewhere, these polls do not seem to have an impact on actual prioritization, except in the event of a No vote. No risk assessment has yet been done and no significant discussion has occurred, so it is also difficult to make an informed decision.

5 Likes

I have some questions that I’m posting here since the Meet Your Delegate call usually happens at an awkward hour in my timezone!

This Medium article says that GFX Labs is a blockchain products company with products such as minecraft on the blockchain and a DeFi credit card. A third point mentions that they’d like to be involved in governance of various crypto protocols, including MakerDAO.

  1. What was the motivation for PaperImperium to switch from Field Technologies (which was a one-man company) to GFX Labs?
  1. Why does the company, as an entity, want to be involved in governance across different protocols? Why do you expect such involvement to be profitable, despite holding no crypto positions? While I appreciate the love for DeFi and team building, a startup has venture capitalists and ultimately, a bottom line, to answer to so I’d like to hear about the company’s motivations and vision.

  2. Is anyone aside from PaperImperium going to be involved in the voting decisions for Maker? If yes, who are they, what backgrounds do they have?

  3. What amount of time per week do PaperImperium and others who may be involved expect to spend on Maker related work vis a vis other governance and product activities you do?

  4. Since GFX Labs will be/already is involved in governance of many other DeFi protocols, how do you plan to address the conflicts of interest you have declared? Note that this has already started to occur with the offboarding of various COMP and UNI vaults.

Thanks for answering and welcome (back!) to delegation :slight_smile:

6 Likes

GFX Labs is supporting the current executive, Onboarding WBTC-B, Increasing WBTC-A Stability Fee, Change of Covenants for P1-DROP, Offboarding Collaterals.

While GFX Labs did not recommend all of the changes (please refer to this post), there is not an obvious reason to recommend blocking this executive.

4 Likes

4 New Polls (closing Nov 25):

Add GUSD Peg Stability Module

Summary: This would create a new Peg Stability Module (PSM) similar to the current PSM-USDC and PSM-USDP. The initial parameters would be:
Toll in (tin): 0%
Toll out (tout): 0%
Debt Ceiling (line): 100m DAI
Target Available Debt (gap): 10m DAI (this is how much it can increase at a time until the max DC (line) is hit)
Ceiling Increase Cooldown (ttl): 24 hours (this is how long before DC is raised by another gap)

Recommendation: Vote yes. Tyler Winklevoss proposed this in October. Gemini has a good reputation generally, and from a risk standpoint GUSD looks very similar to USDP. GUSD is smaller market cap, and thus experiences a bit more price volatility, so this is likely to help GUSD’s peg but be immaterial to Maker’s. However, Gemini is a useful business partner to have a relationship with, and the additional risk seems low.

Most importantly, Gemini will integrate support for the PSM through their own product lines, offering a way for users on Gemini to directly mint DAI through USD>GUSD>DAI. This is similar to what Paxos has done, and provides an on/off ramp from fiat to DAI and vice versa. The more of those – and at arm’s length so KYC is the responsibility of the integrator – the better.

Increase the System Surplus Buffer

Summary: This is an instant runoff poll with the following options. Voters are allowed to rank their preferences:
 Option 1: Increase the System Surplus Buffer from 60 million DAI to 90 million DAI, with a gradual increase of 0.67 million DAI per week.

 Option 2: Increase the System Surplus Buffer from 60 million DAI to 130 million DAI, with a gradual increase of 0.67 million DAI per week.

 Option 3: Increase the System Surplus Buffer from 60 million DAI to 90 million DAI, with a gradual increase of 1 million DAI per week.

 Option 4: Increase the System Surplus Buffer from 60 million DAI to 130 million DAI, with a gradual increase of 1 million DAI per week.

 Option 5: No change to the System Surplus Buffer.

Recommendation: Vote Option 4 for First Priority, Option 2 for Second Priority, Option 4 for Third Priority, Option 1 for Fourth Priority. MakerDAO is still largely in a growth phase. However, as Maker increasingly embarks upon risky policies with regards to its peg management (D3M) and regulatory scrutiny (Deco Protocol), having ample reserves to insure against both bad debt and inability to pay (rapidly growing) salaries seems prudent. DAI supply is rapidly expanding, and a 130m DAI surplus today would still be just over 1% reserves that are earmarked for both self insurance and operating expenses.

