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I'm Sonia Agarwal and I am free. Canst.
And today we are talking with room Christensen of maker, Dow,
and talking about many of the exciting development and things
that have been going on with Diane and the etherium
ecosystem. And, you know, about stable
coins and the governance of the maker Dow itself.
So it's a really exciting episode before that though, we
have a couple of announcements, many of them to do with the
Berlin blockchain week. The first one has to do with
adapt console. Of particular given that gnosis
is one of the, you know, co-organizers of it.
Would you like to talk a little bit about that?
Defcon is one of the conference's at Berlin
blockchain week. It's starts August 21st, and is
until August, August 23rd. And we have a 20% discount code
for epicenter listeners. So, the discount code is
epicenter. Def con 20, 19, no spaces.
We will also record a second edition of epicenter life with
myself sunny and Sebastian at the def con conference.
The last one that we had at The Interchange conversations was
Really nice. Yeah.
And then a lot of us will be attending at many different
events throughout the week at Berlin boxing week.
I'll be there at the better cartel demo day as well as the
web three Summit and East Berlin.
So you know we I think it should be a really exciting week.
So I heard many people to show up and we'll actually be having
our own epicenter event during that week as well.
Where we'll be having our small Meetup similar to the one that
we've had a couple of times that, you know, Dave.
Khan for, and at UCC, for be a drink speed up with the host and
other listeners, it will be on Thursday, August 22nd.
The location is still to be determined, but it will be
pretty close to the location where Defcon is.
So, you know, it'll just be a quick walk over from the from
the venue over to the Meetup location that day.
Finally, the last announcement I have is not for Berlin
blockchain week, but for SF blockchain week, which is quite
a bit further. Out near the end of October, but
the Cesc conference crypto economics and security
conference. That's basically it's the UC
Berkeley academic content box and Conference that.
And when we launched a curry throws annually, we're currently
accepting papers for submission. And so if you just go to Cesc
dot IO from that site, you'll be able to find the link for how to
submit papers. And so, you know, we're open to
papers on, you know, any topic within the field of the period.
Economics or systems designed Game Theory and so we encourage
as many people to participate as possible.
I'm going to be I'm on the program committee.
So I look forward to reading all of y'all's papers So without
further Ado, we'll go to the interview with Ronan.
Welcome back to epicenter. And today we have on with us a
guest room. Christensen who is the CEO of
the maker foundation and the founder of the maker Dow
protocol and so many people are, you know, probably pretty
familiar with maker do especially, you know, it's
probably one of the most popular products on the etherium
ecosystem with the dice table coin.
And so ruin has been on the episode once before, Our bat all
the way back in 2016 before died had even launched.
And, you know, since then dye has, you know, grown to become
this massive project that as come, you know, very successful.
And so, you know, we thought it was time to bring ruin back on
the shore to talk a little bit about how their project has
changed and what's new and how this massive surgeon adoption
has gone. So, welcome back onto the
showroom. Can you give yourself?
Can give listeners a little bit of an intro about yourself in
case, you know, some of them may have not seen the last episode
given that it is all the way back in 2016.
Yeah, absolutely. And yes, thanks for having me
back here. It's pretty wild to sort of look
back three years in time and the crypto space.
So this is a very interesting opportunity.
I think and just quickly about myself.
So basically, I did a lot of attempts of startups when I was
younger and And worked a lot of quick.
Lord worked a long time in Asia. When I then discovered
blockchain technology and first going to bitcoin good really
into Bitcoin. You know became like a real
Bitcoin type back in 2011 2012 but then over time I discovered
like I got somewhat dissolution. Buy Bitcoins volatility really
and sort of the fact that it wasn't seeing less kind of the
mainstream adoption that people predicted initially.
And I think to a large extent that was because of the
volatility right in because it's not it's more useful as gold
rather than regular currency. So I got into stable coins.
And I discovered bitshares which was the first decentralized
stable Grant project. But unfortunately, due to many
reasons, bitshares, never really gained the kind of traction that
we hoped for and instead me and a couple of other people from
the bitches Community, eventually pretty much switched
over to etherium and kind of Took the Stephen component from
pictures and try to implement it on a theorem.
So will you actively involved with like the development of the
church? No, you could say I was a very
active Community member and in Russ.
I mean, many of these like fundamental ideas around, make
it all come straight from from the pitched like from the idea
of pitchers in particular, right?
How like you have regular community members ultimately
being like, despite not being sort of an official developer of
the project, right? I still was very deeply involved
in sort of the core of the governance of it.
Which is exactly what was the part of what is so powerful
about blockchain Technologies, right blockchain?
It's tease. So the picture system, you know,
they used their contract for difference system, you know, can
you tell us a little bit about some of the things that why it
shares you know maybe didn't work and how that kind of
contributed to your design of the maker system with the cdp's.
Yeah so there's really Couple of reason I'm saying this is really
three major reasons why like I mean, the three major things
that to some extent got ambitious way, right?
So first of all, was that pitchers, was this, it was not
like aetherium smart contract platform rather.
It was kind of like a Swiss army knife sir.
So it's like a single platform or like a single project that
tried to do many different things, right?
So it's both it did, save all coins which is mainly, like, was
kind of this main product, right?
And really, they're the biggest Innovation of the project but it
also did things like privacy and like a very Advanced privacy
system and things like account names, which is a time.
Like, instead of having the long strings, like, having actual
account names was like, very revolutionary and just like a
whole range of other things like decentralized exchange, there
was even like some music related stuff which is I think is funny.
It's like it's kind of related to what ended up happening with
our chain many years later. But I mean there's just there
was a lot of try to do a lot. Things and as a result it didn't
really like mr. Will on any one specific product
at least within the very early like big window of opportunity
that it had back even before we throw him launched and then
secondly, the were some fundamental problems with its
table coin design. Still chiefly that the stable
coins were based on a single collateral type, right?
So they were only collateralized by the pitch years as it is.
Itself. So, actually similar to the
current design of single metal die.
And the downside with that approach is that it really
limits the level that the system can scale.
Because once you get to a certain size, you cannot create
the systemic risk, where the stable current failing could
take down the entire platform. And that's of course, like
that's the really big innovation that we brought to the table in
that, we actually figured out. How do you take this basic
approach with a single little time?
And you actually did design a system that has many different
collateral types, which can then diversify, and really mitigate
the risk That's the so like that's inherited having just a
single little type and even Branch out the use.
Case Way Beyond what was originally envisioned in terms
of like even accessing real-world assets and all sorts
of even more sort of futuristic stuff.
And then I think the final point that I think is also like has
been really critical for our development and really a big
part of how maker has evolved is that the pitchers community and
some of the pictures Philosophy was quite extreme in that it was
really like hardcore anarchism in many ways, and really by to
some extent totally detached from reality which then ended up
just like, you know, turning off a lot of people who otherwise
have been interested in, but who simply, we're like, turned off
by like the the idea that if you want to use this super awesome
technology, you also have to like, subscribe to all this
ideology right which is not always.
In fact, it's a pretty bad strategy for trying to get
business adoption. So So maker did start off like
very much derived from that and I kissed Philosophy for sure,
but it was with the mindset that the end.
The goal is to make change in the real world and and that
perspective then letters on this like ability to essentially grow
up alongside the rest of the ecosystem, right?
Because really today the blockchain space is just very
different from what it was even less a back in 2016.
Yeah, absolutely. And we are deep dive into how
exactly the stability mechanism Works in a second, but just as a
catch-up, can you can you give us the 90 second version of what
happened since we last had you on the show?
