[Signal Request] Raise SF On RWA When Issuers Unilaterally Change Terms


There has been significant debate around an under-recognized aspect of DROP token assets – namely that the Issuer of the token may, with two weeks’ notice via an email, change terms in the Executive Summary of its issuance. This can include, but is not limited to, what metric is used to measure collateralization within the Special Purpose Vehicle (SPV) that is the Issuer, the rate of return of DROP token holders who represent an equivalent seniority in the debt structure, size of junior tranche, and anything else stated in the Executive Summary for that DROP issuance.

As is currently structured, the Issuer only has to send an email, and all parties are considered notified. After 14 days, the Issuer may then enact these changes.

Given that:

  • This power to change terms is clearly stated in the DROP token subscription agreement under section 4.F
  • This has already occurred within the first month of our only DROP asset collateral (New Silver),
  • The notice was not received by the DAO at large until June 10th, despite being sent on/around May 21st,
  • There is demonstrated opportunity for the notice to become lost or delayed before the DAO at large is notified, thereby lessening time to react or – as was the case with New Silver – even be informed until after the changes had gone into effect,
  • It is difficult for the DAO to discuss, vote on, and enact a response to any changes that it feels negatively impact the DAO’s position in such a short window,
  • Public debate about liquidation of a DROP asset will likely allow other DROP investors to front-run Maker, leaving the DAO to wait for even an unimpaired debt pool to mature before recovering principle,
  • No offer to remove this power to unilaterally change terms was forthcoming in a lengthy call with Centrifuge and New Silver yesterday,
  • All DROP assets through Centrifuge share this power for Issuers to unilaterally change terms,

I propose that upon public acknowledgement of notice on this forum, notice provided on this forum, or implementation of changes – whichever occurs first – Maker automatically authorizes and compels a 3% (300 bps) raise in the Stability Fee for that DROP asset’s vault. This could be avoided by the Issuer communicating early with the DAO, and getting a vote to override an automatic raising of Stability Fee. Should it be consistent with our governance process, this can be a simple on-chain poll, otherwise it would follow the standard track of poll and then executive.

This action would be applicable each instance an Issuer utilizes their power to alter terms, and has no upper limit to the cumulative Stability Fee.


  • Maker is no longer at a disadvantage when terms are changed but no evaluation or response is able to be organized.
  • This does not liquidate – and thereby end – the relationship of Maker and the Issuer of a given DROP token.
  • This puts the burden upon the Issuer to communicate clearly, fairly, and early, rather than burdening individual Maker representatives with collecting and disseminating notice of change, particularly as the number of DROP vaults grows.
  • Demonstrates to current and future Issuers that Maker is a serious source of financing that will protect its interests.
  • Provides additional yield to compensate for the risk presented by Issuers unwilling/unable to secure a vote to override this provision.


  • Risks alienating Issuers who wish to retain and utilize the power to change terms of their Issuance without approval from Maker.
  • Issuers may prefer not to change terms that would be beneficial to the underlying debt pool in order to avoid the burden of gaining the approval of Maker.
Should Maker Automatically Raise Stability Fees by 3% (300 bps) When An Issuer Alters Terms Of Their Executive Summary?
  • Yes
  • No
  • Abstain

0 voters

Next Steps

The poll will run until July 3, 9:00 am EDT/13:00 UTC ; this will result in on-chain-polls assuming the outcome of the poll is affirmative


For me, this is the real issue. Is there a good reason why not?

If we cannot find ways around this together, it might be that we should not be doing business together at all. I’m not sure if this tit-for-tat style of working is going to be sustainable in the long run. I imagine their changes in the future will simply be drastic enough that the 3% fee increase is an insufficient counterweight.


This is intended as a temporary solution to avoid delaying more collateral types. Hopefully we can get the structure changed going forward


Abstaining for now. Is this something we can legally do within the current agreements? @SebVentures

Maker can’t enter an agreement. We don’t have any agreement with the Issuer. The executive summary and subscription agreement govern the DROP tokens’ value and rights. Our collateral is DROP held on our behalf at Tinlake

@PaperImperium a couple of points:

