MKR Holder DAI-gest Week 12 and some PR thoughts

On the subject of PR, this week’s Maker Holder’s DAI-gest for your review. This gets posted on Github, Reddit, Medium, Gitcoin, and direct site mkrdai.info. I get around 50 hits on the website weekly; just made it onto google search; around twenty five upvotes on reddit weekly (two weeks ago I did get a gold medal from a redditor), a modest Medium viewing of around 10-20 per week. Positive responses and discussion in the reddit comments of a post or two. So, it is being seen.

I am passionate about the platform. I hate the technical barriers that exist for new users / ease of use. Cryptocurrency and MakerDAO is extremely tribal knowledge. I’m often quiet on issues around Governance because I really intend on watching and reporting more than participating, however, the PR side of things interests me.
Could it be a good weekly podcast? I may submit a prototype for the community to thumbs up or down. A hybrid governance-update and Maker demystified is what I had in mind. An on ramp to defi for the curious non-technical even. As always, your feedback is welcome, wanted, and needed. I am not a PR guru, but definately down to serve the ecosystem.

The Undiscovered Country

MKR Holder DAI-gest: Week 12 2020

Governance Recap Week March 20, 2020

MKR Holder DAI-gest is a weekly Maker governance recap that is written by the community for the community. The best source of Maker Community information is through active participation and engagement. This supplemental publication strives to present all relevant facts and remain free of editorial opinion (Big 3 takeaway excepted). The statements made herein are not the opinions or statements of the Maker Foundation.

makergovernance

Corrections / Comments / Suggestions / Other: [email protected]

Big 3 Take-aways for the week:

  • We don’t know what we don’t know current activities are focused on system health and stability following a very serious black swan event. It is important that a full understanding of system parameters are realized before more changes are made. Keeping cause and effect on easy audit trails is critical now more than ever as learning comes from a never before imagined scenario.

  • Eye on the Prize Don’t let the cycle of urgency and apathy invade as crypto market prices stabilize and the black swan grows more distant. There is important governance and risk discussion and decision making that has been precipitated from recent events that needs to be seen through.

  • See something, say something all ideas, input, and skill sets are relevant to the Maker ecosystem health. Speak up if you have an idea or concern. Contribute your skills and/or learn new ones. Stop by the Community-Dev chat channel to say hello. Hello.

DAI Digits

Recapping Last Week’s Events

A huge cryptocurrency market drop in prices triggered a mass liquidation event in which auction keepers were able to bid on collateral auctions at a price of zero or very low Dai. Ethereum block chain congestion due to market panic slowed updated price information from oracles and imposed very high gas fees on all transactions. This made it impractical or impossible for diversified auction bidding and allowed single zero/low bid auctions to be won. This perfect storm of events caused a system debt of around $5 million Dai. The Maker platform was functioning as intended, there were no technical malfunctions. To reconcile this debt the system is set to generate flop auctions. A flop auction is where a larger amount of MKR token is sold at auction, at a slightly reduced price, to generate Dai that pays down the debt.

The Undiscovered Country

The Maker community rallied this week with their nose to the grind to produce some corrective actions very quickly. The overall state of the Maker platform is HEALTHY. The “down-to-business” atmosphere in the forums and on the Governance calls has sparked very creative, thought provoking, and polarizing questions to be answered. MakerDAO is a decentralized finance platform. It is economy created through community. Anyone can participate in a variety of ways. Being a Maker token holder gives the right to vote on system governance and risk directly. Dai holders brings stability and legitimacy to the platform through saving, spending, and holding the Dai stable coin. Furthermore, third party integration’s of Dai such as cDai (compound Dai) and other variants have been created based on the Dai stable coin. Vault holders initiate an automated smart contract with the system to which Dai is generated through held collateral.

The beauty of this system comes from the diversity of the whole group, the ability for anyone to participate, and the ability for anyone to contribute ideas or time. Monetary policy is set by the Maker holders weekly Executive Vote. Block chain technology keeps the financial network public, encrypted, and widespread. Attackers are hard pressed to gain access to any part of this system, as it is virtually impossible. Because the block chain is hosted by hundreds or thousands of different individuals (anyone can host a node) it is impossible to bring the system down.

