Know your MIP KYM#08: MIP50: Direct Deposit Module - Monday, April 26th 17:00 UTC

What

For the 8th episode of Know Your MIP we’ll be talking about MIP50: Direct Deposit Module with Stani (@ethwarrior) and ours truly Sam MacPherson (@hexonaut).

The Direct Deposit Module interfaces with third party lending protocols to enforce a maximum variable borrow rate for selected assets. Maker Governance is able to pick a target variable borrow rate, and the module will automatically deposit/remove liquidity to ensure that target rate is hit.

You can read some discussion on the topic here and here.

@juan will be doing the hosting :heart:

When

April 26, 2021 @ 17:00 UTC

Time in your local-timezone format:
2021-04-26T17:00:00Z

Where

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See you there!

attn: @amyjung; @LongForWisdom ; @g_dip ; @iammeeoh ; @ejbarraza ; @prose11 ; @mrabino1 ; @ultraschuppi; @psychonaut; @monet-supply; @mmoossttaaffaa; @davidutro

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Know Your MIP Summary - Episode #08

April 26th, 2021

Agenda

  • 00:00: Intro with Juan Guillén
  • 00:28: Discussion with Stani Kulechov from Aave and Sam MacPherson
  • 49:45: Outro

Video

https://youtu.be/MpOR479UVpU

Introduction

Juan Guillén

Agenda and Preamble

00:00

  • Welcome everybody! Today we will be discussing MIP50: Direct Deposit Module. It is an integration with Aave. I am joined by Sam MacPherson - @Hexonaut in our forums - and Stani Kulechov from Aave.
  • For other episodes of KYM, please check the forum.

Discussion

Stani Kulechov from Aave and Sam MacPherson

00:28

00:28

  • Juan Guillén: Stani, can you quickly explain what Aave is and why it is good for users?

3:57

  • Juan Guillén: Can you explain what aDAI token is and how it works?

7:30

  • Juan Guillén: Sam, can you tell us briefly who you are and you got into this agreement with Aave?

8:55

  • Juan Guillén: Can you explain how this agreement would work?

10:10

  • Juan Guillén: In this situation, you are going backward, right? Usually, you would deposit DAI to get aDAI but here you would deposit aDAI to mint the DAI?

14:00

  • Juan Guillén: If aDAI is backing the DAI and DAI is backing the aDAI, we are trusting that both protocols will not fail. How would that have an impact if both start going down?

15:27

  • PaperImperium: Is there going to be a minimum pool size or amount of liquidity supplied to a given pool to avoid us becoming the market? We do not want to become the biggest player within the liquidity pool, right?

17:33

  • Payton Rose: I am curious about the target rate. Can you give us an idea of how responsive that would be? How quick is it able to react when it breaks a certain target range?

18:33

  • Juan Guillén: Going back to your example, in the case of 8% for the borrowing rate and deposit rate at 5%, would Maker be getting the 5%?

18:57

  • Planet_X: I have a question about the scaling possibilities of this. Let’s say that Maker Governance sets a target interest rate of 1% - 1% being the cheapest loan for a US dollar-backed stablecoin. With this mechanism, we can just keep pumping because there is limitless demand and as long as we are backed by other coins, it loops around.

21:11

  • Payton Rose: There is a practical lower limit for us because if we were to push the rates too low wouldn’t we face an issue where possibly a bunch of our borrowers leaves the Maker Protocol?

21:47

  • Juan Guillén: Because aDAI tokens are accumulating interests live, like every single block, how does it work? Is there any type of adapters or any special adaptations that you would have to consider?

23:04

  • PaperImperium: Would changes in the interest rate need to be voted on and how often we would have to do that?

23:36

  • PaperImperium: In terms of what you were talking about transferring to the surplus buffer, would we do that in a regular schedule or at a certain threshold? Could you speak more about that?

24:50

  • Juan Guillén: I wanted to discuss a bit on the risks. Stani mentioned the safety protocol on Gauntlet and Sam spoke about the security considerations on the MIP. Maybe you can touch upon that.

29:10

  • PlanetX: This is not about Dai, this is about Euro Dai. Is it possible to pull this off with a Euro version of Dai as well, or are the deflationary properties of Euro a problem here?

31:55

  • PaperImperium: If this works well, is this a solution that we can then farm out to other protocols if we feel they were a good vector for getting Dai into the system, or is this something that is only going to work with Aave?

33:16

  • Juan Guillén: About the spread between lending and borrowing, what I found weird is that we are not deciding how much fees we are earning, we are just deciding on the targeted lending. This gives us less control so we need to be guessing what the rate would be. Is that right?

35:18

  • Frank Cruz: First, how do you think this could help out with RWA as far as new opportunities from the Real World coming into blockchain? Second, I saw on the piece that you wrote on the forum, you talk about how Aave is going to be interacting with every L2, so far we only heard you working on Polygon, does this mean you will also be on Optimism and any other kind of CK rollup?

40:45

  • Payton Rose: In your posts, you mentioned L2 lending markets, I was missing the link on how this helps support lending on L2. Could you go over that with the DDM?

42:10

  • Aaron: What you were saying about the bridge contract for Matic that Matic controls… So could we create our own Maker bridge that we control?

43:50

  • Juan Guillén: Regarding the timeline, when is this planned to be moving forward? First the MIP, then the parameters from risk, and then finally going live into the blockchain.

44:36

  • Payton Rose: Any future partnerships you have been thinking about at Aave?

45:36

  • Frank Cruz: At Maker, we have a large Risk team. I was wondering if you guys have a Risk team at Aave. Can you give us a synopsis of how you measure risk?

Closing Comment

Juan Guillén

Outro

49:45

  • Thank you, Stani Kulechov from Aave, for joining us and thank you, Sam, for having the patience to explain to us more. I will see you guys at the forum!

Credits

  • @gala produced this summary.
  • Everyone who spoke and presented on the call, listed in the headers.