  • SR pools should show who the voters are
  • You sit on the RWA Committee, yet didn’t collaborate at all with the committee members to craft a proposal that would come from the Committee.
  • You have the new proposal that RWF, Centrifuge and NS have discussed that was shared with the committee for comments. You seems to act like nothing is being done which is not a fair statement. The delay is moving to 21 days btw. And enforced by the Independent director. The change will have to wait that all DROP holder wanting to leave have left. All members from the RWA Committee could get the notice. I guess we will have a mandatory post as well.
  • While it is complicated to decide as a community is such short notice, I guess that PPGs are here for that. I guess that everyone agree that being slow is shooting ourselves in the foot (the last change in rates for crypto vaults decided 3 weeks ago and yet not in effect). Are we in planning to be slower than TradFi?
  • Your proposal add the fact that we can change the rules unilaterally (increasing the SF while we never discussed that earlier), the exact thing you don’t like. Contrary to New SIlver that has a contract with its investors, we don’t so we can do whatever we want. But we have a reputation. I would have fewer issues by triggering a liquidation gov poll by default (not that I think it would be great).
  • I don’t get how your proposal is implemented. Ideas are great, but execution is what matters. Discussion ideas takes time and removes us from improvement. You had also a concern about getting the CFG rewards. Seems reasonable and easy but took hours on our side to think about it and find a solution (tech and legal are usually and issue) Yet we know that it will be solved (at least probably) when we will have a legal entity to hold the DROP tokens.
  • I find it more scalable to let the AO changing stuff when needed. He is incentivized to have a discussion if this is significant. Having a complex governance process for all minor decision is not scalable. We own 2B of USDC yet we don’t vote on every change they are making in their investments strategy (actually we couldn’t as they are not transparent).
  • I would highlight that MakerDAO is having the exact same right regarding the DAI holders. We unilaterally change stuff every weeks and never care to inform them or give them the right to do anything except leaving with a few days period.

I agree there were some failures, but the ability to change terms was mentioned before onboarding the asset. And I didn’t see an actual discussion about the terms changed.

There is a line, I will not cross and it’s asking for more rights than other DROP investors (like an affirmative vote by Maker before changing). Fairness is one of my core values, one I think DeFi should have as well.

In my view, the final solution to this problem is another core value of DeFI: transparency. If we can get all the underlying loan data public (ARV, LTV, …), we could use them to have a permissionless smart contract that liquidates as soon as some constraints (code is without interpretation and public) are breached.

It’s the early days of RWA, what matters is keeping the same risk level of MakerDAO and progressing towards the future. I don’t see how this item is adding significant risk.

I’m working on a post-mortem.


I like the idea, we will need to see how can be implemented.


That is my oversight. If anyone knows how to edit that now the poll is live, please let me know.

It shouldn’t be on Maker to react to an Issuer. It’s pretty absurd for a borrower to be able to have these powers. If they want Maker to participate in financing after changes, the burden should be on the Issuer, not the DAO.

We’re the ones providing financing, and at a very low rate. We cannot signal to all borrowers that all it takes to pick our pocket is to send out an email and then wait for the DAO to be slow to liquidate. Note also that the option to liquidate is not a good one for us, due to the public debate that would signal to other DROP holders to exit before us.

Right now everything is manual for RWA – including oracles and liquidation orders. I fail to see how manually raising the Stability Fee would be any worse. It’s certainly lower stakes, so if that’s not good enough for changing the Stability Fee, then that’s not good enough for the other moving parts.

We don’t ask DAI holders to loan us money.

Then we should be paid the same as DROP investors. I see a 50 bps difference between what NS DROP holders get and what we get. And that’s after NS abruptly cut the returns to those holders by 100 bps, effective June 4th. It can’t be “same rights as DROP holders” and “lower returns than DROP holders.”

I fail to see what possible justification there is to allow an Issuer to unilaterally – and without input from Maker – change terms that affect the value of the DROP collateral. I can understand why the Issuer would want that power, but I can’t understand why Maker would accept that without some way to counterbalance it. Remember, we’re here to protect Maker, not the Issuers on the Centrifuge platform.

Given that MakerDAO’s acceptance of these terms is being widely touted both to potential investors on Tinlake and in their application to Aave, it is clear that we are the blue-chip, mature, experienced, smart-money protocol that is expected to be doing thorough due diligence. With our name being actively used to show the legitimacy of the New Silver pool and Centrifuge in general, we are have not simply a financial interest in these structures being balanced. We have a reputational interest in these deals not being structured in a potentially abusive manner – after all, MakerDAO’s acceptance is being used in ways like this:

“With our recent onboarding to MakerDAO we deem our initial approach validated and are looking to further expand RWA within DeFi while improving the setup continuously.”

If Maker cannot even change rates in response to changes in the underlying collateral, exactly what deal are we agreeing to when we onboard these collaterals?