Yeah. I mean, it's, I think it is
really mind-blowing. If you could go back to 2016 and
then tell people what the landscape looks like today would
like make her out in the world and things like that.
Impound another DIY projects all working together, but just the
very basic Milestones, right? Is obviously the launch of
single collateral died which was really, to some extent.
The the first launch of like a, like the first successful launch
of a major dep and Then followed immediately by the trial by
fire. As it had to survive, a 95%
crashing, its collateral, right? Just study immediately from its
launch and actually single felt I was able to, you know, totally
like brush, Alright, so that was that complete creche in 2018 and
at no point in time, they did in any ways of come close to
threaten the stability of die or threaten the Integrity of the
pig. So that really created this
critical proof point that the technology didn't affect worked
work in the way it was supposed to work, which then led to just
this greater sense of trust and system and ultimately adoption
of follower that, right? So in summer, 2018, Seen the
system, had its initial debt ceiling of 50 million and the
governance had to actually raise it beyond that.
And then it went all the way to about 80 million dollar in
circulation, which is where it's sits today as well as something.
Like, I think it's more than 300 million dollars worth of
ethereal blocked as collateral in the system right now.
And then what came next was the proliferation of the defy
ecosystem, right? So, this sprawling ecosystem of
startups, that could really be made by, Anyone right?
Like and I can fit together seamlessly and because they have
died as their source of decentralized ability, they can
actually provide very useful products and very useful
services without giving up or sort of compromising on the
decentralization which is otherwise often what you see is
the the trade-off with for instance something let me just
with Bitcoin for it. So I tried a lot of very
interesting stuff you do that or just other Other systems that
are that don't up that aren't based around smart contracts.
You very often have to give up decentralisation to get more
advanced functionality and I think this might be the first
time where we've seen this. Like, we've seen the opposite
where we've actually seen that decentralization.
In fact, adds to the functionality and adds to the
convenience of using these apps because they all fit together
seamlessly, right? Which is I mean it is really my
blur I think and it's not many people think about that also
because maybe many people didn't really weren't around and So
2015 2016 when the theorem started but it is pretty crazy
that the ecosystem has actually been able to deliver on that
promise of like this seamless interconnection between you
know, trustless and permissionless financial
services. And then finally, I think this
has been a little bit more than 90 seconds now.
But the final and perhaps the well in my opinion, the most
critical Milestone is that the community was able to bootstrap
the decentralized. Tons of the single flat or die
protocol and actually begin controlling the system.
Directly through them cartographers in a very active
and very well somewhat efficient manner although with a few
pitfalls here and there. But but that's has really been.
I mean, that is the most incredible thing of all because
of all the things, it is really the decentralized governance
that collect defines the mega project the most and it is the
critical value proposition and the Critical feature of the
system that really makes it interesting because it promises
to deliver something that's completely different from
existing Financial systems. Write that are all like
incredibly lockdown and and with with this like inherent lack of
transparency and and very often contradicting incentives built
into the system. I mean, this also just one of
the things that many people didn't believe it was even
possible, right? Like, I mean, in fact, we didn't
even really. I mean, we weren't really sure
if it was you Owing to be possible to do, right?
If you could actually launch a, like a, like a sustainable
Financial system, and then just let it be controlled by random
strangers over the internet, as long as they have, the right
incentives by holding the right token, but it has actually
played out, right? And and nowadays we've reached a
point where on a weekly basis, the a whole is actually manage
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Can you explain to us how the system makes sure that one day
is always 1 US dollar. So I mean just for just just for
the larger picture there are other stable tokens such as you
SEC and the Gemini dada and tether that are supposedly
backed by a dollar in the bank. For each one of these coins that
are issued. So die actually works
differently and that it's backed by crypto collateral.
So how does that work? And how Do you keep, how do you
Peg the value to the dollar? Yeah, very important question.
There's kind of two mechanisms to right?
There's two sides to it. So, there's the, there's the
long-term question of fundamental solvency and I
guess, you can say resilience of the system, right?
Which is like, can it like, is it really is a real value there?
Behind the tongue or is it all just like hot air, right?
And that's where the answer is. It comes from the Unchained
collateralization, right? So the reason why you know, that
there's Is real value in your thigh is because you can go to
the blockchain. You know, right now go to a
tools for instance and you can actually, you know, on your own
do if complete audit of every single aspect of the system in
real time, even, right? And you can ensure that there's
always this like, there's always this fundamental and inherent
solvency in the system as well as a safe level of over
collateralization, so that despite the system right now
being backed by only eith, And the inherent volatility of East,
the still able to remain stable, even in situations, such as the
2018 crash, because the risk parameters.
So the kind of like the, the safety logic of the system that
keeps it safe from things like Crash from, a crash rate is set
correctly, so that you could have a, you know, you can have a
significant fall in the price of eath, but that's fine because
there's about five times as much value of Ethan the system as
there. Is outstanding died in the
market, right? So you could really live system
can handle a very big Crush. So, that's the best kind of like
the lot. You know, that's the fundamental
like value in the system. That means that there's a
potential here for pursuit of for stability, right?
But then the other question is, how do you create short-term
stability in one hand? So like packed price?
Right? Let's like that stays at the
same price point, but even more importantly, how do you create
liquidity, right? So how do you make it possible
to move large amounts of do? Into East or into another stable
coin or even cash it out for Fiat.
And the answer is that it's it is like you said, it's kind of
the system, keep this stable but perhaps a better way to think of
it is that it's the government's that keeps the keeps it stable
and then actually make it takes care of this because it is
managed through the like adjusting the rates in the
system. So basically the the cost of
generating that I primarily is how How it works right now in
the future, it will also be the savings rates.
Like the games you get from holding die but it's not going
to be available until a future version.
So right now it's actually purely done on the the
generating die side which is really it's similar to changing
the cost of borrowing. Let's say US Dollars which is
exactly how the let's say, the Federal Reserve Central banks,
in general, they maintain the value of their currencies.
So, what they do is they modify the interest rates, and as a
result, they basically change How likely it is.
Someone in the market is going to borrow money, which expands
the food supply, right? Because when you borrow money in
a fractional Reserve System, you you're essentially creating new
money or other, or will do the opposite, right?
Pay back their loans and actually just hold onto money if
the interest rates higher, right?
So it's the same thing that the maker system doesn't That
governance controls is they modify, What's called the
stability fee, which is the fee that someone pays to essentially
borrow die or generate die by depositing collateral into the
system and then utilizing the smart contract system to to
essentially print you die. And then the stability is the
price. You have to pay for this for
this service and it's cut and that's what I was referring to
that this is what's be actively changed like actively modified
every single Right now by the decentralized governance, this
stability fee has gone up from I think initially something like 5
or 7 percent to currently over 20%, what do you make of that?
So what what what do you think this means for the ecosystem?
Not in terms of how expensive it is to borrow money, but in terms
of, what does this say about? The ecosystem?
What has changed? What's the underlying metric
that has changed? Yeah, that's it.
Started at 0.5% when the system was launched and the Very like
the very basic assumption that turned out to be wrong, is that?
It did assumption was that there's going to be incredible
demand for decentralized stable fine.
And which is kind of like the simple use case rather than sort
of the basic value proposition of the maker protocol.
And then this the secondary use case of generating day which is
a much more advanced type of way to interact with the system.
Right which is its and it's similar to its similar to
borrowing money in the bank, or taking out a mortgage or even
margin trading in some situations where you deposit.
Laterally into the system and you generate diorite and yeah,
it was just the first of all the interface to do, this was
incredibly complicated and it took about seven etherium two
sections to even have a CD P go through, right?
