There’s been a lot of discussion about the inclusion of real world assets as collateral in Dai. While the core MKR governance community has long thought about and discussed the risks and benefits of real world assets as collateral, there is a wider community of Ethereum enthusiasts who love Dai and Maker, but have not followed governance closely and were shocked to learn that real world assets might be included in Dai.
The result is that a lot of people have voiced their opinion and tried through various means to discourage MKR governance from including real world assets as collateral as the revelation spread through reddit and twitter. But from the depths of crypto twitter a potential solution also emerged: PurityDai
As you might know, on the roadmap after Multi-Collateral Dai launch is the ability for Maker Governance to launch new Synthetic Assets, so that other Dai Stablecoins can also be created. This includes things like EuroDai, YuanDai, YenDai and even SP500Dai, GoldDai etc.
But! Turns out the same concept can also be used to solve the real world asset controversy by allowing Maker Governance to press ahead with its plans to include real world assets in Dai, while also using the Synthetic Asset capability to create a version of Dai that does not have real world assets backing it, but is instead backed purely by ETH: PurityDai.
What’s really cool about this approach is that PurityDai would be a very unique asset in that it would have both the benefit of being backed only by ETH, and thus have no chance of having its collateral seized, but it would actually still also be protected against black swan events in the price of ETH, because it would share the same MKR with Dai and other synthetic assets, and thus would still benefit from the highly diversified black swan protection that real world assets offer.
There would of course be a cost to this. Since PurityDai would have very restricted collateral in the long run - only ETH would be accepted - then there would be little room for supply growth. And because it has very unique security properties, then at the same time there might be a lot of demand for it. The result is high demand and low supply, which the Dai Credit System can only deal with in one way: Low, or even negative Dai Savings Rate. Where the rate ends up depends entirely on the market dynamic of this kind of unique asset.
There’s still some technical building blocks, and even greater risk and governance barriers that would need to be in place before something like this can be built, and it would for sure have to come after e.g. EuroDai and YuanDai as they are a lot simpler to create.
But it is certainly possible to create this eventually if the demand is really there, and for now, the existence of this concept should be able to alleviate everyones concerns on both sides of the debate: Maker Governance gets to chug on with carefully adding real world collateral to Dai without vocal opposition, and sceptical ETH enthusiasts have a unique asset to look forward to around the time real world assets start to be included in the collateral portfolio. And PurityDai will not only give them what they like about SCD, it will also come with the additional level of black swan protection afforded by MCD and the real world assets, making it amongst the most robust cryptoassets imaginable.
Everybody wins, and what started as a controversy ends up as a great story and concrete proof that innovation in Ethereum is truly driven by the community.