---
# System prepended metadata

title: 'Episode #186: April 14th, 2022'
tags: [G&R]

---

---
tags: G&R
---

# Episode #186: April 14th, 2022

## Agenda

- [00:00](https://youtu.be/QH82k0Lkpi0): Introduction
- [00:38](https://youtu.be/QH82k0Lkpi0?t=38): Votes and Polls
- [02:38](https://youtu.be/QH82k0Lkpi0?t=158): MIPs Update
- [08:12](https://youtu.be/QH82k0Lkpi0?t=492): Forum at a Glance
- [12:07](https://youtu.be/QH82k0Lkpi0?t=727): Initiatives Update: March Financials 
- [35:58](https://youtu.be/QH82k0Lkpi0?t=2158): Initiatives Update: MIP66: Pairwyse Licensure 
- [39:52](https://youtu.be/QH82k0Lkpi0?t=2392): Discussion: Dai Marketshare & Liquidity
- [1:15:16](https://youtu.be/QH82k0Lkpi0?t=4516): Conclusion

## Video

[Link](https://youtu.be/QH82k0Lkpi0)

## Introduction 

### Agenda and Preamble

#### LongForWisdom

[00:00](https://www.youtube.com/watch?v=QH82k0Lkpi0)

- Hello to everyone. Welcome to the MakerDAO Scientific Governance & Risk episode #186. We have got an agenda to get through. We will have some updates about governance, the forum, and some initial updates and discuss Curve Pools and Dai MarketShare/Liquidity. We are recording this call and will love to hear from you. Please try not to speak over each other. You can use the hand race functionality or jump in.

![Agenda](https://i.imgur.com/GEBJRMv.png)

## General Updates

### Votes

#### LongForWisdom

*Polls:*
- 1 Weekly Poll - **PASSED**
    - Adjust CRVV1ETHSTETH-A System Parameters
        - Debt Ceiling - 50M
        - Target Available Debt - 10M
- 12 Monthly Ratfication Polls - **In Progress**

*Executive:*
- Last Week's Executive - MOMC Parameter Changes, CRVV1ETHSTETH-A Debt Ceiling Increase, Recognized Delegate Compensation, ETHAmsterdam Event SPF Funding - **PASSED and EXECUTED**
- Tomorrow's Executive Proposal 
    - Offload TUSD Collateral 
    - CRVV1ETHSTETH-A Parameter Changes 
    - Ambassador Program Pilot Funding 
    - Growth CU Budget Transfer 
    - Gelato Keeper Stream Replacement 
    
### MIPs

#### Pablo

[02:38](https://youtu.be/QH82k0Lkpi0?t=158)

[MIPs Update #82](https://forum.makerdao.com/t/weekly-mips-update-82/14570)

![](https://i.imgur.com/5JBHY1q.png)

![MIPs General Updates](https://i.imgur.com/wz8TatK.png)

 ![Weekly-Cycle Subproposals](https://i.imgur.com/tLkOQoy.png)

![Ratification Polls](https://i.imgur.com/P8hfEmo.png)

![MIPs](https://i.imgur.com/bYuStFd.png)

![More MIPs](https://i.imgur.com/RRDvMOy.png)

![More MIPs](https://i.imgur.com/YImnTVd.png)

![](https://i.imgur.com/WS06NvC.png)

![Events CU(EVENTS-001)](https://i.imgur.com/m0d0qUo.png)

![](https://i.imgur.com/yOWXlpj.png)

![](https://i.imgur.com/2T8r24H.png)

![Proposals in RFC](https://i.imgur.com/Ri7pQVv.png)

![Proposals in RFC](https://i.imgur.com/67xlRei.jpg)

![](https://i.imgur.com/oHzgUDf.png)

![Thank You](https://i.imgur.com/vGjyvMj.png)


### Forum at a Glance

#### Artem Gordon

[8:12](https://youtu.be/QH82k0Lkpi0?t=492)

Post: [Forum at a Glance: April 7th - 13th, 2022](https://forum.makerdao.com/t/forum-at-a-glance-april-7-13-2022/14624)

- [_News & Announcements_](https://youtu.be/QH82k0Lkpi0?t=492)

    - [Off-Chain MIPs Collateral Update: What's Going On](https://youtu.be/QH82k0Lkpi0?t=506)
    - [Update to the Gelato Keeper Network Top Up Contract](https://youtu.be/QH82k0Lkpi0?t=534)

- [_Discussions_](https://youtu.be/QH82k0Lkpi0?t=553)

    - [MIP6 Recommended Guideline Metrics for Onchain Collateral Onboarding](https://youtu.be/QH82k0Lkpi0?t=559)
    - [A Letter to the CUs on Community Impatience and Trust](https://youtu.be/QH82k0Lkpi0?t=580)
    - [Charting a Path For RWAs - The Case For Continuity](https://youtu.be/QH82k0Lkpi0?t=601)