And it was just all. So like is a very Advanced and
completely Cutting Edge and new type of service, right?
Like the very first defy app and that had never been done before
the term defy even existed. So we naturally assume that it
was going to be more difficult to people to do that.
It whereas it will be easier to get them to use the most symbol
and approachable stable coin functionality.
And this was also the case very in the very beginning, but very
quickly. The I like the idea of defy of
being able to in a decentralized system actually access financing
for your inventory and taking on decentralized Magic positions
was act. Like it was a very powerful idea
and it's essentially spread like wildfire with people teaching
each other. I guess, how to do.
How do you use this, right? Even in the very first stage.
We were so different views. So, what ended up happening is
that there were way more people interested in using the advanced
degeneration functionality, right to to borrow and borrow
Diane open cdp's. Then there are people using die
naturally. And then what the system does is
it because what this affects right?
It's like the, it's the supply and demand, right?
So, you have sort of the de Madrid I, which sits some
particular level, and then you have the supply of die.
Which, which sits somewhere else, and they're kind of
independent of each other. As in people holding by are
people who want to go out and use a stable coin, maybe spend
it people who open cdp's, have a different, a completely
different Demand right. They're interested in leverage
their just financing. So the way you and what do you
have to what has to happen is they have to meet exactly in the
middle. So they have to be exactly the
same because if they're not the price won't be $1.
So if let's say supplies higher and demand is lower, the price
will be below a dollar. And if it's the other way
around, the price will be above it, all right?
And so what governance does fundamentally to kind of like
tie them into sink is to adjust the stability fee.
So it so what that means is adjusting on the supply side,
how look like, how interesting, how, how, how, yeah, just like
the terms on which you can generate that, right?
Because if the stability of these higher it costs way more
to generate die unless people are going to be interested in
it. So that's why and that's then
how you how we know Oh that what happened is that they were tons
of demand for generating diet, right?
Because the stability features shut up which meant that without
like if the disability has stayed the same the system
probably wouldn't be in sync. Today will probably be like
they'll be way more die outstanding but also the price
would be below $1. So why was the stability Theory,
the only way to modify the supply?
I mean, in a way, what should we expect that, you know, back when
the dye price dip to like, you know, 80 cents or something?
Shouldn't we expect that the difference from the shelling
point of $1, should provide the CDP creators enough incentive to
Arbitrage that and you know, maybe buy a bunch of die close
their cdp's. Allow the system to go back up
and then reopen the cdp's when the dye prices back to a dollar.
Yeah that and that's the basic Assumption of how it's a very
micro scale, the system remain stable, right?
But the thing is that that assumption depends on The like
another subject right? Which is that governance will
actually act to deal with the balance, right?
And that's, that's of course, in the early stages of system,
that's there's less proof that got the governor's actually
works, right? So the fact that the shelling
Point even is one dollar isn't really as established compared
to, you know, after basically today, right?
Where people are a lot more more willing to trust the fact that
the price will go back to $1. You think part of the issue
might be that the set of Who are able to participate in?
Arbitrage is limited where are, you know, I guess what I was
first learning about die. Like it didn't guess.
It didn't hit me. And then when I was looking at
it again, like, you know, like a couple years ago, it took me a
while to realize that oh, wait, the die holders.
Actually don't have any claims to underlying collateral
assuming, you know, except in the case of triggering a global
settlement but because it's not possible for the die holders to
actually, you know, go against the basically, you know, the
only people People who are able to Arbitrage, it are the CDP
holders, and they have to over collateralize, so heavily, and
so that heavily limits, the set of potential arbitrageurs, thus
making it a much more inefficient Market.
What's actually being a rest and this is what's what's, I mean,
this is the part that can be very difficult to to sort of
wrap your head around, right? But it really is the cost of
capital. So it's not a quick because
they're like there is no fundamental claim in any way to
$1 it. Unless, in the situation that
you described the global settlement, right?
Which is a very like Niche, each case that isn't actually meant
to even happen. My point, is that even a CDP
holder? Doesn't have some like, direct
way of If I have one day, it's automatically.
Unlocks one dollar value elsewhere.
I mean you could, it does of course, apply on the actual
liquidation ratio. Sure.
But it doesn't like, I mean in the end it's a different concern
compared to kind of like the risk management at the better
larger scale right. And in reality what they're what
they're really looking at is the cost of capital.
So what they're they're interested in is How likely are
they going? Like, I think going to make more
money if they hold onto the CDP and they hold onto the leveraged
position of ether instance in there.
And despite and paying whatever cause they have to pay on the
both on the you know on disability fee side but also on
whatever potential you know Arbitrage gain that would be.
And the thing is that in many cases you know the even if the
Arbitrage potentially huge it might not actually outweigh the
the sort of imagined again, I like the projected gains, I'm
sleepy holder so that there's just so many Dynamics playing
into this where There's only one solution and that is very
proficient management of the stability fee and the monetary
policy of the system. But with that in place they're
actually like it should theoretically be exactly as
efficient as the current monetary system is in this
regard but of course with the extra benefit of also being even
more seamless and blushing based and so on.
So to make it as efficient as the current monetary system that
would make the claim that the mkr holders are as proficient at
monitor. Policy as the, you know, the
people at the Federal Reserve who are, you know, generally
much, you know, trained Economist and stuff, two
questions here one, which is a question I've had for a long
time and I unfortunately couldn't find any good
resources, answering it on the Internet is how was mkr
distributed because, you know, there was never any sort of Ico
or anything done for mkr. Yeah.
Kind of how does that distributed?
What percentage of it is still in the hands of the Nation as
well as VCS or and then what percentage up is in the hands of
The Wider public. And then to how do we make sure
that the people who are holding this, mkr are necessarily the
most sound monetary policy decision makers.
Yes, this is really the fundamental question of the, the
system, right? Because like I said earlier, the
decentralized governance is the cool feature and the I mean, the
basic underlying assumption is that If you have a proper like
open and like equal playing field, I guess you can say for
the science and the knowledge related to monetary policy.
You always be able to beat any amount of experts, right?
Because you will have the entire Global body of knowledge
participating directly in governance.
Which means that you could even have, let's say, central banks
participating potential, right? And they would all have the
exact same point of access in the SEC, same framework to
participate, as Well, every other Central Bank or every
other Commercial Bank or we all the like random econ dirt
sitting in the basement, I kind of like thinking about
Innovative new, you know, ideas around it, right?
And the thing is that in the end it's very hard to sort of say,
who is like it's very hard to pick kind of like this genius
person, who knows how to like Run the World economy, right?
Because it's kind of it's, you know, Global like macroeconomics
and monetary policy is it Silly to some extent a bit similar to
Voodoo in that it's not totally like it's not, you know it's
like white fluid and it's quite to some extent, an art form as
well, right? So what that means is that it's
not really guarantee that kind like highly-decorated Ultra
expert, is the guy that will prevent the financial crisis
from happening. It could just as easily be
someone who's just seen something that no one else saw
because they all were locked in their old way of thinking, or
something like that, right? And the core.
Year of the maker doubt, decentralized governance, is
that what we want to do is we want to create?
I mean, what we really think of as something like something
similar to a scientific Community right?
Where there is a free, Again like a free playing field and
free sort of open framework for all ideas to participate in a
like a like an unbiased Forum, right?
Where you can have like where every perspective gets a chance
to participate, right? So whether it's established
Central Bank or the sort of the the the more radical and more
modern or whatever new Innovative approaches, of
course, there has to be like, I mean, once you've done of open
that Pandora's There's so many questions, there's a gif
moderation and like priority. And so on, right that needs to
be considered and in the end and that's maybe also like a, like,
a critical other piece of it is that you have to, of course, you
have to ground yourself in a conservative mindset, right?
