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

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


:heart: Vote for Centrifuge and @spin – we need the best of the best to see our Community and Maker grow exponentially. BTW, Would love to visit Korea! One day. MakerCon S. Korea 2022???


I thought in Matt’s term sheet he is going to be maintaining a conservative debt/equity ratio? Is the equity not his “skin in the game”?

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The equity is from a third party for 6S. As said, both Centrifuge (and NS and CF) and 6S have invested a lot of time an money to work on onboarding RWA.

To be clear, the money thus far spent (and about to be spent) for 6s’ related trust implementation is not coming from investors (nor will it be reimbursed). It is coming from the principals of 6s. It is the definition of gut risk equity.

We are only raising external investor capital (pref equity) when it is time to marry debt and equity for a given transaction.


I wanted to know if at some point, there is some chances to have somehow a proper S6 tokens inside the vault and somehow some liquidity for it.