- [_Active Signal Requests_](https://youtu.be/QH82k0Lkpi0?t=625)
    - [[Signal Request]Extend SHCU(SH-001)Budget Until May Governance Cycle](https://youtu.be/QH82k0Lkpi0?t=625)
    - [[Signal Request]Onboard D3M for TrueFi](https://youtu.be/QH82k0Lkpi0?t=662)
    

## Initiative Updates

### March Financial Updates

#### Aes

[12:07](https://youtu.be/QH82k0Lkpi0?t=727)

![Overview of MakerDAO and DAI - March 2022](https://i.imgur.com/rdddTGH.png)

![Legal Disclaimer & Preliminary Notes](https://i.imgur.com/fHEHAmD.png)

- I am Aes from the forums and the facilitator of the Strategic Finance CU. Just a brief legal disclaimer before we kick things off. This report is for informational purposes only. It does not constitute financial, investment, legal, regulatory, or tax advice. 

![Overview of Monthly Results - March 2022](https://i.imgur.com/O4MmnmP.png)

- The protocol earned 6 million in revenue last month, a 15% decrease vs. the prior month and a 31% decrease in the prior year. Last March was an extremely bullish period that saw ETH-A rates rise by 5.5%. That means a 13% decrease in net interest income becomes much more palatable with current ETH-A rates: 60% lower today. On-chain workforce expenses increased 37% from last month, driven by the timing of the PE budget draw, which had February's budget captured in March and March's budget. One of the few bright spots is that our Oracle Gas costs decreased 45% last month due to a much lower NFT trading volume and minting volume across Ethereum. 

![Reconciliation of Monthly and Quarterly Results - March 2022 vs. Prior Month & QoQ](https://i.imgur.com/WIxJF7m.png)

- Here is a brief month over month and quarter over quarter, showing the walk from our recurring net protocol income, which captures stability fees and operating expenses, down to our March income. We have a walk from February to March showing that the largest driver is increased workforce expenses. And with a modest offset on lower gas expenses. We see a much higher driver coming from the change in our assets or risk weight assets on the quarter of a quarter view. Then a much more modest offset on the Oracle gas expense side.

![Overview of Lending Business - March 2022](https://i.imgur.com/YjQvOUL.png)

- We see an ongoing decline in Dai denominated vault collateral sizes and a loss of market share in the lending business. This is mainly because we are not in a full bull market. We have a healthy share between ETH and WBTC even if WBTC is significantly down.

![Overview of Balance Sheet Assets - March 2022](https://i.imgur.com/SqTz6yE.png)

- We have a small increase in the total yield-bearing assets in the overview of the balance sheet assets. Some Gelato pools are not yielding a lot. One is counted as a yield-bearing asset because it is a loan. We have 62 people that are in USDC. We have much liquidity. That is very good for the peg. The bad part is that we are not generating much revenue from this part.

![Overview of Key Risk Metrics - March 2022](https://i.imgur.com/L5yx0Qp.png)

- From the risk metrics perspective, it has not been a big difference since the last month. The capitalization ratio, surplus buffer or equity, is divided by the yield-bearing assets. That is risky if you include USDC; we are still at three 2.3%, which is not a lot if you want, but still very high compared to historical numbers. One reason is that we do not have a lot of crypto loans outstanding. That is the main issue. The leverage ratio, which is equity divided by all the assets that we have, USDC, PSM, and the crypto loans, has been flat over the last year, more or less, just below 1%. 

![Overview of ETH Market Share - March 2022](https://i.imgur.com/r6kVI9z.png)

- To talk more about the market dynamics. We will go through an overview of the different market share trends and talk about trends on Arbitrum. Here, the prevailing trend in the ETH lending market is one of decline, month on month, quarter on quarter, and year on year. We are flagging the last day of March because there was a significant move in market share literally on the 31st of March, with Nexo moving ETH in and out of vaults. This created a little bit of churn there at the end. One thing worth highlighting from this slide is that in this environment of depressed lending demand, Aave is gaining many shares, largely driven by its liquidity mining incentives. The story is trying to weather the storm, look for growth where it occurs, nurture the whales and make sure that they do not leave the vaults and stop generating revenue for the protocol. Hopefully, wait for Aave to stop pumping money and sending it to people one day.

