The Bull Case for MKR | Sam MacPherson, Niklas Kunkel & monetsupply.eth

Transcript

welcome bankless nation to this very special episode today we are talking all about maker dow and the bowl case behind maker dow you guys all know banker dow it's the organization it's the the dow product behind the die stable coin the first ever trustless stable coin that crypto has ever seen but i'll ask the listeners do you really know maker dow have you really been paying attention to what's going on behind the scenes because in my mind from my understanding it's a dow like none other uh and maker dao has made fundamentally different choices less about different smart contract design choices but more about how the dow operates how the dao is organized and what is going on behind the scenes i've been a long supporter of

maker dao before i started writing about ethereum i started writing about maker dao first so i've been very close with the team and organization behind maker dao they have been an organization since 2016 and has blossomed and grown since then uh it really started very emergently uh people that were just interested in figuring out how to produce a decentralized stablecoin all came together this was before defy was a thing this was before the ico boom mkr the mkr token was minted and distributed to early stakeholders and a treasury of mkr was maintained kind of as you see in the current dow landscape but again this was in 2015 and 2016. um then the maker organization realized that they really needed to have

real world footprint they needed a centralized foundation the maker dow turned into a foundation which with like that operated as a typical company more normally would and that foundation existed for for years uh and then that foundation was disbanded almost a year ago and once again the dow which started as a very emergent bottom-up organization is now returned to a dow structure but it's not just a dow structure it's more a doubt of dao structure and maker governance really is just capital allocation decisions rather than you know voting on what the brand or icon should be or you know who should be able to tie their shoes with a snapshot vote uh so entire companies work for the meta dow the bigger dow rather than just

simply individuals in a discord i think that there is a very strong bull case for maker dow that the market does not appreciate and the market has never really fairly appreciated maker dow at least in my opinion and so we have brought on three maker dao community members to give the bold case for maker dow and to illuminate what is going on behind the scenes with maker doubt because in my mind it is a fantastic story that's very rich and is extremely compelling and interesting and so we are going to give out the bowl case for maker dow here on this live stream i got a few more things to say before we bring on the panelists but before i do we gotta let you know that they're in honor of national youth hiv and aids awareness day on april 10th mac cosmetics has created the first ever

nft collection featuring the work of the iconic artist and activist keith herring they are minting nfts this is the nft project where a 100 of the purchase price of primary sales of the uh keith herring nft collection will be donated to the mac viva glam fund to support to support youth impacted by hiv and aids there are three rarity levels in this nft drop 1000 total red tokens available for 25 each 250 blue tokens nfts are available for 150 each and 25 yellow tokens available for a thousand dollars each minting has not yet happened that is uh coming up on april 10th so mark your calendars if you have never been a part of an nft drop

this might be the first one for you because of how everything is going for charity it's like an nft drop where you can feel good about everything that happens there is a link in the show notes to sign up and learn more and you can access all of that information there in the show notes and so uh with one last comment before we get started this is a future this is a coming up an experimental show model out of bankless uh future bullish blank shows are definitely going to be a thing this is the bullish maker show which i think is has a compelling story but i'm sure there are many other communities many other dows many other projects that have the bowl case for that project for that token that the rest of the market might not understand so this is a new

format that we're trying on bank lists if you think that their the market is under appreciating a particular token a particular dao particular community here's what you need to do assemble a team write down some notes hit bankless up on twitter saying you've got the bowl case for your particular token ready to go and you've got the team assembled to get it done uh this i think will be a very fun show moving forward to help spread the alpha about what is going on behind the scenes with your particular favorite dow and we are getting started here with one of my favorite dows maker dao of course so we will be right back to get into the show and the bowl case for maker dao teaser they actually just announced a a deal they're financing a deal with tesla and this is something that the market

just doesn't understand it's a little ridiculous and so we're going to get into all the details about maker dow and the bold case for mkr right after we talk about some of these fantastic sponsors that make this show possible arbitrary is an ethereum layer two scaling solution that's going to completely change how we use device and nfts over 300 projects have already deployed to arbitrary and the d5 and nft ecosystems are growing rapidly some of the coolest and newest nft collections have chosen arbitrarum as their home all the wild d-fire protocols continue to see increased usage and liquidity using arbitrary has never been easier especially with the ability to deposit directly into arbitrary through all the exchanges including binance ftx hobie and crypto.com once inside you'll notice arbitrary increases ethereum speed by orders of magnitude for a fraction of the cost of the average gas feed if

