Episode 180: March 3rd, 2022

--- tags: G&R --- # Episode 180: March 3rd, 2022 ## Agenda - [00:00](https://youtu.be/qjg6cG7h_ak?t=1): Introduction - [01:57](https://youtu.be/qjg6cG7h_ak?t=117): Votes and Polls - [03:59](https://youtu.be/qjg6cG7h_ak?t=239): MIPs Update - [09:45](https://youtu.be/qjg6cG7h_ak?t=585): Forum at a Glance - [17:50](https://youtu.be/qjg6cG7h_ak?t=1069): Discussion - Pilot Ambassador Program - [40:36](https://youtu.be/qjg6cG7h_ak?t=2436): Open Discussion - [1:25:38](https://youtu.be/qjg6cG7h_ak?t=5138): Conclusion ## Video <https://www.youtube.com/watch?v=qjg6cG7h_ak> ## Introduction ### Agenda and Preamble #### Payton Rose [00:00](https://youtu.be/qjg6cG7h_ak?t=1) - Hello everyone, welcome to the #180 Scientific Governance & Risk Meeting here at MakerDAO. My name is Payton; I go by Prose11 online. I am one of the Governance Facilitators. A group of awesome people from Maker joined me today. They work for the protocol, care about it, and wish to engage with it. This is our weekly call, where we discuss what has been going on and what needs to be considered by the DAO. As usual, we have an Agenda to get through. We are recording this call. We also encourage this to be an open meeting: we want you to ask questions, give feedback, and engage with the conversations while keeping a respectful manner. You can use the raise hand feature on Zoom to join the speaking queue or speak whenever there is a moment to do it. You can drop a comment on our sidebar if you are unable or unwilling to use your microphone, and we will try to address it when the timing is appropriate. Thanks for joining. - As usual, we will get started with our Governance roundup. This will give you an idea of what is going on with our official Votes, the MIPs process, and what is happening in the Forum. There are no Initiative Updates today. We have a light discussion topic: the presentation for the Ambassador Program. We will talk about that at length, and I believe there will be time for open discussion. ## General Updates ### Votes #### Payton Rose [01:57](https://youtu.be/qjg6cG7h_ak?t=117) *Polls:* - 2 Weekly Polls – Passed - PPG - Open Market Committee Proposal - Adding Rate Limiter to Flap Auctions - 1 Ongoing Greenlight - Voting ends on Monday (March 7th) - PUNK (NFTX CryptoPunk) - Concluded Ratification Polls to be Covered in our MIPs Update *Executive:* - Last Week's Executive – Passed and Executed - GUSD PSM Maximum Debt Ceiling Increase, Makerman Retroactive Delegate - Tomorrow's Planned Executive Contents: - Delegate Compensation for February - Core Unit Budget Transfer and New Streams - MOMC Parameter Changes Proposal ### MIPs #### Gala [03:59](https://youtu.be/qjg6cG7h_ak?t=239) [Weekly MIPs Update #76](https://forum.makerdao.com/t/weekly-mips-update-76/13493) ![Calendar](https://i.imgur.com/aFs1ABo.png) ![MIPs General Updates](https://i.imgur.com/30De3vg.png) ![Ratification Polls](https://i.imgur.com/lwrDgSY.png) ![MIPs Outcome](https://i.imgur.com/8i61znN.png) ![Proposals in Request For Comment](https://i.imgur.com/b5PKZf2.png) - Most of these proposals are eligible for March's Governance cycle and have now entered their frozen period. ![RFC - MIP61](https://i.imgur.com/8f9OE9H.png) - MIP61, Delegate Compensation, is on trial. It probably will not enter March's cycle, but April's. There is still time for feedback on this one. ![RFC - Core Unit Budgets](https://i.imgur.com/uT46K8e.png) ![RFC - Core Unit Offboarding](https://i.imgur.com/a3jBw90.png) - MIP41c5 offboards the MakerDAO Shop Core Unit. This does not comply with the offboarding process formalized in MIP39. The process itself has proven inconvenient, and people are working to improve it. - Since this CU has no budget to remove and the circumstances for the offboarding are public, MIP41c5 will suffice in this case. ![MIPs - Amendments](https://i.imgur.com/XA71qt2.png) - MIP4c2-SP15 amends MIPs 39, 40, and 41, which together define the Core Unit Framework to improve the current CU offboarding process. - It will remain in RFC status and is open for comments and feedback. - MIP4c2-SP17 amends MIP64, which defines the Bug Bounty Program run by Immunefi Security to make small payments more agile. This entails a modification to Immunefi Security’s previous budgets. - MIP4c3-SP1 presents a minor change in the budget amount of MIP64. - MIP4c3 sub-proposals amend MIPs that are younger than three months. They will go through the weekly cycle and have a feedback period of one week. Before going on-chain, a Signal Request will need to pass with 51% of approval or more. ![MIPs - Others](https://i.imgur.com/C1khbuc.png) - Eligible for April's cycle, we have the renewed mandate for the Governance Communications Core Unit, whose goal is to adjust its accuracy and provide enhanced accessibility to the Core Unit’s documentation. - A Declaration of Intent to invest in Short-term Bonds is proposed as a solution to MakerDAO having its balance sheet composed of around 60% stable coins. ![MIPs - End](https://i.imgur.com/8OmgISu.png) - The formal submission window for March's Governance Cycle opens next Monday. Make sure to post any proposals you wish to enter April's cycle by next Wednesday, March 9th, at the latest. ### Forum at a Glance #### Artem Gordon [09:45](https://youtu.be/qjg6cG7h_ak?t=585) Post: [Forum at a Glance: February 24th - March 2nd](https://forum.makerdao.com/t/forum-at-a-glance-february-24-march-2-2022/13590) Video: [Forum at a Glance](https://youtu.be/qjg6cG7h_ak?t=586) ## Team-Led Discussion ### Pilot Ambassador Program #### Kat [17:50](https://youtu.be/qjg6cG7h_ak?t=1069) ![Discussion - MakerDAO Ambassador Program](https://i.imgur.com/Iw5SIoG.png) - Hello everyone, I am Kat. I