---
# System prepended metadata

title: 'Episode 144: June 3rd, 2021'
tags: [G&R]

---

---
tags: G&R
---

# Episode 144: June 3rd, 2021

## Agenda

- [00:00](https://youtu.be/f1QjT-yaztA): Introduction
- [01:00](https://youtu.be/f1QjT-yaztA?t=60): Governance Update
- [02:55](https://youtu.be/f1QjT-yaztA?t=175): GovAlpha Core Unit update
- [04:36](https://youtu.be/f1QjT-yaztA?t=276): Forum at a Glance
- [06:55](https://youtu.be/f1QjT-yaztA?t=415): Protocol Engineering Team Update
- [11:20](https://youtu.be/f1QjT-yaztA?t=680): Oracles Team Update
- [13:38](https://youtu.be/f1QjT-yaztA?t=818): Risk Team Update
- [17:07](https://youtu.be/f1QjT-yaztA?t=1027): Real World Finance Update
- [18:26](https://youtu.be/f1QjT-yaztA?t=1106): Growth Core Unit Update
- [24:30](https://youtu.be/f1QjT-yaztA?t=1470): Sustainable Ecosystem Scaling Update
- [30:53](https://youtu.be/f1QjT-yaztA?t=1853): Dai Foundation
- [46:10](https://youtu.be/f1QjT-yaztA?t=2770): Monthly Financial Report
- [1:00:25](https://youtu.be/f1QjT-yaztA?t=3625): Open Discussion
- [1:09:36](https://youtu.be/f1QjT-yaztA?t=4176): Anonymous Question Box

## Video

<https://youtu.be/f1QjT-yaztA>

## Introduction

### Agenda and Preamble

#### LongForWisdom

[00:00](https://youtu.be/f1QjT-yaztA)

- Hello everyone, and welcome to the MakerDAO Scientific Governance and Risk meeting number 144 taking place on Thursday, June 3rd at 17:00 UTC. My name is LongForWisdom. I'm the Governance Facilitator at MakerDAO.
- Apart from the usual weekly updates and segments, we will have a presentation by @sorenpeter from the DAI Foundation.
- If you want to ask questions or have comments, please do speak up. Everyone here enjoys answering questions.

## Weekly Updates

### Governance

#### LongForWisdom

[01:00](https://youtu.be/f1QjT-yaztA?t=60)

[Maker May Governance Review](https://forum.makerdao.com/t/maker-governance-review-may-2021/8613)

- We passed [last week's executive vote](https://vote.makerdao.com/executive/urgent-changes-oracle-whitelisting-liquidations-2-0-activations?network=mainnet#proposal-detail) which did a couple of good things. First, it moved the Uniswap LP token vault to the Liquidation 2.0 system. Second, with the executive, we whitelisted [B.protocol](https://www.bprotocol.org/) on the WBTCUSD Oracles. Third, we increased the [Flat Kick Incentive `tip`](https://community-development.makerdao.com/en/learn/governance/param-flat-kick-incentive/) from 0 DAI to 300 DAI. Finally, we increased the PSM-USDC-A Debt Ceiling from 2 billion DAI to 3 billion DAI, which I know is met with various excitement, but at least we can keep the DAI peg.

### Polls and Executive

- We had a poll to reduce the [PSM-USDC-A Fee Out](https://vote.makerdao.com/polling/Qmc7PYCn#poll-detail) (aka `tout`), and that was successful. So it will be included in this week's executive votes. That's tomorrow.
- The polls to onboard the Sushiswap LP Tokens also succeeded ([SLP-DAI-ETH](https://vote.makerdao.com/polling/QmPSKDeH#poll-detail), [SLP-WBTC-ETH](https://vote.makerdao.com/polling/QmYkwNiM#poll-detail), [SLP-USDC-ETH](https://vote.makerdao.com/polling/QmQhab5R#poll-detail)). I don't think we'll see them this week, but they will be in an executive coming soon.
- In tomorrow's executive, we will see the [Core Unit Budget Distributions for June](https://vote.makerdao.com/executive/june-core-unit-budget-distributions-other-changes?network=mainnet#proposal-detail). 
- We will also see an increase in the [Global Debt Ceiling](https://forum.makerdao.com/t/propose-to-raise-the-global-debt-ceiling/8516) to resolve some of the issues that we have been facing for the last few days emitting DAI. 
- We will do some [final Liquidations 2.0 migrations](https://forum.makerdao.com/t/architectural-debt-cleanup-migrating-remaining-collaterals-to-liquidations-2-0/8515). The Protocol Engineering will elaborate on that in a moment.  

