[Signal Request][P1-DROP] Change of covenants for P1-DROP (farmlands)

Yeah, it was premature on my part to get so triggered by this post. I interpreted this signal request as being about activating the DC of the structure, which I am against. Not that it would just change some stuff that is totally irrelevant as long as the DC remains at 0, which means it is effectively not onboarded as collateral.

Fundamentally the way this deal is currently structured simply is not compatible with the interests of MKR holders. It’s not about liquidity or term length, it is how those things exercabate the issues of a structure that is not using state of the art best practices when it comes to enforcement and liquidation - which means doing it the way all the banks, and all the institutions have done it for hundreds of years, using senior secured credit positions held with top-tier trustees. There is no reason why this deal cannot be structured that way, using competitive terms.

There is simply no universe where MKR holders should sign up to scale, or do anything other than PoC experiments, with suboptimal legal structures. It just doesn’t make any sense.

We need to instead investigate how we can restructure this deal and other centrifuge-enabled deals in a way where it becomes appealing to MKR holders to take the risk on it.

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This signal request appeared to me to be plenty self explanatory that it was regarding two small changes to the MIP6 that was approved by the procedures set out by MakerDAO. There are plenty of hot shot attorneys that are going to “doc” up the deal and make sure that the structure is negotiated and protects the interests of the DAO and reflects the terms as negotiated.
It is disingenuous at best to refer to SPV and trust structures that have been done for 100’s of years, as to some extent this is all novel. There is no well traveled play book. With digital assets liquidations and oracles are live and completed on a per block basis. This clearly has advantages and disadvantages. Like recently Cream was exploited and it also appears that potential partner Aave is alleged to have a vulnerability that “could” have been exploited for Lord knows how much. My point is that you appear to be arguing about the color of paint on a house, when building in an earthquake zone.
I am perhaps reading between the lines, but I am going to guess that you have the solution? Is it a proprietary one? Does it require MakerDAO to incorporate somewhere?

Just had a really productive conversation with @spin about a path to how we can restructure the current centrifuge-enabled deals and provide better terms and scalable structures to future partners.

I will be posting my proposal on what I call the Arranger Model asap, which is a way to standardize RWA to optimize for MKR holders concerns around risk and enforcement, making it possible to scale it to very high debt ceilings.


Thanks, look forward to learning about the proposal “Arranger Model” when it is published. I am just really befuddled of the process and procedures of the DAO and can only assume maybe that there has been a shift of the power center of the DAO since the MIP6 risk assessment and MIP6 were published in June of this year. I realize that with delegated powers maybe that has shifted the dynamic somewhat where the voice that did not have confidence in the Centrifuge model or the contemplated “trust” structure is able to flex. I don’t know. I really have only had the limited basis of doing a risk assessment on this one deal, and perhaps don’t see the governance mechanizations and the larger strategic vision.

That said, my risk analysis was contingent on legal buttoning and due diligence. It was also premised on what I thought the rough model for the real asset container, SPV model, Drip/Drop, etc. Therefore I would request to the extent that this model is going through serious revision that the risk analysis is not relied upon either until I have at least had the chance to review these substantive and material changes to the structure. It would appear that from the “no” votes in the signal, that appear to control large blocks of delegated and owned maker, that either large players in the DAO hate Arkansas or have no confidence in this structure, asset class, and model.

I am disappointed, but understand that strategic visions of DAO’s can change and with that I guess they have the ability to take a second bite at the apple. I know that all parties have had to put up with me, even though I am ornery we tried to get a deal that would protect and benefit all the players.


I’ll be the first to tell you that your Alternative Equities Advisors Assessment was impeccable and thank you, for the analysis you performed back in May.

And as you mentioned earlier, the infighting we are witnessing within DeFi gets us nowhere.

We woke up this morning to developments in DeFi that can harm the ecosystem, divide it, and take it to a blackhole with no escape. The recent $130M Flash Loan via Cream Finance has led to a Feud between AAVE and YEARN. Do we do the same here, or prove to the world that we are united.

And then…

And then later today we got a $58M rug pull that some folks are alleging that it was orchestrated courtesy of the team using an EOA. This has led to accusations between team members that this one or that one is responsible. All in all these events make DeFi look like :poop:


13,597 WETH Rugged

Together We Are Great Energy—Divided We Will Fall Apart.

I don’t have the right answers on what is the right structure and how we should proceed with RWA Collateral types, but this is how I’m thinking about it.

We must work together to find the right solutions for MakerDAO. The Maker Community has an appetite for RWAs, therefore we must find the right structures that works for the benefit of the DAO. We must ALL understand and educate one another on what Real World structures best PROTECTS MKR token owners. A “No” Vote has nothing to do with disliking Arkansas. Go Razorbacks!

