On the priority of real world assets: Where do we stand?

This was added to tomorrow’s agenda of the Governance and Risk meeting. I am looking forward to discussing this further on the call. Please do join!

RWA Collateral Priority

The prioritization spreadsheet does not seem to accurately reflect the priority of RWAs and perhaps should be revisited. It would be great to get feedback from the domain teams on this and come up with how we could use it better to reflect the focus on RWA as MKR holders voted to see prioritized.

Proposing Centrifuge’s Spell to onboard New Silver

We know that the resources of the smart contracts domain team are stretched thin. To help with that, Centrifuge has been working on a spell with along with tests against mainnet. I am happy to share a first draft with the community here:

The spell deploys the a new collateral type. Using dapp --rpc we can then deploy this spell against the mainnet deployment of New Silver and Maker and test different scenarios. This takes the state of all relevant Maker contracts live on Ethereum Mainnet and allows us to test these changes against them in an environment that behaves identically to mainnet. With this we are able to show how New Silver will be able to borrow their first loans with DAI minted backed by NS DROP tokens and test other scenarios.

We are expanding coverage of the tests still but the following key test cases are already present:

  • Generating DAI from New Silver Loans! :partying_face:
  • Repaying DAI
  • MIP22 style soft liquidation & hard liquidation and getting liquidated through a liquidation spell by Maker Governance

I don’t see what this spell proves.
I am more than happy to let the contract team taking more time to check the overall contract orchestration especially as you are the first with this type of contract.

And I personally don’t think it is at the other side to check the contracts.
Here Maker takes the risk not centrifuge.
And for Maker it is a big risk.

But I appreciate that you have also checked on your side to decrease the risk.

To address your concerns, we are not proposing to push this spell through without audit but have been working on this in constant contact with the smart contracts domain team. In addition, our team has made tiny contributions to the core codebase of Maker and tools around it, I personally contributed to Chai (a fungible token that locks your Dai into the DSR) and we have worked on this goal as part of the Maker community for more than two years.

In addition, Martin Lundfall (MrChico, 5th largest contributor to the DSS codebase: https://github.com/makerdao/dss/graphs/contributors) who has been developing the spell & adapter with us is one of the core contributors to the MakerDAO smart contracts design & develop this together with us. We will have an independent review done by other people experienced with the Maker codebase. Ultimately, the smart contracts domain team will of course review and write an assessment of the changes we’re proposing.

I’m the last person to propose anything risky just to rush things. This would be very short sighted for what we all want to achieve: making Maker safer with diversified collateral and growing the supply of DAI.


Really loved hearing what you had to say on the call today, even if we were a little pressed for time. Given the discussion today, are there any next steps community members (such as myself, plenty of passion not nearly as much technical know-how) could undertake to help continue the march toward this unique opportunity?

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From a Community Pleb’s point of View:

As Community member @juan pointed out during today’s G&R call–there are two subjects to consider here–the first is how Community Member @NikKunkel first priority is protecting MAKER. Totally love that–so, thank you Nik, Marc, and the rest of the Oracle Team. The second is the community has spoken about helping Centrifuge prioritizing RWA (I believe that’s what you said Juan)

IMO–as a community, we should give Centrifuge & New Silver the benefit of the doubt and provide the 5M DC. I truly believe they both have good intentions, 5M Dai is not something any of us can retire with(ok maybe in El Salvador we could)–and honestly, I want to believe New Silver has bigger fish to fry. At worst–would starting with 2.5M DAI help us move forward?

Let’s not forget that there was a successful Pilot conducted by the Foundation. And in the future, when we as a Governance community have to raise the RWA DC to $50M, $100M, $300M, $500M, $1B–we can explore RE analytic tools that will help us monitor the value of RE collaterals.

However, these traditional RE Tools won’t help us avoid financial ruin. What will? A TRUST with a personal guarantee? An Audit Firm working on behalf of the community with 30 years of experience? ETH & MKR mooning so we avoid financial ruin? I don’t have the answers.

At the end of the day we all have a passion to help replace the traditional banking system. And we can all agree that in order to accomplish such, we are going to have to take on Risk. But at the same token, it is in the best interest and our priority as Nik is doing–to protect Maker. IMO.

ON the other hand–once we get the ball rolling with Centrifuge, and reach the DC–should we the community ask these “LendCo’s” to create a TRUST with a personal guarantee? Like 6S capital. Would the Community provide a 50M DC without a Trust in place? Who’s responsibility is it to ask New Silver & others/future RWAs to Create a Trust?