### GovAlpha Core Unit update

[02:55](https://youtu.be/f1QjT-yaztA?t=175)

- There’s a [forum post](https://forum.makerdao.com/t/govalpha-weekly-update-2021-06-04/8526); you can go there for details. 
- The Foundation Frontend Team created a UX for Delegation, which we have seen and signed off on. Big thanks to @tiago (? 3:33) for producing those.
- We have set up the GovAlpha multi-sig fully. The spending limits and allowances are set up for the Pause Proxy. We have also done test transactions that were needed for us to get the necessary confidence. 
- Onboarding plans are going well. In a couple of days, there will be a forum post on that. It covers some of the positions we are hoping to fill for GovAlpha and what things they involve. 

### Forum at a Glance

#### Elihu

[04:36](https://youtu.be/f1QjT-yaztA?t=276)

[Forum at a Glance for May 28th - June 3rd](https://forum.makerdao.com/t/forum-at-a-glance-may-28-june-3/8525)

#### Three-Point Summary

- There’s currently 4,7B DAI in circulation.
- System Surplus Buffer is at 39,6MM DAI.
- Total Value Locked in Maker is $9,1B.

#### Announcements

- There are two new posts on the Foundation blog. One is on [Smart Contract Wallets](https://blog.makerdao.com/what-are-smart-contract-wallets-and-how-can-they-benefit-defi-users/) and another on [Community Development](https://blog.makerdao.com/the-maker-communitys-next-call-to-adventure/).

#### Active Discussions

- [Governance-Focused Documentation](https://forum.makerdao.com/t/governance-focused-documentation/8504)
    - @LongForWisdom starts a discussion around existing and/or needed governance-related documentation.
- [Need for Data Insights Core Unit](https://forum.makerdao.com/t/need-for-data-insights-core-unit/8450)
    - @tmierzwa points out the need for a Data Insights Core Unit to aggregate and present on-chain data for the improvement of the Maker ecosystem.
- [A Multichain Strategy and Roadmap for Maker](https://forum.makerdao.com/t/a-multichain-strategy-and-roadmap-for-maker/8380)
    - @Derek presents a bird’s eye view of the Layer 2 ecosystem and the various opportunities for Maker.

#### Signal Requests

- [Burn the 84k Foundation MKR](https://forum.makerdao.com/t/signal-request-burn-the-84k-foundation-mkr/8338)
    - @Aaron_Bartsch is running a poll to burn the 84,000 MKR recently transferred from the Maker Foundation.
- [Should we add new PSMs?](https://forum.makerdao.com/t/signal-request-should-we-add-new-psms/8337)
    - Another Signal Request by Aaron is looking to add Price Stability Modules for new stablecoins.
- [Lower the UNIV2DAIUSDC-A Liquidation Ratio](https://forum.makerdao.com/t/signal-request-lower-the-univ2daiusdc-a-liquidation-ratio/8487) 
    - @hexonaut is seeking consensus on adjusting parameters of one of the Uniswap LP vaults.
- [Adjusting Dust Parameter](https://forum.makerdao.com/t/signal-request-adjusting-dust-parameter-2021-3/8315) 
    - @monet-supply is suggesting adjusting the dust parameter to account for various recent developments.
- [Parameter Changes Proposal - PPG-OMC-001](https://forum.makerdao.com/t/parameter-changes-proposal-ppg-omc-001-1-june-2021/8476)
    - Last but not least, the Parameter Proposal Group has put forward a set of parameter changes for various Vaults.

### Protocol Engineering Team Update

#### Derek 

[06:55](https://youtu.be/f1QjT-yaztA?t=415)