have been around here for a while. I am currently running the Ambassador Program. [Hola, ¡bienvenidos, amigos latinoamericanos!](https://forum.makerdao.com/t/hilo-oficial-de-bienvenida/13566) ![Discussion - What is the Ambassador Program?](https://i.imgur.com/NKhwZUU.png) - The Ambassador Program seeks to engage with and provide resources for non-English speaking communities who would like to learn more about MakerDAO and Dai. We are currently doing a pilot in Latin America because it is our largest demographic other than the English-speaking public. ![Discussion - Who are the Ambassadors?](https://i.imgur.com/zgO7MMi.png) - We are bringing MakerDAO to new communities and engaging them in their language for them to participate. ![Discussion - Pilot Progress](https://i.imgur.com/nhrKezn.png) - We formally piloted the Ambassador Program with the--now offboarded--Content Production Core Unit. It was adapted from the GovComms Translation Program and the formerly Dai Action Group--no longer in existence--. - There is a large amount of want and need for educational material in other languages, especially Spanish. - Since we have created accounts and groups for this program, we have received a large wave of appreciation and excitement from the Spanish-speaking audience--that often felt forgotten--. - We created an infrastructure for the team to have a cohesive voice and consistency in our content. A big thank you to Sebastián, who took the lead on this. - We created a translation guide and designed a workflow that prioritizes and rotates tasks; this ensures consistency in our translations and guarantees that each ambassador has exposure to every material. Therefore, if an ambassador is absent for some time, none of the other ambassadors would have a problem taking over their content. - There are longer-term projects, such as translating our evergreen content. We completed a content audit for English and Spanish resources to prioritize what to translate first and translate from Spanish to English. We have just completed our fiftieth project. - Since we have started this pilot, we have made a huge amount of progress on the Maker Operational Manual. We translated the "How to Vote" video subtitles as well. We would love to work with other Core Units when more educational material content is produced. ![Discussion - Pilot Future](https://i.imgur.com/aXu3kqw.png) #### Questions [23:22](https://youtu.be/qjg6cG7h_ak?t=1402) - I will answer some questions from the chat. There is one about translations and languages. - Right now, our pilot program is for Latin America, in Spanish. In the future, if it is successful and we can create our Core Unit, or we integrate with another Core Unit, we would like to see this expand to other regions: Asia, Eastern Europe, would be some of the larger ones. Latin America in Portuguese, instead of Spanish, would also be very helpful. - Andrew Burban: I saw a discussion on the Forum about why not just pay these people in SourceCred. In my opinion, the SourceCred trickle is fine but is probably not enough to cover the scope of what you are trying to do. Could you add a little bit in that regard? Why does this need slightly more budget than SourceCred itself pays out? I am for what you are doing, but some people have just asked why does not SourceCred pay for this? - Kat: This is professional translation material. It is not just participation. Neither is it the kind of participation any of us has online or in the DAO. It is professional work that we need to pay for. - Andrew Burban: I do not think this was covered here, but you are asking for a preliminary budget for the first quarter to see how it goes. If everyone likes it, you can expand the budget in the future. But, for the first quarter, you ask for a minimal amount of money, which the DAO can provide. - Kat: I agree. Thank you. We need trained professionals to do this. Therefore, we need to provide more incentive than just SourceCred. The cost of running the program for a year at its current state would be our budget times four: a hundred thousand a year. That does not include my salary--I am running it--. This is only to pay our three ambassadors. If this goes well and grows, the cost would be higher because we would expand to more regions. - Chat: Twitter has not been active, with only three tweets so far. Any plans to make it more active? - Kat: Yes. We created that Twitter account about a month ago. That is part of our pilot program. It already has a huge amount of engagement and followers. We do seek to make it more active. We just need our content to be able to post. We posted today about our new [Welcome Thread](https://forum.makerdao.com/t/hilo-oficial-de-bienvenida/13566/24) in the Latin America Forum. We also posted about this governance call to have people join. Despite being a very new account, it has been doing well. [27:42](https://youtu.be/qjg6cG7h_ak?t=1662) - Andrew Burban: Another question people might ask is if you envision this spinning off into a new Core Unit, or you think the Ambassador Program could become a would-be subsidiary of another Core Unit that already exists; so you would not need to become a Facilitator, managing budgets and such. - Kat: It makes sense to be its Core Unit, but if the Community or another Core Unit would like to take it on and take the responsibility, that would be wonderful. I will do it if I need to. And I think it makes sense for this to be its Core Unit. - Chat: Any plans for translating [makerdao.world](https://makerdao.world/en/)? - Kat: Yes. As our Community Portal, it is one of our top priorities. - Kat: Regarding social channels, it depends on the regional aspect. We have seen that the biggest communities