So many questions–so little time.


If I summarize the discussion, there was 2 separated topics.

Oracle Work: @NikKunkel pointed out that having Centrifuge setting the price of DROP is not good. I fully agree and the Risk team made the same decision regarding the underlying asset valuation (not saying that Centrifuge is not giving the good price, we just want to control our own destiny). A temporary fix suggested by @NikKunkel is to use a DSValue (not sure the name). Basically, Maker Gov update the price manually. We can have the DROP price with a simple formula from Tinlake pool (like this one). Basically DROP start at 1 DAI and increase slowly (up to the DROP APR rate on the page). @spin agreed to that. Risk can take the duty to trigger an gov poll/executive each 2 weeks. Problem solved (even if we need to find a better solution for the long term). I want to add that it’s a credit facility. The Centrifuge SPV can use it or not (they can issue DROP to other investors). Our interest are aligned (as we want the business in order to generate fees). The issue was solved in 30s which shows how we will crush the traditional finance :slight_smile:

Prioritization framework: Here the issue is that governance put a signal request to prioritize RWA that had strong participation. On the other hand we had a Collateral Prioritization sheet in which RWA are penalized. What should be done was left to interpretation. I think the signal request took precedence on the spreadsheet (that is far from perfect anyway) but other can think otherwise. Some have decided that RWA are a priority but only one RWA. At the end of the day, it’s an coordination issue. For me, the more logical choice would have been CF-DROP (which is the only one we didn’t published yet …) mainly because it’s already live and they are just waiting on us. 6S is way easier from an oracle and SC point of view (as almost everything is off chain), but is harder from a risk perspective (higher DC, concentration risk, moe legal stuff, …).

I really think it would have made sense to do both NS/CF-DROP and 6S before a lot of other things. We could have done better (and me first in line). Hopefully, we are smart and we will progress.

As a philosopher said: “To infinity… and beyond!” at full steam


Before the call I thought that the Trust model was better (but less on-chain). But I now disagree. For 6S we are trusting respectable trustees (but as you can see in the risk assessment, respectability and human behaviour is always tricky. For Centrifuge assets, the Trust is played by Centrifuge and more specifically the smart contract (that I didn’t read) at least for the issue discussed during the meeting. Who do you trust more? I never saw a smart contract take retirement in El Salvador.

And remember we are already trusting Circle to have USD in their bank account (and the banks therefore) and BitGo to custody BTC.

0% risk doesn’t exist. Diversification, risk control and due diligence is the key.


Yes I personally have full trust and faith in Lucas and Centrifuge. 100% agree. They mean well.

Crossing 42nd Street on a busy day is a hazard and a Risk. Hence, I am pretty Sure BITGO and CIRCLE consortium have a Trust in place. And yes retiring in El Salvador is not recommended. :upside_down_face:

Did Centrifuge ever clarify why their model (for liquidations) doesn’t require registered broker dealers? These tokens are admittedly debt securities so why isn’t a registered broker dealer involved in their model?

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This is a good question and the initial answer is that Centrifuge and their issuers use Securitize when selling tokens. This handles some of the legal issues. Lucas is supposed to publish some info about overall legal issues here on the forum.

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@Philinje & @Tosh9.0 the summary is: MIP22 liquidations doesn’t actually transfer the underlying DROP security tokens to any third party, they are always in posession of the Maker adapter and the DAO uses the Tinlake smart contracts to enforce a liquidation. There are no BDs needed to facilitate this transaction as the liquidation occurs by returning them to the issuer. I would refer you to the MIP22.

As @juan mentioned in the call there are two topics that are somewhat related in this thread, the overall priority of RWA and specifically what to do about New Silver and ConsolFreight the two collateral types that use Centrifuge to get onboarded with Maker. @SebVentures has outlined some first ideas on how specifically we should move ahead with New Silver and I will start a new thread outlining a proposal. Let’s keep this thread to discuss the priority of RWAs overall.

What should we do next here?

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@spin this is probably a nutty idea–but how about Centrifuge puts up a collateral of say 500K DAI/$500K USD composed of 50% DOT and 50% RAD into a multi-sig Maker Community controlled Wallet? Again, prob a crazy idea…

Would the Community be open to anything out of the ordinary since some are worried of a 5M DAI DC?

