Replace the mechanism to burn $MKR with a treasury

The idea is based on the concepts expressed in this article, I advise you to read it

Summing up the article: using the earnings of the protocol to buyback $MKR and burn it is not efficient.
The idea I propose is to accumulate the stability fee in the treasury and then dispose of it through voting. Governance will find the best way to use these funds. Some examples:

  • Buyback of $MKR during pullbacks is simple better than buyback at market buy
  • Buy governance tokens of other protocols with the aim of increasing the power of our governance

and IMO most important,

  • Accumulate $ETH. Reasons: in Ethereum 2.0 purchasing $ETH or staked $ETH will be the same as purchasing hash power. I imagine that before long every protocol will start doing this to protect the network from possible attacks. The better $ETH will be divided between protocols, the more secure the network will be.
    Also, holding a certain amount of $ETH in the treasury will make the price of $MKR less susceptible to the $MKR/$ETH exchange rate.

I think the majority here would rather buy TRON than ETH. I suggested many times that ETH is our infrastructure and without it (and without its price/security increase), DAI is worth nothing.

The community here has a very low confidence in ETH and we are rather accumulating centralized stablecoins. They consider buying ETH (in any form) gambling on price and risking undercollateralization.

As usual, I’m against the proposal. I’m not sure the governance will make a good use of the accumulated funds so it is best to burn MKR.


We should not change the MKR burning, it is not good. Go against the original intention.
Let the holder lose trust.


$ETH is the unit of account of our system. 1$ETH = 1$ETH. There is no volatility.
IMO is fine to use $USD as unit of account for themselves, but from a protocol point of view using $USD instead of $ETH as unit of account is a big mistake.
We should aim to account for our profit in $ETH rather than $USD. Doing so we will ensure the network and Makerdao. IMO it makes no sense to hold MKR and have a downward vision of $ETH in the long term.

As written in the article, there are also other ways of managing the treasury in addition to governance, such as making use of a Balancer-type pool.

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Holders will have full control of the treasury. If this proposal is voted by most holders, how can you imagine that they will lose confidence if they themselves voted for a change? Also, from an evolutionary point of view, not adapting to change is a guarantee of extinction.

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I am favourable to the idea of a treasury vs automatic burn, but not with the proposed intention of ‘investing’ it in various ways (Tron :face_with_monocle: :-1: :scream:, governance tokens, etc).

In my opinion, there are (and many more in the future) other DeFi app to invest your money, and each user should choose it’s favourite, not MakerDAO.

The treasury (imho) should be used to:

1: buy&burn MKR, but only at convenient moments (e.g., when Governance feels that the price is low).
2: fund development (e.g., domain teams) and other governance expenses (e.g., SourceCred, etc).

That’s it. No more than these two things.


A part of such construct is in MIP13c3-SP3: Declaration of Intent - Strategic reserves fund (SRF) that will be in this month governance poll. If accepted, I will see how we can integrate such treasury with executive votes so any action will need MKR approval.

The usage is a different matter at the hand of MakerDAO governance, but most likely having funds to pay domain teams and having some kind of insurance in case of bad debt (to avoid printing MKR at the worse price).


At this rate we will start burning in less than 2 weeks, let’s start with that, the burn rate is currently something never seen before so it’s likely to attract attention and hopefully more people to the project.

Meanwhile we can deduct from the surplus buffer the domain team expansion and can start dipping our toes into strategic reserves.

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There is no evidence to suggest that governance will be capable of timing the MKR market and getting a better buyback execution price than simply burning MKR at market while the surplus buffer is full.


zenithlight is right.

I think using one-sided AMM here (buy only) could be a good solution. I’m not sure Governance should have arbitrary say when we should accumulate MKR. Governance could however have a say at what pace the accumulation should go forward.


Even though I agree with most of the points in the article you link to- I very opposed to the proposed mechanism here. It would be much truer to our existing social compact if we continue to burn the MKR as the system was designed, and the community voted to issue new MKR to fund specific projects or activities that people agree are worthy. We can always issue new MKR when we agree there is a need to, so let’s keep the burn mechanism untouched.

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I don’t think the Dao is well enough developed for a general strategic reserve fund, and it is highly susceptible to abuse. Let’s keep burning MKR as the system was designed and then we can vote to issue new MKR to fund individual projects that MKR holders agree are worthy.

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Fine, admittedly I think you are right on this.

At the same time, I think there are improvements that can be made on the current setup that do not try to ‘time the market’. Perhaps we can have a productive discussion about those (see my example below).

For example: I think buy/burning the MKR as soon as the surplus buffer is full, is not necessarily the best strategy.
We had a peak of burning in february (before Black Thursday) and then 0 burning for many months (up to now, November), when the price of MKR was very low.

Simple Proposal: I suggest we could buy/burn MKR not as soon as the surplus is full, but following some kind of “moving average” of sorts, so to smoothen peaks and dips.

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I am certainly not against optimizing earnings distribution in the mid/long term, but I just can’t see this topic (buyback) being really important at this point, i.e. so early, in the DAO creation process.

The important part is to have a Treasury - especially to start covering expenses, while strategic part is imo, not so important, in the short term.

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@jernejml, one can have MKR-burning and at the same time MKR-minting for covering expenses, etc.

I guess this might seem convoluted, but as others have suggested above, it keeps the system simple and working as it was designed for (i.e., MKR burning).