are Twitter and Telegram. We drive people to the Discord channel and the Forum, but it depends regionally. For Latin America, Telegram might be larger. In Asia, WeChat. The ambassadors are doing more than just translation work; they are doing ambassador work so that we know where to post and where to make contact with the community we are trying to reach. - Chat: Is the goal to attract diverse talent Stakeholders, Dai users, Vault users? - Kat: I think we will be able to get all of those. The content we are translating right now is more technical and aimed at people interested in participating in the MakerDAO Community Governance, with a larger goal than just holding Dai. We would like to see the number of Dai users increase, but we need our content to do that. - Artem Gordon: I have a quick question. From my personal experience, somebody will probably ask this sooner or later. Do you have any ideas, or any potential strategy, on how you might quantify or analyze the value of the translations? - Kat: Of course. We will be able to see it through our click-troughs and analytics. Also, through the community's growth, with new users signing up to the Forum and participating in the Latin American portion of it. I currently do not know how to get those analytics, but I am sure that we can and will be able to be quantified. - Artem Gordon: I am currently trying to get API access to get Google Analytics on discourse. If anything, I will update you. - Kat: Perfect! Thank you. [31:48](https://youtu.be/qjg6cG7h_ak?t=1908) - Person 1: I will mention one word of support for this. This is a baseline internationalization expansion strategy. We cannot even hope to grow in these other markets until we have the right translation infrastructure. I have worked for several companies that have expanded internationally, and this is a pretty standard first step. I am very much in support of funding this experiment. - Person 2: Plus one! - Kat: Thank you, guys! - Payton Rose: One question is coming up from the Governance side. Have you thought about how you plan to implement the trial process in administering the funds and reporting how they were spent? - Kat: Yes. I am waiting on one confirmation for my multi-sig, and I will have a post that wraps everything up for that. We will have a two out of three multi-sig with specified dates and milestones to reach to ensure we are on track. [33:15](https://youtu.be/qjg6cG7h_ak?t=1995) - Andrew Burban: This is tangential regarding multi-sigs. As some of you might know, I have a one-on-one multi. I do not have a multi-sig. I might move my next budget to a multi-sig. After the whole fiasco with Content Production, it seems like it does not matter who is on the multi-sig. I do not know how it is done right now exactly, but I think the multi-sig should probably be, at least in part, made of other Core Unit Facilitators who keep the meaningful community separated from the actual people in the Core Unit. That is a tangential topic. - Person 3: There are a couple of things there, Andrew. On the one hand, yes, the DAO wants more security guarantees. But, on the other hand, you have a huge inefficiency if a Core Unit cannot control a multi-sig on its own. Depending on the number of transactions you have to do, if you have to rope in other Core Units every time you need to make any transaction, this will not scale. It is not viable at all. The best we can hope for is that if a Core Unit wants to run off with the money allocated, they can do that. There is not much you can do to stop it without crippling the Core Unit's ability to execute. And I think, between those two, we should err towards the not-crippling Core Unit side. What you want to protect, and this is what we can fix if there is an accident or bad blood with some member that you are not dependent on, is for the Facilitator or the members of that Core Unit to play along where other facilitators or people that Governance thinks should be on this multi-sigs could pull the funds back. That is what we are protecting ourselves from. With the former scenario, you have no hope of defending against that. - Andrew Burban: What if the Core Unit has the main wallet, a multi-sig held by other coordinated facilitators, that can be accessed when necessary. Then, a secondary wallet could be held by people from the facilitator's group itself, and they can spend from that wallet as needed. But when they want to tap into larger portions of their budget... - Person 4: This only works when running a budget surplus. Not when you are spending less than you expected in your budget, which should not be the case, although it is common at the moment--at least for my Core Unit--that we are spending significantly less than we budgeted for. But that is more a symptom of a problem than something you can rely on to create this mechanism; this multi-tier ladder of multi-sigs to get some protection. The streaming of the payments is supposed to be that you are spending what you need to spend. You are allocated what you need to spend every month. - Andrew Burban: It might just be overcomplicating it. We take the risk when we hand over a Core Unit budget. We assume the money is gone. And if they run away with it, that was the risk we took. And if they do not run away with it, that is great. I was seeing the fall out of it. How can we mitigate that if the way to do it is just not voting in people like that again? - Person 4: If people are budgeting appropriately, the most the Core Unit can run away with would be one or two months' worth of budget. If we are budgeting inappropriately, you get these giant surpluses within the multi-sigs. There are these lump-sum payments that a Core Unit can run off with