![Overview of WBTC Market Share - March 2022](https://i.imgur.com/zZatGgr.png)

- On wrap WBTC, it is an environment contrary to the one you see in ETH, where lending demand is increasing quite nicely year on year. Aave takes the crown for growth entirely because of the last-minute move again by Nexo, withdrawing 100% of their BTC vaults but intending to reposition them into the protocol eventually. We are hoping to see this move back into the vaults in April. This slide highlights the vulnerability we face in this space and shows how competitive it is. Barriers to entry and exit are essentially zero. This is a very competitive rate-driven space where whales hold sway. It will be important to keep an eye on those in the following months.

![Stablecoins on Arbitrum - March 2022](https://i.imgur.com/UmO3j7F.png)

- There is an impressive stablecoin growth store in Arbitrum. As Arbitrum, in general, is peeling away from the rest of the L2s in terms of total value lock. The recent run-up that you see towards the end, starting in mid-March, is largely due to the acceleration from the launch of the Stargate Bridge as of the mid of last month. The good news is that our team and PE are in touch with Stargate. I will not speak for how advanced those discussions are. The idea would be to have Dai listed on Stargate, as it cleared the 2 billion dollar value locked mark and keeps going.

![3+9 Forecast for FY2022 - March 2022](https://i.imgur.com/oZktEHc.png)

- We are showing a 3+9 forecast for the full year 2022. We break out the interest income on loan balances and the generated interest income. We are looking at things quarterly. So this is full-year actuals for 2021 plus a forecast for 2022. In other words, this full-year 2022 figure, as actuals of Q1 and the forecast for the rest of the year. We have built up the assumptions with as much conservatism as we can stomach. We are looking at a relatively flat ETH lending market, which would be an improvement relative to the lending market today. We hope that these balances are essentially an average the year over the year. We hope that these balances stabilize as the year moves on. 
- There is one major catalyst with the merge and uncertainty on what that will do to lending demand. If it accelerates lending demand and stETH and Maker are uncompetitive, market share gains might accelerate. For Aave, for example, were able to take some of that share, it might turn the trend around and start building the vaults in ETH again. On WBTC, assuming that Nexo returns the BTC into the vault, we are projecting good growth on the back of general BTC market growth. RWA is starting from a very small base as the foundations were built in 2021. They began in April 2021. They did not show up in Q1 of last year. We hope to hit an average of 300 million that is eating a vault capacity throughout the year, which would imply about 600 million towards the end of the year. And then other captures; all the other vaults that generate less yield. We forecast around 40 million Dai in interest income for ETH and WBTC. With another 20 from RWA and the other vaults in the system. This highlights the story. It is important to nurture and grow the whales. We need to be able to make much more comprehensive rent revenue-generating bets.
- Regarding expenses, it is worth highlighting that 2021 is understated because of the foundation's dissolution in the middle of the year. Some of these expenses are understated. It is not like the protocol was legitimately running with only 70 million Dai last year. The expenses increased, but it is important not to focus on the absolute amount but instead think about the expenses in ROI turns and look to invest in where they can get the maximum amount of growth possible. This particular environment that we are in is relatively sideways and volatile but challenging to work in. Expenses, particularly salary expenses, tend to have quite a static nature. So this operating expenses line is a fixed liability because the whole protocol is priced in Dai terms, and then the rest of the revenue items are floating relative to Dai. There is a strong exchange rate effect there. As we think about putting these expenses together, it is important to think of them in ROI terms and transparently communicate how those expenses are performing to the Maker holders to hopefully avoid a lot of the fiery back and forth that we have had some of the budget expansion requests. 
- Finally, one thing that is worth flagging, we are not showing a balance sheet picture here. Currently, our balance sheet is yielding very little. And this is a huge opportunity cost that we are incurring as a protocol. It will improve the resilience of the protocol and overall profitability to increase the asset productivity by putting the balance sheet of stablecoins to work, putting our treasury to work. These revenues are diversified, acting as volatility cushions when the markets go up and down. Investing in real-world short-term bonds also has the added benefit of being less correlated to the overall crypto market, providing a stable source of revenue.

### Questions

[25:09](https://youtu.be/QH82k0Lkpi0?t=1509)
- LongForWisedom: I appreciate the presentation. Maybe we can talk about financial forecasts.
    - Someone: These are forecasts for the end of the year. We want to highlight that ETH balances were projecting them to be flat, on average, flat relative to the end of March of this year. This would be a gain relative to the trend, given that the lending market is compressing, but we do not know what the lending market will do in the coming months. The key takeaway is to focus on driving as much growth as possible with every expense we make and focus less on the absolute expenses and more on productivity. Making more revenue-generating bets are very important. Related to this asset productivity question, we need to have more conviction and make more revenue-generating bets with the expenses that we are incurring to improve the long-term potential of some of these bets to become a real source of growth. If you look at the RWA’s picture, we are operating in a credit deficit environment where the rates are low, with more competition to get even lower. It is important to get these values as large as possible and as large as we can. The benefit of the RWA space is that it is uncorrelated to crypto. This is a big advantage of this asset clause.
    - I do not have an honest answer for how you nurture the whales. Rates will be a big feature of keeping them attracted or linked to a protocol. The reality is that it is very easy for whales to switch from one to the other. Marketing CU might help increase demand for Dai. In this regard, Maker has a key advantage relative to some of its lending peers, such as Aave and Compound. Now we have a stablecoin that has or should have organic demand around it. The more demand and activity there is for Dai, the more interesting it will be for people to collateralize their crypto loans to create Dai.
    - Aes: We are doing much research as a team into the segmentation of our customers versus Aave and Compound. We are also looking at the different markets for those customers, further digging into on-chain research and analyzing what those people are using Dai and other stablecoins for. In doing so, we can better position the vault as a product. We are talking to growth a lot about these research activities. Hopefully, we will have more to share in the coming months.