- Hi everyone, I’m Derek from the Protocol Engineering Core Unit. First, I want to shout out to the JS Team for their work on the https://liquidations.makerdao.com/ frontend. All the LP Tokens are up on that. So if there are any liquidations, you’ll see them there. 
- Regarding this week’s executive, we have the 500 million Global DC increase. There’s a [forum post](https://forum.makerdao.com/t/propose-to-raise-the-global-debt-ceiling/8516) on that for context.
- Another thing is the [Architectural Debt Cleanup](https://forum.makerdao.com/t/architectural-debt-cleanup-migrating-remaining-collaterals-to-liquidations-2-0/8515). This concerns us moving stablecoins from `Flippers` to `Clippers.` Basically, we are keeping liquidations turned off by disabling the `Clipper` contract. It’s mostly a move around removing architectural debt so that we don’t have to maintain the old contracts. With this, we are ensuring that everything is now on the new Liq 2.0 contract. It’s better for us than having different collateral types split across various contracts. I hope it’s all clear but feel free to ask questions. 
- Concerning work on L2 this week, we have been speaking with Optimism. @Chris and the team are in the process of upgrading the DAI-Optimism Bridge to the new Optimism ERC-20 Bridge standard. We are also working on them and other L2 initiatives with regards to token bridge standards. We are trying to align on a common standard which will hopefully move forward in the same direction. 
- We began working with auditors and hope to have that continue for the rest of the month.
- We discussed the DAI-Arbitrum bridge with Arbitrum. We also had an exploratory discussion with Starkware regarding Starknet. 
- As you saw from the [forum post](https://forum.makerdao.com/t/a-multichain-strategy-and-roadmap-for-maker/8380/3) last week, we have a backlog story concerning setting up the risk framework. We are trying to align the technical and economic risk across L2’s. We hope to share more news on that with you soon. 
- Regarding Smart Contract Technical Assessments, last week we had Centrifuge RWAs, which are managed by [MIP22](https://forum.makerdao.com/t/mip22-centrifuge-direct-liquidation-module/3930) but interfaced with the Maker Protocol through [MIP21](https://forum.makerdao.com/t/mip21-real-world-assets-off-chain-asset-backed-lender/3917). This includes Fortunafi, People's Company, Harbor Trade Credit, and ConsolFreight.
- Today, @hexonaut did a review on the Sushiswap LP pairs, which are [AAVE-ETH](https://forum.makerdao.com/t/slp-aave-eth-erc20-token-smart-contract-technical-assessment/8519), [YFI-ETH](https://forum.makerdao.com/t/slp-yfi-eth-erc20-token-smart-contract-technical-assessment/8518) and [LINK-ETH](https://forum.makerdao.com/t/slp-link-eth-erc20-token-smart-contract-technical-assessment/8517). We are waiting on the MasterChefV2 deployment to launch the SushiJoin adapter. 
- Feel free to ask any questions. 
  - LongForWisdom: I would like to add that the post on L2’s was much appreciated.

### Oracles Team Update

#### Nik Kunkel

[11:20](https://youtu.be/f1QjT-yaztA?t=680)

- Yesterday, we had a Launch Pod Session for the Oracles Core Unit. With lots of interesting questions, that went pretty well. The [recording](https://www.youtube.com/watch?v=niWT5wk2MNo) is on YouTube. 
- On the governance side, we have a [proposal from yEarn](https://forum.makerdao.com/t/mip10c9-sp29-subproposal-to-whitelist-yearn-finance-on-uniusd-linkusd-aaveusd-compusd-oracles/8448) to get whitelisted on UNI, LINK, AAVE, and COMP OSMs. They want to set up more delegated Vaults as their users would provide them UNI, LINK, AAVE, or COMP. yEarn would borrow DAI against those Vaults and manage the positions actively using DAI to earn yield for the users. It’s the same contract that they have been using for ETH, Bitcoin, and YFI. Polls concerning this will go up next Monday and should get to the executive the following Friday. 

### Risk Team Update

#### Primoz Kordez

[13:38](https://youtu.be/f1QjT-yaztA?t=818)

- We posted three Sushi LP evaluations last week. We will do a final one soon, which will be Sushi LP paired. We will also cover xSUSHI as new collateral. We suggested only one million DC per pair, and we also suggest increasing it as soon as we have a week or so of testing. You should expect to see a higher DC soon, similar to Uniswap LP or potentially even higher depending on the demand. 
- The Parameter Proposal Group, which I am also part of, made a [post](https://forum.makerdao.com/t/parameter-changes-proposal-ppg-omc-001-1-june-2021/8476/8) about newly proposed parameter changes for June. We proposed decreasing the SFs more drastically this time because we want to boost the DAI supply from other collaterals due to increased USDC exposure but also because crypto market rates decreased for the second consecutive month in both DeFi and CeFi. If Maker wants to remain competitive, we should follow those rates. Another suggestion was to change DC Instant Acces Module parameters for all Vault types, which will allow for more frequent DC increases. It was also proposed to increase the DC of ETH-B to 300 million. However, with the condition of changing its auction parameters, which we did. On the same day, I [posted a proposal](https://forum.makerdao.com/t/adjusting-auction-parameters-for-eth-vault-types/8477) to shorten the auction duration of ETH-B Vault from the current 40 minutes to 20 minutes. The idea here is to lower the market risk in auctions, which is a bit higher for lower collateral Vaults such as ETH-B. At the same time, we proposed increasing auction throughput for all ETH Vault types because we could potentially see higher exposure on ETH-B and ETH-C, where only 1% SF was proposed. Those two exposures could increase, and the current auction throughput might be a bit too low. 
- We are looking for different solutions regarding institutional Vaults and the proper setup there. Nadia from Growth Core Unit will soon make a post or discuss this potential setup of institutional Vaults. We have been thinking a lot about this, so we will provide some of the solutions we thought about.