Because of course, if you just go out and so do radical
monetary policy, you will quickly end up looking like
Venezuela or turkey or something, right?
Where people try to defy gravity, which, of course you
can't do, right? Yeah.
Like the base, the answer really is that You could say that like
even if the FED had the world's top economists and monetary
policy gurus, they will still just be a subset of the people
who will be able to participate and have direct line.
Like both have direct access and line of sight to make a
governance. But also have that direct
ability to actually influence the government itself.
This then comes back to the question of decentralized
governance and a holders and how you actually implement this in
practice rate because many people People think that.
The basic idea of make a comment is just a card holders, just
vote and decide whatever they want, right?
They basically do whatever they want and that's the end but it's
actually a much more sophisticated framework where
it's more. It's more than a holders have
this role of trying to surface that you know, like the key
rational points made in this scientific framework and and
only sort of by going for this rational approach and try to
reach something that's as objective and as is vetted as
possible. Are you able to actually reach a
selling point where you can even get consensus around the direct
approach before we dive into the governance?
Sonny asked earlier? So how are the maker tokens
actually distributed initially. So who are these people who
actually Howard maker? There was initially 1 million a
took right created by me really under and a couple of other guys
in the early days and we knew like we knew from the very
beginning that because again like they've called it gets our
goals are not meant to kind of like run the system through a
popularity contest, but they are, of course, very important
in that with the wrong set of stakeholders.
You could have like you could easily see how the system could
fail, right. So we knew very early on that.
It would be too risky to just do for instance, nice.
Go and try to pump the token and get a bunch of speculators in,
right? But rather it's all about
choosing the right set of stakeholders.
So the very first approach was to to distribute it.
Directly to people who volunteered to work on the
project contributing with like, with like science or
engineering, or to select various forms of contributions,
to the project. And then also selling directly
to to some like Engaged community members.
That were kind of like essentially like a part of the
early. It's of the core engaged group,
right. Which is very different from how
I see you operated because the early major project actually
distinguishes Itself by sort of almost doing - marketing like
five club-style. Like it was actually meant to
kind of be a bit of a secret Club where the right people
needed to get some space to get their head around it before the
masses came in, I guess you'd say right and of course after a
while the system grew to a point where the Really felt confident
enough to kind of open up wider and make the project more widely
known, which actually coincided with, then when I did those very
early podcasts, including here on epicenter, right?
This came at the same time as like the increased scrutiny of
the blushing space as well as new regulation and new kind of
like concerns around. You know especially totem
distribution. Right.
So so basically once like once we reach that point it became
I'm very clear to us and from the perspective of a legal
strategy that the only reasonable way to distribute
tokens like a total, like a, I would be to sell it to like
essentially like, you know, like, like established and just
like that, you know, very, very proficient.
It's tution Investor's, right? So, so in the u.s. accredited,
investor Spencer, that's right. And just in general, the kind of
like the kind of stakeholder where you can you could You
could sell them a token and they could go totally poof be worth
nothing and everyone would be like.
That was your own fault, right? Because you knew what you were
getting into and you did your own research write and on the
other hand, if you actually try it again like if you try to sell
to the masses and thanks blew up.
It's a little bit different like there's a level of trust there.
That's kind of expect it to be to be maintained when you do it
which is also where we saw the whole Ico craze go wrong, right?
But the biggest of the like the biggest event of when we started
this new approach of selling and care to latch, establish
stakeholders was, of course, when we sold, actually a total
of six percent to address Horowitz which was among their
very first purchasers of digital assets and to this day is kind
of like one of the absolute core pieces of their of the crypto
portfolio. That also really put the project
on the map. Because it was a huge stamp of
approval in the more established VC and like crypto world and
even wider Financial space or text-based to get addressed
Horowitz, buying into this project and also participating
directly right? Like in terms of promoting it
and sort of talking about the implications of the project kit.
And as well as supporting the foundation, in all sorts of
activities, we were doing. So, like it mean, today, it's
basically a mix of kind of like, Early Community contributors
early Community, like buyers, like people who've bought on the
secondary Market especially in the early days, there's
particularly a lot of Chinese people who did poop ball in like
that. So there's a actually, a very
significant Chinese community in the make it our ecosystem.
And then there's a lot of these institutional stakeholders,
including addressing Horowitz, which is one of the biggest but
then also actually, a lot of other sort of smaller, like, I
guess you can say, medium-sized institutional stakeholders, This
episode of epicenter is brought to you by Microsoft and the
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Blockchain would like to thank Microsoft and Azure for their
support of epicenter. Before we dive into what exactly
governance means in this instance and what mkr coders can
actually do with their make a tokens, the stability fee.
That is generated currently still goes to make a holders,
right? It doesn't go to the die or as
it goes exclusively to make a holders.
What was the rationale behind that?
Designed it behind that design decision when you made it?
It's really, the fundamental economic Dynamic, on a system
that kind of makes the makes it go round in a sense that it
aligns, it said it was between the different participants in
the system, right? So it really it's very basically
that a holders. They sit sort of at the guess
you can say this at the core of the system and the they
fundamentally perform, the governance function system,
right? So they decide really how like
the business logic of the system and what it's actually doing.
So it's includes like Stabilizing the price of diet.
So one by levying a stability fiancée DP holders but also in
the future other more advanced functionality such as those
setting, the die savings rate which and a whole range of other
stuff or Advanced governance. But most crucially, the thing
that they like they're doing right?
Is that they're setting, the collective risk parameters and
sort of the logic around. How do we keep the system safe
from a crash, right? So how do we make sure that we
don't put all the In one basket so that we only relying on, you
know, a single cryptocurrency as collateral even when we are at a
scale of several billions. Because that's when you really
get that systemic risk, right there, could you see the whole
thing wiped out? And also the ratios are set
correctly so that you know, like I mean do you have the right
amount of buffer, you know it exists of a particular position
the system where you've put in some collateral to generate die
and you can hold us? Then make sure that when you do
that, The excess collateral that you put in is enough to cover
the volatility of that asset, right?
And if and then the, and then, the key aspect is that if they
set this incorrectly, right? So if they failed to correctly
predict the system from excess risk, they have to absorb that
excess risk. So let's say that they allow a
cryptocurrency. That's not particularly good
into the system as collateral and they allow it in with like a
very small Gap, right? So you can generate a lot of die
from that cryptocurrency. And then just like, goes poof,
right? It's gone, there's no money
left. Then what you what you end up
with is it's bad that right on uncollateralized unpacked that
and in and without any other measure you actually have
insolvency in that case, right? You actually have a situation
where there's no longer guarantee that all dies backed
by on chain collateral, right? But then that's where the a took
steps in and takes the loss, essentially through an
automatic. Fully autonomous mechanism that
what it does is it's just that sprinting a to raise funds.
So basically it prints have care like automatic.
Like the system detects that there is a loss, write the text
this is a shortfall then it prints MPR and then it
automatically sells in the market to race to race died from
the market, right to? Yeah, basically raised the same
amount of dye as there's a shortfall in the system and then
it uses the dye that is raised to essentially cancel out the
shortfall Bye-bye burning the day, like by removing the dye,
from circulation, so that it can kind of like they have the two
things equal out, and make sure that.
Now, the amount of collateral is in the system is congruent with
the amount of dollars in circulation.
So, is this lender of Last Resort functionality actually
implemented on the current live maker contracts.
