On-chain vault compensation poll, draft

It’s really difficult for us to ensure that this is the case because we don’t control the UIs that can be used to interact with the platform.

Now I’m definitely not saying that we can’t make the educational materials more prominent on the various documentation sites that we do control, but there is always going to be a risk that users interact with the system without having a sufficient understanding of how it works.

That’s fair and I know you and I have talked about this in the past, but if Maker can make that message very loud (maybe instead of marketing the product…), then the liability (not legal, social) is clearly on the the interfaces ignoring the message.

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I have posted elsewhere on this but I finally have two independent full Maker liquidation data sets on hand for general analysis as well as to cross check against whiter4bbit. Hopefully I will have some reports soon on this and probably will be posting it here or a new thread that pops up if this compensation poll passes.

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This will decide whether compensation will occur in ETH/BAT or DAI and will have a big influence on the outcome.
Please take time to review and give your input!

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I understand that Oasis is now a separate “company” under Maker Ecosystem Growth Holdings, but it is also the go-to place recommended by the Maker community (and has roots in Oasis Dex, which was created by the foundation).

I would venture to guess that the vast majority of people casually using the Maker system did not know about these details. To most people, it looks like there’s just one Maker, and Oasis is part of its suite of products. Perhaps not using the name Oasis after the switch would have alerted more people to the fact that it’s no longer the “responsibility” of Maker.

I think it’s fair to say that the community (i.e. MKR holders) has at least some degree of responsibility here. And just a disclaimer, I might be wrong here since I haven’t had time to follow every little business decision the Maker foundation has decided to enact.

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I completely agree, and I know how it looks.

Unfortunately that doesn’t change the fact that ‘Maker’ is made up of lots of parts. The Maker Foundation, MakerDAO (which doesn’t have a good definition), MKR Token Holders, etc. I am not arguing that Oasis is not the responsibility of the Maker Foundation (regardless of whatever the company structure looks like for that.)

I am arguing that Oasis and other UIs aren’t the responsibility of MKR Token Holders (who are the people who will be paying for the compensation). There was never a vote to create the Oasis UI, MKR Token Holders have no input into its operation, we don’t fund it. The same is true of the DefiSaver UI which shows the same 13% liquidation penalty.

At best we can vote to say ‘Oasis (or UI’s generally) should do this’ and hope that they do what we asked them to.

So I would disagree strongly that MKR Holders have responsibility for Oasis or any other UI. What MKR Token Holders do have responsibility for is the auction parameter settings that were active during Black Thursday which turned out to be inadequate, and there is an argument that this was predictable beforehand to some extent.

If we do end up compensating Vault Holders, my hope is that it will be made clear why (though I know people have different opinions, and therefore in all likelihood this will remain muddy).

As to the Maker Community recommending certain UI’s there is perhaps some level of responsibility there, but it’s probably not correct to equate the community directly to MKR Token Holders.

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Thanks for the elaboration of your points, was very helpful actually.

In an ideal world I think many people would agree that the Maker Foundation should just fork over the money to compensate vault holders. MKR token holders however need a way to exert pressure upon the Maker Foundation because the decisions they are making have serious effects on the public’s trust of the system which in turn can be detrimental to MKR token holders.

However, there is currently no way for MKR token holders to force the foundation to do anything and I think this is where there is a potential issue of moral hazard. I’m not saying that MKR tokens should be able to force the Foundation to fork over money, but there’s certainly a mismatch of consequence and power here.

And to bring the point home, regardless of who’s fault it is, if people think the system feels “unfair” then it’s going to be detrimental to MKR token holders AND the Maker Foundation in the long run. I say this as a significant holder of MKR and someone who also lost their vault.

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Currently 93,208.35 MKR voting, making it one of the most contested polls in history! :grinning:

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I feel a bit sorry to raise this issue now when compensation poll is almost finished. But anyway.

Arguments for compensation in DAI (the DAI value of the residual collateral at the time of liquidation):

Not sure why the option to compensate “the DAI value of the residual collateral at the time of liquidation” has ever popped.

What the compensation is about?
If it’s about returning the lost collateral assets then this option is unfair. Why to use the collateral-to-DAI price at the time of liquidation? Why not use a price an asset was bought at or a price at the time when it was put to vault? Equally unreasonable any arbitrary time point is just meaningless without a time machine so anyone can buy back their collateral. Sure there’s a technical challenge to give a fair price to collateral assets at the time flop auctions will take place but that’s a minor thing as it can be largely mitigated by setting a price point the day/hour before auctions start.

If the spirit of compensation is more like a moral compensation then this approach is ok. However it’s unreasonable to speak of any additional haircut to payouts in this context. And also there’s another drawback as this desincentivize Maker holders to resolve this issue ASAP (the longer it takes the better is MKR/DAI ratio).