### Real-World Finance Team Update

#### Sébastien Derivaux

[17:07](https://youtu.be/f1QjT-yaztA?t=1027)

- The four Centrifuge Collaterals were delayed but will finally be published and polled on Monday. It’s [CF-DROP](https://vote.makerdao.com/polling/QmRCn7Mh?network=mainnet#poll-detail), [HTP-DROP](https://vote.makerdao.com/polling/QmRWg6nZ), [P1-DROP](https://vote.makerdao.com/polling/QmdHV2tW), and [FFT1-DROP](https://vote.makerdao.com/polling/QmZCPDVY). 
- We are still working on the Trust structure concerning 6S and other collaterals. We are in the process of hiring law firms and are making progress. 
- I published the [MakerDAO May financial statement](https://forum.makerdao.com/t/financial-report-2021-05/8527) earlier today, which we will discuss later during this call. 

### Growth Core Unit Update

#### Mariano DiPietrantonio

[18:26](https://youtu.be/f1QjT-yaztA?t=1106)

- We have been working very hard with the Polygon people to see a shortlist of implementations that they provided in the hopes that we can work together on auctions with their partners. We see a trend of DAI from BSC getting eaten by DAI-MATIC. We see this happening with the number of partners who are integrating Polygon, which is interesting.
- Beginning this week, we have a new wallet in Argentina called [Bitera](https://biterawallet.com/), which is a DAI-only wallet. It is a great wallet, capable of competing with MercadoPago, the biggest wallet in Latin America. Bitera is expanding to other countries such as Peru, Colombia, Chile, and Venezuela. They want it to be the DAI hub for Latin America because they also implemented a Linen chain and will implement Polygon along with other blockchains that use DAI. Our strategy is to have DAI on other blockchains and obviously on other L2s. 

#### Questions

- Frank Cruz: Genesis is doing DAI as an acceptable tradable asset. He took a sheep shot at DeFi, saying that liquidating Vaults does not warn, stating the amount of time you have to get liquidated. I wondered if your team is reaching out to companies like Genesis or Nexxo, etc., and telling them: "Hey man, are you down for 155% collateral ratio? Maybe you should top up." Is that something you are doing?
    - Mariano DiPietrantonio: We have "institutional Vaults," which we are already discussing. We have big Vaults like Nexxo, and they have people that are constantly monitoring those types of Vaults. We are also working with Ethereum Push Notification Service, a new protocol that is developing quickly. The idea is to have that implemented soon. For example, on an L2, we want to tell people whether there is something they need to know, such as a change in the price of the OSM or anything that can be interesting and valuable for those Vault owners. We initiated this conversation last week, so it is all pretty new. Ethereum Push Notification Service is also a new service. We have to identify when it is an institutional Vault, in which they would have their infrastructure to monitor the Vault and other Vaults that may be anonymous and do not want to be contacted. 
    - Frank Cruz: What happens if someone is anonymous? Is that optional?
    - Mariano DiPietrantonio: Yes. Part of the team right now is in Miami because a lot of the industry is there. We will talk with some of these institutional representatives interested in getting a DeFi implementation with DAI on their services. We need to develop their ideas and gather all their requirements because they have different requirements based on their country, the type of clients, and the services they are offering. We need to perform a very customed-based thing if we want to have them onboard carefully. We are in the phase of gathering all of the information. We will share with the Community once we have something to agree on the type of client type. 
    
### Sustainable Ecosystem Scaling

#### Juan Guillén

[24:30](https://youtu.be/f1QjT-yaztA?t=1470)

![](https://i.imgur.com/Drrn9z3.png)

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

- [Project X-Ray](https://docs.google.com/document/d/1wCDVNnFF9KSEB_9nUGQZ3k3tRrOzGBagqTMBazbQlv4/edit#heading=h.julguouh4f79) is launched. It is about talent onboarding. LendCo is working on that. We are also working with one of the 2 Core Units to be about talent and about getting the right people in the right places. 
- Dog Food project is launched. It is about our own experience in setting the Core Unit. Ideally, we will document everything for other Core Units that want to come, set their Core Unit and learn from our mistakes. 
- We have the office hours set already by Andy. Join us if you have any questions about SES or anything that we are working on or think about anything we should do. Drop by, and we will be happy to answer you. 
- Yesterday, we had the Auditors Call for the first month where we reviewed our forecasts, and we are going to do the transfers very soon.
- Starting next week, we have the LexMaker Series, which I am excited about. It is about regulating IP licenses and anything that has to do with legal since LayerZero and Astrogator will be doing many things regarding that. Check the [ad in the forum](https://forum.makerdao.com/t/lexmaker-1-i-dai-foundation-maker-ip/8528); Pablo has already posted the agenda. Make sure you save the date. 
- We have also been working on setting up OKRs, which we will try to make public sooner than later, and improving our SES portal so that people can find the things we are working on. 