[28:58](https://youtu.be/QH82k0Lkpi0?t=1738)
- Kianga Daveringston: In terms of the whales, how much behind the scenes do we know who the individuals are? How can we directly communicate with and market to them? In our open community, are we doing that? It is an advantage to have those personal relationships.
    - Nadia Alvarez: We have a personal relationship where the biggest whales are Nexo and Celsius. We have a personal relationship with them. We are in constant communication with them and receive feedback from them. Thanks to them, we thought about the creation of the institutional vaults. As someone mentioned in the chat, they care about rates, predictability, and capital efficiency. That is what they are looking for. With the institutional vaults, we are trying to give them a product that will solve that. We are in conversations with the users of the protocol that have the largest vault but not the size of the whales. One of them is Gnosis, which has a huge vault with a stETH. When we talk with DAOs that have vaults within Maker, and if we want to do something else with them so they can increase their position, we have to give them something in return. We are considering onboarding their token as collateral, and in return, they have to mint at least X amount of Dai and keep it for one year, or I do not know how long. So we are trying to do this kind of thing. You are right. These whales need our one-to-one support.
    
[31:53](https://youtu.be/QH82k0Lkpi0?t=1913)
- Frank: For the Strategic CU, when thinking about bets and there is the possibility to take on some more risk, should the CU be hiring more? I see many other side chains or L1s deploying all these platforms, and most of the time, they are doing liquidity mining with USDC and USDT. It is frustrating. I get it. You do not want non-canonical Dai to go all over because it gets messy. So, when thinking in bets, how do you feel about CUs hiring more folks so we can keep up with all of these platforms that are raising a quarter of a billion dollars in 48 hours, which is bananas? 
    - Aes: For hiring, it goes back to the ROI. What value is being created by the CU or the expansion of the CU? What problem are they solving? Are they bringing on new revenue? Are they just a cost side but making things more efficient operationally, indirectly leading to more revenue? It is hard to make a blanket statement one way or the other. On the product side, the more we expand and do R&D products, the higher revenue we will generate in making some of these revenue bets. For example, I would hate to underinvest in engineering, especially when we have all these D3Ms and MCDs on L2s and other chains in the pipeline that can drive a lot of organic Dai and revenue growth with the new vaults.
    - Someone: There was a comment earlier in the chats from Lucas asking whether it was cash or accrued type of expenses. One of the disadvantages of transparency in the blockchain space is that these expenses will hit early, and the benefits will be felt later. When you invest in technology, for example, in a regular company, you might find ways to smooth it over by capitalizing on balance sheets; we do not do this in the blockchain. This is worth keeping in mind when you are discussing. So, to PaperImperium’s point, most of this is cash. It is challenging and near impossible to grow. This is worth bearing in mind when we think about budget requests. The final message is to think about the volatility of this market which might turn, and make sure that we are positioned well to take advantage of the upturns. If I misspoke and said Nexo BTC went to Aave, I was referring to a general example of whales going towards it. This was not a specific example. 

### MIP66: Pairwyse Licensure

#### Akiva Dubrofsky

![MIP66: Pairwyse Licensure](https://i.imgur.com/2mTFnhZ.png)

[35:58](https://youtu.be/QH82k0Lkpi0?t=2158)

