Some comments on the state of the DAO

Why I’m writing this

I’m writing this post because there’s some things I feel like I need to get off my chest and I’m not sure how else to do it. The past few weeks have been extremely stressful in dealing with the decentralized governance process. While I love this entire community, I think it’s time to take a good hard look at ourselves. Something @prose11 wrote last week stuck with me; that the forums and chat are an extension of the workplace and that we must therefore enforce the standards we expect in any workplace. I fully agree with this line of logic and hope everyone else feels the same. But to expand on this point, a workplace is not a social club, it’s not a place that we go to chat and play games - it’s a group of people with a unified goal and the prioritization of achieving that goal comes before all other niceties and benefits. I’ve been involved with this project practically since its inception, first as a community member, then as part of the Foundation, and now as a community member again. I’ve been a MKR holder for almost that long as well. I am sharing this because I’ve been around the block in decentralized communities, both with Maker and other ethereum-related activities, and at the risk of sounding dramatic, if we don’t get our act together quickly things are going to start falling apart. So with that, I’d like to say a few things:

(1) On Core Units

MakerDAO is no longer a startup gasping for air, it is a fast growing application with product-market fit and non-blockchain users that depend on it, and it needs to operate with a level of professionalism that reflects that position. The Core Units we are onboarding are often very talented, but the budgets are seriously frightening to me as an MKR holder. I will not mention any specific names or units, but I find two key disconnects: (1) some Core Units are applying for very high budgets and do not have the commensurate experience, (2) other Core Units have great experience but are effectively negotiating against themselves for their compensation – while neither of these may be an issue in the short term, without some kind of financial oversight and negotiation on behalf of MKR holders, this is going to spin out of control. My personal suggestion would be to create a Finance Core Unit which passes a global budget through MKR holders and then allows individual Core Units to negotiate within that framework.

In addition to currently having a limited grasp on the scope and size (given the lack of clarity around MKR payouts) of various core units, we lack any meaningful way of replacing them or their facilitators. In this kind of environment everything will be drawn to its logical conclusion - “if you don’t like it, try to fire me.” Given the overall friction of the governance process, I can assure you that this is a recipe for disaster. There needs to be a better way to deal with errant Core Units and mandated actors, otherwise we’re operating a political party, not a business. Perhaps it hasn’t happened yet, but one day we will onboard the “wrong” person for a job. If we can’t get rid of them or scrutinize their work in public because it hurts people’s feelings and causes friction in our relationships, we may as well give up before we even begin. My recommendation is to onboard a Core Unit which is tasked with sourcing independent reviews of the other Core Units and making recommendations around their performance and compensation. As an idea, it would be nice to see these independent reviews come from reputable consulting firms that have experience in the area of expertise of the Core Unit and are not otherwise conflicted. These firms could also be tasked with recommending compensation and scope for newly proposed Core Units, or reviewing proposals of this nature.

Finally, we need to prioritize redundancy and decentralization in Core Units themselves. This is a key and missing component in the overall decentralization of the system. If a Core Unit can not effectively be fired because it has siloed information, legal agreements, or IP, then we are going to find ourselves being dictated terms, not negotiating.

(2) On Real World Assets

Since early 2019 I have been openly endorsing entering real world assets into the Maker Protocol. I will reiterate here that it is the only way to scale in the short to medium term unless we’d like to become a USDC wrapper (there remains an open invitation to provide an alternative that’s not negative interest rates, by the way). Over the years, all parties involved with RWA have put in a tremendous amount of time and money into getting us to where we are today. I’m thankful for them and I hope that they’ll keep working towards this admirable goal. Unfortunately, I have to say that I think things have gone horribly awry. Now to be clear, there is nothing wrong with the “concept” of RWA in Maker, just like there is nothing wrong with the “concept” of a smart contract - I am only talking about the implementation. To draw a comparison, both MakerDAO and The DAO share similar names and concepts, but the poor implementation of the latter doomed it to failure (note I am NOT comparing any of the current applicants to The DAO, it’s just an extreme example to highlight a point). It’s my fear that we’re heading down a route of totally avoidable implementation failure. We need to view the legal agreements and structures associated with RWA just as system-critical as we view the smart contracts which power the protocol. So where do I think things have gone wrong?