![Incubation Program Updates](https://i.imgur.com/jj9lLEE.png)

- Starting this month, we have the [dTalent Core Unit](https://drive.google.com/file/d/1-n_yibHlZuIJmHVfj49NyPK6BzY6ADc_/view), which is what I was referring to involving recruiting. If your Core Unit has any needs, please reach out. 
- The other incubation program is DUX Core Unit related to interfaces for Governance.
- We are talking with other potential-to-be Core Units. Some of them are super interesting, and we hope to have more news on those soon. 

![](https://i.imgur.com/w0ObkAU.png)

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

![](https://i.imgur.com/Y1QxnOj.png)

- Nik presented his [Core Unit](https://forum.makerdao.com/t/mip39c2-sp13-adding-oracles-core-unit/8048). I encourage everyone to watch the [Launch Pod Session](https://www.youtube.com/watch?v=niWT5wk2MNo). Oracles may become a crucial part of Maker and potentially a really big entity on its own. I am excited about that. 
- Next week, Kath will present [Strategic MarComms](https://forum.makerdao.com/t/core-unit-launch-pod-sessions-session-12-strategic-marcomms-core-unit-cpm-001/8552) with some modifications that they have been working on. That agenda will be published soon.
- One week later, we will have the first session of the [LexMaker Series](https://forum.makerdao.com/t/lexmaker-1-i-dai-foundation-maker-ip/8528) with the Dai Foundation & Maker IP. The board members of the Dai Foundation will explain how to safeguard Maker IP, the overview of the assets, on the management, current licenses, guidelines, operations, and budget. We encourage everyone to join us. It will be very exciting to start working in that direction. 
- The following week, we will have Stefan from Gnosis presenting their [MIP6 application](https://forum.makerdao.com/t/gno-collateral-onboarding-application/8484) for collateral onboarding. I'm looking forward to that one as well.

![](https://i.imgur.com/Jb9ifI0.png)

### Dai Foundation

#### Søren Peter Nielsen

[30:53](https://youtu.be/f1QjT-yaztA?t=1853)

- I am excited to be able to start engaging the Dai Foundation with the Community. This is just an appetizer because we will have a complete call that will include much other stuff. 
- Next Wednesday, we are hoping to host a call dedicated to in-depth about the Dai Foundation. Our entire board will be present. You may already know Wouter Kampmann and Jacek Czarnecki. We also have Payam Samarghandi, a lawyer from Denmark, and Hans Henrik Hoffmeyer, COO in Coinify. We hope to get more awareness around the purpose of the Dai Foundation. 

![Intro](https://i.imgur.com/JS7NGrv.png)

![What if 1](https://i.imgur.com/PxJ2Vyz.png)

- With the current set of users we see now in DeFi, many people do not look at the underlying protocols to determine whether this is a Dai. As we want to grow adoption, we also must anticipate that many users cannot see if this Dai is legit. There is a real danger that somebody uses the trust of the Dai brain to scam users. If someone does that, it will hurt the trust and adoption of real Dai.

![What if 2](https://i.imgur.com/zdYgYTs.png)

- That would mean they would reach the open-source licenses we have on the software. However, it is difficult to do anything about it if the copyright to that software is scattered among many different contributors. There is a real need to go and have concerted action if somebody uses the software for something that is not according to the principles of MakerDAO.

![What if 3](https://i.imgur.com/ZWhh1CP.png)

- We just saw the SES Core Unit talking about Maker evolving tenfold; as we get more and more collateral locked into the protocol, it will also become more and more attractive for an attacker.

![What is needed](https://i.imgur.com/XpAWWNn.png)

![Dai Foundation](https://i.imgur.com/5LIKGoo.png)

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

![Aim](https://i.imgur.com/g2LG7Ud.png)

![Call invite](https://i.imgur.com/fAXgswo.png)

![Contact](https://i.imgur.com/cgkDy1S.png)