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assets are bridged and available for use almost instantaneously across bridges are powered by uma's optimistic oracle to securely transfer tokens from layer 2 back to ethereum a token proposal is being deliberated as we speak in the across forum where community members will decide on the token distribution you can have your part of across the story by joining the discord and becoming a co-founder and helping to design the fair fair launch of a cross if you want to bridge your assets quickly and securely go to across.to to bridge your assets between ethereum optimism arbitrarum or boba networks maker dow is the og d5 protocol the maker dao produces dye the industry's most battle tested and resilient stable coin using maker you don't need to sell

your collateral if you need liquidity instead you can spin up a maker vault and use your collateral to mint die directly with maker the power to mint new money is in your hands the maker protocol is extremely hardened and operated by one of the most experienced dows in existence they've been here since the beginning they've seen it all and so you can mint die with the assurance that your collateral is safe soon maker will be present on all chains and l2s so minting dye can take place on oasis.app xerion zapper or any other d5 protocol that you use follow maker on twitter at maker dow and learn from the oldest and most resilient down existence [Music] all right bankless nation here is our bowl case for mkr a bowl case for maker dow panel on the top left we got sam who

uh is all the three of these uh our dow members got top left is sam bottom left we got monet supply you probably know him on twitter uh and in the bottom right we got nick kunkel who i've actually had the pleasure of spending uh cobia time with nick and i went skiing a lot in during during cove and that that has been a fun time uh and so guys are you guys ready to get into the bowl case for maker dao yes yeah all right let's do this i gave a little bit of an intro about the maker foundation the origin originating story about maker doubt but i want you guys to pick up the thread and take it from here and sam i want to start with you just like uh let's zoom forward to the present like what is maker dow and what

about maker dao is just so different than the typical dow that people are familiar with and and also just who is a part of maker dow like who composes it and how is how is the culture of maker dow just different from other organizations that we find in defy sam i'll start with you yeah sure uh first thanks for having us david uh and congrats on the bankless arena you got today very very bullish news um so i would say uh one of the big differences uh between maker dao and other dows is we don't have an associated legal entity uh we used to back in the day the maker foundation uh people probably know that pretty well but they are fully dissolved now so like uh yeah we're fully a dao um no legal entity that's an interesting piece

another thing is that uh we're completely sustainable uh the protocol revenues more than pay for all the expenses of uh running the workforce and you know paying out various uh things on the protocol uh so that that's something that's really interesting and unique i think uh in terms of who's involved uh there's a number of different groups in the dow uh we have what's called core units this is like our main uh unit of like workforce so me i'm on the protocol engineering core unit so we're responsible for maintaining and building the uh smart contracts for the core protocols as well as other things involved with that you know we have risk we have mones on that uh nick's on the oracle's team uh so this is sort of the

fundamental unit we have uh we also have what are called mandated actors uh and uh so these are sort of uh elected people to sort of run the day-to-day operations of the protocol this is sort of mixed in with core unit facilitators essentially we have a once a week meeting um that like we kind of uh go over like and synchronize and stuff like that there's also delegates which do the voting and there's maker holders and just the wider community you know anybody can be involved nick what would you add on to that uh how would you illustrate the differences between maker dow and and how maker dao came to be and how people think about dows these days um

well okay so uh right i mean we have we had the dao right um and uh right uh right af right before kind of the dao blew up right you had a every project was trying to be a dao because we we thought we had just discovered this uh new kind of social primitive a way of like you know of like collectivism right and so you had maker dao and you had digix dao and you had a couple of these other ones right and then the dow got hacked um and then dao was kind of a dirty word for a long time right uh maker we considered dropping the word dao from our name you know for like a long time

and uh now it's almost like enough time has elapsed that like dao zar um like this idea that came back that people are like no wait that was actually like like a very useful uh concept um i wha what i think kind of makes maker like unique and and special really is is not just the way that we we structure ourselves as a dow but the way that we build is just very uh comes from a perspective that's very adversarial right uh we really think of like um truly every little thing that could go wrong and try to have as little kind of

direct human control or authority as possible uh you know we as you know the developers like we don't have special knobs and switches of turning the the system on or off or deactivating stuff or activating things right it's really completely controlled by maker governance it's completely controlled by the maker token holders and that type of full decentralization i think is is quite rare um in in in d5 especially right where uh i i think many teams take the argument that oh well we need to be a little bit