that are substantial in terms of loss to the DAO. The way to combat this is to be more prudent when budgeting. For example, when it comes to renewals for a Core Unit's budget, you need to ask: what did you spend last year? What changes are you trying to implement this year to justify spending more in certain areas? If you asked for a two hundred thousand legal budget, but you only ended up spending fifty thousand of that, there is no reason to ask for the same initial budget next year. [38:53](https://youtu.be/qjg6cG7h_ak?t=2333) - Payton Rose: I appreciate the discussion, but I want to drawback to the Ambassador Program and see if we have any other questions or comments before moving on to other topics. - Chat: Is there a budget breakdown in terms of cost per session or action? - Kat: We have hourly rates for the ambassadors, and we have a budget breakdown of how that will go monthly throughout this pilot. That will be shared later today when we confirm our multi-sig. - Kat: I think we are finished with the last Ambassador Program questions. Thank you so much, guys. ¡Gracias! - Payton Rose: Thank you, Kat. We appreciate the presentation. As we said, that was an [Active Signal](https://forum.makerdao.com/t/signal-request-fund-ambassadors-program-pilot/13199) on the Forum. It will be going up for polling, presumably, on Monday, as long as those implementation details are posted. ### Open Discussion #### Payton Rose [40:36](https://youtu.be/qjg6cG7h_ak?t=2436) - That was all for our planned discussion topics. We have much substance in the chat to facilitate Open Discussion, which is awesome. The first one to ask to be a part of this portion was Luca, who wanted to talk about the [Real World Asset Fast-Tracking Signal](https://forum.makerdao.com/t/signal-request-real-world-asset-fast-tracking/13563). - Luca: Thank you, Payton. I wanted to highlight this very quickly and open the floor for discussion. - Yesterday, there was a Signal Request, as we have seen before, to propose a fast-tracking channel for the Real-World Assets application. I want to give some context: we all want RWA to be onboarded on Maker, albeit this has never been done before. It is complex. We are talking about enormous sums without the transparency of the Smart Contracts concept we are used to. With a legal setup that is untested. This requires an incredible amount of work. - On the other side, borrowers are not our friends. Borrowers have conflicting interests with their lenders. This is the nature of such a beast. Hence, this competent, sophisticated, and prudent RWA construct within Maker in the Core Units was created. - Unfortunately, not all borrowers will receive positive feedback. Sometimes, these borrowers have blatantly insufficient structures or track records or other issues that the Real World Finance Core Unit needs to work on for the Community. - The system is not perfect. I know there are many frustrations because things are slow, and people would like them to be faster. Despite not being there yet, things are improving massively. - Providing an opportunity for unhappy borrowers--potentially with political contacts--to bypass Real-World Finance, any other Core Unit, or any borrowing application, is nuclear. It does not provide the community with the required information. It creates an existential threat if we are onboarding hundreds of millions without any analysis, without any counterweight within the community. The community should carefully assess who is asking for this type of back-channels and willing to use them. Because, on the other side, another counterpart is very happy--although it is heavy-lifting, and they have conflicting interests--to labor with us in doing this workout. - I believe Real-World Finance, as well as myself--I'm incubating a lending oversight Core Unit--, have made mistakes in being not public enough with the heavy work we are doing. We will amend it. We will be much more open, and we will create office hours so anybody can chip in. - Distrust people who want to project the image that doing this is easy because it is not. - I leave it to you, guys. Thanks for these couple of minutes. [43:54](https://youtu.be/qjg6cG7h_ak?t=2634) - Prose11: It was GovAlpha that put up this signal. We try to be clear that we were not endorsing the option, but instead trying to facilitate many people asking why there is no quicker governance process for this? The answer was because no one had proposed it yet. We took the opportunity to ask the community if they think a faster process should exist. Whatever the community agrees to do will follow us as governance here. - Unknown Speaker: I want to complement what you and Luca just said. This issue with signal requests is we have been spending a significant amount of time working with contract parties. We have a bit more work with not neglecting the transparency and communications in the form. We have spent a lot of time working with contract parties and sought to be as gentlemanly as possible. We are doing okay in the professionalization of flutter. As we are giving many opportunities to contract parties, I should point out the associated risks so we can find workable agreements for possible mitigations. We have had this approach with both external and internal Core Units that we work with. - In private, I have expressed the vital issue that I found with the signal request. Now I shall express it in public. While we have taken a goodwill approach to the contract parties, they did not reciprocate when the signature press was discussed. Honestly, the signal request was not even discussed before its submission into a call to action. This caused this so much disappointment with the signal request. I