Now so instead of a little die, there's actually this additional
mechanic called pith and all of this logic is implemented more
on the kind of like the like the he's CDP holder side with a I
mean it's actually it's a it's a, it's like it's a
functionality that that sounds very complicated when you
explain it, which is like that, that this aspect of the force
dilution of kind of like the underwriter of the system sits
with the people. Also hold collateral in the
system in the event of a serious crash.
So I guess my question is that in the moment in the single
collateral die instance, is there any risk that the mkr
holders? Take on because currently the
lender of Last Resort our risk is passed on to the the CDP
holders. So what is the risk that the mkr
holders are currently being rewarded for?
Yeah, this is a very I mean this is a very common concern I
guess. You can a point made about the
system, right? But if you really think about
it, then right now as a napkin holder, you're taking more risks
that you ever will write. Because at this stage in the
system's life cycle, there's a way larger probability that will
just completely and outright fail, right?
And that's the big, like that's the big additional Dynamic of
same cartoon today, right? That because you're acquiring a,
that's, I guess, you'd say freshly made, right, because the
system is brand-new. There's a way bigger risk that
you're not really, you know? You're just buying into an
experiment, right? And not of course it is by far
the most established experiment on ethereum, right?
But if they're him still is just I mean, D5 really.
Is this still like it's thing that has yet to fully prove
itself. So from that perspective, I mean
a whole is really ever. I mean, they still take by far
the largest risk of anyone in the system, right?
Because I would say that there's a bigger risk of mkr.
I mean, it's Like etherium as a whole is obviously better
established than a, right? So the demand dynamics of the
system itself still doesn't directly impose a loss on a
whole is right, but of course if you had the system Wipeout, it
would sort of a guess as a second order effect.
Also just wipe out the a to. But I mean the thing is that
none of that really it doesn't really matter that much, right?
Because we're just talking about the very early stage, it's sort
of microcosm of the system and its Really, you know?
It's like it's yeah, it's like it's kind of like initial face
where it hasn't yet scaled, right?
So these Dynamics become a lot more important.
Once we exit hate a larger scale where you have to, you know,
whether also is a real job for a hose to do in this in the sense
of doing proper risk management by diversifying different
assets. So let's talk about what the mkr
holders, what the scope of their governance currently is.
So there's a couple of parameters that Can be set and
reset in the system. Can you describe what they are
and how this voting casting a spell happens.
Yeah. So I want to explain all the
parameters that can be modified by Governors because there's
actually a huge amount in a system is incredibly modular.
But the the sort of standard risk parameters, right?
To the standard things that a whole is, they they deal with in
the current system is. So there's this stability fee,
right? Which is the the cost of
generating died from a CD P. Then there's the debt ceiling
which is the total amount of data can be generated out of
Eve. And then there's a liquidation
ratio, which is Is the the so the buffer between deaths and
collateral, you need to have an STD pee before the system,
liquidate your position. And and so governance, really, I
mean it the job of government is to modify all of these
primarily. Obviously, it's the stability
for you, because that's how you stabilize that I market price in
the wild. And then there's a debt ceiling
which is more like of a. It's like, a routine thing you
do as a system grows, you kind of like evaluate the overall
risk to allow it to grow to a larger Sighs.
And you would still I mean you would very rarely see something
like the liquidation ratio be adjusted in the in the wild in
single level died because of the significant Direct effects.
It will have on CP holders who are actively building a sleepy.
Who could have the effect effectively have the rug pulled
out from under them, right? So so it would be it would be
quite unlikely. They were actually see the
liquidation ratio changed and then there's also some other
like some other Mo administrative.
Things that them careless could do such as changing the set of
oracle's right in choosing picking.
The Oracle providers, that hasn't happened yet though.
So the oracles that exists in the system today are the same
oracle's that it was launched with.
And then there's also another very critical functionality,
which is emergency shutdown. So the ability to shut the
system down in the face of some sort of.
Like, I mean the main reason is you want to use that in the Face
of a crypto economic attack or perhaps a book found in the
system or some other significant problem, or maybe even a run on
the bank, which is where you then, establish this direct
ability to turn the dye into underlying collateral.
So, how does the voting system itself work?
If I'm a make a token Hodor, how do I participate in the
governance? There's two aspects to that,
right? So there is the unchanging
Infrastructure, which is very simple.
So, it's basically a constantly, it's like a vote that's
constantly happening inside this my country called the chief
where what the governance participants do is they
essentially, you can say they steak the steak there and Care
answer to Chief. Although that's not real.
Like it's better to think of it as they just participate in
voting and it's just like a technical defect.
Like I said, it's a technical detail that they actually move
their mkr into the chief, but But once they've done that, then
them care is able to vote and then they're actually able to
essentially Point their votes on any smart contract, on the
entire theorem blockchain and the system then is costly,
keeping track of like which smart contractor which is the
area mattress has the most votes.
And whichever has like this the single address as my contract
that has the highest number of votes on the entire Block, in
above all the votes in that's happening in the system, is then
given direct admin access into the causing.
Well, do so the way that you, for instance, modifies the
Builder fee is that you the way it works is that you do have a
smart contract that basically says, Target the like it says,
send a message To the core of single day that says racist
ability fee by 2% something, right?
Or else that disability fee to 14 percent if that's what you
want to do, right? And then once that's my
contract, gets the highest number of votes in the system.
So it gets the admin axis. Then anyone can go and poke it
essentially, which is called casting a spell because it's
like a technical term for this, kind of smart contract is Spill,
right? So what happens is anyone is
able To then just like trigger The Proposal from like trigger
the execution of the proposal and the transaction is then
inserted into the system to modify the internal state of the
system. So, that's the, and that's the
smart contract infrastructure, right?
So then just very briefly, there's a layer on top of the
Reese's, this user-friendliness layer, right?
And right now, it's the foundation is only one who
maintains this kind of front end.
But really what it is is like a voting dashboard where you can
like see different options for voting and like you can see
different like there's even like a bow that this both the polling
system, so sort of like a pre vote and then there's the actual
like like Voting as well where you actually execute on
decisions made in the community and it's then presented through
it, like an easy and secure interface, that allows a larger
amount of the community to participate who what percentage
of makers typically pointed. At proposals, that then become
the front door front, runner and become implemented. so right now
is typically between 5 to 10% and you also have at like you
have this important Dynamic of around and also five to ten
percent of people are always voting at, as kind of like the
current active proposal, which then sets the bars, like you
have to get at least as a seven percent of the work to be able
to to like trigger a new proposal in the system and kind
of like it really acts as a quorum in that sense.
You said earlier that Andreessen, hold six percent of
the maker tokens and there's a couple of other maker waves as
well as well, right? So basically, it would it would
only take one or two of those to actually force a proposal
through, right? Yeah, I mean, theoretically,
it's possible for someone to in the current system, try to like
pass a minister proposal, right? And then the reaction, I like
the response to that would be to then trigger an emergency
shutdown, right? Actually, Try to shut down to
system from the, from the crypto economic perspective, right?
But the challenge in the system right now, is that whereas in
the multi-level died, when the final version of the governance
system is implemented, right? There's actually some incredibly
strong game theoretic checks and balances in place.
That makes this kind of behavior.
Even if you had, let's say, like, Anonymous actors holding,
let's say 50% of the tools, right?
Or even like all this opens. Well.
Okay. I mean just like significant
amounts of the toes, right? You still have just like like
incredibly rigorous game-theoretic systems in place
that prevent anyone from actually acting maliciously, in
the system, in the current, in the current state of the system,
rather the like a key defense comes from the fact that it's
known to the foundation. For instance, like the forever,
rather the foundation has been very careful in who has sold to
these like least large blocks to write and it's and it doesn't
involve play. See a nation state action which
could for some reason decide that they want to shut down the
system, right? And kind of like vandalize it
rather, it is just very rational economic actors, that, you know,
wouldn't wouldn't have their themselves by burning the system
down. But the, like, I mean, it's,
that's always a dynamic of all decentralized system, right?
