MIP41c4-SP1: Facilitator Onboarding (Real-World Finance)

MIP41c4-SP1: Facilitator Onboarding (Real-World Finance)

Preamble

MIP41c4-SP#: 1
Author(s): Sébastien Derivaux (@SebVentures)
Contributors:
Status: RFC
Date Applied: 2021-01-26
Date Ratified:

Specification

Motivation

  • Being part of the Maker Community and Governance, I truly believe MakerDAO will change the world. Having worked to build the Real World Asset (RWA) section of the Risk team for 5 months, I want to push my contribution to the project to the next level by creating a Core Unit.

Core Unit Name

  • Real-World Finance

Facilitator name and information

  • Name: Sébastien Derivaux
  • Forum handle: @SebVentures
  • RocketChat handle: @SebVentures
  • Ethereum wallet for signing: 0x0d61c8b6ca9669a36f351de3ae335e9689dd9c5b (or any new address provided by @SebVentures)

Facilitator Commitment

  • The vision

    • On the core unit : With TVL on DeFi is growing quickly, it’s still only $30B. The traditional financial system is over the quadrillion. I think both systems will merge meaning we have to find ways to onboard all those assets (bonds, real-estate, derivatives, …) and tools (Yield curve, risk frameworks) in DeFi. Moreover, Maker is resurrecting the Free Bank concept. With an expected competition in this field, I think MakerDAO should continue to innovate and should stay at the forefront of onboarding the real-world financial system into DeFi. Failure to do so might lead Maker to lose its leading position. The aim of the Core Unit is to nurture competencies related to those challenges and find solutions for each problem in order for MakerDAO to be the leader in this space. The Core Unit is a toolbox at the service of Maker Governance.
    • On the facilitator role: The role of the facilitator is to serve as a link between Maker Governance and the Core Unit facilitators. Using the reporting, it allows Governance to have a simple view on what is done on the Core Unit topics. The Facilitator is also the point of contact if Governance wants something specific to be done/prioritized. On the other side, the role of the Facilitator is to allow the contributors to be efficient without having to understand every detail of MakerDAO (especially important for punctual contributors). The Facilitator is also handling the administrative work for the underlying legal entity of the Core Unit.
  • The how

    • Continuity: continue the work done on Real-World Assets with the same team. You can refer to our reporting here and here.
    • Adaptability: The Core Unit proposal is broad and offers ways for Governance to influence and prioritize the core unit work within the mandate. Onboarding the whole real-world will take time and not be a linear process nor a predictable one. Similarly, leveraging our balance sheet, will require a lot of theoretical work and can be limited by Smart Contract bandwidth.
    • Scalability: While we aim to start thing with an experiment in order to learn, the end game is to have something that scale. For instance, we aim to have around 20 vaults types at most for Real-World Assets. Each vault type will be managed by an Asset Manager that will source investments opportunities from plenty of Asset Originators as well as the open markets.
  • The structure

    • Legal The Core Unit will use the existing legal entity of the Facilitator and/or create a new one.
    • Budget The budget is defined in a MIP40c2 sub-proposal as well as an informal one. The aim is to continue to be able to fund the current contributors but to cap any team expansion to a revenue-generation milestone.
    • Reporting The Core Unit have historically been keen to share progress information (here and here). A monthly dashboard will provide governance transparency of Real-World Finance work and Key Performance Indicators. The January report can be found here.
  • Facilitator credentials

    • Risk domain facilitator
    • Lead the MakerDAO RWA working group since September 2020
    • Member of the Autonomous MakerDAO working group and rate setting working group
    • Collateral onboarding process for Real-World Assets (RWA) and 6S risk evaluation
    • Work on the accounting of MakerDAO and implications
    • MIP13c3 - Strategic Reserves proposal
    • Smart Contract Community assessment for EURS and HUSD
    • Why would I make a difference? Being in charge of Real-World assets since September, I have shown my capacity to move this topic forward. I know well the systems (from the code of Maker Protocol to the legal documents of Centrifuge-like collaterals) and all the real-world assets partners with whom I have daily interactions I have also build the RWA team with @williamr and @Philinje which will be part of the Core Unit I propose.
  • The main goal is to onboard $300M of Real-World Assets for the end of 2021.

