Kurt, thanks for your detailed answer, always a pleasure to discuss things with you. Please see below my responses.
Staking services are a highly competitive market with winner-take-all tendencies/power law success distributions–I expect operating margins to be thin, and scaling challenging unless we’re one of the top services (hard to do when it isn’t your #1 focus)
The idea behind this is not to obtain a “significant” margin but rather is about horizontal expansion to offer more services that we can connect with DAI regardless of whether we are a TOP service or not. In my mind Focus # 1 is growing Dai and the DAO. As a base, we have a collateralized stablecoin issuance system that is the envy of many and I think it is our duty to expand the capabilities of the possible byproducts that this building block can give us.
We are in a nascent and tremendously competitive industry, where every minute more and more capital is deployed, far greater than ours, and from my strategic point of view, we have to act first (which is our advantage) to cut chances for other players.
Building something like that also requires the DAO to invest in physical infrastructure in one or more specific jurisdictions, or to establish financial relationships with entities that provide those physical resources.
Yes, if we want to achieve the vision that we have for DAI we will definitely need to establish financial relationships with entities around the world.
It’s not clear to me if the advantages from running our own staking service (i.e. a more trustworthy staking derivative, no middleman, and deeper possibilities for integration with the rest of the protocol) outweigh the risks and high costs of doing so
In competitive environments, it is often much more expensive not to develop a business line.
Take a look at our run rate, mostly comprised of people (salaries).
IMO it’s probably a distraction from our core business until that reaches a scale where it’s feasible to spin up completely new lines of business.
The point is that the consensus on what MakerDAO’s core business is is practically nil, almost all members of the community have a great vision of what DAI should be, but very few propose HOW to reach that vision.
Does Starbucks sell just Coffee?
Does Apple sell just Phones?
Also, is not clear what scale we should reach to create new lines of business, if we have the opportunity and the capacity, I think we should take advantage of it.
Is it easy? No
Will it cost money? Yes
We will need to work our asses off? Definitely, that is why we are here.
Not sure I fully understand the idea, but–I think you’re suggesting expanding the financial services offered by the DAO to directly include a Compound/AAVE-like product that would directly compete with those other lending protocols. I have some similar opinions here as mentioned above–I think at the moment it would distract from the core mission of growing DAI as a currency.
Yes, competition will always exist and we have to be prepared for it.
The problem that I see with just “Dai as currency” is that is limited to be a type of commodity. Nowadays, the “Dollar parity” is the proposition sought after by everyone in order to create financial services, this is very easy to achieve, either via USDC, USDT, or any other stablecoin, if we limit DAI within This category of “as a currency” we do not have any type of weapons to fight against other options. Even in terms of regulation, which sooner or later will arrive, Dai is at a serious disadvantage compared to the options mentioned, that is why I want to bring to the table that the core mission of the Dao is to grow an entire ecosystem around DAI so we can avoid that “commodity label” and be able to generate a differentiator and a stronger value proposition than any other stablecoin out there.
It also jeopardizes cross-protocol efforts like the Direct Deposit Module (an AAVE integration that creates DAI supply in certain interest rate regimes).
Cross protocol efforts will never be more important than the protocol itself.
If we build a useful ecosystem, they will build things anyway.
An idea that’s been floated around is some sort of attached lending market where Vault users can opt-in to making their collateral available for borrowing (they’d get a cut of the interest for taking additional risk, partially offsetting their stability fees).
This is neat!
-That said this sort of “vertical integration” (i.e. offering a full stack of financial services) is certainly a direction the DAO could choose to grow in.
I really hope so.
I’m starting to see a dichotomy where we need to think and define if we want to be some sort of “public good” and grow because we are sailing the good waters and tailwind of the industry or if we want to become a powerful ecosystem with Dai & MKR (DAI as an Appstore analogy) at the middle and craft our own destiny. I lean towards the latter.