centralized at the start right in order to innovate quickly to scale quickly uh but then later uh they don't actually decentralize and i think maker is one of the few that really stuck to that promise and and is following through on that monet i want to get your perspective in on this as well what are really the the properties or characteristics about maker dow that stand out is unique and special that only really maker dao exhibits i wouldn't say onlymaker now exhibits this but i feel like the maker community is really mission focused you know part of that might be from the token you know sort of stagnating i think in a

certain way but it's people don't get into maker because they're you know just hyped about number go up um you know we have a clear goal of making a really reliable um financial system that people can trust and that that people can actually be safe to put their money in and um you know it attracts just kind of like a special committed group of people um and i think you know other protocols really are striving for that but maybe are still in the uh the like hype phase that is something that i think stands out to me the most is the ability for maker to retain the same talent that it had years ago

i find the same people the same maker dow community members every single maker dow event year after year after year and for some reason something about the maker organization just retains developer attention and talent attention inside of it and so it's the same cohort it's always the same builders and that's really really rare in d5 when there's so much churn all the time people that seem to work for maker tend to commit really really hard to make her monet you you kind of alluded to this i want to ask this next uh this next question is i've always thought the story behind the fundamentals of maker dow and then the mkr price on the secondary market to tell two completely different stories like there is i don't think there's any other dow that has had so much thought

and attention and like attention to detail and conservative labor built into the protocol yet none of these properties seem to be reflected in in the mkr token uh and so i want to get your guys's thoughts on like the historical price action of this thing as it relates to some of the fundamentals that have been built over the years like is there like a curse on the mkr token i just want to ask that question does the mkr price kind of feel cursed to you sam i'll start with you uh yeah um so like i mean i've i kind of went through a phase i guess where i was like you know concerned about the maker price and stuff like that but at a certain point you just kind of become numb to it and all you can really do is just keep delivering on building fundamentals and

stuff like that and you know the price will catch up at some point um you know like the market can only remain irrational for so long kind of thing so that's kind of the way i look at it nick same question to you like what's up with the mkr price uh makerdale's been building so hard for so long and just do do you see like a discrepancy between the the what the story of the price is being uh is telling versus what's actually happening with the fundamentals um yeah but i but i think it's quite obvious how we kind of ended up here uh there was never a focus on trying to showcase mkr trying to advertise mkr to

get mkr listed on exchanges to build liquidity to incentivize liquidity right it was never just a focus the focus was always die and the i think the rationale was quite reasonable right uh make dye have utility make that useful scale die as much as you can and if die is successful by proxy mkr becomes successful right all of the profits that are generated by the system right are diverted to mkr token holders and so it's really one of those things that in the end it'll work itself out yeah i think that you make a really really good point part of the

legacy of the maker foundation uh from what i've gathered from being an outside observer is that the legal side of the maker foundation really hamstrung the marketability of the mkr token right like we could talk about die we can talk about the contracts getting a vault all that stuff but in a industry which clamors for attention the the legal side of uh in the compliance side of the foundation was like you guys can't talk about mkr uh monet would you agree that that would that was kind of one of the influencing cultures of the maker dow as a result of the foundation is that there was a removal of a culture of attention to put on the on the mkr token yeah i think that um i i imagine that a lot of that was like some legal influence but i think it's

also um you know kind of goes back to just the discipline of the project which um you know if if you just are disciplined and you keep doing the right things for long enough like it does pay off um and i think there's you know lots of advanced new tokenomics that we've seen people deploy in the last couple years um a lot of that is like kind of very flywheel based where you can accelerate your growth um but then you know on on the rivers it also you know kind of accelerates your decline um and i think maker has just been very sort of um conservative about those sort of changes like we don't want to like

over leverage ourselves and put die holders in a position where their funds are at risk um so yeah i think it's it's like not surprising that you don't see the maker token rallying as much in a bull market but hopefully it won't be crashing in a in a bear market as much and i do remember the mkr token was one of the leading tokens in the 2018 to 2020 bear market uh it was kind of where a lot of people put their attention including including myself all right guys so there are so many subjects to get into we're going to talk about the supply of dye where supply comes from the demand for dye how demand uh how demand is induced into die we're going to talk about maker's penetration into real world assets we're

also going to talk about maker's l222 strategy and then also finish off with maker tokenomics each one of these subjects has just some insane development in progress to talk to to talk about so but before we get into all of those things i want to talk about just like the meta goals of the maker dow protocol what are the goals of maker what does the protocol want does the protocol want something just fell off my desk sorry does uh the what does the protocol want die number die supply to go up loan fees to go up like what are the really bullish metrics for maker dow that you guys are trying to to optimize for and monet i'll throw it back to you on that one i think total die supply um and then also like usage and integrations across