understand that you all have the role in facilitating the discussions that bubble up to you. That is part of the process. However, in terms of normal adult interaction, not having the professionalism of engagement is simply out of this world. - I have expressed this before in the community. I have four-year kids, and this is like a kindergarten on steroids. The fact that borrowers can self-deal is an extremely dangerous prospect. I am not advocating for bottlenecks in the system or restraining particular Core Units. However, no interaction and oversight on a protocol are a nuclear bomb waiting to happen. This is not only for real-world assets but also for all protocols. I would encourage action risk professionals with professional integrity to thoroughly examine this topic. This is about the DAI and MKR that you hold. I would leave the protocol tomorrow with it was fully self-dealing with no oversight going forward. This is serious. This is not about bottlenecking Core Units. I am making deliberate efforts to scale the number and professionally acquire the number of Core Units. I encourage people to do that, but having zero relationships between borrowers and lenders oversite is a nuclear bomb. - Prose11: The only part I wanted to comment on was to issue an apology for not warning for Real-World Finance. Long addressed that on one of the posts on the thread. However, we wanted the discussion to take place publicly. While we agree we did not execute this ideally, its benefit caused public discussion. This gave us a lot of feedback, and many people felt the process was opaque. People felt the discussion was not taking place as publicly as shared. I wanted to add some caveat with the [perhaps poor] apology. I appreciate you. [49:50](https://youtu.be/qjg6cG7h_ak?t=2990) - Unknown Speaker: Although I have been involved for a little while, I only properly handled facilitation with the possibility of deploying budget for the choices of the Core Unit in one month. I had overseen one of the worst transition processes that the DAO probably has ever witnessed in terms of handover. I was there for that operation for about a month. I am not rejecting the fact that communication needs to be improved. The initial focus was getting the teams in place to set the mod partially for its professionalization. I have not communicated enough on the forums, but I am putting money in place for the action plan to share more proactively and regularly with the farms. This ensures that the process is transparent, and the people have access to our actions and monitors in that space. - We have not stopped working for the whole month. I have delivered efforts in ensuring that we were not working in isolation. We are collaborating and building bridges with different teams in the DAO. Those teams are aware of our actions because we have coordination sessions and workshops with them weekly. The units are fully engaged. To clarify, the team comprises two risk professionals, one lawyer, and me working on the incubator programs. Currently, the Lending Oversight CU has assisted a lot in ensuring our processes. This is not entirely an off-market process, but it helps with that professionalization. But anyway, I am not saying that our communication has been perfect in any way. Improving this communication is my priority for the month ahead. [53:14](https://youtu.be/qjg6cG7h_ak?t=3194) - Justin: This is a discussion between Governance and Real-World Assets, so I had to let everyone get what they had to say off their chest. I want to zoom out and take a larger view. I can see the frustration generated by this request. However, we also need better to respect the different Core Units and their competency. I realized that these things are trading at a timescale that seems very slow for crypto natives. But that is because we are on the finance frontier trying to do something that has never been done before. We are also trying to do so in an organizational forum that is very novel. These combined factors create a negation challenge that causes things to take even more time than they might otherwise do. Simultaneously, I agree with Luca because you must be extremely careful in your approach. - The whole protocol survives on trust. If we lose that competence and confidence, we no longer have the protocol. We cannot afford to have real-world assets blow up in our faces. We are better off not having real-world assets than those that fail. We should be cautious in approaching the subject matter and take baby steps to ensure that everything holds together before taking the next one. If a borrowing application is brought before the vote that Real World Finance has not yet reviewed, I do not see a scenario where I will favor such a proposal. Suppose I see a borrower unwilling to interact with Real-World Finance, which immediately makes me question their motives. If they are the most professional counterparty with everything perfectly laid out, maybe all Real-World Finance must do is review and approve the proposal without talking to the counterparty. But unless Real-World Finance approves, I can see myself voting in favor of it. [56:17](https://youtu.be/qjg6cG7h_ak?t=3377) - MakerMan: I will try to keep this short. I hear you saying that we are like a bunch of five-year-old children. I have dealt with many DAOS and calls; I would like to reduce the inflammatory language. Nuclear seems a bit inflammatory. The real issue here is our players who would like some word as to a reasonable timeline for a first agreement. Yet nobody has anything, and people would push forward on stuff. I understand that Real World Finance is changing. From a budgetary perspective, people are looking for clarity on how