And all these centralized governance is that, by the very
nature of having the governance, be fully decentralized and
having the, the, the sort of the the Final and the fundamental
controller system being available to decentralize
community. You always have this element of
like allowing people to shoot themselves in the foot if they
want to the question always is what percentage of people
actually have to glue to shoot everyone in the foot.
And one would wish that in a in a system that creates so much
value and hold so much money, it would have to be more than 5 to
10%. So can you tell us what's going
to change for the new governance model that that you talked
about? Yes.
It's really likes is a wave with that.
We saw this problem, right? It's really based on two
fundamental approaches, right? Like fruit to fundamental
constructs. The first is What's called the
governance security module. So this idea that, all right,
this is like a smart contract where it's kind of sits between
the voting system and then, the core system itself as kind of a
security buffer, right? A firewall in a way and it works
quite simply, it's that when you create A proposal that you
execute a proposal in the voting site, then passes into the
governor's security module and then sits there, for some
predetermined amount of time which initially would likely be
between 24 hours and up to a week.
And then once it has sort of run its course in the government
security module and and B subject to the security delay,
it then executes and enters the core system.
And so you have this this approach combined with What's
called the emergency shutdown module.
So which is really just an upgrade of how emergency
shutdown curly functions in the system.
And what the emergency shutdown module does is it allows a much
smaller like it, it allows a fixed and and quite small
potentially percentage of a holders to trigger an emergency
shutdown, which right now it's at launch, it's going to be five
percent. And so what that means is that
any like any consolation in the community that's able to 45
percent of the total and cast Supply will be able to counter a
malicious proposal that's sitting in a government security
module. Right?
So so someone tries to let's say yeah it is like burn down the
system or steal all the collateral or somehow like try
to Harness System. Then they will need to you know
they will need to first of all, let's say by 51 percent of all
them care or maybe there's only 15 percent voting than 50
percent of them go. Right?
But some significant amount of in care and then they use that
to trigger the proposed. It'll but then it just goes into
the governor's security module. And the meantime, the honest
actors in the system can then essentially rarely and respond
by triggering an emergency shutdown of the system.
And what then happens is the system shuts down, right?
It totally unwinds. Everyone is able to exit the
position at the technical blockchain level, but in
practice the way it plays out is that you immediately deploy a
new system and then you provide what we call a smooth
transition, right? So we provide this What's really
more like an upgrade process where you can transition from
the old system that is now shut down and then to the new
deployment as seamlessly as possible.
And this is also how we for instance, do the upgrade from
single-level die to multilateral diorite.
The point is obviously to make it as painless and as seamless
as possible for the end user, but the really critical game
theoretical piece to this, is that in the new deployment
because anyone is able to do a new deployment, right?
It's just an open, you just deploy some open source code.
Right. But the community will
ultimately will in most situations reach consensus and
kind of like equilibrate towards a single successful deployment
that then just becomes the new maker system and this deployment
could in response to for instance let's hacker just blend
it. Blatantly trying to attack the
system, right a steel, the collateral or harm system in
some way. And using a significant amount
of a for that in response to that as heck, you can actually
just burn their and Care on the new deployment like choose to
what you call. Honor the care of everyone else.
Would you can choose to kind of like lit everyone else is a
transition over but obviously there's not really a good reason
to allow at clearly malicious attacker who has voted to harm
the system from Gaining governance power, right?
So what do you think get is? You get stronger governance with
the bed exercise, cut out of the system and you also get a like a
significant, a burn, right? So you get a significant
reduction in total Supply which then makes up for all the
friction that having to go. Go through this whole process
cost you, right? And the same Dynamic also
actually exists for someone who abuses in the first place, its
power to do an emergency shutdown, right?
So someone goes on, kind of like let's have some fun and shut the
whole thing down because it's quite easy to the barrier for
doing that is still in initially, for instance, 50k, a
right? So, it is still, which will then
not be honored in the new deployment, if it was purely a
troll attack. And then you, again, you have
this Dynamic where ya like, The attacker did manage to shut the
system down, but there was a smooth transition to a new
system and it cost them a ton of money and that money actually
went to a Elders. So who do you say?
It's whether a shutdown was, in fact, a troll attack whether a
proposal it was malicious because there could have been
just a bug in it or the people honestly thought that the system
was under attack. So who actually determines
whether to penalize, make a holders or not.
So it's quite a complex question really, rather probably complex
issue, right? But the basic answer is that the
community decides, right? Because, because anyone can
deploy and maker system at any point inside, right?
Because the code is open source, you could actually very easily.
Imagine that immediately after the merger shut down, there
might be for 10 or like a thousand two deployments, right?
And everyone saying, this is my fault, super awesome deployment
right where I haven't, you know, and then maybe I mean there
might be People trying to like give themselves extra and Care
are, there might be people to try to like, cut out and care of
people didn't like or something, right?
And the question is, which new mkr distribution is able to
basically, you know, get the faith of the overall community
and the economic majority of the, of the ecosystem, right?
And in most cases, like in clear-cut cases such as someone
Blatantly attacking system. It's really obvious that you
have is, I mean, you essentially have the, like a governance
convention on me. You can even call the Social
convention that if you try to attack the system, you don't
deserve your own care, right? And, and there's a good reason
to migrate to A system that doesn't include a holders that
have proven that their militias to the system, right?
So, it really comes down to, like, the Dynamics of.
What do the users of the system? Think is best for them when
they, when they're picking what system to migrate to.
And that's also actually end up like that is actually like what
the maybe the most fundamental point of maker governance.
Right. Because that is the point where
you actually see that the power of a holders is an infinite.
They don't actually decide everything like the kind of run
the system on a day-to-day basis.
Until the moment that a very significant event happens,
right? Until it.
Like to the point where the governance has to kind of like
fracture and reassemble itself and then what happens is, the
power actually falls back to the economic participants themselves
and a girl does become totally powerless.
And the only thing they can do is cut like, point to the Past
actions and say, hey, I was so good at governing system, right?
So I should totally be a part of the new deployment.
So what's the worst thing that they could get away with?
So could they, for example, steel all the collateral by?
Like setting the stability to 100%, stability fee, to 100% in
that, get away with that. Like what would be the potential
reward that they could get away with with an attack?
Like if there was no response from the community, yeah, you
could actually be anything like it could be printing.
Like, I mean this system is like because the system completely
relies on this Dynamic of, you know, triggering an emergency
shutdown within the time frame allotted by the governor's
security module like because it would be impossible regardless
like so there's no attempt to kind of like restrict what kind
of take your Lexus Governor's already has right?
The question is Is that outcome ultimately going to be better
for like the average user and the average a holder in the
system, right? And anything that isn't
following the regular governance process, right?
So like actually tried to scientifically optimize the
system and following the consensus of the community is
always going to make people worse off, right?
Because it breaks the fundamental social contract.
And so, this Dynamic of like a blatant attack also works on
sort of smaller levels, right? Because the, you know, it's not
just that It's not just a dynamic where, you know, you
want to protect the system, right.
Like you want it from from very powerful attacks.
You also actually want to kind of like police and and try to
catch people from breaking the social contract and sort of
catch them in the act of doing something.
Where the situation where the users most likely wouldn't like,
will most likely actually consider this Behavior like,
like negligent or malicious to them.