My proposal is to have two DAI options in the poll:

  • moral compensation with DAI proportional to lost collateral (ratio to be decided in a subsequent poll)
  • compensation of lost collateral with DAI (due to its technical simplicity, haircut to be decided in a subsequent poll)

With this options I think it’s not necessary anymore to include an option to compensate vault holders with a liquidated asset.

Your comment is more relevant to the next poll. Please review https://github.com/makerdao/community/pull/496

Yes, this is exactly the poll I’m referring to in the further comment.

I couldn’t follow your comment. Can you propose changes in the github PR? The poll is not live yet so we could still change it.

I’m not sure how to correctly represent my suggestions in a poll text. I can copy-paste my comment to the PR to move this discussion there or you can tell me here what’s unclear to you.

OK, I read your comment again. Do my latest changes on github address your concerns?

No, it doesn’t. Let’s move to GitHub.

I lost my entire vault it seems. Idk my number so Idk how to check but I think it was 23 ETH. Please kindly let me know what I need to do.

I’ve spent the last hour or two reviewing this thread, the GitHub PR, and the signalling guidelines, and I have some significant concerns I’d like to address surrounding the process, not the intent, of this poll.

In summary: I’m not sure it’s a good idea to add this to the portal without some review of the signalling guidelines, seeing some more evidence that there’s been adequate discussion with the relevant stakeholders, and having clear signs that community consensus has been reached on the content of the poll.

I’m going to run through a pile of stuff, please forgive the point form.

Procedural Concerns

  • This thread is getting extremely unwieldy. I don’t think it’s very likely people are going to be able to come into this cold and understand what is going on here. Section 3 of the Guidelines addresses this issue: “The topic should seek to gather signals for only a single issue. If you want multiple signals, make multiple topics.
    This is particularly important because the ecosystem needs a clear audit trail, a historical record, of the decision making that went into a change to the system. Especially in light of the tremendous amount of crypto press interest generated from the last compensation poll :frowning:

  • Can we have a lock-down, or code freeze period here? The process in the other signal threads has generally been at least a few days beginning after the forum poll has ended; the proposer summarises the discussion and then it sits long enough for people to have enough time to find the proposal (people are busy) and express last-minute contention.

  • This proposal has also been altered in other venues after the debate here slowed down. If the content of the poll changes after the debate winds down it’s hard to assert that the community has actually agreed on a specific course of action.

  • Do we need the summaries of the arguments in the body of the poll? Is it possible to do that in a way that accurately reflects everyone’s thinking?

    • If not, doesn’t this addition imply that someone is editorialising? Can a few users encapsulate the arguments from all the people in the thread, and the ecosystem, without unintentionally introducing bias?

    • Can’t voters be referred back to the thread for summary review and leave the polling to clear decision making processes?

Consensus Concerns

  • The convention around all previous polls from the community has required an in-forum poll to gauge sentiment, this new poll does not have one. As per the guidelines: "Polling Results should be made visible after a vote has been cast. ‘Show who voted’ should be enabled."

  • Can we keep the conversation in the forums so the less technical can remain engaged? I had no idea there are debates and edits going on in GitHub. Some of them are fairly significant, and recent, developments.

Planning and Feasibility Concerns

I’m not sure I’m following the chain of events are here. The first poll was to determine if there is an appetite for compensation. Why is the second step to determine the denomination? Wouldn’t it make more sense to get the community aligned on a plan, map it out into a roadmap, then figure out which parts need to be put into the polling system? This feels a bit like it’s being invented week to week. I’m not sure there will be any resolution to this issue without a plan that involves the stakeholders and some discovery about who will do what, when.

In the absence of, or until one arises, I would really like to avoid any mention of specific mechanics. This poll is still getting deeply into the territory of making assumptions about feasibility. There are an unbelievable amount of complexities hidden in these guesses at solutions.

The community may find out that some of those implementations are not possible. What happens when voters get upset that what they signalled for isn’t the same things as what actually happened?

For example, in this poll it’s not clear who is going to custody these funds or how the transactions will take place.

Also: “To provide compensation, Maker would have to purchase this ETH at the current market rate”. Depending on how this is read it can have very different implications. Who is Maker in this context?

Summary

In light of this lack of established norms I’m going to recommend the community and the proposers address the missing process and consensus issues here before I add this to the portal.

I am, as always, very reluctant to exercise any of the IGF mandate’s powers but this is an extremely sensitive issue with a wide number of stakeholders, lots of moving parts, and countless possible implementation plans.

And, as the community seems to have signalled their intention to move ahead with compensation, I don’t believe a further review of this proposal will materially delay any eventual outcomes.

Community, let me know your thoughts.

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@rich.brown Can you lock this thread so we don’t keep adding to it?

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I was confused about this poll, are there post-mortums going into what exactly happened? I wouldn’t want to vote on anything until a post-mortum involving Maker devs is available.

Its interesting how much mkr voted. 90k is no joke.

Edit: My mistake for the useless comment there is this https://blog.makerdao.com/the-market-collapse-of-march-12-2020-how-it-impacted-makerdao/