PECU: Q4 Highlights and Looking Forward to 2022

PECU: Q4 Highlights and Looking Forward to 2022

Happy holidays everyone! Rather than give a comprehensive line by line of the work completed in Q4 as has been done previously, which has been sufficiently covered by GovComms, Risk and others, I thought I would settle by giving a brief summary and use that as a stepping stone for some thoughts and considerations for the activity that awaits us in early 2022.

As always, this is not to be considered a finite list, but rather some top of mind items that can hopefully spur other ideas from the community to help us prioritise, identify dependencies and allocate resources efficiently to keep Maker at the forefront of DeFi.

Q4 2021 PECU Highlights

Firstly though, looking back at the previous quarter, Q4 2021 saw a variety of technical additions and updates from the Protocol Engineering Core Unit, including; the onboarding of modules like the D3M, collateral like stETH, G-UNI, WBTC-B and WBTC-C, the GUSD-A PSM, and associated weekly parameter changes to keep the protocol operating safely and efficiently. In parallel, an up and coming game changer is the work we are actively doing on the Maker Wormhole Design. Likewise, behind the scenes there has also been engagement with Risk and Growth Core Units covering topics such as fixed rate and Institutional Vaults, which we hope to see launched in Q1, as well as discussion covering new PSMs, D3Ms and the Curve technical assessment. There have been process improvements to optimise awareness across core units, such as the Chainlog and how we all keep track of deployed contracts, information sharing sessions with the Collateral Engineering Services CU have also taken place, as well as the birth of a new Stakeholder Alignment framework.

So, looking forward towards 2022…

Layer2

Protocol Engineering is committed to the Layer2 MultiChain Strategy in 2022. To date, the initial Maker Wormhole code has been drafted and is in the midst of preliminary audits by ChainSecurity. Going forward we will be working with Oracles to have price attestation systems in place to support this new infrastructure. Completion of the Wormhole will enable Maker to operate in a very capital efficient manner enabling the bridging of DAI between between domains due to minting rights and infinite liquidity. Similarly, the concept of fungible debt means we will be able to scale more easily and efficiently than other protocols. Ultimately, the Maker Wormhole will facilitate Fast Withdrawals and later in the year, the deployment of MCD on L2. This has the potential to reveal new native L2 collateral types, new markets, new integrations, new ways of interacting, and new business models.

The Layer2 initiative is not only about the technical architecture and engineering work, it is also heavily intertwined with the work of Growth, Risk, StarkNet CU, Governance, and others. For this reason, we have started holding Stakeholder alignment sessions to support the cross-team coordination required to keep everyone on the same page. These meetings are currently scheduled weekly as a touch-point for dependency awareness and tracking. This is something that we want to open up to Delegates and others for greater transparency within the coming weeks.

Liquidations2.0 for Flap Auctions

With the resumption of auctioning off surplus DAI for MKR (flap auctions) in late 2021, there has been research to update the auction mechanism and bring it in-line with Liq2.0’s dutch auction design which supports instant settlement and therefore a faster recycling of capital. Future development has the potential to make gas optimisations and improve overall user engagement leading to a more competitive and efficient auction marketplace. To manage expectations however, it’s not a quick fix and potentially requires updates to the vow along with the required audits etc. A proposal will be documented including the scope and shared shortly for community feedback.

Module Enhancements & Integrations

In the context of the Maker protocol, modules can be thought of as standalone bolt-on components that interact with the core contracts to offer specific product offerings, enhancements or integrations. To keep the protocol competitive in an ever changing DeFi landscape there will undoubtedly be the need to build modules that enable us to be responsive and receptive to these market changes. Current areas of research and development include:

  • PSM rewrite to improve the user experience via gas efficiency optimisations
  • Compound D3M to further extend our DeFi protocol integrations
  • DssCharter enhancements to accommodate additional 3rd party institutional vault integrations
  • CDP Manager/CropJoin updates to enable third parties to integrate with yield bearing collaterals
  • Sandbox design sessions to enable low debt ceiling offerings for new risk-limited initiatives
  • Debt Rectifier Module designs to manage DAI mis-sent to the DAI contract, or locked in L2 bridges
  • Auction keepers and auction infrastructure when new collaterals are added - until other core units are able to take on this burden
  • Deco infrastructure internal audits and integration to offer fixed rate loans

MKR Tokenomics Redesign

The Maker community has shown interest in a tokenomics redesign to provide a high yield return when locking up MKR. This redesign seeks to provide opportunities for growth, scaling and long term governance participation. Protocol Engineering is keen to join forces with the community on thrashing out this concept as it will require comprehensive architectural modelling and game theory analysis. Needless to say, this is a big piece of work and resources will need to be dedicated to this new phase of scaling.