And as a result, my crew to a system where this actor The a of
the sector is included because that's then you have this very
strong Dynamic, right? Where people have to be very
careful about like carelessly track to push some proposal
through that could actually get the whole system shut down and
maybe even get the penalized for being responsible for it.
Quit. So that two very significant
updates coming to the makers of some soon.
The first one is the interest generating die.
Can you talk about what that is and what made you roll that out?
Yes, so the dye savings rate, which is what allows you to hold
die and actually get a, like, get a savings return on it as
you, hold it in. Your wallet, for instance, is a
really fundamental feature because it's kind of the
counterpart to the stability for you, right?
So right now when the system is balanced, you have like you can
only change this Billy fee and then you can modify the supply
and then the dark side of that is that that means that when the
system really gross, but the supply grows more than the
demand, your only option. Is to pull down on Supply.
So you kind of have to let the system, become a victim of its
own success writing and artificially restrain, the
growth of the system which is what's happening right now where
the interest, like the stability fee is just incredibly high,
right? And it's actually really, yeah,
it is kind of create a lot of people coming, you know, why are
people even generating died? When the fee is just that crazy
high, right? And it's amazing to see the
people still are using it, but the problem is that That the
system has no way to Spur diadem and right is no way to kind of
like make it more attractive to hold die.
And that's what the die savings rates solves.
So instead of just pulling down on the stability for the side
when the system is growing, you can pull up on the demand side
as well, right? So if you had like the mismatch
like this, you can pull it into sink like here and actually see
overall growth of the system. The actual effect of that in
practice could very well be quite, you know, quite a Quantum
Leap in terms. Terms of hitting some sweet
spots and product Market fit where the system suddenly
becomes interesting to a lot more people, right?
Because on one hand you get, you get the the CDP functionality
which is right now, incredibly popular, even with these
ridiculously high fees, you can get that down like you can well
rather you get because you can you can get that down to a much
lower rate because you can now suddenly make die incredibly
attractive, right? Because when the stability fee
of twenty, 20% for instance, on on generate day, theoretically
enemy. This is a than educate.
Like it wasn't wouldn't actually happen, right?
But if you're ready, there is a 20%, like they're sort of 20%
available to give to dial is, right?
So imagine if holding the, I gave you a 20 percent return and
this was without any additional risk whatsoever, right?
It was just like holding a regular die.
Like it is gave you this massive return, right?
You would immediately see tons of people moving their the
savings into this because they would want to take advantage of
Very high savings rate. Quick question about this
though, like about how this works, doesn't isn't the
stability Faith, be paid in mkr and then the diag savings rate
would be accumulated in die. How does that work?
The transition from the stability from mkr?
Does it have to go through some exchange or something to be paid
out? The feature of the fee being
paid directly name Kia and single that will die is, it's
kind of one of the features that were in the end not done for
any, like business reason, or any, any sort of user facing
reason. But rather, because it was
easier to implement. So it was easier to get single
little it done and get the get the, you know, system live and
rolling, and sort of see it play out in the real world, right?
Wasn't any place in every aspect of mkr because the fee is bird
also. Important to the economic
design. Oh yeah, absolutely.
But the way it's going to be implemented in multi-level to is
just a more like a most that like a better approach are all
right? Which is that the system takes
in fees and die and then what it does is it accumulates kind of a
pool of dye called buffer and when the buffer hits a certain
size it triggers what's called a surplus surplus auction.
And the surplus auction is then where they a burnt and then what
the means is that buffer is also available as kind of like an
account where I can also be taken out of, and put into the
dye savings rate for instance. And actually today, you can also
pay your stability for your CDP with die because it is actually
super frustrating. It was one of the biggest
concerns all the users head that they had to let go.
And, you know, they have to use eith to open the CDP and then
they get die. The second token and then they
also have to go and get a third token, like some dust mkf dust
right to then pay the fee to retrieve their collateral out of
it, right? And it's just like incredibly
You know, user unfriendly really and as a result the feature to
pay the stability will die was added to the front end and kind
of like me is that it takes care of automatics go and buy a on an
exchange and then pay the stability for you.
But that that convenience functionality is moved into the
core of maker in multilateral die.
So the release that that also supports the die savings rate
and is then fundamental to facilitating the die savings
rate and the flows of Any that that really go from from CP
holders, paying the stability for you, right?
And then the part of that going to die holders and another part
of it going to a holders. What happens if people don't
actually use this ability fee and so you know you promised the
the lock die, there's interest rate but then it turns out
there's not enough people actually you know, closing their
CDP and so this you don't actually have the money.
Like is there other critiques concern here like you know, what
happens if you don't have the money to actually pay out the
interest rates that were promised Yeah, that would be if
you used the current model where you pay all the fee at when you
close this EP, but in the next version of the system they're
counting is continuous. So, you actually see the die.
Like, rather than scdp accruing, you could say like a fee
overtime, right? This will sit there and has to
be paid what a silly P does in multilateral dice actually
continuously generate more and more data, so it doesn't kind of
like a cumulative fee. You have to pay it just Generous
die on your behalf that is then sent to the buffer.
So what that means is that it's just like the direct link when
the DSR pays out, that died has been directly generated out of
the city piece at that moment in time.
So there's always like real-time solvency in the system, right?
Because of course that's necessary or you could run into
these weird edge cases. That sounds like a very major
upgrade one thing I'm curious about.
So in my understanding to actually generate have your die,
generate interest, you have to put it in a particular smart
contract. And only then, does it does?
It generate interest? Why was that design decision
made? Why don't you just have all died
in existence, generate interest, or at least have a tokenized
claim against that died in that smart contracts, similar to what
compound is doing with seed? I did because that would let
people's not just have died sitting there but also let them
be able to use it in depth. Yes it's really the short answer
is that it's for the sake of like use of friendliness because
while it sounds great to always have like it's dies
accumulating. There might be many situations
where for instance if you're trying to write a small app or
you're trying to like create a smart contract or you're sending
some amount or like there could be a lot of situations where you
don't, you know, you just need to send an exact amount of money
and you don't really care about getting some small savings for
for like, let's see, a couple of days or a couple of hours or
something. Also the, I feel that there
might be an issue here, you know?
Just, you know, we've had issues like this in design of Cosmos as
well where it's like, you don't want to iterate over all die
holders every single time you want to pay out interest and the
problem is, you know, okay maybe you can pick it so you add it to
a pool. And what actually happened is
die holds have shares in a pool but then the problem is then die
is not stable anymore. That that defeated the whole
point of what we were trying to do with creating this.
Table coin. So I am not sure how it would
actually be possible to have it. Go to all die holders in a
computationally efficient way. And then a lot of use cases
where currently you're locking up.
Dies over instance, a you'll use it in a prediction Market, as
collateral, for instance, and you really wanted to be in, to
be to be generating interest in. Don't you kind of push people
into compound and into using compound die for this instead of
interest and rating die. Yeah.
I mean, that would be a, that could totally be concerned.
But the thing is that it is actually implemented in a way
where that is completely possible.
So you would see, you know, you would see, let's say, the
prediction Market implement on there and the like an
integration where the moment you deposit down to the platform.
It's automatically sent into earning the die savings rate.
And on top of that, it is even technically possible to create
this concept of the, of the, you know, the CD with the data where
you actually. Actually can use the die
directly in. The DSR is tokens.
And the long-term vision is in fact that like, one day far out
in the future, right? When the ecosystem is way more
mature and the, you know, the standards are able to handle
this and collect the accounting systems, and even the
accountants can sort of wrap their heads around it.
You would have all died in real time.
Always generate the savings rate, right?
Because rationally, there's no reason to do it.