All options should continue to see Maker regularly burn MKR, which should ensure a healthy keeper ecosystem. The first two options would result in slightly more burning a week, which should not affect MKR price, but does materially slow the accumulation of surplus buffer. Note that even at 1m DAI/week, it would take 70 weeks (around 1 and 1/3 years) to reach 130m Surplus Buffer.

Add WBTC-C as a New Vault Type

Summary: This would create a new vault type (ilk) for WBTC with the following initial parameters:
Stability Fee: 1.5%
Liquidation Ratio: 175%
Debt Ceiling (line): 1 billion DAI
Target Available Debt (gap): 100 million DAI
Ceiling Increase Cooldown (ttl): 8 hours
Debt Floor (dust): 7500 DAI

For the various liquidation auction parameters, see the poll.

Recommendation: Vote yes. Now that Maker is the main source of WBTC lending on Ethereum, new ilks for this underlying collateral can help to segment users based on risk tolerance and also potentially spread out liquidation timing. Two weeks ago, GFX Labs voted yes on WBTC-B, which is now live and provides exposure for users more risk tolerant than WBTC-A would allow. WBTC-C provides lower rates for those users who manage their position more conservatively. For reference, WBTC-A has a LR of 145% and 4% fees, and WBTC-B has a LR of 130% and 7% fees.

Increase the Aave D3M Maximum Debt Ceiling

Summary: This would increase the maximum debt exposure from 50m to 100m DAI.

Recommendation: Vote yes. This has been successful to date, and allows Maker to generate higher revenue that most of its vaults would generate. As an unintended consequence, Maker is also beginning to accrue stkAAVE. While there are serious concerns about using this module to target a rate and not an amount of DAI, the 100 million DAI maximum exposure is unlikely to pose a risk to the USD <> DAI fixed exchange rate.

3 Likes

GFX Labs is supporting the current executive. It includes onboarding WBTC-C, some parameter changes, and core unit budget distributions.

7 Polls Ending Thursday, Dec 2

Increase the Dust Parameter for Most Vault Types

Summary: This would increase the Dust parameter for all vault types excluding ETH-B, ETH-C, and PSM facilities. Dust would be increased from 10,000 DAI to 15,000 DAI.

Recommendation: Vote yes. Dust is the “debt floor” parameter. The main justification to raise this is to ensure that liquidations are still worthwhile in an environment where gas costs continue to escalate. If large amounts of bad debt accumulate in small denominations, that debt would need to be either written off or increase the subsidy parameter (Chip and Tip parameters) in order to entice at least one bid.

Increase the Dust Parameter for ETH-B Vault Type

Summary: This would increase the Dust parameter for ETH-B vault type from 30,000 DAI to 40,000 DAI.

Recommendation: Vote yes. See the above recommendation. ETH-B offers riskier levels of leverage, so it is particularly important that small lots of collateral not accumulate as bad debt, or present a potential attack vector.

Use the MakerDAO Treasury to Fund MKR Expenses

Summary: Future and currently vesting MKR expenses will be paid from the treasury (currently the wallet known as Pause Proxy) rather than being minted.

Recommendation: Vote yes. While the treasury MKR is effectively as good as nonexistent while it is out of circulation, it seems prudent to use MKR that already exists on-chain rather than issue new MKR. In the event that MKR is in the future considered a security under US laws, this at least prevents Maker from issuing new securities. This seems like a prudent move, made out of an abundance of caution.

Add GUNIV3DAIUSDC2-A as a New Vault Type

Summary: Include a new vault type, which supports the Gelato token for UNI DAI-USDC LP tokens in the 1 bps pool. Initial parameters would include:
Stability fee: 1%

Liquidation ratio: 105%
Max debt ceiling (line): 10,000,000 DAI

Recommendation: Vote yes. The highly popular DAI-USDC pool enabled at Uniswap (after a proposal by a GFX Labs member) has attracted enough liquidity that the associated Gelato token is likely to scale to a size worth onboarding as a new vault type.

One Time Payment to the GovComms CU to Deal with Budget Issues

Summary: Make a one-time payment of 27,058.33 DAI to COM-001 (GovComms CU) to correct a misconfigured budget streamed during Q3 2021.

Recommendation: Vote abstain. This CU just had a ~6% budget increase approved recently. That this discrepancy was not discovered until the close of the previous quarter suggests that these funds were not needed to meet the budget needs of that quarter.