(A) The current crop of Centrifuge originators (termed DROP in the MIPs) are not structured in a way that provides fairness or recourse to MakerDAO. We have already been taken advantage of once, as our first DROP originator (New Silver) was able to change a key parameter, which is comparable to the collateralization ratio in other Vaults, without any kind of approval from MKR holders (or even the RWF Team). We will likely be taken advantage of again. To quote Charlie Munger - “show me the incentive and I’ll show you the outcome.” Now I actually do not blame New Silver or Centrifuge for this governance failure, they are (allegedly) well within the rights of the documentation they’ve signed. The issue is that these documents (except in generic form and not pertaining to the individual borrower, and apparently with the exception of the Subscription Agreement for Sebastien’s personal investment into New Silver’s DROP token) have not been published to the forums. A comparison I’d draw for this issue is if Protocol Engineering was refusing to show the source code of our smart contracts before they are voted into the system. Well, more accurately it would be as if a bug was anticipated despite not being able to see the full code, and then exploited, and even then no one did anything about it…but I’ll leave this digression for other threads. I have been raising this as a concern, among other issues with these Vaults such as the Asset Originator’s ability to amend material terms and thus the need for an independent director, as a red flag for months but have been routinely rebuffed or dismissed by the RWF Facilitator. The other issue with these Vaults is that the information flow is entirely siloed within the RWF Team and I believe this exceeds the mandate of not just this but any Core Unit. The primary value add of MakerDAO is transparency, if we eliminate this feature for the sake of convenience we will not be in a good position. My recommendation for how to deal with current RWA collateral is to limit debt ceilings to 5M Dai and the cumulative debt ceiling to 25% of the Surplus Buffer until the following issues are fixed with the structures:

  1. Ensure that the borrower (the “Asset Originator” in Centrifuge terminology) can only change material terms in their agreement with the explicit vote of MKR holders (just like all other Vault types in the system)
  2. Insert independent directors into all SPVs that can act as general protection for MakerDAO and for protection from bankruptcy
  3. Get an opinion from a reputable CPA that the Asset Originators will not have to withhold tax on Maker’s stability fees (and if they do, restructure in a legal but more tax efficient way)
  4. Further distance the ownership of the SPVs from the Asset Originator to increase bankruptcy remoteness
  5. Ensure an independent agent of some kind can reliably liquidate collateral for any facility where the asset is not a short-term instrument that converts back into cash (e.g. farmland)

Note: I am recommending 5M strictly out of the consideration of being a good partner to the originators, but this number (if anything at all) should be passed by MKR holders

(B) The RWF Team will be more effective by reducing its scope and clearly defining its mandate. Right now, it appears to me that this team is trying to do everything, and understandably things are falling through the cracks. I’d also like to say that, for the most part, I think they are a great group of individuals with the right qualifications. But they are independently trying to (a) source new deals, (b) assist in the structuring of these deals, (c) price risk, and (d) manage the positions. What I’ve just described is generally under the purview of an entire company, not a small distributed team, and I don’t think the answer to our problem is to rebuild JP Morgan as a MakerDAO Core Unit, thus I recommend keeping the team similar in size but reducing scope. I believe it would be better for everyone if we operated RWA the same way that we operate other collateral onboarding and management. The collateral sponsor (in this case the originator) should come to the Protocol independently (or through a third party like Centrifuge or RWA Co.) and be proposed either by themselves or that third party. Prior to a greenlight, elected members of the DAO should not be having negotiations with the collateral sponsor (I’m not saying they do, by the way). After a greenlight, the RWF Team should intercept the application and ensure that the appropriate structural safeguards are in place (like the list I’ve outlined above), and then run the proposal through an objective prioritization framework. The final output being a risk assessment with recommended stability fees and other parameters. Positions should then be managed on a micro-scale by an independent director (or Trustee) who executes a clearly defined agreement, and on a macro-scale by the MKR holders directly. My request to the RWF Team is as follows:

  1. Limit your scope to enforcing maximum structural protections and proposing Vault parameters
  2. Ensure you are only needed for oversight and do not represent a critical intermediary in the operation of any Vault
  3. Do not become a silo of any information critical to the decisions being made by the MKR holders (e.g. deal-specific loan documents)
  4. Develop an objective prioritization framework that will demonstrate to MKR holders and collateral applications the standards that will get a proposal to the front of the line
  5. Develop an objective framework for the structural and financial precautions that a borrower must meet in order to access your recommendation for higher debt ceilings, and specify what those debt ceilings will be at each level of increased structural and financial integrity

(3) On philosophy

We need to move forward quickly and intelligently, not move fast and break things. Those two approaches may sound similar, but the absence of thoughtful risk analysis in the latter has never worked in this space. I’m as tempted as anyone to cut corners and take risks, but I just can’t square that line of thought away with the potential impact on users of the protocol. I’d encourage everyone to scrutinize changes to the protocol through a more conservative lens. Recently someone told me “life is full of risks” when dismissing my concerns around a particular collateral application. While this sentiment may be true, it’s a comment that’s more relevant coming from a psychiatrist, not someone assisting in the management of over $5B. I believe our philosophy needs to be one where we do not waive away any risks, and mitigate all that we can. There will be countless risks that we cannot control or do not anticipate, but to ignore the ones that we can and do is simply negligence. This isn’t a damnation of any group or individual, it’s a humble request that we all adopt this philosophy given what is at stake here.

I’m bringing this all up in the hope that it will resonate and things will start to change - if they don’t, the Protocol will enforce this change with MKR dilution. I’d really like to never get there. With that being said, I’m personally exhausted. I’m trying to balance running multiple businesses and a three month old, and I only have some much more time and energy that I can dedicate to trying to constantly keep track of the Maker Forums and Chat. I believe the only way to solve this is with vote delegation (and hopefully experienced delegates), so hopefully that’s coming soon. Anyway, thanks for reading/letting me vent. Still looking forward to changing the world with all of you.


Here’s the TL;DR for anyone who needs it.

(Lots of other useful stuff in there, too)

1 Like

Addressing one or your first points on a core unit to provide evaluation of other core units, I 100% agree. Dedicated oversight is needed for any project as the amount of core staff goes up, and the arenas of forum or on chain democracy aren’t the best venues to carry out more routine and specific appraisals of performance that might be lost on non specialists, or people without the time and technical skill to be effective oversight.


Who watches the watchmen (i.e. core units)?


Happy to see the DAO’s eyes opening to the clear detrimental position we maintain vis-a-vis the DROP-related crop of AOs.

My suggestion here would be for the RWF team to ensure that all self-interested positions, such as holding a token (e.g., DROP) that may color how the RWF team member advocates for the DAO, be clearly disclosed.

This is the only viable solution to governance overhead on the horizon – look at how VCs involve delegates like the Harvard Blockchain Club in governance for other protocols (e.g., Uniswap). MakerDAO could have those benefits, too, with delegation.


Did we not delay and change the last RWA governance poll after you arguing aggressively on a Sunday evening?

We didn’t source any of the deal in the pipeline, neither did we setup the Centrifuge structure or the 6S one. We are working on a trust structure for the same problems that you are highlighting. MKR token holders will decide. For management of the position, that’s for the RWA Committee I would say.

Why don’t you coordinate with the RWA Committee so we could have a good workflow and less drama in the forums?

So there is one issue you are using over and over (the ability of the AO to change the parameters unilaterally) and put that on the fact that documents weren’t published so that I hide stuff from MKR holders. All documents related to this point were published and the issue highlighted by RWF. MKR token holders have approved the onboarding. So how exactly would publishing more documents help on this item?

This is why I launched the RWA Committee to have some community members looking more carefully at the documents we are publishing.


@g_dip this is a good post but one argument (1) is very general (wide in scope) “Core Units” while the other (2) is more specific and feels like a semi-private discussion with RWF. I will only comment at (1) here.

Great suggestions! However, if MakerDAO has only limited alternatives, these performances evaluations, schemes, committees, etc, will have a limited impact.