- Hi, everyone. I will tell you a bit about the MIP. We have submitted MIP66. One of the key aspects of MIP66 is joint business development to promote fixed-rate Dai. We believe that fixed-rate Dai is essential to the development of Maker. Not only fixed-rate vault but also fixed-rate Dai. We did that because all financial institutions match their assets and liabilities. Maker DAO is no different. Part of matching your assets and liabilities is matching floating to floating and fix to fix. We see that Maker has a lot of floating assets and floating liabilities right now. It will also need to have fixed assets and fixed liabilities. Part of doing that is using interest rate derivatives. 
- We developed the product for MakerDAO over the past couple of years, which will allow for fixing interest rates without interfering with any of the core Maker code. Somewhat the same way people use money legos and abstract over different protocols. We can abstract MakerDAO similarly with these money legos, creating fixed rates. We believe that this is beneficial from the perspective of assets and liabilities and the perspective of decentralization. It is important to have composable instruments and not tie everything into the same codebase. It is also important to have fixed-rate protocols that abstract over MakerDAO rather than going into the core plumbing. That is why we developed this product.
- One of the key parts of developing a fixed-rate ecosystem around Maker, and we are ready to go and start doing this right away, as soon as the MIP passes, is this business development. We partnered with two regulated investment banks. One is first Penny Investments in Australia, and the other one is True Altitude in the UK. And using those partnerships, we believe we can grow MakerDAO’s pipeline of fixed-rate investors. All primary largely in those jurisdictions, the UK and Australia, and other places worldwide because those companies also have a presence in UAE and Switzerland. For MakerDAO to achieve maximum stability and decentralization, it is important to have multiple fixed-rate ecosystems, not just one. To get there, we need strong business development and strong decentralization, and that is why we propose that if the MIP passes will also open up our patents to the community, which two of them have been granted. We are willing to open those up to the community. We want to create an open fixed-rate ecosystem or Maker to see DeFi thrive. I will leave it like that if you guys have any questions.



## Discussion

### Dai Market Share & Liquidity 

[39:52](https://youtu.be/QH82k0Lkpi0?t=2392)

![Dai Market-Share/Liquidity-Curve Pools & More](https://i.imgur.com/peZMdBn.png)

- Sam: This is about the recent news of the 4Pool trying to replace the 3Pool on Curve. People that read Crypto Twitter are probably aware of this. This topic is about what we want our response to be—thinking about the ramifications of potentially losing the 3Pool and possible solutions.
- Niklas Kunkel: Is 3Pool going to survive? It will be something between a 4pool and a 2Pool. How much does it affect us in the short term and the long term? Can we do something about that, and should we? In terms of the peg, we do not struggle with that slightest. We have enormous gobs of liquidity in the PSM that exceed 3X the amount of liquidity currently in 3Pool. 4Pool, we would have never wanted to join because it is UST rug risk. 
    - The way it works with a Curve Pool is you have almost full exposure to whatever is the weakest link in the token pool. In terms of 2Pool, there is not much we can do about that. I see what you mean by Dai plus 4Pool. But the problem is that nobody wants to incentivize that. It works right on Curve because the projects want to incentivize liquidity for their token. They acquire or bribe Curve voters in some way. Without those bribes or votes, you would never get the Dai pool to have enough yield right for any amount of liquidity to build up. Then, should MakerDAO try to get a stake in Curve voting? I would say. One, it is expensive. And two, it is one of those things where the people that got in early got the best chess position here. We would never build up a significant enough stake to swing our ding dong around. Then you can look at it and say, how likely is Curve to be the DEX of tomorrow, three years from now, or five years from now? That is quite questionable. 
    - We have seen much jockeying between DEXs, or even DEX aggregators over the years. Nothing tells me that Curve will be the central hub of liquidity forever. Through G-UNI, the increasing debt ceilings, and the amount of leverage that we allow, we have already started building up significant sums of liquidity in the Uniswap V3. That will continue. From a peg and liquidity point of view, it is entirely irrelevant. We are already building up liquidity on Uniswap. The only thing you could argue is, from a user point of view, will they not be exposed to Dai? Because Dai is not in the Curve 4Pool or the Curve 2Pool. I do not know how to answer that. I do not know what the value of something like that is. Looking at all the information, I do not think we have to do anything. Terra is trying to hype this up into being something bigger than it is. It is suitable for them. But it does not matter to us that much.
- Sam: This is less of an actual issue for the protocol. It is more of like a marketing PR problem. I do not think it looks great to do anything. If we could make an easy response, I think that could potentially work. One idea that has been thrown around is that they have 4Pool. We can make 5Pool with BUSD, USDC, USDP, and a couple of others, which I am not thinking off the top of my head. This could be a narrative shift in our favor. We would not have to spend anything. We would redirect some of the PSM supply into this 5Pool and give high leverage on it to fill up even with low fees. We do not need to worry too much about rewards. This is a potential option.
- Niklas Kunkel: I do not think that could work, Sam. The Curve fees are irrelevant. The Curve liquidity is almost 100% dependent on the incentives Cannon is being pointed at a pool.
- Sam: The fees can be essentially nothing. We can set the leverage as high as we want because it is the same as the PSM. We could set it to even 1,000X, and it will fill up. We can fill it to whatever number we want, as long as we have PSM supply. There is an additional benefit. Curve has become less friendly with us. This may be a nod to them that we want to continue working together. This is for marketing PR reasons and stuff like that, but it could be a good move. It does not require much engineering effort, and it could be an easy win.
- Niklas Kunkel: From an asset risk exposure point of view, it would be as strong as the weakest asset. If any one of those gets rugged, you get rugged for the entire exposure you have to that pool. If you are willing to take on risk exposure to each of those coins, it would be better to create a PSM for each of those. And then you segment out the risk. If any one of those fails, you only lose that particular segment instead of the entire thing. Plus, it sets us up positionally better if we have this entire network of PSMs. Eventually, it evolves into its Curve competitor, at least from a stablecoin point of view.