Parameter Changes Proposal- MakerDAO Open Market Committee

Summary: The MOMC (MakerDAO Open Market Committee) has suggested the following parameter changes:

-Increase ETH-A fees from 2.5% to 2.75%
-Increase ETH-B fees from 6.0% to 6.5%
-Increase LINK-A fees from 1.5% to 2.5%
-Increase MANA-A fees from 3% to 6%
-Increase UNI-A fees from 1% to 3%
-Increase GUSD-A fees from 0% to 1%
-Increase UNIV2DAIETH-A fees from 1.5% to 2.0%
-Increase UNIV2WBTCETH-A fees from 2.5% to 3.0%
-Increase UNIV2USDCETH-A fees from 2.0% to 2.5%
-Increase UNIV2UNIETH-A fees from 2% to 4%
-Decrease GUNIV3DAIUSDC1-A fees from 0.5% to 0.1%
-Increase WBTC-A max debt (line) from 1.5b DAI to 2b DAI
-Increase WBTC-A available debt (gap) from 60m DAI to 80m DAI

Recommendation: Vote yes. These mostly reflect fee increases to reflect increased borrowing demand in the market generally for ETH and LINK. The increase for GUSD is to begin encouraging unwinding of the small GUSD ilk in preparation for a GUSD PSM. The remaining increases are an attempt to make those smaller vault types able to cover estimated oracle expenses. The decrease in the Gelato UNI vault type is an attempt to retain users as liquidity continues to migrate to the 1 bps pool on Uniswap.

Add CurveLP-stETH-ETH as a New Vault Type

Summary: Adds new vault type for Curve LP stETH-ETH. The initial parameters can be found in the proposal, with the most important ones being:
Stability Fee: 4.5%
Liquidation Ratio: 155%
Maximum Debt Ceiling (line): 5m DAI

Recommendation: Vote yes. While not without some underlying risk due to the exposure to Curve smart contracts, Maker has determined it wants to support the growth of and use as collateral of staked ETH. This is another way to offer this to users.

1 Like

GFX Labs has supported the current executive. These include a slew of parameter changes, onboarding a new vault, and distribution of DAI to recognized delegates (GFX Labs compensation will be rolled to next month out of respect for gas costs to the protocol)

2 Polls Closing Thursday Dec 9:

Adjust wstETH-A System Parameters

Summary: Adjust parameters for the wstETH-A ilk. Notable changes are to increase maximum debt (line) from 50,000,000 to 200,000,000 DAI, and the available debt (gap) from 3,000,000 to 20,000,000 DAI.

Recommendation: Vote yes. The staked ETH (Lido) collateral type has proved to be popular and a growing source of revenue. As staked ETH becomes more liquid on secondary markets, this collateral promises to be a source of much-needed growth for Maker. Though staked ETH is more risky than ETH itself, it does accrue much higher fees.

Adjust MATIC-A System Parameters

Summary: Increase maximum debt (line) from 20,000,000 to 35,000,000 DAI. Decrease available debt (gap) from 20,000,0000 to 10,000,000.

Recommendation: Vote yes. This collateral was onboarded as part of a deal with Polygon to utilize their treasury. Raising the maximum debt ceiling will allow them to get closer to the targeted DAI debt, while lowering the amount that can be minted in a single transaction reduces risk in volatile markets – most MATIC liquidity is not on Ethereum, limiting liquidation throughput.

2 Polls Closing Monday Dec 20:

Greenlight Poll: aUST (Anchor TerraUSD)

Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Greenlight Poll: G-UNIv3-DAIUSDP (Gelato Uniswap V3 DAI-USDP LP Token)

Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

2 Likes

GFX Labs supported the current executive, which includes changes GFX supported in previous polls – mainly parameter changes to MATIC and wstkETH ilks.

DAI Direct Deposit Module (D3M) Debt Ceiling Targeting

Summary: This proposal from the Maker Open Market Committee is to target a percentage of the DAI (excluding DAI used for recursive or looping leverage) on Aave V2. Options are 25%, 30%, or neither indicated percentage.

Recommendation: Vote 25% of natural DAI supply. Some discussion can be found here, though it is not well developed. D3M would most safely be managed by referring to the utilization of the various PSMs. However, targeting a share of supply on Aave V2 as the limiting variable seems more conservative than targeting a borrow interest rate alone. Details of how to regularly monitor non-recursive/looping DAI supply would be appreciated, but this policy seems less likely on the surface to negatively affect the USD <> DAI peg. Note that looping for liquidity mining rewards adds to net supply, so 25% of natural supply would be less than 25% of total supply.