#### Questions

- Frank Cruz:  Is there a possibility that you will expand the Foundation to the United States one day? What jurisdiction would come into play with Dai regarding IP and the types of IP law? If I was in Asia and I wanted to create YDai or ZeroDai, or something, what is to stop me when it comes to IP law?
    - Søren Peter Nielsen: We have our trademark registered in several geographies, including China, Singapore, Japan, and some of the trademarks also Hong Kong, besides Europe and the US. I do not think it will make a big difference concerning the location of the Foundation according to how IP protection is done. It is a question of how you are going through and having the trademarks and the other assets you want to protect registered with the different jurisdictions. From my point of view, we have that.
    - Frank Cruz: There are no advantages to setting up a Foundation in Wyoming or Delaware?
    - Søren Peter Nielsen: It is quite cumbersome and very expensive to set up a non-profit foundation. I would not recommend doing that unless necessary. 
- LongForWisdom: Can you briefly touch on how domains will be managed with the Foundation?
    - Søren Peter Nielsen: We do not have all the answers, but we are looking to engage. We do not even know all the questions. We are very humble and want to create unhindered access. One way to manage the domains would be that whoever got to post content on a sub-domain must be a Governance approved entity. It is simply either through a Core Unit, MIP, or a Governance vote. A particular Unit is getting Governance approval to post content. Then through configuring that sub-domain, we could point to that content provider, allowing them to use that sub-domain.
    - LongForWisdom: The Dai Foundation will manage the top-level domains, and then the sub-domains would be...?
- Søren Peter Nielsen: We would do what it takes to keep full control of the DNS but point to vote.makerdao.com to whatever side that the Core Unit builds the vote.makerdao.com frontend is deploying to.
    - Hans Henrik Hoffmeyer: That is one potential scenario out of many. We have been working in the Dai Foundation to run these war games to figure out what could happen, which you do not want to happen. It is important to understand the Dai Foundation as a form of insurance; You do not want to use it, but we prepare for that scenario the day you have to. That is where we want to ask the entire Community to bring forward those cases to preempt them. We want to discuss them before they happen to prepare as an organization when they happen. That would also be good for our next session: to bring forward those cases to run some war games to figure out what we can do as an organization and if this is something that the organization should do anything about. There are a lot of conversations to be had. 
    - Søren Peter Nielsen: It is true. Even though our mandate is very specific and narrow, there is a lot to discuss around it. I am aware that one big question in the Community now is how to get practical access to some of these assets. We are certainly open to discussing these ideas and look forward to seeing a lot of you next week. 

### Monthly Financial Report

#### Sébastien Derivaux

[46:10](https://youtu.be/f1QjT-yaztA?t=2770)

- You can find the presentation on the May financials in the [forum](https://forum.makerdao.com/t/financial-report-2021-05/8527) and in the Governance and Risk channel on Rocket Chat.

![](https://i.imgur.com/nD8INpf.png)

- Everything is great. We had 23 million of net income in May, which is quite an improvement compared to April. Lending income increased by 29%. trading and liquidation incomes went up as well. Work expenses also increased but not enough to make any difference. The only thing that decreased was the MKR price. 

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

- We can see that the bar on the income statement in May 2021 is quite huge. Looking only at the green bars representing the net income, we notice it's been a linear growth within the last six months. Please notice the net liquidation income here, as that's where we benefited from the crash in the crypto market. 

![](https://i.imgur.com/Q91kXhP.png)

- When it comes to the lending business, I changed the slide slightly compared to last month. It's not presenting only ETH-A but now all the ETH-related vaults. This way, it's more representative. Dependency on ETH increased to 84% in May from 80% in April. That's the biggest dependency we've had on ETH since early 2020. It's quite a concern for a multi-collateral protocol backed mostly by one collateral (WBTC is still the runner-up).
- The yield is a little bit above what it was last month at 6.2%, but that's only because the average yield is calculated using the loans at the end of the last period (May) divided by two. As there was an increase in the loans and then a big crash at the end of the period, there seems to be an increase in the yield, but there was none. 
- The loan balance dropped a lot because people are deleveraging due to the crash.

![](https://i.imgur.com/a4ppyTM.png)

- Regarding the trading business, it's mainly the conversion from USDC to DAI and the opposite. There was a crash in the market, and people deleveraged a lot on the Maker vaults. As the demand for DAI was constant, arbitrageurs put some USDC into the PSM to generate DAI. As a result, all the stablecoins increased from around $1 billion to around $2 billion. The difference between the PSM and the inventory of the stablecoin is the legacy stablecoin vaults: PAX, USDC-A, and GUSD. That generated a profit of around $1 million which is quite an improvement since the year. 

![](https://i.imgur.com/hFFX9kR.png)

- We made almost $10 million of income on liquidations. Only two liquidations were not 100% successful. Everything else ran smoothly. Please notice that we made more from this month's liquidations than what we lost in March 2020. 

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

- Crypto-loans are decreasing a bit, but the balance sheet size is increasing. The difference between these forms the liquidity reserves, which are stablecoin Vaults and the PSM. At the end of the month, 48% of DAI was backed by USDC. It might be a concern if you are following crypto Twitter, but we are working on that. 