[48:39](https://youtu.be/QH82k0Lkpi0?t=2920)
- Nadia Alvarez: I like Sam’s idea from a narrative perspective. Everyone is complaining that we are doing nothing against Terra, which is good because Maker is not Terra’s competitor. We are more than just a stablecoin. It will be great for our responses to the crypto and DeFi community to see what we can do with the Rari pools and other stablecoins, like Fei or MAI, which did not join the Cure 4Pool. Suppose we could use the Cure LPToken with the 4Pool plus Dai or 3Pool plus something. Or create a new pool and use it for leverage and give them a zero stability fee. That will create a message around what are the things that Maker is doing. We must start doing things for our community and the external creator community. We need to start being less risk-averse.
- Niklas Kunkel: I completely disagree with you guys. But I love and respect you guys.
- Sébastien Derivaux: We are missing the point. We might lose 1.5 billion of Dai demand if a 3Pool disappears and Dai is not kept. This is not a big problem because we are not doing anything with those 1.5 billion. They are just sitting as USDC in the PSM. They will disappear. It is not a big deal because we are not doing anything. But the problem is that we are not using the PSM. I understand that we can use all this liquidity to provide leverage to initiate some like we are doing for the Gelato Dai USDC pairs, and it is providing liquidity; we can do much stuff. However, that is useless at the end of the day because it is not generating anything. If you want to be useful, we should use all the assets on the balance sheets, get revenues, and give those revenues to Dai we lost. Then, we can fight because of the stablecoin works. The next step is more about giving yield to customers. We have no idea how to do that securely.
- Someone: We should not dismiss a losing demand. We should plan to grow the interest-bearing Dai supply to meet the demand. That should be our outlook. We should fight someone to keep this demand even though it is just sitting in the PSM for now.
- Niklas Kunkel: The PSM is dormant capital right now. Presumably, we will find a way to earn yield off that in the future. Keeping up a healthy amount of capital in the PSM is objectively excellent.
- Someone: This could be a simple message that the crypto media will pick up. Maker response to 4Pool with 5Pool. It is simple and dumb, but people get it.
- Niklas Kunkel: Here is where I disagree. Now you compare 4Pool and 5Pool, and 5Pool will look like a joke compared to 4Pool. The narrative looks even worse because now we tried to compete, and by the numbers, we lost. 
- Someone: Why would it be a joke? We can crank the TVL to whatever we want as long as there is a PSM room.
- Niklas Kunkel: Nobody will use it. We will be the only ones using it, and the yield will be nothing. It will be like this dead pool that no one uses. Look at the LPs. It would be one LP, and it would be MakerDAO.
- Sébastien Derivaux: Listen to Sam. He is saying that Curve is not a DEX. No one is using Curve for anything. It is a way to reward the LPs. You have incentivized the usage of your token by bribing. I am not an expert on CRV, but you are giving a reward on the token. It is more a saving account than anything else.
- LongForWisdom: To clarify, who is Sam?
- Sébastien Derivaux: Sam is the co-founder of Frax. He was calling MakerDAO as he wanted to create a PSM with us, and we did not move on this point. Because Frax is another model, it does not fit well with us.

[54:58](https://youtu.be/QH82k0Lkpi0?t=3298)

- Niklas Kunkel: I want to caution against starting to do risky things because we feel like we are not degen enough for some narrative. We have never been under the Degen protocol. We have been the risk-averse protocol, which has gotten us to what we are today. It is better to have that property that we can hoist up than to start trying to do degen stuff and still not be as degen as other protocols. They get more growth out of it. But now, we are neither low risk nor high growth. We are in this murky middle where we do not want to be.
- Someone: I agree. This is not risky at all. Whether the stablecoins are sitting in the PSM or Curve, it is just a matter of they are paying Curve fees. That is the only difference. It is not riskier to hold this stuff in the PSM or Curve.
- Niklas Kunkel: You still have this homogenous exposure to all of the tokens in that pool compared to having them individually in a PSM.
- Someone: It is the same risk profile?
- LongForWisdom: You do, but they are all centralized.
- Niklas Kunkel: We talked earlier about how we will find a way to monetize the PSM. So having that liquidity in a PSM versus having that liquidity in Curve, I know where I would rather have the liquidity because we can monetize it one day. 
- Mark: To briefly put some numbers on this. Curve had 27.6 million in volume traded through the 3Pool, and the Uniswap v3 pool had a 26 million Dai USDC pair. It has got less than 10% of the TVL. But it is doing effectively the same trading volume. I am not overly worried about Curve 3Pool decreasing significantly, impacting our peg.