We had a huge thread of discussion at the time of formation of the SC core unit (then renamed Protocol Engineering core unit), which was perhaps the main example of a very experienced and solid CU, with a proved track record.

You can have the Finance Core Unit in place and all kinds of frameworks. But ultimately if you have no alternatives you are doomed to accept any conditions. What would have happened to MakerDAO if the PE core unit wasn’t approved in May?

My opinion: Sure, we need frameworks and stuff. But what we need is an efficient way to promote healthy competition. We need MORE core units on the same topic. Each competing and trying to outperform the others (and thus get better terms).

I have expressed this PoV several times (e.g., MIP39c2-SP7: Adding Protocol Engineering Core Unit - #2 by iammeeoh).

I don’t think this has been a priority so far when setting up the various CU.
In fact, the opposite happened:

  1. the SC (smart contract) core unit became the PE (protocol engineering) core unit, when they decided to merge with another team (the one planning to work on L2 solutions).
  2. The governance CU recently added @prose11 as 2nd facilitator, rather than splitting into 2 governance CU units.

These choices are 100% understandable, we need to start from somewhere, and that ‘somewhere’ is basically the legacy units of the Foundation. And, as we know, decentralisation/duplication is very costly.

All CU that have been approved so far are GREAT, we are lucky to have them and ultimately they are fairly paid all things considered. But we are extremely exposed to risks associated with lack of diversification (aka “centralisation”).

Example: What will happen if @NikKunkel, for whatever personal reasons, decided/needs to quit? Are we ready to quickly replace the Oracle CU with a sufficiently solid alternative?

I somewhat share your sense of urgency.


Yes! I was actually going to suggest splitting the forum thread to be able to discuss both topics separately.

Great posts, @g_dip and @iammeeoh .


Maybe @g_dip can position RWA Co as a CU facilitating RWA. So at least that would be solved for RWA. This will also remove the conflict of interest of defending the interest of the protocol but being paid by asset originators

You are also right, and I think those discussions are hurting the image of Maker. I would propose that all RWA concerns are directed to the RWA Committee (DM to @prose11 ?) so the committee can prioritize them and process them in an appeased way.


Maybe some day. Right now that committee does not even get to issue recommendations before RWAs go up for a vote. Note that it was asked about P1, HTC, CF, and FortunaFi (forget the abbreviation for that one), but due to lots of contentious issues has not even tried to vote on a recommendation.

I don’t think FortunaFi has even been discussed because there has been such a scramble to get information on the Centrifuge model.

Like a lot of the RWA, the FFT1 deal has been in the works for a while. Couple of calls that might be of interest:


Wow. Thank you for that post @g_dip

Interestingly because of the focus on RWA in your post many of the more important topics have for the most part been ignored.

(i.e. Maker Financial Cost controls and justifications for budgets vs. a free for all grab not just on salary but on MKR as well)

I am not sure when I will get to my lengthy reply. But being part of a few DAOs now I see similar issues cropping up. Effort reporting, and grading, compensation handling, communication/consensus stress. Focused discussion and scope handling to say the least.

The real problem with DAOs isn’t doing the work, it is the politics behind the DAO micromanaging every little thing. Imagine if you will having to deal with 50-100 people to make every decision. It is horrible, highly inefficient, stressful, and time consuming. The reverse of this is having CUs where as you rightly assert one terrible CU or CU leader and basically one can get into a kind of battle ground between the DAO and a CU employee.

In my own experience walking into and out of over 150 companies I found 8 to be about the point where ‘easy consensus’ breaks. Often times because it wouldn’t just be 1 person that needed to be convinced but 2 or more. Some ideas of how to make a practical DAO I believe would be useful for all DAOs, because honestly I see these same issues cropping up all over the board. Everyone is being overloaded just trying to keep whatever the DAO was doing afloat vs. taking time to streamline DAO operations, communications, discussions and ultimately decisions and the easy part the work.

The above was a prime reason why I wanted to characterize and measure who actually owns the DAO vs. who doesn’t. While I want to hear from interested parties. I want those parties to have a measurable stake in the organization - either as users (or clients), as owners, or as workers.