DAI Direct Deposit Module (D3M) Net Rates Spread

Summary: This targets a net spread between Maker ETH-A vault type and borrow rates on Aave (inclusive of rewards). The proposal is specifically for a 50 bps spread with Maker vaults cheaper than Aave V2.

Recommendation: Vote No. This increases both liquidity and credit risk exposure to Aave. Given current rewards and ETH-A rates, this implies targeting 3.75% borrow rate on Aave. This is below the current 3.9% borrow rate targeted on Aave. Manually or automatically, Maker runs the risk of negatively impacting its peg should reserves be drained by overheating the DAI borrow market with artificially suppressed rates. D3M should be used in a manner that is either market neutral, or with a built-in kill switch when PSM reserves fall below a given amount. Until Maker has policies in place to avoid copying hundreds of years of history of government currency mismanagement, actively pushing borrow rates artificially downward is imprudent.

Recognized Delegate Compensation Trial Performance Modifier

Summary: This would create a linear modifier to DAI compensation for Recognized Delegates that have a minimum of 75% participation. This would slightly reduce earnings for delegates with performance metrics between 90% and 99%, and make eligible for partial earnings those delegates with metrics between 75% and 90%.

Recommendation: Vote Yes. This seems a fair iteration on delegate pay, and should foster a healthier delegate ecosystem.

3 Likes

5 Polls Ending Jan 13

Prioritize Onboarding a Compound DAI Direct Deposit Module (D3M)
Summary: This would signal to the various core units that a Compound D3M should be prioritized.

Recommendation: Vote Yes. @GFXlabs proposed this, and supports it for reasons outlined in the original Signal Request – the most important points being that it treats Compound and Aave on par with each other, diversifies exposure for Maker, and generates material amounts of revenue.

Raise the Emergency Shutdown Module (ESM) Threshold
Summary: This would raise the required MKR from 75k to 100k in order to allow permissionless activation of emergency shutdown.

Recommendation: Vote Yes. @GFXlabs proposed this, and supports it for reasons outlined in the original Signal Request – the most important point being that it would place the shutdown threshold beyond what a single MKR holder can activate.

Prioritize DAI Direct Deposit Module (D3M) for Maple Finance
Summary: This would signal to the various core units that a Maple Finance D3M should be prioritized.

Recommendation: Vote No. The proposal is to create a pool of DAI that would then be managed by a Pool Delegate to provide unsecured or undercollateralized loans. In its current form, this sounds a lot like creating a portfolio manager rather than lending against specific collateral. There also is minimal junior tranche and no co-investors. The combination of small or no junior tranche/co-investors and unsecured/undercollateralized loans is a large increase in risk. That a Pool Delegate would oversee the DAI investments without direct voting by MakerDAO is a third way in which this would be “deep space” for Maker, and GFX recommends the applicants return with a way to remove some of these novel aspects, or reapply using the traditional MIP6 process for these borrowers.

Increase the Dust Parameter for Select LP Token Vaults
Summary: Increase the dust parameter from 15,000 to 60,000 DAI for UNIV2DAIETH-A, UNIV2USDCETH-A, and UNIV2BTWCDAI-A. Increase the dust parameter from 15,000 to 25,000 DAI for UNIV2WBTCETH-A and UNIV2UNIETH-A.

Recommendation: Vote Yes. This adjustment is meant to account for the gas costs when liquidating LP tokens, which were not considered under current dust limits. Dust is the minimum permitted debt for a vault.

Recover DAI Locked in Optimism Escrow
Summary: Assist a user by recovering 10 million DAI from Optimism Escrow.

Recommendation: Vote No. Maker should find a way to assist users who perform this and other correctable user errors. There should, however, be a uniform policy in place. This user within hours had highly connected individuals within MakerDAO lobbying for the return of 10 million DAI, while Maker has never assisted small users who have performed similar “copy/paste errors” like sending tokens to the DAI contract. GFX believes Maker should assist this user, but under a policy that would provide recourse to other users who do not have the benefit of connections or large sums of money to catch attention on the forum. Where possible that process should be permissionless, and probably involve a fee for retrieval – Compound, for example, charges 10% as a means of discouraging users from treating it as a risk without cost.