[57:41](https://youtu.be/QH82k0Lkpi0?t=3461)

- Nadia Alvarez: I am not worried about the 4Pool, but more about the 2Pool because Curve is thinking about excluding Dai in the future deployments of this pool, which is a risk for us. If we see what happened in Arbitrum, where the 3Pool does not exist, we struggle with that liquidity on Arbitrum. Maybe we can solve that by deploying Maker pools everywhere. I do not think we can do that now. But Curve can deploy the 2Pool tomorrow if they want. I want all to be aware of that and the risk that we have about not having Dai included in the 3Pool in the next deployments of Curve in their multi-change strategy because I think that that could be a problem with Dai liquidity, not on mainnet, but L2s and sidechains.
- Someone: Let us avoid this defeatist attitude that we are bad at marketing. We got to try. We got to work on things that we are not good at instead of saying we are not good at them and are not even going to try.

[59:43](https://youtu.be/QH82k0Lkpi0?t=3583)
- LongForWisdom: Does anyone else have any comments? We can talk about liquidity more generally. If we do not have the Curve pools on the L2s and other chains, in what other ways can we ensure Dai liquidity on those chains?
- Someone: We should message to the DeFi community that we are up for collaboration and this type of initiative. Part of being the boomer coin, or whatever the name, is that we do not do anything. We do not react. We mint Dai. We have a chance to start changing this and be a bit more proactive. Although it is a risky move, it can also give us a nice image for the DeFi community.
- Someone: I agree. Our public perception is that we do not care, and we snub other protocols. It would be nice to try and change that.
- Someone: We have plenty of levers to use to model the risks. Let us use them. We should use those levers and try new things. When I say try is doing with a purpose, not just for doing it. We need to do this right.
- Sébastien Derivaux: I have a suggestion about making things without protocols. There was Fei on the forum asking for PSM. So I am not sure having a PSM with them was a smart move, but we might want to open them a vault so they overcollateralize Dai as they borrow Dai. And we can get rewards for that. They agree to pay. They said that in the forum. So we can get a newer collateralize Dai loan to fade with an interest rate, which is better than the PSM. No one replied to that. Maybe we can move on that front. Make collaboration with Tribe.
- Niklas Kunkel: What is the use case for a borrower? Does Dai have significantly better yield opportunities than Fei?
- Sébastien Derivaux: It is not about that. Fei is in institutions that have much equity. They have a big surplus buffer of 300 or 400 million. But they have a little failed demand currently. But they are excellent at investing in those assets better than us because they move faster and take a bit more risk. They have more liquidity issues, and that is that they are always needing some dimes. Currently, they have only 20 million Dai for their PSM. They have the same PSM as us. If we give them 100 million, they will be able to invest them in whatever ways they want. It will still be safe for us because they have so much equity.

[1:03:37](https://youtu.be/QH82k0Lkpi0?t=3817)
- Someone: I try to stay out of these things. Just be careful about reacting. Only react fast if necessary. Do something stronger. Think about it. I have not looked at this particular issue. But I think it is indicative of a larger issue, which was related to Maker competitiveness, that we are not addressing. We are getting trapped in our issues, and we need to find a way to move forward on them. Figure out first is this a real issue we need to deal with? Is it the real issue? Or can we make a stronger move that silences this and does something bigger and more important for us? Do not let your opponent dictate what you will do. Do what you are going to do and let your opponent react. That is just my opinion.
- Someone: I agree with that. We could do both. I am suggesting this because it is not like much effort. And we will have some side benefits that come from it, improving the relationship with Curve.
- Someone: I want to comment on the Curve thing. I think it is entirely unclear to me, given this move, whether somehow we can get on the Curve’s good side. There are some difficult waters here to navigate in both a political and financial sense. When I first thought about it, I was like, let us do a deal with Balancer and have them do a 3Pool with really low fees. I mean, let us take it off Curve and move over. I have not looked at this particular issue. Perhaps some creative thinking here is more important than making a fast and quick, easy reaction that may not be as strong as you think.
- Someone: I believe they will like it because they are getting more fees. They have another pool. The fees are going through there as opposed to the PSM.
- Niklas Kunkel: You guys are missing the point. Liquidity swap fees are irrelevant. It is just the token emission.
- Makerman: Let me add here. This is something I have been harping on for a while. When trying to compete with this kind of farming liquidity they are throwing out, you look at their numbers, which is not sustainable. I look at it across the board, not sustainable. But Maker has not even tried to enter the game sustainably. It is one of the reasons why I finally threw out Maker 3.0. Let us get into this game, let us do it sustainably, and let us have a real message that is to send about what we are going to do with Dai. That is just my opinion. I go wherever the DAO goes, as much as I can. It is a greater strategy we are trying to solve here. I do not know if we can deal with this one issue with one move. We might not make Curve happy with us somehow.