long and how much money it takes to give one tangible agreement that we can move forward on? This is the real issue. This poll came about because of pushback from people who want to work with Maker but feel stuck. We are not giving them any clarity on any account of a timeline. Everyone is on hold, situated, and trying to navigate positions. We are spending a lot of money and not finding a lot of traction. I think it is apparent that Real World Finance needs to put forward some clarity that we can get behind. I agree that it is not suitable for the protocol to move forward on agreements that we cannot characterize rampantly. We need not just one legal team but a couple of different groups to give careful attention to gatekeeping. This includes how they come in, are accelerated, who lets them come in, and how we reject them. That requires time, but we need to clarify how we move forward. [58:32](https://youtu.be/qjg6cG7h_ak?t=3512) - Luca: We are bad at communication. Please, we need to improve, and we have taken the point. However, this is incorrect. I have been overseeing the Real-World Finance team for one month, which is nothing. Within one month, pretty much all their counterparties have engaged in improving unsatisfactory legal structures that will not give any right as a borrower at Maker. Simultaneously, we have provided a detailed overview of the requests of monetarists in this case. I am calling the names, as requested. We have allowed them to amend the proposal with those reviews because they have published any specific proposal. Henceforth, we have not published our review because we wanted as gentlemen to allow the borrower to reply. The borrower has not replied for a month. He stalled the process and worked with Governance. This is bad faith. Although we will try to remain gentlemen, we will change because gentlemen are not welcomed in the house. We will publish every assessment without allowing the counterparty to remedy it. This is unprofessional, but we will do it because otherwise, we have no protection against ourselves. - We shared the analysis of monetarists with them, and they have not replied. The monetarist can decide to go through a standard process, disregarding our view and endorsement. As we are not gatekeepers, they are free to do so. However, monetarists cannot say they have been waiting for an answer given them a month ago. That is like a borrower asking for a million dollars without substantiated facts based on risk management. Since the risk management opinion is negative, lobbyists take over the board of directors for a direct relationship with the committee overseeing any internal controls. I will walk away from this protocol and sell every DAI I have if a million dollars are given without any internal checks and balances because that is insane. I do not want anybody to say they have been hanging or waiting because this team has provided opinions for months. - We are not forced to give any constructive opinion to people we believe do not have the requirements. This is why we are here. We are here to protect the protocol and help it grow. It will be much easier for me to give away money to random people, professional or not than be here in six months because Maker burn said we had delivered $1 billion. I will make clear this important point of falsity. We have been gentlemen, and we will change our approach by publishing everything. Now ask yourselves, what kind of borrowers are not deciding to engage and ask for direct relationships with Governance bypassing everything? What type of borrowers are they? I am not making money on this job. I am dedicating time to subpar compensation because I love this protocol. I will walk away and sell every DAI because I can guarantee that if we give hundreds of millions like this, this protocol will not live a long life. Instead of being Maker, it will be another copycat of Mint, Tyme, or Wonderland. - Now pick your battles. We are doing our jobs. It is time-consuming as we cannot even engage with top counterparties. We have spent all the time protecting our backs politically against these types of movements. This is unacceptable. Now the rest is with you. I want to make sure that everything is clear. From today, we will publish all the opinions shared with our counterparties before. [1:03:20](https://youtu.be/qjg6cG7h_ak?t=3800) - Prose11: In a DAO, people can always propose things through MIPs or other structures to voice their proposals to a vote of MKR holders. From Governance, our main concern is that if the information is not publicly available, then MKR holders are inherently making uninformed decisions. So, that is the push for transparency. It is not for people to be mean and start trashing people on the forum. Instead, if people seek a vote (in which there are many avenues), MKR holders need to know what the people they elected professionally think about the manner. [1:04:10](https://youtu.be/qjg6cG7h_ak?t=3850) - Will: In the diligence process, you do not necessarily have a single assessment but instead have several stages that can happen in an assessment. For example, monetarists pointed out several critical risk issues in many DAOs. We recommend certain mitigants to be worked through. We got back in response to the blunt rejection of single-issue pointed out the assessment. They had access to double opinions that came to a similar conclusion. This is not simply a case of he says, she says. We are talking about people that worked in the credit arena for 25-30 years. On the other side of the equation, people have all experiences, but not everything is like that. Regarding the relationships, we talked to professionals in the industry with like for like marketing