16 Polls Ending Jan 24

Community Greenlight Poll – OGN (Origin Protocol)
Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote Abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Community Greenlight Poll – OUSD (Origin Protocol)
Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote Abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Community Greenlight Poll – RBLD (Robinland Holdings)
Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote Abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Community Greenlight Poll – TUSD-PSM (TrueUSD)
Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote Abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Community Greenlight Poll – USDap (BondAppetit)
Summary: Signal support or opposition for onboarding this token as collateral.

Recommendation: Vote Abstain. As mentioned previously, greenlight polls do not appear to in practice affect the speed or order that collateral is onboarded. Additionally, at this stage, there is often de minimus information available, and no due diligence or risk assessments have been performed.

Modify Core Unit Budget, ORA-001 (Oracle Gas Costs)
Summary: This requests 8,771,477.05 DAI. The breakdown is as follows:

Oracle Gas Costs (1/1/22-3/31/22): 3,932,547.84

Oracle Emergency Fund: 1,805,407.21

Maker Foundation Refund (~8/1/21-12/31/21): 3,033,522

Recommendation: Vote Abstain. The costs for ongoing and future oracle gas costs should be in a separate proposal from a 3 million DAI transfer to the Maker Foundation, which requires more discussion. It is not clear why a nonprofit foundation that existed to bootstrap MakerDAO is now sending a bill for 3 million DAI. That being said, this 3 million DAI is bundled together with a “must pass” proposal. We prefer to pick our battles, and while this is disappointing, this is not a hill we plan to die upon.

Onboarding Tech-Ops Core Unit (TECH-001)
Summary: This would onboard the proposed Tech-Ops CU. The annualized budget requested is just around 2.5m DAI (NB: There is a discrepancy in the proposal where not all numbers were updated to a slight decrease in budget, and this does not appear to be reflected in the poll; the discrepancy is just under 80k DAI). MKR per full time contributor is budgeted at 75.68 per year.

Recommendation: Vote Yes. The budget is a bit high, but after sharing that view, the proposed facilitator was able to find a way to lower the budget. It still seems expensive on the MKR side, but the personnel have performed good work to date and were willing to compromise. That’s a solid combination.

Onboarding Strategic Finance Core Unit (SF-001)
Summary: This would onboard the proposed Strategic Finance CU. Its mission would primarily be a dual mandate to provide and improve financial reporting within the DAO, and allocate capital to improve efficiency. The annualized budget requested is approximately 990k DAI. MKR per full time contributor is budgeted at 80 per year.

Recommendation: Vote Yes. The facilitator and other staff are members from the Real World Finance (RWF) CU, and are experienced and knowledgeable about MakerDAO’s internal workings. The facilitator, @Aes, has been a driving force for greater internal cost controls and financial oversight. The other prong of the SF mandate that is capital efficiency is also supported by GFX – which has two proposals that are in part to address that lack of efficiency. Aes and @SebVentures will be addressing a largely unmet need for the DAO.

MIP62: Collateral Offboarding Process
Summary: Provide a standard procedure for notifying users of collateral offboarding.

Recommendation: Vote Yes. GFX made this proposal, and collaborated with members from GovAlpha, CES, and GovComms in drafting it. This will likely need further updates, but will support @collateral-core-unit in their mission to have a “lifecycle” approach to collateral management.

Modify Core Unit Budget, SNE-001
Summary: This is a budget for the StarkNet CU to pursue its Phase II of deliverables. The total budget is 974,583 DAI, of which StarkNet will cover half. The total request is for 487,292 DAI.

Recomendation: Vote Yes. The StarkNet CU is inexpensive, and a way to continue pursuing L2 solutions beyond what Protocol Engineering CU can output. Hedging in as many directions at once as possible is prudent, and the continued cost sharing with StarkNet is appropriate and makes the expenses quite manageable. This tranche of deliverables include L2>L1 fast withdrawals and L2<>L2 teleportation with Maker Wormhole, adding to network effects of the former including Arbitrum and Optimism.

MIP64: Ratification Poll for Bug Bounty Program for MakerDAO Critical Infrastructure
Summary: Proposed by the Immunefi Security CU, this is establishes a bug bounty program managed by that core unit.