[1:07:41](https://youtu.be/QH82k0Lkpi0?t=4061)
- Nadia Alvarez: There is something that we did not discuss. I was joking about adding the 4Pool as collateral. It was a joke, of course. What if we are more flexible with USDT. The community does not like that idea. If we onboard as collateral the 3Pool, that will be an interesting move. But of course, we have to accept USDT in our system. Something to think about. 
- Someone: It is not the same as full exposure to USDT there. We would not offer crazy leverage on that one, maybe. So we can sustain a bit of a hit and potentially even hook it into rewards. Not saying this is necessarily a good use of time, but just spitballing here.
- LongForWisdom: That echoes monetsupply’s point. 3Pool is equivalent to USDT exposure. All these pools it is good as the weakest component. If one component fails, then the pool empties, and it is all of that component.
- Niklas Kunkel: To put it into perspective, the swap fees as a percentage on 3Pool, is 0.15%. Even trying to lever that up, the yield is nothing even if we do zero civility fees on it.
- Someone: You can always find a number. We can go as high leverage as we need to.
- Niklas Kunkel: That is what I am saying. It is 0.15% right now. If you allow people to get leverage and put liquidity in there, they will not do it because the yield will be low. And even after you start putting liquidity in there, the yield just gets more shit.
- Someone: Yes, but 0.15% at 100x leverage is 15%. It is not anything.
- Niklas Kunkel: You will not get 15%. You will get 2 or 3%. Because after adding, you have diluted the pool by that much.
- Someone: Turn it up to 1000. There is a number you can hit.
- LongForWisdom: Nick, you are comparing the current API on our 3Pool, which already has 3 billion of liquidity in it. So it is 0.15 on 3 billion. So if it was a new pool with nothing in it, it is potentially way more than that.
- Someone: Monetsupply is right too. The un-levered people would leave.
- Niklas Kunkel: Also, the volume going through that pool. Maybe we will find ourselves, but I do not know how much of that pool’s volume is tokens going from Dai or to Dai. There is no 2Pool right now. All of the trading going from USDC to USDT, or USDT to USDC, Dai is getting the free ride, in terms of the LPs of 3Pool or putting in Dai get to intercept the trading fees from USDC to USDT and vice versa. If the liquidity starts to disappear and starts going towards 4Pool, that 15 BIP reward APY could potentially even go lower because all of a sudden, we have to survive off of the yield of just Dai trading. We do not get to leech off the USDC to USDT portion of the trades, which will exclusively be happening inside 4Pool if this whole scheme comes to pass. It is all interconnected.
- LongForWisdom: That fight is stupid, for sure. If we fix each other, we potentially lose a bunch of volume.
- Niklas Kunkel: I am not trying to sound like a defeatist here and shoot down everything. I am more in line with what MakerMan was saying and that this is not worth our time to respond to. It is a foregone conclusion. We should focus on what we are good at and our targeting. That will make a difference for us and more than some narrative stuff, which, even if we go in this direction, we are still not guaranteed to achieve. It is more deterministic
- LongForWisdom: I do not think anyone mentioned this yet. One of the potential benefits I see is that it gives other tokens on Curve; other options to pair against. One of the problems with the current options is that they are all slightly not good for various reasons. 3Pool has Tether. 2Pool, if it comes in, will have Tether. 4Pool, if it comes in, it has Tether and Trax, and UST. If we open the pool, it would have Dai against centralized stables that do all have some level of trust, like USDC, Pax, GSD, etc. Then that is an option for other people to pair against. That does not, in theory, require exposure to Tether or Frax and USD. That does not exist currently. I do not know if that is something people would value. 
- Niklas Kunkel: That is a fair point.

## Conclusion

### LongForWisdom

[1:15:16](https://youtu.be/QH82k0Lkpi0?t=4516)
- Let us wrap up. Thanks to everyone for joining us. I hope you enjoyed the discussion. We will see you all next week. 

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## 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

- Kunfu-po produced this summary.
- Larry Wu produced this summary.
- Everyone who spoke and presented on the call, listed in the headers.​