You also see another round of over-collateralization that protects us. @williamr is working on a model to fine tune what the gap should be. There is also a APR/APY issue. Finally, there is a business reason so AO chose MakerDAO over others DROP investors.

It can, and will, be fine-tuned over time. But at this stage, I’m not sure this is a priority.

Thanks for this post. I feel it’s a very important and delicate topic.

For the moment I have “abstained” as I don’t think rushing a YES/NO answer (based on my limited state of knowledge) is reasonable. But emotionally I’d be quite inclined to vote YES.


Voted yes and agree with this statement 1000% – if companies and projects are touting affiliation with MakerDAO to raise funds or expand their business, we have a significant reputational risk if a project’s structure is less than ideal. Put another way, there is the possibility of contagion from a poorly structured arrangement to stain and, if the DCs are high enough, potentially cripple MakerDAO.


I voted Abstain for now, but I will admit–and traditional Capital Structure experts will also tell you that MakerDAO is taking on a lot of RISK for low rates. I’m sorry, but it’s true.

At the same token, rates are so low right now that folks who know how to access the Capital Markets can get access to cheap capital.

So, how do we compete? What happens if AAVE, Compound via their Substrate Chain, or some new App. on a Layer 1/2 (Jet Protocol, Acala, etc.) offer Rates much lower than Maker?

We have seen this happened with Governance Tokens like Balancer, Comp, etc., they just don’t get any traction based on their home-base providing better incentives.

And speaking of incentives, what incentives will the Maker Community provide RWA AOs when borrowing on-chain takes off?

Is the Maker Community ready to accept that Yields are about to go low as the Yield Farming euphoria is coming to an end?


Voted No. Will consider changing my mind once we have a proper post mortem and guidance by the RWF-CU.

No need to rush anything, I also feel towards the RWF the same way as I do for Protocol Engineering, Oracles or Risk CUs: I prefer to let them to initiate and lead and (usually) just go with their guidance.


I think we have an issue here, our interest is diverging from the centrifuge one.

My view is centrifuge needs more investment pools to survive and for diversifying their risk. For that they are happy to take an higher risk on their users. Users will come only for an higer rate than compound, that is also why they have started the token reward part.

Instead of increasing the rate which won’t really help and should not be technically possible. I think we should have a lower DC. We should spread the risk with their users and don’t ending with 33% or more of one investment pool. I would consider a 10% max as a good start.

A starting DC of 1 or 2M should be more in line with our interest.


To the broader point about our reputation and our status as the blue chip defi protocol, especially as it relates to RWA, I really worry that we are ruining our reputation and watering down our brand with all these low-tier centrifuge deals, and as a result we are cutting ourself off from all of the legitimate, large-scale deals that would be possible to do in the future if we are just able to prove that we are able to do standard deals and follow best practice, and have the capital available.

It’s like we are in such a hurry to go full speed that we just drove straight into a ditch right off the bat, and will be stuck spending all of the governance bandwidth for the next many years, arguing and litigating about random issues that occured in these tiny, bad deals that we are shoveling in to the protocol right now.

And of course we won’t just be stuck, we’ll have no credibility. Even if we did have governance bandwidth, we simply won’t be able to engage with legitimate, large-scale counterparties if they see how out of touch we are with best practices and how many dumb disputes we are involved in.

The root of the problem isn’t one specific term or issue, it is the general arbitrary and thrown together nature of these structures that in the end don’t protect maker at all, and are instead fully based on trust, and are basically unsecured with no real guarantees or collateral. The lack of any real, solid, and enforceable legal claim is the fundamental reason why things such as terms arbitrarily changing are even possible.

It takes very little structured finance knowledge to know that these issues simply will not occur if we do things right instead of trying to take shortcuts, and use tried and tested structures that are already being used in the real world, like the trust company.

To be brutally honest what is really happening here is that we have gone dunning-kruger and are trying to reinvent the wheel of structured finance for no real reason, and it has already blown up our face on the very first deal. Considering how important real world assets are for the future of the project, this is nothing less than a disaster that puts the future of the whole project at risk, because of how it can nuke our reputation. Reputation is extremely hard to build, and really easy to destroy.

We even already have complete deal from 6S which is already being proposed with all legal documents and terms fully published and transparent (and they contain no possibility of the kind of shenanigans that it is now clear we should expect from each of the current centrifuge deals on a monthly basis), but it is being sidelined in favor of these tiny centrifuge deals that don’t even have nearly the same level of documentation and legal work, and contain endless amounts of these gaping holes such as terms changing unilaterally, and of course the fact that there is not even real recourse through the DROP mechanism, and these flaws will just overload governance with brain damage as they inevitably blow up in various big or small ways.