![](https://i.imgur.com/XK4xa6r.png)

- Regarding the stablecoin usage, it was interesting to see the stablecoin on-chain volume spike a lot in May. It involved all stablecoins, but the winner was USDC which doubled its activity. Concerning the market share, USDC gained a lot, and BUSD lost some. BUSD had been increasing its market share at the expense of USDC in the previous months, so the drop surprised me. DAI'sOn the other hand,  market share is slowly improving at the rate of 13%. 

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

- On the risk side, thanks to the fact that many users closed their Vaults, we are now safer than ever, assuming USDC is risk-free in terms of the CET1 ratio. The leverage ratio (the equity divided by the assets) is slightly below 1%, but it still increased a little. The statistics for the CET1 ratio are symmetric but weighted by the risk of all the assets. All stablecoins are zero-risk except for USDT; ETH-B is double the risk, ETH-C is half the risk. CET1 is now around 1.5%. It means that we could lose 1.5% of our loan exposure, and we should still be fine. 
    - (chat) Greg DiPrisco: Is this chart saying that the more stablecoins we onboard, the less risky DAI is?
    - Sébastien Derivaux: It gets less risky as we onboard more stablecoins, assuming other metrics are the same. But there is a tail risk from having 50% of USDC exposure.
    - Wouter: Why is ETH-B double the risk? 
    - Sébastien Derivaux: That's a decision for now. We are planning on calculating the real risk, but we will need a big study on that. There'sUnfortunately, there's no literature on having a crypto-backed loan. 

![](https://i.imgur.com/fHJJmC1.png)

- The MKR price decreased a bit. However, the recurring earning yield is quite high again. The equity per MKR Token increased to $44.44, which we could distribute to MKR Token holders if we wanted to shut down the MakerDAO project. 
- The recurring earning yield (annualized income divided by the MKR price) is quite high but remember that we might decrease the stability fees next month if MKR token holders follow the proposal of the MOMC committee. That would result in less income and would change this picture. 

![](https://i.imgur.com/JMM5Zyi.png)

![](https://i.imgur.com/iFzL22c.png)

- Liquidity pools saw a large decrease of 25%. That's because Uniswap rates on lending pools are lower now as there is no Uniswap V3. Also, the crash and people deleveraging contributed to this as well.
- That's all; I'm open to any questions you may have.
  -  Wouter: Should we include LUSD in the overview of the market share of stablecoins?
  -  Sébastien Derivaux: The slide is taken from Dune Analytics who currently doesn't have LUSD in this table. There are many transactions on-chain, so you cannot start counting all of them so easily. The last time I checked, LUSD was 99% on the Stability Pool and Liquidity Pool.

### Procedural

#### LongForWisdom

[59:04](https://youtu.be/f1QjT-yaztA?t=3544)

- This is a gap week for MIPs and therefore does not include a formal submission for MIPs. Next week we will have a formal submission for June, between the 7th and 9th. If you have a proposal in RFC, the 9th of June is your deadline for submission. 

### Open Discussion 

#### Maker Open Marker Committee Proposal

[1:00:25](https://youtu.be/f1QjT-yaztA?t=3625)

