Help MakerDAO respond to a media inquiry from Cryptonomist

The community-led Governance Communications GovComms team is collecting responses for a media inquiry from Cryptonomist.

Please feel free to answer any or all of the questions provided. Answers must be submitted before 7:00 AM (UTC) on Friday, August 21.

Responses will be vetted by the GovComms team before submission but all constructive input is welcome and appreciated.

Questions from Cryptonomist

  1. Why use a centralized stablecoin to create a decentralized one?

  2. There have been several problems with this protocol in the past, have you integrated any form of insurance?

  3. The cost of gas is becoming a problem, how do you intend to deal with it?

  4. What do you think about bitcoin on the Ethereum network?

  5. What do you think about banks issuing cryptocurrencies?

  6. Are there any plans and projects to encourage the integration of MakerDAO into other protocols?

  7. What is your opinion on centralized stablecoins, do they have a future?

  8. Can DAI realistically become a tool to spend bitcoin?

  9. How much can the risk that an algorithmic stablecoin like DAI can become volatile in certain critical moments be quantified in percentage?

  10. Can the governance of DAI ever be totally and completely decentralized?

Thanks for Participating!

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4 Likes
  1. centralized stablecoins as a portion of a portfolio help diversify the kinds of risk taken on by the maker protocol. Over the long term these should not be overweighted relative to other asset types, especially since they have no yield. However, all RWAs have the same kind of custodial risk as centralized stablecoins. The best that can be done here is to diversify across many companies and jurisdictions(we are currently onboarding PAX, TUSD, and other stablecoins from different companies).

  2. I don’t understand this question. What problems are being referred to? Also mkr is insurance, so there’s insurance built into the protocol itself.

  3. I can’t really speak for the protocol devs, and atm there does not seem to be consensus on ways for makerDAO to deal with this issue. However lots of projects are trying to move to layer 2 solutions which greatly reduce transaction fees. This technology is still only a few months old though. We should see L2 take off I expect before the end of the year, and we probably need to talk about L2 solutions within makerDAO more.

  4. Bitcoin on Ethereum is great for Ethereum adoption and great for Maker. It’s less clear what it means for Bitcoin in the long term.

  5. I don’t think bank issued cryptocurrencies are going to be viable for mass adoption. They are just very antithetical to the ethos of cryptocurrency and the problems they are trying to solve for individuals. A currency like xrp may have viability within the banking system itself though. I think it is promising that banks are beginning to use cryptocurrencies to transfer value within the banking system. This should help speed up transactions and really bring banking systems into the 21st century. Lots of these processes that banks charge huge fees for(wire transfers, international transfers, etc) can be done without human oversight on a blockchain.

  6. Not to my knowledge

  7. Centralized stablecoins probably have a future for awhile. It’s hard to know what happens once cryptocurrencies become large enough to compete with national currencies.

  8. Dai currently is a tool to spend bitcoin when using WBTC.

  9. This one’s tough as market conditions are largely unpredictable. I guess the best way is just to look at previous crisis events, like Black Thursday, and find safeguards and improvements to counteract that kind of volatility.

  10. Maker governance is decentralized. Maybe this refers to the Foundation’s role in relationship to MakerDAO? There’s been a gradual transfer of responsibilities from the Foundation to the MakerDAO community. This is really more about finding ways to organize and collaborate on complex tasks that are typically done in the format of a centralized top down organization. I do believe we will get there and the Foundation will be dissolved at some point. Maker Goverance itself is already fully decentralized though.

3 Likes

My first reaction to this request, “Can’t Truss it” -Public Enemy

But here we go. This is from my point of view and strictly my personal opinion and NOT the opinion of anybody associated with the Maker Community, or the Maker Foundation. This opinion does not constitute any financial advise, I am not a financial advisor, nor do I ever wish to be a financial advisor. The sole opinions are my own and should not constitute any forward looking statements, or predictions of future outcomes.

  1. Why use a centralized stablecoin to create a decentralized one?
    If in another life you find yourself living as a citizen of Nicaragua, where the promise to achieve financial prosperity is non existent, your dreams of financial freedom diminish instantly. With DAI, Nicaraguans have the ability to self-sovereign, access to interest yields, and more importantly, the ability to own the keys to your financial freedom without the reliance of a centralized authority.