There is no central bank that decides policies affecting everyone. There is no behind the scenes authority or power that leverages the Maker platform for their own greedy motives. This is run by the people it directly affects. People like you, like me, all are welcome. All can benefit.

That being said, this does bring the “Undiscovered Country.” The events of last week formulated a perfect storm for which no imagined case could practically be thought up prior to happening. Cryptocurrency and defi are new technologies. Platforms like MakerDAO are pioneering this technology. Not all scenarios have been imagined. Not all risks have been realized. While the MakerDAO community strives very hard to anticipate all risk vectors, there are just those pieces of emerging technology that “we didn’t know, we didn’t know.” To that end, here is a summary of this weeks governance and community happenings in response:

Paul-Blart-Mall-2-tcm25-378786

Community Team Work in the MakerDAO ecosystem far outshined this mob of mall cops on segway’s

Governance Polls and Executive Votes

Proposal for Collateral On-boarding of USDC

Passed on Mar 16, 2020, 22:56 UTC. Executed on Mar 17, 2020, 02:58 UTC.

  • Allows users to open vaults with the USDC stable coin.

Adjust Multiple Risk Parameters

Opened on March 19, 2020

  • Lower the Sai Stability Fee from 7.5% to 3.5%
  • Lower the Dai Stability Fee 0.5% to 0%
  • Keep the Dai Savings Rate Spread at 0%
    • Note: This will set the DSR to 0%

Polls that ran March 16-19, 2020 are the current parameters up for vote in the current Executive opened March 19, 2020.

Current Issues

There have been daily governance and risk calls about all of these issues. The YouTube link to the recordings can be found below. This section is grouped together by subject which may have evolved over multiple meetings.

USDC

The stable coin USDC joins the ranks of eligible collateral for opening vaults. This comes as Dai liquidity is scarce, but need for auction bidders to claim won lots. During the crypto price fiasco, many people have turned to Dai as the harbor in the storm, and thus driven demand to very high levels. The inflated peg price has also incentivized the use of Dai elsewhere other than auctions. The necessity for a stable coin in the collateral portfolio is a certainty. Some of the characteristics of USDC however bring questions and concerns.

USDC is a stable coin that is issued by Circle. It is a fiat backed coin that is subject to regulations and monitoring like that of the actual U.S. dollar. This is contradictory to decentralization. The primary use case for the collateral is solely for auction participation at this point in time. A higher collateralization ratio (~125%) is a hopeful deterrent to other uses of the coin beside auction liquidity. A modest stability fee that is competitive with other exchanges is one option so as to bring the bulk of around 7 million Dai back to the Maker platform. This amount of Dai is locked in other exchanges, and it is a “would be nice” action item to draw the bulk of that back to Maker. A policy change on other exchanges could trigger mass liquidation which is undesirable. A modest debt ceiling for USDC will minimize exposure to the risk of this collateral. The biggest risk: black listing. If Circle detects nefarious use of USDC funds, they can black list specific addresses. The whole of the collateral is stored in a single address adapter and could potentially invalidate the value of collateral if the unlawful actions of a third party were traced to the Maker platform. Visit the forum thread for details . Here’s another USDC forum thread

Flop Auctions

An overview of the flop auction mechanism was given. This is the auction used to reconcile system debt. A starting bid of 50,000 Dai at 250 MKR (-3% discount) starts the bidding. A winning bid can close the auction in 6 hours or the 3 day maximum length of the auction can close the auction. Zero bids will re-trigger a new auction with an added 30% MKR for the same 50,000 Dai.

auctions.makerdao.com is the new user friendly site for becoming an auction keeper. It is currently only in use for flop auctions, but will soon be implemented for all auction types. You no longer need to be a rocket surgeon to participate in auctions.

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A bug was discovered in the deployment of flop auctions on Thursday. This caused 8 or 9 auctions not to go live, but rather reserved them to be eligible for repayment only through surplus or stability fees. Governance is able to override this. The severity of the bug is minor and does not present a direct attack vector. The community feels strongly about not moving too quickly to correct it, but rather work to fully understand the issue. In this climate of very dynamic system parameters it is crucial not to change to many parameters without fully understanding the impact of these changes. #theundiscoveredcountry

Additional Collateral On-boarding

Discussion around adding another stable coin to the collateral portfolio is hot. There are those that are in the thought camp that diversification of stable coin collateral can minimize risk. There are those that are in the thought camp that the current stable coin addition has a specific use case which will disappear when the system debt is corrected. USDC, while not the most savory option for a defi platform, is doing well with Dai peg arbitrage and providing liquidity for auction keepers to bid. To get details or weigh in with your opinion: To the Forums Jeeves

Public Relations

Discussion and questions have come up regarding protocols for unifying and disseminating information from the community as “one voice.” A mechanism for the DAO to speak authoritatively and officially is the protocol to be defined. Defining this is no small order. Look for forum discussion and further discussion on calls.