Just thinking out loud–I might be pushing the envelope here… and not sure if that would move things forward… but something has to move us forward IMO.

Words from the Wise–or Maybe I should say battled tested:


@ElProgreso I started the 48 laws of power recently and this sounds similar. I agree that we need to focus on the root causes of onboarding RWAs in order to circumvent them.

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To add a bit to this comment, Centrifuge is providing a bridge between the off-chain assets and the on-chain world. It is a benefit to have the Centrifuge platform, because it makes it easier to integrate with the Maker vault and also to monitor the underlying portfolio. So in my opinion, projects that use Centrifuge have lower overall risk. It may not be possible to turn real world assets into entirely on-chain assets (though many are trying), and instead Centrifuge takes a practical approach to tokenizing debt related to those assets, as a bridge built on smart contracts.


Lucas, you may be able to technically ensure near-immediate liquidation of the securities that people have purchased with the MIP 22 design, but people are still buying securities from the DAO. You’ve stated multiple times that DROPs are debt securities, so you have to have a B/D involved no questions asked.

If you disagree with that, can the DAO please see some analysis from your attorneys at Manatt explaining why you don’t need a BD? Since your team is trying to onboard regulated financial products to the DAO (a hot button topic), we need to see something that explains your setup’s legal/regulatory justification.


I’m not sure I understand what you are saying. What makes you think that “people” are buying securities? No keeper is bidding on these assets, we don’t have a regular liquidation where anyone bids on collateral.

I think this is a misunderstanding of the functionality of MIP22. The MIP22 liquidation is only operated by the smart contracts maintained by the issuer of debt. The issuer is not asking anyone to participate in this liquidation and is merely relying on the smart contract the issuer has deployed to repay the vault.

Just to frame the problem, Centrifuge is the technological provider, not the asset originator. To compare that to cUSDC, Circle would be the asset originator and Compound the technological provider. For 6S, 6S Capital is the asset originator and the trustees (Wilmington Trust or others) are the technological providers (in that case humans using the paper and pen technology).

Now if the community prefers to trust people from the banking industry than a smart contract, that would be a news ! :face_with_monocle: :astonished:

Again, the DROP price issue can be solved by setting the price ourselves just like USDC and other stablecoins like GUSD. When we will get tired of updating the price manually, we will check how the smart contract set the price and decide to trust it or not.

I must add that both Centrifuge and New Silver are invested in the pool, they both have skin in the game. So if they raise he price of DROP, they lose money. If they lower it, they will be sued by DROP co-investors. In the Risk RWA team we have decided to ask asset originators to have skin in the game. This was waived for 6S (but I had to agree that 6S, just like Centrifuge are spending a lot of money to make this work).

I think the risk issue is solved for Oracles, the question is what is the priority to set the price feed controlled by Maker Governance.

The New Silver pool is live and the first loan should be made this week or the next one. You can see the DROP price on the bottom right here. Currently it’s 1.0, and it will increase slowly by up to 5% a year.

RWA could be reality end of this year, early next year. If there is a critical smart contract risk, let’s do nothing but otherwise let’s just find solutions. We fixed the oracle issue in exactly 30 seconds with the safest method possible.

I keep hearing how Maker was always intended with RWA in the future. The day we lent to a Wawa or a house renovation this will no longer be the future, it will be done. Checked once for all. This day could have been next week. But we will be late. Let’s not get too late (like after Cresco and Aave) and celebrate this victory.


So true! And thank you for posting the New Silver Pool.

I was thinking this morning of an interview with Real Estate Investor Sam Zell about his trails and tribulations of how hard it was to convince Traditional Institutions to Adapt Real Estate as an Asset Class. From the Tim Ferris Show:

Sam Zell: In 1989, 80 percent of the institutions that I pitched to didn’t have real estate as an asset class.

Peter Attia: Let me make sure I understand what you’re saying. You’re saying 30 years ago —

Sam Zell: 30 years ago.

Peter Attia: 80 percent of pensions and endowments didn’t have real estate in the book of business?

Sam Zell: As an asset class, that’s correct. They owned stocks and they owned bonds, and that was it.

Are we, the Maker Community going to be the “institution” that only cares about onboarding ETH, USDC, and __________?

Or, are we going to rewrite the History books?

“Those who do not learn history are doomed to repeat it.” –Santayana


I will vote for you if you somehow run for office in Korean politics