Btw, I’m not arguing against centrifuge as a whole, just the specific bad, unsecured deals that are on the table right now. If you are an MKR holder and are looking at this problem from the perspective of what is best for the DAO, it really isn’t hard to understand why we need to demand locked down, reliable and regulated trust company-based structures (or equivalent regulated and best practice approaches) from the deals we do, centrifuge included. There is just no benefit for the DAO to engage in this risky and time consuming experimentation when this is the time where we should be scaling and growing.


Incredibly well said. Thank you.


In November 2020 6S was supposedly was only weeks away. Matt said the following:

Yet 7mo later we are still waiting on 6S to publish the enforceability opinions and for any legal review to be able to take place. If we are able to get a legal opinion on the feasibility by our own lawyers and the community decides this is an adequate way to onboard RWA to Maker we will be the first ones to adopt it. @SebVentures is working actively with SolarX on a similar setup and I fully support legal innovation within MakerDAO to improve Maker’s position. The reality is, in November it was just around the corner and it still is just around the corner.

I’m personally convinced it was the right decision for us to move ahead with a simpler structure for now. Maker finally onboarding the first RWA, New Silver, was welcomed by the community, led to publications in every major media outlets, a very positive market feedback (on the MKR price) and countless institutional MKR investors (A16z and the likes) reacting positively. These deals are small today because we never wanted to onboard $500M of assets in one step, it would simply be irresponsible of Maker to do so; we should learn along this process and improve it along the way.

This is what we all are doing, appointing independent directors is the next step for New Silver (and will be implemented for all future collateral types we bring). This process is discussed in the RWA Committee and a solution is put forward to the community by that community & Centrifuge. Until then, this forum thread is an inferior solution as @SebVentures has pointed out in his well written response.


I reached out privately half a week ago to try to figure out a different, lower-bandwidth way to onboard your platform’s assets (I suggested we perhaps try a smaller % of more pools that meet hurdles XYZ and just make it automatic). I was told Centrifuge was not interested in a conversation.

In the call with NS and Centrifuge yesterday, several of us asked about this very unusual power of borrowers on your platform. We were told if we didn’t like when an Issuer changed the terms, we can liquidate/redeem.

If you expect Maker to onboard even more assets under this structure and plan on asking for a quadrupling of the debt ceiling for NS, you cannot expect us to delay trying to patch this hole on our own after it being a demonstrated non-priority for Centrifuge.


Agreed 100%.

Also, Lucas (@spin), many people are clearly focused on issues with the structure your team (and Manatt?) designed, which may be detrimental in some regard to MKR holders. This is a healthy conversation to have and Paper’s concerns, with which I wholeheartedly agree, are an attempt to suss out options to improve the Centrifuge design for the benefit of the DAO/MKR holders.

As an MKR holder, I commend those efforts especially because we – MKR holders – are responsible for the system’s performance, for better or for worse.

Lastly, on your points about media, you are correct, the coverage was positive. But it was also superficial and does not negate the issues many have brought up in this forum. I for one would rather see a quality structure that will last a decade slowly make its way to Maker rather than something fast tracked through while laden with risk. Again, I’ll vote my positions as I always do and I want to thank you for your engagement, which I have found sincere and good natured, despite our different points of view.


The proposed solution in this Signal Request is taking money from others TIN investors when we have a disagreement with the Asset Originator (TIN providing the over-collateralization buffer in the MIP22, that will be used to pay that 3% penalty). The AO is one of the TIN investors but not the only one. So it is stealing from third parties that have nothing to do in the “dispute”.

We can discuss if the liquidation poll should be mandatory or at the discretion of the RWA Committee to avoid Governance overload (I tend toward the latter as it scales better).

That’s the problem, if governance is using emotion to decide when the core value is “scientific governance” we are not going in the right direction. Granted, it’s complicated. Granted, we could do a better job at explaining (but all parties are still learning). But having discussions that are mainly based on opinion, feeling or superficial understanding of the reality is not helping neither.

We are still lacking the legal opinion on which the whole structure is build on. The published documents have significant changes to the MIP, yet no one is complaining on those unilateral changes. And the only thing we are waiting for the DC increase is @mrabino1. Therefore, on what exactly the 6S “being sidelined” is based on? 6S was prioritized with MIP21 being worked on before MIP22 (which delayed New Silver).