[Poll] Should MakerDAO print unbacked DAI to solve the peg issue?

As the idea to print unbacked DAI is discussed here and here and on the chat, I think we need to know the position of the overall community to either work the idea or stop it (didn’t find a poll about that).

Full disclosure I’m against so keep in mind while reading the rest of this post.

First, from the whitepaper it seems clear to me that 1DAI = $1 at the ES.

Every Dai in circulation is directly backed by excess collateral, meaning that the value of the collateral is higher than the value of the Dai debt

Changing that would break the promise. I think trust is important and once broken it no longer can be restored. Are you ready to trust the USA to go back and keep the gold standard for 100 years if they say so? Me neither.

The second argument is from a balance sheet point of view. The equity part of the Maker balance sheet is actually the surplus buffer, i.e. almost nothing. Printing DAI would mean having a negative equity quickly therefore being insolvent. Central banks don’t print money, they expand their balance sheet (similarly to the aDAI/cDAI discussion).

Place to add any con argument, let me know what to add

Nevertheless, there are some good arguments for printing unbacked DAI.

The inability to solve the peg issue is a trust issue as well and some might object that USDT is the stablecoin leader while being probably insolvent. Printing unbacked DAI would be only temporary and solved by either the stability fees or by issuing MKR tokens. The MKR market cap is worth more than all DAI issued, it shouldn’t be an issue.

Another way to look at it is that the public see DAI as having more value than the collateral (collateral + utility value). It can be the censorship resistance or whatever, but DAI is worth $1.015 for some people for a reason.

Place to add any pro argument, let me know what to add

Choose your camp carefully or dai.

Post poll results : The poll was closed 7d after the start and 5d after the last comment. It show that the Maker community in majority feel that the promise of 1 DAI = $1 of collateral at any time is essential. Still one fifth are okay to have it lower than $1 and one fifth don’t have a clear opinion at the time.

  • yes, 1 DAI can be backed by less than $1 of collateral to solve the peg issue
  • no, 1 DAI = $1 of collateral, that’s the promise
  • abstain

0 voters


Going to share this as I’m not sure you’ve necessarily seen it: Practical Guide to the Signaling Process.

Feels like this is more of just a general poll rather than a call for anything specific to happen. If that’s the case it’s probably not technically a signal request (at least as we usually define them).

Glad to see someone new taking initiative and putting up polls! :slight_smile:

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You are right, I was asking myself if it was a signal request. It’s a general poll not something that will go on chain. But it signals where we should focus and I think it is important. Feel free to change anything as needed.

Notice that there is the abstain option :slight_smile: . I got that right.

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Aight. I have done so. Appreciate the understanding, I think it’s important to keep things consistent in terms of naming in order to build the right expectations for newer members of the community.

I’m not sure there are other ways to fix the peg when DAI>$1 and SF=0%. So far - NOT.

When we fix the peg - another hard problem will emerge - how to deal with rising fees on L1 which can approach $10 for a simple transfer.

We just need to treat it as a credit card and repay it regularly at some time in the future.


Nice one,
Isn’t the equity equal at surplus + MKR hold?
Also the main question is what to do with the printed money.
For example the PSM was printing money, right?
You generate some dai to sell it back as USDC.
You don’t necessarily unback the dai by printed money.

You can buy USDC, instead of let maker doing it.
You can buy MKR.
You can buy ETH.
You can buy Uniswap token.
Or you can use it to pay your new Lamborghini, that what most central banks do.

Tho there is a technical problem there how do you do that?

I have voted Abstain, because I believe there is still a little room before that like decreasing the USDC multiplier level and increasing WBTC.

MKR market cap is the market evaluation of the equity part of Maker. It’s not on Maker balance sheet. Maybe there is another Maker asset somewhere that I’m not aware of.

You are right. We can print as many DAI as we want. It will be on the asset side and the liability side of Maker balance sheet, let’s say 100. Then you can buy 100 USDC so there will be 100 USDC on the asset side, 100 DAI on the liability side and a small profit (let’s say 2 DAI remaining on the asset side therefore expanding the equity of Maker). That’s the PSM idea.

It’s quite different from buying MKR and burning them. This way you end up with 100 DAI as liability and nothing on the asset side which mean a loss that reduce equity.

You can buy MKR or ETH with such DAI, but there would be no buffer to sustain any drop.

Issuing DAI is issuing an awesome debt (no interest, no redemption date except ES). We let our clients issue the debt but don’t use it ourselves. As we don’t have equity (or so few) issuing DAI would be like having a vault with a LR of 101%.

Maybe we need to issue equity (issuing MKR for ETH), leverage it by issuing DAI debt and investing it in Compound, Aave and Uniswap (directly positive for earnings per MKR token). Stop trying to be a central bank and be a bank.

People want Maker debt, they are ready to pay negative interest rates (by buying above par).

As we can see by the peg situation, letting third parties managing Maker balance sheet isn’t working very well regarding the peg. But not having an equity base limits our ability to manage it. I’m on the side to kept the system solvent but some don’t, which is the reason of this poll.

Obviously, wanting to manage the balance sheet would create a lot of technical and managerial issues for MakerDAO. Maybe it’s too early for that.

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Thanks for the explanation.
3 points

  • I think the foundation still hold 30% of all MKR.
  • Also burning MKR if you can mint them, should be the same as buying and keeping them minus the administration and the fact it is already more or less inside the protocol.
  • regarding the PSM, I thought the idea was to recycle the migration contract with an already verified and proved code. The conversion would be a fix 1 to 1. like dai to sai you will have USDC to dai with an initial reserve which will play a bigger game here.

Also burning MKR if you can mint them, should be the same as buying and keeping them minus the administration and the fact it is already more or less inside the protocol.

