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# System prepended metadata

title: The situation

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Following the [successful onboarding](https://vote.makerdao.com/executive/onboard-new-silver-series-2-drop?network=mainnet#proposal-detail) (yet to be confirmed by actual interactions) of New Silver Series 2 DROP, it is now time to discuss the strategy regarding RWA onboarding for the rest of the year.


# The situation
In January, I was suggesting a 300M exposure for the end of the year. This wasn't challenged by the community. Obviously, 3 months were kind of lost here. From an RWF core unit perspective, **we can onboard 2 collaterals per month starting in May**. [ConsolFreight](https://forum.makerdao.com/t/cf-drop-collateral-onboarding-risk-evaluation/5597) is already done, [HarborTrade Credit](https://forum.makerdao.com/t/htc-drop-mip6-application-harbor-trade-credit-drop-short-term-trade-receivables/3502) should land next week. [People's Company](https://forum.makerdao.com/t/p1-drop-mip6-application-peoples-company-drop-us-agricultural-real-estate/5518) and [FortunaFi](https://forum.makerdao.com/t/fft1-drop-mip6-application-fortunafi-drop-revenue-based-financing-assets/6015) are in good shape. Those are for Tinlake-based assets. For the trust-based ones, @mrabino1 is making big progress [in shaping the trust solution](https://forum.makerdao.com/t/6s-rwa001-a-document-roadmap/7413). [SolarX](https://forum.makerdao.com/t/solarx-mip6-application-uprets-solarx-industrial-real-estate-backed-loans/6718) should be done in June (there is coordination needed between investors, lenders, land sellers, development contractors). [SolidBlock](https://forum.makerdao.com/t/sb-ldb-mip6-application-solidblock-democratizes-real-estate-with-london-digital-bonds-a-smart-tradable-property-investment/6276) and [Reinno](https://forum.makerdao.com/t/reinno-mip6-collateral-onboarding-application-real-estate-new/6218) are in the starting blocks. There are also a lot of prospects in early stage (>500M deal flow). I'm not saying we will, nor should, invest in everything, but the demand is there.

Currently, **the path going forward discussed with the mandated actor is to onboard one RWA collateral per month starting in June**. There are, indeed, other priorities at the MakerDAO level.

# Defining the strategy

More important than those bandwidth considerations, is the strategy that Maker Governance wants to follow. I will propose some but I am not saying that there aren't more.

## Moving slowly

One path is to see what happens with those two first RWA onboarded. This asset class is new for MakerDAO, MIP21 and MIP22 are yet to be tested and all the legal infrastructure is also new in DeFi and would profit from time of inspection from the soon-to-be onboarded legal core unit and external counsels. This path is about ramping very slowly (nothing in the next few months) and very carefully.

## Focussing on experiments/small collaterals

Another path is to onboard collaterals as we can but focusing on the smallest ones. This will give us experience without risking too much. Not earning too much neither. In such a path, SolarX will have to be removed as too big (100M DC).

Most trust-based solutions might be too expensive to make sense.

## Focussing on profits/scale

This path is about onboarding the largest collaterals first. If we only have a few slots remaining for the year, we should focus on the collateral that can move the needle. SolarX being a good example.

In such a path, I would not recommend onboarding trade finance-related collaterals. They are usually small (but they yield a lot). At the same time, they may be a key component to promote DAI for companies doing cross-border payments that often use trade finance (and are currently using USDT). 

## Big push on RWA

Lastly, we can also onboard as many collaterals as possible using all those that are deemed interesting by Maker Governance. The objective is to learn as much as we can and be a leader in RWA financing within the DeFi space. We know that the solution is not yet perfect, but we focus on gaining market share.

Onboarding a lot of collaterals is also safer on the credit risk as we increase diversification.

# The RWF perspective

My perception is that RWA, at this stage, should be around 10% of the assets of MakerDAO. Enough to be significant, but not enough to be too risky. The unwinding of RWA takes time and I don't want to risk hitting the peg in case of a DeFi winter season. Moreover, the current macroeconomic environment doesn't incite us to invest so much in TradFi (very low yields) when it's the farming season on DeFi. But RWA is key to the future when DeFi becomes the new finance.

We also have 750M USDC that are sitting idly on our balance sheet. This limits us to make a bold move like setting the DSR to 2%. While a good chunk can be used as liquidity pools or lending to earn a yield, there are limits (especially lending will canibalize ourselves). And all that demands also significant smart contract work and research. RWA, using MIP21, is a solution here.

10-20 RWA collaterals is a good target so each collateral is below 1-3% (ideally below 1%) of the total MakerDAO assets, having enough diversification to reduce the risk and learning a lot (so far each collateral type is very different on at least one dimension). This would be a strong foundation to level up our game and going bigger in the future. 

We are on the path to get 1 trillion DAI outstanding at the end of the decade (according to the [MKR valuation framework](https://forum.makerdao.com/t/a-framework-for-valuing-mkr/7442/)). I would love to see a significant part of the capital used in the real world and not only financing the crypto wealthy. It is also super important to learn how to take credit and interest rate risks and not only liquidation risks. I have a strong feeling that margins on liquidation risk will be quite thin in the future.

Achieving this target will need a big push. The governance expressed a significant priority for RWA both [off-chain](https://forum.makerdao.com/t/signal-request-should-real-world-asset-collateral-onboarding-be-prioritised-in-the-short-term/4075) and [on-chain](https://vote.makerdao.com/polling/QmccnaQc?network=mainnet#vote-breakdown). Support for the New Silver executive was also [through the roof](https://vote.makerdao.com/executive/onboard-new-silver-series-2-drop?network=mainnet#proposal-detail).


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Quite interested to see what is the community feeling about this topic.