different platforms you know being able to use it in real commerce um as well as just you know defy um and then i think kind of more directly to the bottom line like what's our actual pro like amount of dye that's being generated through um through vaults rather than through stable coins because that's that's where we're actually able to to earn revenue so yeah i think those are probably the two biggest fundamental drivers sam nick anything to add on about the the optimizing metrics for for maker dow which metrics are the most important uh yeah i would say um like in the short term uh what monet said uh we need to

get sort of the interest bearing supply up uh to replace the stablecoin supply i would say a medium term goal is to at least for me is to reactivate the die savings rate start getting a die demand growing in a more organic way um and long term yeah it's sort of like several orders of magnitude scaling of the dye supply such that we're in sort of the fiat currency scale um as like a credibly neutral alternative nick anything to add no i think that uh it covers up pretty well all right so let's start with the supply side of things what is the actual strategy for increasing the die supply

sam you just talked about interest-bearing collateral um so i think we can also talk about usdc and like the dominance inside of usdc inside of maker dow do you guys consider the dominance of uscc in maker a problem uh and if so how what's the plan to fix that and overall what is the overarching like strategy for increasing the total die supply on the secondary market sam i'll start with you uh okay um so i've uh put out along with some of my colleagues a recent strategy to address the problem of lack of sort of organic dye supply generation i put this out as a tweet and a post called the aggressive growth strategy so really this involves two parts

the first is we want to do a cap raise a sort of debt uh or equity offering or some mix between the two uh the idea behind this is uh the surplus buffer uh if you can see in the image um this is sort of our making sure we're solvent kind of uh number so currently it's at 65 million and this is uh just growth from revenues in the protocol but we kind of want to move that up another 5x or so to like 250 million or even above and what this gives us is the ability to basically take uh basically move up the risk curve and uh you know take defaults on individual loans without like breaking the protocol and so as you can see here we we don't

really do high-risk loans all that much um because we're kind of limited in how big they can go but we increase the surplus buffer we can increase the size of all these sort of more high-risk loans address a larger market and um sort of grow the revenues in a in a good way but you know the surplus buffer can you just let's define that a little bit more what is the surplus buffer in maker how does it grow where does it come from and why is having a large one good right okay so the uh surplus buffer uh is basically um well okay it's a buffer of die rep so let me start with i guess stability piece so if you open up uh vault on eath or something like that um and you take out a die loan you're paying interest on

that now so currently it's i think 2.25 so where does that go uh that goes into what's called the surplus buffer so this is basically um an excess of dye that the protocol controls and it can be used for a couple things so we use it to pay for things like core units and whatnot but it's also there just in case uh we take a loss on one of the loans say one of the loans defaults and we have bad debt uh this will eat into the surplus buffer but it will as long as the surplus buffer is larger than this bad debt the protocol is still solvent we're all good um we can continue operation so by growing the surplus buffer to a larger number

we can sort of increase our tolerance for individual defaults the idea is that we spread this risk across many many different protocols and sort of lenders and stuff like that such that we have sort of independent risk on every single one of them such that we can tolerate losses and sort of plan for them this is more how traditional lenders work they don't usually plan on no losses they account for them um okay so yeah the the growth of the surplus buffer comes from the revenue on the interest rates on the collateral inside the vaults and you say that we want to like 5x this to the supply of the surplus buffer to give maker a larger buffer so that it can start to

lean into more risky loans than it what it currently has because if it can uh service more risky loans it can also serve as higher interest rates on those loans and so the idea is that a larger surplus buffer allows the protocol to get higher yield on a larger array of loans uh without having to really increase the risk because of the supply of the the increased supply of the surf surplus buffer is all that correct yes exactly cool um so by doing a cap raise we can basically say hey we've got you know 10 billion in die demand people love die we've got a very good value prop it's it's probably going to be very likely to be able to raise capital uh in anticipation of the future so uh you know how we do that is some sort

of combination of debt and equity offering um so yeah basically what this gives us is the ability to experiment more uh integrate with more protocols under collateralized lending reputation based lending loans to trade phi where we don't necessarily have all the legal uh recourse in place yet these are the types of things we can do with a larger surplus buffer and so that we have low risk loans up top and those are really big bars and i think that just indicates the total supply of collateral inside the maker dow system but those low risk loans have low interest fees and then below that we have the high risk loans which doesn't have a lot of collateral because of how they're high risk but there's a lot of interest rate there's a lot of money to