experience. The counterparty expressed a desire to inquire about which professional firms in that jurisdiction would like to get in that market. - That was how we formed the logic of the opinion. We are not doing something entirely out of whack. As Luca said, we expressed these concerns a month ago. And since then, there has been no interaction. The counterparty has spent the whole month in the forum asking when you will originate half a billion dollars in assets. However, it would help if you spent some time working rather than in the forums. Otherwise, it will be hard to originate half a billion dollars like that. I find this quite concerning. However, we have been making every effort to be gentlemanly and operate, knowing there are multiple stages in a due diligence process. The risk assessment cannot be the sole entity because there is no back and forth communication. That is not how the process works. I just wanted to clarify that we will improve the documentation, so any data holders know the facts. ### Open Discussion [1:09:06](https://youtu.be/qjg6cG7h_ak?t=4146) - David Utrobin: I want to echo this idea of the borrower versus the lender side of any of these deals. This is why high-quality control and compliance throughout is essential. It is not the same as an on-chain asset where you have immediate recourse. You approve unsecured loans if you do not have a high caliber of diligence in each deal. I hear a bit of impatience in the forums; we want things to happen very fast. I will be the first to say that I cannot wait for billions of dollars to be sourced from real-world assets. If Maker survives long term, it must source at the highest level to attract the largest market participants and a world leader. If we do not, we will attract all the garbage collateral. We will implode, die, and be another story in history. [1:10:49](https://youtu.be/qjg6cG7h_ak?t=4249) - Andrew Burban: This is unrelated to anything on the topic, but a person whose name I do not remember brought up many things. He asked me about the ESM attack and whether we should lower or raise the amount of Maker in the ESM. In the emergency shutdown model, 100,000 Maker must be locked up and burned to shut down the Maker system. The question was: can someone in principle borrow and buy up that much to shut down Maker while simultaneously opening a short? That would be profitable. So then, can someone maliciously exploit that by burning their own 100,000 Maker to shut down the system and profit by shorting Maker on centralized exchanges? His analysis said that the market buying that much Maker would bump the price up 17%. I think it would probably be more. I investigated loosely on liquidity on centralized exchanges, but nothing anything unchained. - It looks like an attacker would borrow around 50,000 – 55,000 Maker between Aave and compound. This puts his collateral at risk to borrow that amount. If they are borrowing 50,000, Maker, let us say $100 million, they might pick up $150 to $200 million of their collateral. Then, if they get a market price, they would have to buy up another 100,000 Maker on the market. That is another 100 million dollars at the current market price. To even initiate the attack, they will need to commit 100 million-plus of collateral, almost $300 million. They then must burn by shutting down the Maker system. To make a profit, they need to simultaneously short more than 100,000 Maker as it drops 70-90%. And then you can make a profit. - The upfront capital requirement on order is close to half a billion dollars even to execute the attack. Maker’s liquidity is so thin across the board that someone cannot short that kind of volume on Maker and make profits that exceed the upfront costs to execute the attack. There is one place they could do something using synthetic leverage on trade gains, but they put a cap of 900% on any position. So, let us say you do a 150 short on Maker. Their current maximum bet is $75,000 with a 900% gain. You would not be able to recoup your upfront capital in this way. I think liquidity to short that kind of volume elsewhere is nonexistent. The only place I had not looked at synthetics, but I imagine it is also not a viable place to get that short. - This question came up partly because 100,000 Maker to shut down through the ESM is relatively high. We want to lower it and reward benevolent actors who trigger it for good reasons while dissuading malicious actors from exploiting it. That attack vector is probably not viable from a financial point of view. However, someone can pull off a Joker-style attack where he burns a ton of cash just for the sake of doing it. If someone had half of billion dollars laying around and wanted to destroy the system, they could do so. They will not gain financially but may fulfill their ulterior motives. Dai would not be shut down due to volatility. I do not think it would lose its peg. It just becomes one-to-one with the collateral it backs. - Prose11: After the end of Dai, it will no longer be pegged to $1. It will be pegged to the basket underneath it. So, it will lose its peg. - Andrew Burban: Dai will lose peg, but marginally, it should be worth more than $1. It will be redeemable for the collateral backing it. This attack is not financially viable, but it will be malicious viable. The attacker would not likely not gain much but risk a lot. If he does any misstep in the attack, he risks burning all the money he put in front. The question was raised because we do not want the ESM to be 100,000 Maker. We want a bit lower. My default thought was to keep a five to ten percent buffer of all the Maker borrowable on Aave or Compound rather than 100,000 MKR. Those were my preliminary