I am a small MKR owner. I have a strong opinion. I try not to speak too much here simply because I know less actually is better, but also because I have a job, a family and a life outside of all of these DAOs. What I can say is that I pretty much don’t have the time to deal with everyone effectively doing all the other stuff I am doing. So I get frustrated, stressed, and ultimately just find myself wanting to ‘go away’. I literally don’t have the time or energy to debate and am like. Ok I have a lot of my crypto associated with Maker and DAI - I hope to hell Maker doesn’t screw up because it won’t just affect me at this point it would destroy my capital in this space and probably a lot of other people too. So I am here mostly to at least try to stop Maker DAO from going off the rails and to try to interject some Q/A where I can. I have had numerous discussions with outsiders about the difficulty of dealing with Maker DAO, as well as every other DAO, and how people are just kinda hunkering down and just dealing with the absolutely necessary and trusting that most everyone else is basically doing the same.

Most of us are highly talented, educated, informed (as much as we can be), we are basically good actors. My concerns are what happens when/if bad actors infiltrate these DAOs and how 1 bad egg can literally screw everyone up. Worse someone who thinks they are acting in good faith but basically can drain a communities energy completely. I have seen this in Intentional communities, I have yet to see it in DAOs but expect it is coming.

So I think in general all of your comments are important, but I honestly have zero clue how to tangibly address them without significant time and resources. These aren’t just a Maker problem but a DAO issue and I would like to see an initiative led by Maker that attempts to form a coalition of DAOs to try to delineate these issues, and then try to address the low hanging fruit because the implications of improved efficiency and less stress I think would be positive for all DAOs, not just Maker.

I have always seen Maker as a leader in this space and that the people here are some of the best in the world. It is one of the many reasons I come back. And why I work insanely hard to say/write less.

Sorry for length and verbiage. I am at work and just outed this. Will try to edit it down later.

Put simply I think the best idea here world be for MakerDAO to put together a proposal for us to put up something like $1M in some sort of matching funds to get something like $20M together to address DAO issues since every project now has a governance token and none of us can effectively deal with our own DAO issues much less any others.

I think the name PractialDAO might be appropriate. Hell we could even make a token for it.


Well said. I just came across this post by Greg and there are so many valid points. And I also agree with Meeoh here–I think going forward all Future proposed Core Units should go thru incubation via the SES CU with @wouter and @juan

1 Like

This would serve to filter out the cream of the crop.

Awesome post Greg. I agree that:

  • RWA are a major piece of MakerDAO’s future and we need to do everything in our power to mitigate all knowable risks–the legal agreements and structures definitely need to be treated with the same level of diligence as smart contract code.
  • A separate Finance CU would be useful; they could even take on the overall DAO financial reporting that RWF team have been producing.
  • An oversight CU filled with multiple independent reviewers would be useful. Such a team could keep existing CUs accountable to the overall transparency and reporting standards being formed at MakerDAO, while also citing underfunded teams or overfunded teams with explicit reasoning for each opinion. I mentioned the need for one in the Core Unit Blindspot Thread a few months back.
  • Everything mentioned in the (3)on philosophy section.
  • I am not a lawyer or professional financier, but I think the structure issues and fixes Greg laid out are reasonable.

I would like Core Units to update their mandates as they mature. Between what Seb says RWF does and what Greg says they do, I am left confused as an onlooker. I hope that not only RWF, but that all CUs polish their public mandates to reflect the current state of their teams and potential pivots. RWF-001 was actually the first Core Unit to be proposed, and had, in retrospect, one of the broadest mandates despite its conciseness. I voted yes because I figured more definition would be added as time passes and as the division of labor becomes more clear. It looks like we are approaching this moment. It would be great to see a refreshed RWF mandate!

I appreciate the tone of this post and the continuous reminder that this isn’t about the current people, but rather the current business practices. I also think it’s appropriate to have this conversation on the forum rather than behind closed doors because the issues being highlighted are very important and should be visible to onlooking stakeholders.


Could RWF keep financial reporting and give up RWA? Asking for a friend. :slight_smile:


This topic was automatically closed 91 days after the last reply. New replies are no longer allowed.