be made on those high risk loans and so in theory if the surplus buffer increased like 5x uh viewers who are watching the youtube would you know you could imagine that dash line moving very very far to the right allowing for more collateral to exist in the high-risk loans uh which would just yield a lot more die on a yearly yearly base is that all right yup exactly nick anything you want to add or any any additional element to discuss here uh no but i i did want to circle back uh because part of your original question was uh trying to address usdc and uh you know what what were we going to do about this problem and i and i just want to push back on that a little bit uh because

i don't necessarily see um the maker protocol having a lot of uscc's a problem i think of it as a capital battery um so when we say like right anyone can mince die one to one against usdc right what we're essentially saying is that uh if die is trading above a dollar right meaning that there is a bunch of demand for die relative to the supply right there's more demand then anyone can go and give uscc to the maker protocol get die

and sell the die in the open market and essentially arbitrage that that peg imbalance and bring it back down exactly towards the dollar so i think that's very useful property because one it even though die has a kind of market based kind of algorithmic peg because it's not hard redeemable for dollars uh we essentially get an artificial hard peg to the dollar and that's incredibly useful when you're dealing with uh kind of more traditional uh kind of trade five counterparties um so okay so we've accumulated a bunch of uscc

um people kind of refer to this blacklist like risk and i i don't really see the difference uh between having like 200 million of uscc versus having 5 billion of of uscc the blacklist risk right doesn't really change right it stays the same but what you're getting out of this is one you're getting extremely deep deep liquidity uh for for die against dollars and so what this really is is a capital battery to supercharge real-world asset lending um so

i i know probably later you you want to get into this a little more right what are we doing uh with with real-world assets uh but essentially it's maker lending you know against uh against assets that exist in the real world instead of off chain um and essentially what they want to do is these lenders they don't necessarily want dye right they can't do anything with dye what they want is they want dollars for their business to go execute on some opportunity right and so having the ability to go to a trade file lender and be like we have five billion dollars of dollar liquidity allows us to do much much larger deals

than if those trade five partners had to try to find like otc liquidity right for 200 mil or 300 mil sam i see you nodding your head can you elaborate and just add to that uh if if you have anything to say uh no i think nick covered it pretty well okay so yeah this usdc supply in in maker i'm i'm seeing uh correct me if i'm wrong but i'm seeing 227 million uh usd die generated from usdc a comparable amount of uscc locked in locked in maker dow and then the stability fee on that almost that 227 million is about one percent so maker is charging one percent on that 227 million dollars which you know that's a decent amount of revenue

uh but is that is is usd revenue from uscc collateral inside of maker just like less revenue than your typical collateral because of how just like low risk it is and it's the idea that you still want to displace the usdc collateral with other collaterals that you can charge higher revenue for uh so so david i i think you're misunderstanding something so um from uh uscc right we are not making uh any money right really uh it is it's just a swap facility right you can go and you swap you give us a uscc we give you a die um

if if you want to say okay well okay there's 5 billion uscc we're not really making any money from those um i would say that that's a completely different problem right okay that's just saying how do you monetize your balance sheet right and and monet can probably explain this a little better than i can so i'm gonna butcher it first and he'll he'll probably correct me and and come up with a much more eloquent uh explanation uh but but the way that i would describe it is uh maker dao is sitting on five billion dollars and can decide on how they we want to allocate those five billion dollars into some productive asset that produces yield right and so

probably we want to look at something very low risk something like triple a rated so something like us treasuries right where the yield will be very very low uh but it's an extremely extremely safe yield and it's also extremely liquid so being able to go from treasuries to dollars right you're not going to really have any slippage no matter what scale you're trading at right even if you want to do like half a billion dollars of treasuries so it's it's more of an opportunity of how do you want to allocate rather than uh oh this sucks we don't make any money off uscc renee you want to add anything to that um yeah i think um like all else equal usdc is i think it's

a lot less risky than many people assume um but there is still you know some small amount of risk holding it so um yeah i think it's it's a positive if we can allocate that intelligently to real-world assets maybe stuff like treasuries or other you know kind of safe reliable investments and then maybe also some a little bit higher risk investments once we get enough surplus to really support that um so yeah i'd agree that it's it's an opportunity um you know it's just we're methodical so we're not just going to eat you know a billion dollars of usdc anywhere we want to make sure that it's it's truly like a