thoughts; someone might want to look at synthetics shorting. This attack is possible for a malicious actor looking at burning his cash and is genuinely for the sake of destroying Maker. [1:17:58](https://youtu.be/qjg6cG7h_ak?t=4678) - Prose11: People are noting that you could short other instruments. You could count on the market instability of Dai losing its peg to have other effects, potentially making different ways to profit. As far as the higher or lower, we do not necessarily want to lower it. It could be higher. We want to look into the PSM threshold setting because it can be called maliciously if it is too low. If it is too high, it cannot be called in a situation where you need it. [1:18:32](https://youtu.be/qjg6cG7h_ak?t=4712) - Andrew Burban: Let us say the system genuinely needs the ESM being triggered. There is a tiny incentive for anyone who has that Maker to opt to burn their Maker. You would probably get it back if it were a good burn. But if you see the whole thing is about to implode, you would instead dump your Maker rather than burn. That is the disincentive structure. Who here would burn their Maker if Dai is about to implode somehow? We could consider bonuses as an incentive to burn. [1:20:56](https://youtu.be/qjg6cG7h_ak?t=4856) - Andrew Burban: One last tangential thought. Some of us like QiDAO, My.Financing. Some do not like it; some do not know about it. They have a symbiotic relationship with us. They absorb a lot of Dai and do partial liquidations. They are very friendly liquidation with a lot of overhead to build, so it might not make sense for us to do that. Their liquidation system works because you have some debt, and they apply a liquidation penalty to your debt. Then, half of your debt gets liquidated as they sell the collateral to cover half your debt. Approximately 40% of your collateral is sold instead of it all. This is probably too much overhead for us to build and maybe unnecessary. However, we have one of the most vicious liquidations in the DeFi space. I do not see anything wrong with the 13% liquidation penalty. - There may be something to gain by doing partial liquidations, like the Seven Siblings. Instead of liquidating their entire $600 million vault (or anyone's entire vault), you are only dealing with half. You introduce people wanting to allow themselves to get liquidated. It will put less stress on our whole liquidation system by liquidating less at a time and moving the collateral ratio up. They would not get liquidated again for a long time. Does anyone think that is a topic worth looking into? - Prose11: There are many open-source options. Anyone can develop an autonomous technique, and that is a beautiful thing. [1:23:25](https://youtu.be/qjg6cG7h_ak?t=5005) - David Utrobin: I have a quick question about multi-collateral Dai slave instances of it. How does the protocol upgrades itself? Is slave instance just copying the parent? Will upgrades have to be compatible across different networks and languages? - Unknown Speaker: I can answer that. The current plan is to copy MCD to get something online. MCD in and of itself can be extended in any way possible. You can see that with a new collaterals routing, crop join stuff, as well as the institutional vaults. So we can extend MCT in any which way we want. You can think of the slave instances as a duplicate of MCD at the stage. - David Utrobin: I got it. Once this version of MCD gets upgraded with, for example, rate-limiting individual vaults, a different circles buffer management system, or a new emergency shutdown module, those slave instances must be dealt with separately as a second order. - Unknown Speaker: It depends on the module. Stuff like the shutdown is not the same. There are also differences in how the surplus and deficits are managed. The VAT can never be redeployed without some Herculean effort on layer one. So that is immutable and weak. But we can tack new features on by attaching them to the VAT with a new type of module to get these new features. But it is not like replacing the current VAT. ## Conclusion ### Payton Rose [1:25:38](https://youtu.be/qjg6cG7h_ak?t=5138) - I am sure we sent any new listeners down a giant rabbit hole. Please reach out to us, and I am happy to give you some resources and documentation. With that said, we are past our scheduled time. - Chris: We should have an excellent little discussion session at some point. Some parts of the plan are still being written up. Everyone will get a kick out of seeing how technically feasible it will be. Everyone will end up with a good mental model of expanding the protocol. - Unknown Speaker: One thing I'll add is for layer two; we can redeploy that. If there's some future upgrade, we want to tack on to it. We could do a new deployment on L2 because it is not the master instance. - Thanks, guys. I would be more than happy to help facilitate that call. Thank you, everyone, for your time and attention. We have a lot of discussions today, and I would like to continue it in the forums. That is a great place for preserving the longevity of what we discussed. We will see you same time, at the same place next week. [Suggestion Box](https://app.suggestionox.com/r/GovCallQs) ## Common Abbreviated Terms `CR`: Collateralization Ratio `DC`: Debt Ceiling `ES`: Emergency Shutdown `SF`: Stability Fee `DSR`: Dai Savings Rate `MIP`: Maker Improvement Proposal `OSM`: Oracle Security Module `LR`: Liquidation Ratio `RWA`: Real-World Asset `RWF`: Real-World Finance `SC`: Smart Contracts `Liq`: Liquidations `CU`: Core Unit ## Credits - Artem Gordon produced this summary. - Constanza produced this summary. - Larry produced this summary. - Everyone who spoke and presented on the call.