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.