  2. There have been several problems with this protocol in the past, have you integrated any form of insurance? Historically innovations tend to encounter problems, that is something that cannot be avoided, it comes with the territory. As far as integrating with an insurance provider, the Ethereum ecosystem is developing different protocols that can provide a safety net. As you know, innovations inherit a lot or risk, and risk management is an important tool when deciding to participate in any risky ecosystem.

  3. The cost of gas is becoming a problem, how do you intend to deal with it? The community has a lot of faith in the innovations that will be available with Layer 2 solutions, as well as Ethereum 2.0. Also, there are solutions already available to users, such as Loopring, zkSync, and the gas token Chi that allows users to save on gas.

  4. What do you think about bitcoin on the Ethereum network? In my opinion, I think it is a wonderful opportunity for Bitcoin hodlers to participate in Decentralized Finance. It certainly is innovative and shows how much you can innovate on Ethereum.

  5. What do you think about banks issuing cryptocurrencies? I believe one day cryptocurrencies will be apart of All investment portfolios. And to be honest, investors will not even know that the PLC/shares they hold in their investment portfolio have exposure to the crypto space—and there will be companies that trade publicly such as Coinbase that many will hold and use in their retirement accounts. I imagine that 99% of Apple shareholders cannot tell you how an iPhone is built.

  6. Are there any plans and projects to encourage the integration of MakerDAO into other protocols? This is a good question, because many talented builders are currently working on projects that will integrate with DAI. The DAO itself is looking to onboard Real-World Assets. I already imaging a day when Real Estate projects will be funded by the MakerDAO. All in all, it’s an exciting future the MakerDAO has brought to the world.

  7. What is your opinion on centralized stablecoins, do they have a future? I believe it will be a win-win for human civilization. Specifically, for people that do not have the ability to have bank accounts, or are restricted from participating in Fintech. You would laugh if I told you that I’ve seen people in the united states wait on a long line to get access to cash via an ATM. Imagine of all the banks in the U.S. would allow citizens to transact instantly via a Digital U.S. Dollar. More importantly it will open a consumer window of tools with DAI, and provide access to financial tools that only Wall Street is privy to.

  8. Can DAI realistically become a tool to spend bitcoin? Yes, it’s already happening with the ability to Wrap Bitcoin and use it to mint DAI on Ethereum. As an example, a Tanzanian citizen who owns a small percentage of bitcoin, I can choose to use their bitcoin as leverage to borrow DAI. Or, if you rather have exposure to the U.S. Dollar, you can convert into DAI. The advantage of using bitcoin as leverage, I get to still own it, and I get to borrow DAI at a very low APY. In fact, right now the APY is 0%.

  9. How much can the risk that an algorithmic stablecoin like DAI can become volatile in certain critical moments be quantified in percentage? That all depends on market conditions and pass performance is not indicative of future performance.

  10. Can the governance of DAI ever be totally and completely decentralized? I believe it will be. It is going to take time, but time is on our side. More importantly, we have some awesome community members and Foundation members that are simply outstanding. The strength of this community is unstoppable. We will be decentralized and that will bring a lot of amazing results. So, stay tuned and join our community.

2 Likes
  1. Fiat, USD if you live on the US, is perceived as less volatile, since products and services in the US are paid for in USD, and those prices in USD remain semi-constant over time. Which means, USD has utility, there is a need for time-stable value (remittances, bounties, etc.). The utility of a decentralized one, with how MakerDAO creates DAI, is that it’s transparent (we know how it’s made, and if the value is backed), without also infringing on potential legal boundaries.
  2. Other entities can specialize in insurance. Car manufacturers don’t provide car insurance. Nexus Mutual is one such insurance provider.
  3. Which banks issue cryptocurrencies? Do you mean in exchange? Or do you mean, a Central Bank Digital Currency.
2 Likes

Bitcoiners currently do not have a permissionless way to leverage BTC. As soon as ethereum builds out permissionless bridges (like tBTC and renBTC), and they are integrated with DeFi protocols, like MakerDAO, there is an opportunity for a huge flood of value to enter into the ecosystem. Bitcoin is over 30x the size of total volume locked in DeFi. Some of that capital is going to want to play!

3 Likes