Emergency Shutdown Criteria

This is a huge subject. The community wants to define the threshold events that should trigger an emergency shutdown. Reflection on this past black swan event is a perfect starting point. Should emergency shutdowns be triggered for purely technical malfunctions? Should they be a circuit breaker for monetary loss? Who are the key stake holders in determining the loss threshold? What are the itemized steps to be taken to perform an emergency shutdown? What is the procedure for a system redeployment following emergency shutdown? Many questions to debate with few answers as of yet. Emergency Shutdown Forum Thread

Sai (SCD) Shutdown

The shutdown of Sai is on the horizon. While a definitive date is not yet decided, it will be soon. Debt ceiling to be lowered to equal supply.

Forum Activity and Signaling

MakerDAO Community and Governance/Risk Forums

Trending issues not mentioned here include:

  • Compensating zero Dai bid vault holders
  • SCD Shutdown
  • TUSD collateral on-boarding
  • Venmo style payment app

Weekly Governance and Risk Meetings

Here is a guide from MakerDAO about becoming involved in Governance. The meeting is held every Thursday, 17:00 UTC. During the postmortem and corrective action phase of the recent crypto market prices and resulting fiasco there has been a daily call. This is expected to drop to two calls over the next week. Please check the forums for information related to ad-hoc governance and risk calls that may be happening.

Governance and Risk Meeting Community Guide

  • Understand the issues that are discussed and governance themes that get explored to build a healthy, secure, Maker Platform.
  • Get info on how to connect by phone or webcam.
  • Explore meeting archives.

Events

5 Likes

Your killing it Adrian, this is definitely my favorite Dai-gest yet, this is about as compressed of an commentary as anyone could possibly give for the last week. I appreciate you highlighting the beauty of all this, sometimes people get a bit blinded by the game theoretical aspect (understandably so).

Really interesting point. I have alot of thoughts on this issue which I am still working on articulating, but personally I trying to tackle it in the context of “scientific” governance which is currently a principle of Makerdao (although I would love to hear arguments against a scientific perspective, science concerns science and is not always practical in a given situation). The only way I could see possibly aggregating information into one voice is through integrating various models capturing all aspects of the protocol and communicating those models together. Note this will never ever ever be a one off situation, for complex systems a continuous dialogue is important for communication, since things are always changing

The issue is describing all aspects of the protocol since its highly complex and touches on many different domains including, technical (many subsets of “technical”, not just smart contracts, oracles are a fun example), economic (which also has social bases), political (people, governance, in crypto this is also economic which is hugely complicating), and biological (look at how tired the domain teams got this week, anyone can try and show me why biology is irrelevant to risk management). Like you said this is run by PEOPLE PEOPLE PEOPLE, so any model describing the protocol cannot ignore that reality.

I would recommend people checking out David Hoffman’s piece on Ethereum as an emergent structure. Emergent can be used to literally describe anything depending on the perspective, so I don’t love using that word. No knock to him, words are really difficult to describe what he is describing, but “self organizing” is probably what I lean to more. He is hitting on a fundamental point about structures with both resilience and sensitivity to the environment. There is much academic literature on this topic which both confuses and clarifies the point. Feel free to reach out anyone whose interested on the subject, I am always just learning.

Here is the piece: https://bankless.substack.com/p/ethereum-is-an-emergent-structure

Great info Mitote, and thank you. Thinking about the combination of scientific, people, and money…there are always going to be feelings. Money = feelings. All of them. That’s all I have for now.

This really is great @adrianhacker-pdx ! As Mitote said, it’s a fantastic summary of the events of the past week or so. The attention Dai-gest has had so far is well deserved, and I’m sure its readership will continue to expand in the future.

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