- LongForWisdom: This proposal changes the SF, DC, etc. It proposes 1% on ETH-C and 3.5% on ETH-A. Does anybody think those are too high or too low? Should we be making other changes?
- Payton Rose: Perhaps some of the methodologies could be shared. We are looking at other people's rates but are not using them as our benchmark. In terms of the magnitude of how much they were lowered, was there any formula or basis that could be explained in terms of how that decision was reached?
    - Matthew Rabinowitz: To tag on that same question: is there an objective of how much new DAI is targeted to be minted by lowering those rates?
    - SamM: It is mostly looking at the competitive rates and adapting to make us the most competitive option in the space. Right now, other secondary lending markets are more competitive than us. These rate changes are moved to counter that so that we are always the best deal. 
    - LongForWisdom: Regarding the methodology, the idea is to balance that against risk and DAI supply. In this case, DAI supply is taking the place of the most important factor, given the recent increase in USDC backing. That was the primary driver for the changes in this proposal. Regarding the amount of DAI targeted, we did not discuss the hard numbers of DAI that we wanted to be minted. It is difficult to target that effectively. The hope is if we position ourselves to be less than our competitors, then we get some level of migration, and potentially we get more leverage sequence using Maker over other protocols. 
    - SamM: Yes, and potentially attracting new users who previously have not taken out loans via the fairly big reduction in ETH-C as an experiment. 
- Payton Rose: I am curious about UNI, for instance; I see it was reduced, but perhaps not very aggressively. In terms of market share, we have an extremely small amount of UNI on the books and would like to see that going up more. 
    - Primoz Kordez: The fee of UNI was heavily reduced because the risk is low. UNI is a very liquid token, and the current exposure is pretty low compared to the allowed exposure that we calculate. From the risk perspective, we could go lower, and in general, all those tokens which could have rates reduced more aggressively, which we did. From a competitive perspective, if you look at the current DeFi rates, everything is really low. If we go to Compound and AAVE, rates are much lower than they were one or two months ago. If you put the incentives on top, it is hard to compete. Before, if you borrowed DAI, the net rate you pay may be less than 1%, and at some points, you were even rewarded. It is hard to compete. We need to go very low. 
    - SamM: We still have an advantage in terms of large amounts of borrowing as well as predictability of fees. They can spike on AAVE and Compound based on unexpected market conditions. 
- LongForWisdom: We had discussed but did not end up explicitly proposing fixing the rates in some of these Vaults for a period of time. We discussed this mostly around ETH-C, fixing the ETH-C rates in the hope of attracting users who are not leverage seekers but are seeking credits more sustainably. They cannot do that unless they have confidence that the rate will be fixed for a period of time. That might be worthwhile for the Community to think about more generally outside of that group because it represents a change of direction, something we have not done before. 
    - Primoz Kordez: It is a double-edged sword. We could see a lot of ETH-A refinance to ETH-C. Last time I checked, how many collateralized Vaults could migrate to ETH-C just because the rate is now low. You could see that one billion out of the 1.6 could easily migrate to ETH-C because their collateralization ratios are high, above 250 to 300%. This affects revenues, and it does not add anything to DAI supply, which is our main goal. 

#### Next Governance Facilitator

- Juan Guillén: Super controversial topic: Should we speak about Payton Rose becoming a Governance Facilitator next?
    - LongForWisdom: We definitely can do it. It is always fun to embarrass first. Does anybody have any comments?
    - Derek: Prose has our full support.
    - LongForWisdom: We will see how that comes out in the June cycle, but I hope everyone will support Prose. 

#### Anonymous Question Box

[1:09:36](https://youtu.be/f1QjT-yaztA?t=4176)

- LongForWisdom: We can take a look at the anonymous question box. Did we get any interesting comments, questions, suggestions?
    - Payton Rose: Yes. We did get one which we did not have the time to answer. The question involved Oracle's performance during the crash two weeks ago. What would have happened if the ETH price had continued to crash while our OSM is an hour behind? This also pointed out some price fluctuations compared to other exchange oracles, but I think we discussed that aspect of it in our previous call. However, it might be worth discussing how the protocol defends itself or what takes place should prices keep dropping during that hour to the point where we cannot recover the debt at the Vault. There is also a suggestion of us using Chainlink oracles if we want to get Nik fired up.
    - LongForWisdom: It overviews the falling price auctions and tries to hopefully reduce that more quickly than the actual market price and clear the debts above before the protocol loses money. This is not guaranteed. In general, as long as most auctions end successfully because of the penalty in aggregates, the vertical should end up ahead unless many Vaults have been liquidated if the price continues dropping to a very extreme level. It is worth noting that the OSM is a double-edged sword; It makes the protocol slower to update market prices, but we have also seen it positively attracting Vault users to Maker and defense against Oracle attacks. This is the key reason that it exists.
    - Primoz Kordez: There is a risk at auctions. That is why we are not proposing to lower the auction duration for ETH-B. I have made the [post](https://forum.makerdao.com/t/link-a-liquidations-2-0-parameters/7180) regarding whether you want to make auctions clear faster, you have this delayed bids risk where you could clear it out and settle them lower, but there would be a loss for other Vaults of the protocol. Ideally, we want the auctions to settle on the first minute that the price updates, but it is always risky. We will be decreasing the settlement time, but we need to see high Keeper participation. We need to be sure this works out well. The first step is doing it for ETH-B. I imagine we can do the same for other collaterals, and after that, we can shorten this duration that is on top of the OSM delay, which can be one hour or more at some points. As Long mentioned, this has lots of benefits. It showed 600 million should have been liquidated on Sunday, but then 50 or 80 million of them save themselves because of the OSM. These users probably like OSM. It saves DAI as well.
- LongForWisdom: We have this anonymous question box for anybody who cannot attend or isn't able to speak on the mic. Feel free to use it. Also, there is a [link](https://app.suggestionox.com/r/GovCallQs ) in the agenda forum post. 

## 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

## Credits

- Artem Gordon produced this summary.
- David Utrobin produced this summary.
- Gala Guillén produced this summary.
- Sonya Olechnowicz produced this summary.
- Everyone who spoke and presented on the call, listed in the headers.​