So ya, IMO there is nothing wrong with iterating on RWA structures–there is a need for checks & balances–there shouldn’t be a split within the community—we should ALL support RWA iterations. And yes, I know repeating a process is painful—because we All wanted RWAs and honestly, so far not much has been executed. For now, RWAs have been a big disappointment. A promise with not much deliverance.

The greatest performers iterated over and over. Let’s become the greatest performers by performing iterations of what can be the ultimate super power of MakerDAO RWAs. I look forward to the Arranger Model and hope that it will keep this community united.


I’m not a regular contributor but the Centrifuge deals have drawn my interest periodically because of the legal engineering involved, and I thought I’d jump in here to remind people of some history and +1 @rune 's take from a legal perspective.

From the start of MakerDAO wanting to do off-chain collateral, many people warned about the risks of off-chain collateral in general as well as the specific ways it was being implemented in this case. @Tosh9.0 made a series of brilliant posts breaking down the issues and highlighting the way they were being brushed under the rug with hand-wavey assurances. He was shot down for being “negative” even though he was asking exactly the right questions.

Securitization is a well-trodden legal path; when handled by experts it will inevitably involve extensive third-party due diligence, including legal opinions regarding enforceability and separation of assets. I am glad to see that now at least a good law firm is involved, but legal due diligence only goes so far.

More broadly, there is the issue that illiquid debt securities and asset-backed securities do not have their risks and value dynamically re-priced in a market, thus there is nothing to tell MakerDAO when the position is undercollateralized such that a liquidation should be triggered. Of course, there is also no liquidation mechanism because that involves off-chain actions (including possibly going to bankruptcy court in an insolvency scenario). Risks can be long buried, but in practice all these assets will just retain their “face value”…e.g, tokenized freight receipts could end up being valued at the face $ amount even though, unbeknownst to MakerDAO, the payers could be insolvent and, if there were such an insolvency, the receipts should be getting marked down dramatically. This is a set-up for people selling hidden risk to MakerDAO with little chance of such risks being accurately re-priced over time.

Also, no lawyers can gap-fill for subject matter expertise like the correct way to price risk. In that sense, the process here is wrong–people selling the risks should never be the ones charged with due diligence and pricing, but that is basically what happens here because although I’m sure MakerDAO risk folks try their best, simply put they are not experts in pricing of things like tokenized fractional interests in freight invoices and farm land (and very few people are). The only subject-matter experts involved are the sellers of the risk and of course they don’t have the best incentive (though I understand in some/all cases they have some exposure to the riskiest tranche).

For all these reasons, I think these types of deals are a risk magnet for MakerDAO. MakerDAO should focus on buying publicly traded bonds, treasuries, public company stocks, etc. where risk is less likely to be hidden, instead of these wonky types of illiquid assets that expose MakerDAO to tremendous information asymmetry and counterparty performance risks.


I don’t entirely disagree, I was asked to help out for this reason. We own and invest in farms, and my Dad was a field agent helping insurance companies place loans on agricultural real estate and now that is also my day job. To help insurance companies and other lenders place loans on quality farm operations.

I assume(d) the model might be more like what a University endowment might do. Keep liquid up to a certain point, and also place money in high quality, longer term, less liquid investments. My concern early on is that a DAO probably doesn’t have the mentality to stick with farmland through a down cycle.

That said, I look at farms (especially in the corn belt)as a bond that pays its dividends in corn and soy. There are advantages to corn dividends in certain economical environments. But your point on bonds is interesting, as I have a distrust of them and generally avoid them at all costs. But we all like what we are comfortable with. Yes, the DAO should stick with what it is comfortable with, though I know that many insurance companies love agricultural investing for the very diversity that it brings.

That said, my issue is never really about whether the DAO should or should not invest in agriculture. It is just that they don’t appear to be following the very process that was set out.


Wanted to bump this, as a reminder the poll ends on Wednesday.

Currently vote is quite tight with the majority abstaining. Please lock in your vote before Wednesday if you’d like to influence this Governance process.

As you discuss a path forward…We have learned a great deal about DeFi and it seems to makes a lot of sense to use farmland as collateral for Dai or any other stablecoin because of its own stability as an asset class. So, we remain interested in devising an approach and structure that works for all and are excited about the potential for this opportunity. If it would help advance the discussions and thinking, we are available to have a live conversation about this.


Thanks to those who participated with the additional time provided. This proposal will be live onchain for a poll on Monday (2021-11-15). Voting will last for three days.

@mamoore930 Maybe recommend a live session with a pre-defined agenda. Due to the nature and heated debate, I’d recommend taking the time to collect some questions from the parties that expressed themselves here prior to such session. So we can have a proper thoughtful and constructive session, away from keyboards.


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