You are right, it’s the same. If you buy your own shares (tokens?) you can either put them on the asset side or deduct them from the equity part (both are accepted methods in accounting).

The equity portion of the balance sheet is the insurance current MKR holders are providing to DAI holders, i.e. almost nothing. The expected demand for issued MKR in case of a need is the insurance provided by future MKR holders for DAI holders.

For the PSM, the conversion could have some in and out fees, creating a spread. Not sure who would own the USDC deposited. I think it’s a vault, so the customers.

It’s off topic, but this can’t be true. If you are talking about multisig wallet it’s circa 10.3%, at least according to etherscan.

Post poll results : The poll was closed 7d after the start and 5d after the last comment. It shows that the Maker community in majority feel that the promise of 1 DAI = $1 of collateral at any time is essential. Still one fifth are okay to have it lower than $1 and one fifth don’t have a clear opinion at the time.

On the side note
I will write what I’ve mentioned already in another thread

I believe that two promises MakerDAO gives

  1. Each DAI is backed by at least 1 USD of collateral
  2. DAI is exchangable for 1 USD

contradict each other since they do not acount for both additional utility of holding DAI instead of holding USD and opportunity cost of it.

For instance due to Compound decisions currently You can have around 30% APY (assuming more or less stable comp token value) with depositing dai and borrowing Tether and making leverage on that several times over

That quite some utility of DAI that USD do not have. And it should (and does) drive DAI price up above 1$


We will never have both. I’m not sure why people prefer #1 over #2. Merchants are starting to accept USDC instead of DAI. I think DAI will have more and more peaks above 1.05 but it won’t get much higher due to people selling it for USDC or other tokens for immediate profit. At that point DAI will be only useful as a store of value for those who bough it at a reasonable price (similar to BTC).

Remember that DAI is backed by USD, but USD is backed by nothing as it is the only way to be useful as a currency. I think we need to be somewhere in between those 2 extremes.


I want to chime in agreeing with @bit and @Adam_Skrodzki. I don’t see how DAI can both be backed by $1 of collateral and trade at $1, given that there is extra utility from being part of a widely-trusted and widely-adopted network.

From my perspective as a user “DAI is exchangeable for 1 USD” is the core value prop of DAI, and thus an end-in-itself. “DAI is backed by 1 USD of collateral” is just a means to that end. So if they are in conflict, it seems clear that the DAI backing should be sacrificed, rather than the stable peg.

For me, this is not just hypothetical–I run the SourceCred treasury and currently we pay all of our contributors in DAI, but Grain is pegged to USD, so I’ve started needing to do spot currency price conversions every time someone redeems their Grain. It’s a pain. For us to keep using DAI long term, it’s important that Maker finds a way to keep a stable peg.


So your argument is that because DAI is superior to USD in almost every way it will be hard to keep it at $1? I think you should think that its such a good product with high demand that we will be able to suck in almost all assets in the world with super low rates due to high DAI demand. Your argument sounds like a short term problem until A) We scale to billions and B) We make efficiencies in collateral/liquidations so that LR can be lower. Perhaps one day we can get to a point when the trust of the system alone allows the whole system to be under-collateralized but I hope not as that just returns to the current economic problems we face today.

The point is not that it’s bad to be better than the usd in almost every way, but it’s then impossible to be worth only what a usd is worth. The whole problem is that dai is extremely attractive. That’s what it means that it’s more valuable than the usd. If we want to break peg we can, but otherwise we have to find ways to be a LESS robust/attractive currency.

I think it is true that we either have to blaze our own trail and break usd peg though, or break some of our rigid ideals around collateralization.

An interesting compromise here is simply lowering the vault collateralization requirements across the board. Atm we are not just 100% collateralized by usd, but significantly overcollateralized. I think the average right now in between 200-300%. It’s actually incredible that we’ve kept the peg so well with such low capital utilization. We could either print unbacked dai, or lower minimum CR and still maintain overcollateralization on a system wide level.

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instead of printing unpacked DAI we should accept inferior collaterals (centralized stablecoins)

the idea that was almost done with PSM before the foundation stopped it

there are 2 scenarios with PSM:
1- we will have significant RWA available in the future so we can easily remove PSM without hurting DAI peg and adoption

2- significant RWA will take much longer time than expected (more than 5 years) then we should adapt with PSM

what are we doing right now is hurting and limiting DAI adoption and growth for the wrong reasons

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It is a paradox,

part of intended DAI utility is Unit of Account, that is why it should be on 1$ all the time. We are not building store of value here.

DAI being on value other than 1$ is not what it was intended to be.

I believe important difference between DAI and USD is in DAI full transparency
not in it being fully backed

redeemability of DAI for collateral is very limited anyway (only to Global Settlement i believe) so it is more important for user that it will be able to redeem it for 1$ in much more practical way - that is selling it on a market and that is the place where dai should have value of 1$ to keep promise of redeemability

You can actually do both and earn high APY in between. For instance Maker could mint x amount of unbacked DAI and deposit it into yCRV until the point DAI is $1 or whatever price ceiling you want (same idea as PSM). The difference with PSM is that Maker starts earning 60%+ on farming fees, the downside is that Maker gets directly exposed to other protocols and collateralization is closer to 1:1.

Also, if community was in favour of PSM and potentially increased stablecoin exposure with lower collateralization, similar mechanics could be reached quickly by having very low liquidation ratio for USDC or other potential stablecoins. For instance having 102% LR for USDC puts a price ceiling on DAI at $1.02. The difference with PSM is that protocol takes more risks when unwinding those vaults. Only certain users can unwind it when DAI price falls enough or governance would need to manually liquidate such vaults when price stabilizes.