I like this idea of “smoothing out” the Maker burn. Maybe accumulating funds and burning x% of the total funds each y length time period. This essentially would mimic the investing strategy of Dollar Cost Averaging, which I believe outperforms lump sum investing (or at least is lower risk), especially with highly volatile assets.

I also like the idea of the maker protocol holding reserves rather than burning Maker with 100% of income. That said, I am completely against holding ETH as it is much too volatile. I think LP tokens are the best option to be held as strategic reserves. Neither volatile cryptocurrencies like ETH nor stablecoins like USDC are a good fit due to their asset class specific risks.


I think we need to sort terms.

Company treasuries usually have - cash - or cash like assets (say bonds that retain value but also earn return) they can have volatile components (often anticorrelated assets that grow when their business sinks or related to supply needs - oil futures for airlines, etc.). When I first brought this idea of a Treasury or a secondary surplus to Maker I wanted to use it as a direct DAI liquidity control (inject by buying assets, withdrawal by selling them). Which meant one had to buy other assets to let the DAI in the surplus go out into the markets rather than draining DAI liquidity and having surplus DAI just sitting around doing nothing.

We have MANY more choices today with what we can do with DAI to both retain it, generate return, while still allowing it to be out in markets (balancer pools, various liquidity stakes) that we can even use with MKR to boot to earn farming returns. Literally there are vastly more ways to manage a treasury now than even 6 months ago. Since one key function of a Treasury is to retain value particularly in bad market situations I urded we should add stablecoins and we can also use those as liquidity pairs to earn extra return for the Treasury via farming.

We don’t have to completely STOP the MKR burn as this is something clearly important to MKR holders. BUT I have urged and will continue to urge governance to stop buying the MKR price up using this burn model and simply set a price floor with some liquidity via limit MKR/DAI or MKR/USDC orders or even using liquidity pairs that are automatically going to buy MKR when price drops and sell it when price rises.

As @befitsandpiper suggests:

we can simply buy market periodically with some randomness and simply dollar cost average the MKR purchase price. Frankly I think we get a bigger bang for our DAI by putting our surplus into farming returns. We achieve multiple goals, a growing return from surplus, diluting farming returns into our own treasury, and still releasing DAI into markets to provide liquidity. If we do this against MKR itself we also indirectly support price via pair liquidity (I don’t think people really appreciate how price support can work in these liquidity pairs btw)

Lets try to separate the concept of a Maker working Treasury which would be used for:

  1. Operational expenses, ETH for smart contract deployment, oracles, insurance, legal costs, licensing fees, etc.

from a Secondary surplus that could be used to add or remove DAI liquidity by buying/selling assets and growing return component from these to the value of Maker.

I think it is a secondary surplus that should have the farming assets as well as MKR purchased to match against DAI to provide liquidity. I can’t stress the following enough. Maker really needs to get past this idea of always burning MKR vs. using MKR that could have been burned against DAI in hand to provide farming MKR liquidity in many pairs (DAI, USDC, TUSD, maybe even ETH) in a secondary surplus fund from a treasury that for the most part only contains DAI, and stablecoins to fund operational expenses (that are in ETH, DAI, USDC and possibly MKR via sourceCRED).

Last thing I want to point out. Company value is not just the following:

  1. Market value of the outstanding stock.

It is the other following values.

  1. Cash flows
  2. Net profit from cash flows to company bottom line (and hence to shareholders)
  3. Total disposable (non-encumbered as well as encumbered) assets.
  4. Future contracts to cash flows and hence profit.
  5. Growth rate (or contraction) of the above.
  6. Speculative value based on the growth in the entire space the company is a part of. (size of markets and growth of them).
  7. Dividend return. (i.e. payout to stockholders either by buyback or by direct dividend as a rate of return)
  8. Intellectual Property (i.e. enforcable patents)
  9. Expense rate vs. cash on hand.

We seem to focus exclusively on (1) and peripherally on (2), (3) and (8) and ignore (4), (5), (6) and (10). We ignore (7) we don’t have much control over it, and (9) because Maker is opensource and forkable.


This might be a good investment strategy, but I disagree on a fundamental level.

In an ideal world, MakerDAO would earn some money (DAI, from SF) and distribute them (proportionally) to MKR holders.

This is not practically doable, because thousands of transactions would waste money in fees. This is one of the many reasons behind the MKR-burning system. It is efficient.

This said, I think we should not impose any investment strategy on any MKR holder (even little holders). Even if this imposition was democratic (i.e., voted) I would probably consider it an abuse.

We should just distribute the revenues (after having subtracted the amount needed to run operations and expand) and then simply distribute (which, as it is implemented now, means burning MKR) the revenues.

ADDENDUM: one of the selling point of DeFi is that I can invest in MKR/BAT/WBTC/whatever by buying 1000MKR or 0.01MKR. It does not make any difference.

There is no need to ‘group up’. I could just as well invest on the farming pool myself, if I wanted, I don’t see why MakerDAO should do that for me.


You are basically discussing the conglomerate discount. It’s a very complex subject.

Farming with MKR money to generate a yield doesn’t make sense as MKR holders can do the same more efficiently.

But adding liquidity to something that helps the DAI ecosystem create good value as there is a synergy with our main business.

Also having cash aside to endure bad times is smart. It would be not smart to let it be idle if we can make a secure yield on it.


Check out how PERP did its token sale:

We can do the the same but in the opposite direction. MKR bought would be burn instantly.