Safety and Tooling

Protocol safety, formal verification and engineer education remain critical focus areas for the team. This work involves building tools, refinement proofs and tests that model state transitions - meaning that developers are able to confirm that a piece of code will do exactly what it is supposed to do. Understandably, this is critical for space grade code. It is also research intensive which helps ensure Maker is a leader when it comes to safe protocol deployment. In Q1, PE plans on revealing more about how we plan to make this accessible to the broader community.

Protocol Operations

Where new shiny objects are nice and get everyones attention, there is still a need to keep the lights on and the ship sailing smoothly. This can cover a variety of tasks, including but not limited to:

  • Optimising the weekly spell creation process and related tooling such as; DssExecLib, and CalcFab to support new features.
  • Building infrastructure when new collateral is onboarded, including new; proxy actions for 3rd party integrations, auction demo keepers and clipper callees. It can also mean building in events and APIs to help developers integrate.
  • Streamlining and automating governance as much as possible. Opportunity exists to research ways in which governance tinkering can be minimised by developing formulas for debt ceiling and rate updates. Automation may further illustrate opportunities for removing modules with certain system authorizations to limit risk.
  • Maintaining and growing a knowledge repository to offer training and bestow good practices on other engineering teams joining the DAO. There is a lot of system complexity and making sure people understand how components function is an important part of ecosystem growth and can be achieved through workshops and Q&As.
  • Maintaining and building upon unit tests and test suites to ensure full coverage when changes are made to the system. This can include proofs, formal verification and fuzzing tests to prevent vulnerabilities.

Decentralizing Collateral on/off boarding

Protocol Engineering have had a number of information sharing sessions with the Collateral Engineering Services CU and these will continue with their focus firmly on collateral additions or removals. For the foreseeable future, PE intend to continue making all other protocol changes and rolling CES change requests into the weekly spell. This requires additional coordination but we envisage that by improving the processes for merging cross-team pull requests the workload will be shared and we will be able to onboard collateral in a safe and decentralized manner. This extends not only to actual collateral onboarding but also to technical collateral assessments where we ensure a peer review process remains in place.

In conclusion I’m looking forward to working closely with the community, delegates and other core units on the above work-in-progress as well as other new concepts (NFTs as collateral, and possibly native L2 collaterals for example) as DeFi and traditional markets evolve. Thank you all for a great 2021 and cheers to 2022!

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Thank you for this summary. I attended the L2 Stakeholder Alignment Meeting that just concluded (4 Jan 11:30 am EST). Exciting and crucial work happening here. :heart_eyes: It was great to listen in and I think important as a non-developer Delegate to avoid being offsides of the “expectation gap”!

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Thank you for the update, and for all the team’s amazing work!

Two things I didn’t see mentioned that I was curious about:

  • In 2021, it seemed that a large proportion of the energy on the forum was about Real World Assets. It seemed to me that bridging the real world and L1 would be at least as much of an engineering challenge as bridging L1 and L2.

    What is the status of the engineering component of RWA?

  • Similarly (in terms of requiring a bridge to the real world), in addition to accepting collateral from staking pools, there was some discussion of developing our own version of vaults that offer staking services for collateral.

    Is that anywhere on the roadmap?

While L2 is exciting, the applications (to me at least) are still a little fuzzy. The above two items seemed to be the clearest next massive untapped sources of collateral and thus growth, so I was curious where we are with them.

Thanks again!

Thanks for the comments @someone

Indeed, RWA’s is a top priority and has received a lot of attention in 2021. The ability to enable an off-chain asset backed lender to onboard real world assets as collateral for a DAI loan has been made possible via MIP21. The technical work supporting this has been completed as seen by the 6S RWA collateral. Similarly, this also supports the work completed by the Real World Finance Core Unit, Centrifuge and Tinlake collateral types including NS-DROP, HTC-DROP, FFT-DROP, CF-DROP, onboarded in this Executive in July. It is also the same framework that is currently being discussed for onboarding the SocGen RWAs.

The heavy lifting for this work has involved extensive legal and entity structuring discussion. From observing Matt (6S) and Seb (RWF), this is where the bulk of work has occurred. From the technical PECU perspective, there is minimal work required if we use the existing framework for future RWAs.

Real-World Finance Team have done a nice job outlining the assets, here as of December 2021:


With regards to staking services. This is not currently on the roadmap. I believe prior community discussion paused on this as we were able to onboard Lido’s StkETH as collateral, which was deemed more efficient than maintaining all the staking infrastructure - not a trivial piece of work. There is also ongoing discussion regarding rETH as well.

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