If it's if there's no friction in doing it, but the fact is
just that If you try to force it on people, it would like it
would create more losses through friction and confusion that it
would create like that it was over you know create the gains
of like let's say you know like when you're sending dodgy a
friend instead of like pulling it out of the die savings rate,
sending it to him and then a day later he puts it into the die
semi-sweet, right? Like sure.
You can you can save. You can save like, oh you can
still gain one day extra of interest earned by just sending
it directly. But the problem is that, what
you then create is like a much bigger burden on the wallets to
properly, incorrect integrate and implement this.
So that's really, that's the big trade-off in the beginning,
right? That is actually simpler
technically to deal with kind of this fixed idea of the die
savings rate where you deposit your day into and you pull it
out when you're, they want to send it around rather than you
always have to account for the, the savings rate of cooling.
Because it is actually, it is, it is implemented it Exactly the
way, you know, you describe, right?
That it is this. It is a share in, like a pool.
I mean, that's a very rough and like, very simplified
explanation of it, right? But it's like, it's it on the
back end. It doesn't actually change over
time, but the front end kind of updates the value.
So it looks like it's kind of like a transaction that's
happening, right? But in reality, it's really just
kind of like numbers. That's If I did and you know,
various ways but which is exactly actually how this
ability feet works right now. So stability.
Feet doesn't actually update individually on every CTP it
just looks that way and in reality it's a single number
called accumulator. That's that's updating and then
it's displayed across all cdp's when it gets updated.
Do you think that over time that you know, currently what what
maker Dow essentially is, is this like decentralized s
central bank right at the Central Bank?
Do you think that over time, maybe, there might be competitor
to central banks that kind of compete with the maker system
and, you know, maybe they claim that their government.
Whatever their governance processes that they use might be
more better than what the maker Dow system does.
I think this is actually kind of what the Libra project from
Facebook is. Kind of going down that route a
little bit. And so how do you think the
maker ecosystem will react to Alternative the central bank's
able coin designs whether that you know a copy of the maker
system with you know different governance system or you know
even a different system altogether, kind of more like
The Reserve System which uses you know slightly different
mechanics Yeah, I always expected that we would see the
copycats and competitors and similar types of systems much
earlier, right? And it would really be this like
big space and there would be just like a lot of different
versions all competing. And it's quite interesting that
the reality ended up being that maker pretty much became the
only decentralized stable cloud with decentralized governance
and then the whole ecosystem of centralized stable coins was
what ended up completely exploding.
But you're totally right that like that, the way that like the
thing that that makes maker though, unique is a
decentralized governance and the way that you would sort of have
something that would actually be a competitor, they would
actually operate in the same space as make it would be by
having a different type of decentralized.
Governance that could somehow add add more to the table,
right? And be more efficient, or better
manage risk or something like that and I mean I don't think
that's so far. There's There's really nothing
like it yet. I mean, there's no attempt at
actually, creating this type of self self organizing and
sustainable community that we're trying to bootstrap, right?
And if you look at something like Libra, for instance, I
would say that like it is actually quite different.
So based on my, why not? Totally, perfect understanding
Libra. It has a bit more of, kind of
like a fixed, like, monetary policy where it's collect,
predefined, and based on the individual actions of of the,
the Events in the in ecosystem so they're not really, they
don't have the same like it. Prioritizes the quickly as I see
it but it what it what it sacrifices is, kind of like a
coherent and unified monetary policy so you end up having a
the end of having a collateral portfolio and you end up having
an inflation rate and a pic that's a little bit more random
because you're prioritizing this ability for anyone to always
create them by with, you know, by pledging collateral into the
system without any Any sort of framework to do that within and
that's what I think. I mean ultimately I think that's
what is by far the most powerful, right?
Because that's what also what you know, thousands of years of
traditional Finance, coalesce that, right?
And what you need to then do to make something that's better
than maker is you need to get better at still playing with,
you know, like creating like the operating within that framework
and kind of like setting that framework correctly.
So that you do get this like Optimal the quiddity optimal
pick, An optimal inflation and best risk management.
The question is, whether you can kind of, like, innovate on top
of this idea of having token holders, ultimately, curating
the decisions, right? Maybe there's something like
paying for votes or like, paying for like, are rewarding activity
or paying experts or something. And all of these ideas is
actually also something that maker governance is very heavily
focused on trying to innovate, right?
Because, of course, this is only the very beginning of
decentralized governance. Let's fast forward, maybe five
or ten years so you just added six tokens for Mighty collateral
die. The choice of tokens or the move
to add exactly. 60 seconds makes me think this is the first of
many additions to come. So basically, if you look at the
market cap of the six tokens that you are, adding their only
on the order of a few percent of what the theory of market cap
is, so the collateral that was already available that version
of the system that was Technically much simpler.
What are you plans for expanding the scope of collateral in five
years? Will I be able to use my house
as collateral on on maker? Yeah.
The short answer is that yes that would absolutely be the
trim. Right?
That where the project is going is that it's kind of trying to
break beyond the boundaries of blockchain and crypto and just
got like I mean to some extent the bubble that crypto still
lives within right? But instead try to reach out to
the real world and integrate with real Financial system, the
real global trading system and most importantly have real
assets and real value in the real world actually back die.
Right? So it's not just hot crypto are,
but it's, I mean, which actually does have its own in very unique
benefits and very really unique risk characteristics, right?
But ultimately, you want as much diversification you want as much
kind of like like as many different perspectives and
avenues of stability as you possibly can behind a stable
coin, right? So and there is actually some ID
Credibly exciting and quite a fast-moving Innovation happening
exactly within the space of like figuring out.
How do you, how do we make it so that You know, five years this
may be a little bit optimistic, right?
But potentially five years from now you can cut like open an app
on your phone and then you click a button and that app uses some
sort of third party service to legally, connect the ownership
and the deed of your house to token, which is then directly
set to some sort of automatic or automated.
You know, risk assessment function that connected to maker
that kind of like, does an assessment of your house and the
value of your house and the risk associated with that house, And
then ultimately create a new c d-- p type unique to you and
kind of like your house and your risk parameters and you're sort
of conditions as a Septa, right? And then ultimately, you can
deposit the toting. Again, with a single, click on
your app into make a directly and generate die directly and
go. And you know, like really well
maybe refinance your current loan or something like that with
it, right? I mean that is certainly like
very cyberpunk and Like a really cool.
I like very concrete way that you could think.
Like you could actually imagine that you know, the bomb and
pup-pups of the future would like have blockchain directly in
the face because that's how they would do their, you know, their
mortgages. Right.
But of course, the steps along that way are most likely going
to be a lot more about kind of integrating on the back end of
existing Financial infrastructure is right.
So it's a tough stretch to take it to the end user and really
make it like Usable and accessible and Powerful for the
sort of the regular in a retail credit secret right but it's a
lot easier if you start trying to implement it to something
like life scale, trade Finance or even just like large-scale
Securities, abundance, repo markets.
Because there's so much like institutional capture and like
luck end of the platforms right now in those spaces.
And there's so much mean really like paperwork and bureaucracy
and Like old thinking around it that it's it's you know it's
incredibly ripe for disruption by by just water technology.
Maybe let's end on this very cyberpunk notion.
I think those are fantastic closing words thank you so much
for being on the show. This was super interesting and I
apologize to our listeners for going over a little bit.
I hope you're all still here. Yeah.
Sorry that that happens quite often from me.
That's the nature of maker being so complicated.
Thank you. But thanks a lot for the quick
questions and great conversation.
Thank you guys for listening and see you next week.
Thank you for joining us on this week's episode.
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