    • Confidence in this target can be found by the fact that the worked on deal-flow is already of $200M (6S aiming for $100M after 12 months for instance)
    • We are in early talks for some $100M collateral types (solar farms, project finance, …)
    • The main risks for achieving this objective are:
      • issues with setting up the infrastructure (MIP21 and MIP22, trust structure)
      • DAI-demand collapse
      • unwillingness by MakerDAO Governance to invest in Real-World Assets.
11 Likes

Monsieur, pouvez-vous s’il vous plaît créer un précédent pour les futurs facilitateurs? :slight_smile:

Can you please expand a bit more with regards to the Facilitator Commitment? Such as mission, vision, and values? Please expand on engagement, contribution and how the community can buy-in. Please point out the mission of your core unit and how you as a Facilitator will commit to such. Thank you in advance! And I am sorry it is last minute. But your contribution could be priceless.

1 Like

OK. This means 300/11 (11 months left in 2021) = 27.3 million Dai worth of collateral types per month. Maker has historically been able to onboard 2 collateral types per month and just for the sake of the argument we say all these goes towards Real World Assets with not a single crypto onboarding in 2021.

The problem is that most of the RWA applications received so far require far too little DAI, only about a million per month on average for the Centrifuge proposals I checked. 6s Capital is the largest by far and asks for an initial 15 million Dai so that is at least something. The issue is that we need to onboard 2 collateral types such as 6s per month if this equation is going to add up.

So to get to DAI 300 million in 2021 there are 3 solution (fill me in if I have missed anything)

  1. Luck. One or more of the Vault holders turns out to be a moon shot.
  2. A second layer solution with Maker no longer onboarding RWA applicants directly but onboards finance companies that then handles the applications.
  3. Some so far unannounced Maker governance reform that enables Maker to process applications on a far higher frequency.

What route are you planning?

NB. I am not writing this to make your already difficult job even harder, it is just that it is not advisable to commit to stated targets unless there is a way to actually get there.

1 Like

The 300 million for the end of the year is based on the current pipeline. 6S has a forecast of $100M after 12 months (ok it should have started in January). There is a bunch of smaller facilities that in total could take 100M after one year (New Silver, ConsolFreight, FortunaFi, …). And we have some talks for bigger ones (a solar farm facility for $100M, another on infrastructure projects). So that’s how we hit $300M. Mathematically it seems easy. Obviously, if there is a crash and DAI demand falls sharply (-90%), the target will be revised to almost nothing. Same if the smart contract or the trust structure part is harder than expected.

Now, if I put something easier, i.e. $50M as a target that means:

  • I don’t trust 6S can achieve its forecast (which I guess they can)
  • It tells our prospects that we are not interested to look at $100M project size (and not really serious if we do).

The limitation is not at all in our ability to process applications (we can process at least 12 applications this year). The deal flow is good enough. The problem remains the mapping between the proposal and the execution.

Once MIP21 (including the trust structure) and MIP22 are live, it will only be copy/paste from a technological point of view.

3 Likes

Thank you for adding more sizzle to it.

I’m going to be a pain in the arse–and perhaps this is not necessary–but do you think you can add:

  1. the What – a brief description of what is the role of facilitation (Maybe take from MIP41)
  2. the Why- the benefits of having a facilitator
  3. the When – when you step in to help – i.e., your role as facilitator
  4. the How – your particular style and gifts that you would bring to the situation.

Sorry man–maybe too much Meat–but sometimes something is better than nothing.

Also, instead of “The Plan”–should WE call it Mission? or perhaps Purpose?

Would be cool if others can give their opinion.

2 Likes

@SebVentures You have outlined some great details, numbers and credentials.

I agree with the suggestions from @ElProgreso. A brief description on how you will make a difference and why it matters would help anyone reading the MIP understand quickly the value you bring to the community and why you should be the facilitator.

2 Likes

Thank you very much @ElProgreso and @Kathleen_Chu. I’m more of a problem solver than a salesman. :slight_smile: I have added your suggestions (a bit differently for @ElProgreso). I hope it’s better now.

4 Likes

Niiice Seb! Thank you.

Looking good.

Awesome subproposal. Did an impressive job outlining the Facilitator Commitment!

2 Likes

March governance cycle formal submission.

3 Likes