Recommendation: Vote Yes. This is necessary for the Immunefi CU to fulfill its mandate, and Immunefi has become one of the leaders in Web3 bug bounty management.

MIP63: Maker Keeper Network
Summary: This is a series of contracts to interface with third-party keepers in the MakerDAO ecosystem.

Recommendation: Vote Yes. Supporting and otherwise encouraging functional and participating keepers in the various auction formats is important. While the keeper ecosystem is sufficient at the moment, any technical assistance to maintain the health of that ecosystem is critical to the overall health of the Maker protocol.

Offboarding Content Production Core Unit (MKT-001)
Summary: This is a proposal to reduce budget to 0 DAI and offboard the facilitator for Content CU.

Recommendation: Vote No. While some improvements could be made in quality and quantity of deliverables, there is no replacement for this core unit available. Maker has no marketing core unit, and cannot afford to also have the Content CU go dark. There would be even less communication with external stakeholders and the public.

Facilitator Onboarding for RWF-001
Summary: This proposal onboards Will Remor as RWF-001 facilitator. RWF CU currently has no facilitator after @SebVentures stepped down following a related proposal by @rune to offboard him. @williamr is the replacement to prevent the CU from being without a facilitator.

Recommendation: Vote Yes. RWF needs a facilitator. Will has shown himself to be qualified and involved in RWF. The only concern is that Will has also been approved to work for Aave in a similar role – real world asset risk assessments. It would be useful to get some clarification from Will if he will work for a competing protocol as well as head the Maker RWF CU. GFX would support a commensurate increase in Will’s pay to ensure Maker has exclusive access to his services with regard to real world assets in DeFi.

Modify Core Unit Budget, DUX-001
Summary: This proposal is primarily to improve the process of funds flows, disbursements, technical implementation, and standardization.

Recommendation: Vote Yes. These changes seem appropriate, and automating a stream of payments to a CU wallet is better than lump sum payments from a standpoint of DAO control.

Modify Core Unit Budget, SES-001
Summary: This proposal is a similar set of changes as that proposed to the implementation of the DUX-001 budget. It is primarily around technical details and improved internal control, automation, and disclosure.

Recommendation: Vote Yes. More automation and adjustments to implementation will improve the oversight of governance.

4 Likes

Thanks GFX for the thoughtful points. I’ve set out some points to address them and give context on how we think the Maple proposal benefits MakerDAO in scaling DAI issuance and diversifying the base of assets.

One of the core value props is the addition of corporate loans to the asset base supporting DAI issuance.

This sounds a lot like creating a portfolio manager rather than lending against specific collateral.

  • This is lending against corporate receivables and future cash flows. This is a new vertical asset type for Maker which diversifies its entry into the real world lending space. It currently supports small-to-med business lending through Centrifuge and institutional lending is a natural adjacency.

Small or no junior tranche/co-investors

  • Maple can include credit enhancement via the staked reserve. This is a junior tranche of MPL and USDC which is held in reserve to provide a buffer against defaults. The appropriate level size of this reserve can be part of commercial discussions. It receives a portion of the interest yield to incentivize it so we expect reasonable appetite.

Unsecured/undercollateralized loans

  • Loans are undercollateralized because we have found that this offering is required to attract the most creditworthy borrowers in the space. The concern highlighted is with credit risk.
  • Expected credit losses are a combination of the Probability of Default and the Loss Given Default. Maple addresses this at the probability of default level by targeting large institutional borrowers where the Delegate 1) thoroughly due diligences borrower financials and 2) Borrowers execute a Master Loan Agreement which gives the legal right to enforce (this would not need to be conducted by Maker, there is a Cayman Foundation set up which would perform this).
  • The other mitigation here is sizing. Maker’s allocation to undercollateralized loans would start as a small portion of the overall DAI portfolio.

Pool Delegate would oversee the DAI investments without direct voting by MakerDAO is a third way in which this would be “deep space” for Maker

  • Key concern identified is the ability of the Delegate to deviate in its underwriting. The counter here is that it is not scalable for MakerDAO to underwrite every loan and hence in any basket approach, where Maker is funding a pool of loans, there would need to be underwriting delegation of sorts.
  • The outcome that needs to be solved is avoiding deterioration or drift in credit underwriting. This could best be accomplished through sharing the Delegate’s credit policy and review of portfolio performance on a regular (quarterly) basis to give MakerDAO comfort that standards are maintained.