safer better bet okay guys i think that covers everything on the supply side like the very basics are you put collateral inside of maker dow you charge a fee on it number goes up uh we also have this usdc as what nick is calling like a battery uh unless there's anything else to cover on the supply side i want to turn into the demand side the other side of things like demand for die uh and so like putting on our like 101 explain it like i'm five hats how does die demand uh how is that good for the protocol how is that good for maker dow and then where does die demand come from and how does the dow plan on increasing die demand um uh anyone want to raise their hand and take this one

yeah monet go for it um yeah i think the way that i look at it is um it's it's kind of similar to banking but when people are willing to hold die they're basically lending maker down money that we're then able to lend out to the the other people who are um you know using our vaults to borrow money um so that's that's kind of a key part of our system is when we have a lot of excess dye demand um we can always be sure that there's you know we have the capital to lend out to people borrowing uh kind of like banks you know they they use the money from people who are depositing with them um to make the loans that they're that they're then interest on um

so yeah it's a really key part of of maker now it's um probably our biggest asset is that we have so many deep integrations with people like curve and and compound and ave um that a lot of people are are really interested and and willing to hold die even though we're not actually um currently really paying them anything to hold it uh through something like the the die savings rate uh you mentioned integrations with other d5 protocols and i think that actually opens up a subject that i think a lot of people uh kind of forget about there's something different about borrowing usdc or borrowing dye from something like avey or compound then there is borrowing dive directly from maker dow maker dao

can mint die whereas compound and ave cannot and this is an ex a huge advantage just in the optionality to be able to min to die to control the supply of dye and there are you got you alluded to some integrations with with ave and i want to turn this to sam next is oh how sam can you kind of just illustrate how those integrations with other d5 protocols work and how the ability for maker to actually mint dye is a useful thing for other d5 protocols uh yeah uh so for ave in particular uh if you remember last year around april may um their interest rates on all their stable coins were like skyrocketing they went up to like even as high as 20

percent and if you're taking leverage on ave and you just get hit with that uh intermittently it's brutal so one of the uh mechanisms to alleviate this for dye um was that we recognized ave was a very you know reputable rock solid protocol so we basically just extend them minting rights uh such that they can sort of squash these excessive times of uh borrowing so we uh built and introduced the what's called the die direct deposit module or we shorten it to d3m in conjunction with ave um and basically uh this module enforces a max variable borrow and it does this by basically

like as soon as if somebody borrows a bunch on ave and the interest rate spikes it will just shove die into that pool put the interest rate back down so nobody gets uh like screwed over by this and how does maker pocket money in that scenario how is that how does that generate revenue for maker dow uh so it's it's essentially just as if uh maker is any other lender so we collect uh interest rate on the lending and like so if of a interest rate like jumps up to 20 and then they tap into maker's credit facility how how much interest rate would maker make in that scenario uh so we would enforce a max rate so uh we would basically um i think what is it now it's probably like 2.5 or something

we're enforcing around there um so that would be the max borough um we would enforce and then we would uh there would be some spread and then we would uh earn some portion of that interest you know 1.5 i don't know exactly what it is but it's yeah it's about that there's a an old model that uh old is in we haven't talked about it a lot on bank list but we talked about we talked about um the uh the protocol sync thesis uh where like deep incredibly neutral protocols are find themselves at the bottom of the defy stack and other applications are built on top of it and so i want to get into the other integrations as well but using that as a frame of mind for the listeners i like ave in this particular arena is built on top of make or dao because maker dao can

supply ave with the credits and with that it needs in times of like a supply squeeze and ultimately that value flows back to make or dao because of maker dao's ability to meant die it's the extreme privilege maker dao has its own money printer the own ability to print money and other protocols need to access that ability in times of supply squeezes um sam and sam or monet or whoever wants to take this one next can we just talk about all the other uh defy applications that are also integrated into maker dao that are leveraging this property of maker yeah so um this is uh sort of the general version is exactly what you said so the recognition that maker's not going to be the best at everything

there's other protocols that specialize and are very very good at what they do so instead of maker trying to do this all ourselves let's use defy legos let's connect all these various protocols and extend them credit lines such that we can kind of exponentially grow together um so what we're focused on right now so we have the ave one up and it's been a great success uh so far um we are now uh integrating with compound to give them something similar as well as sort of newer protocols uh maple finance who does reputation based loans um there's trufi does similar things um yeah so these are all sort of protocols we'll look at rari uh fuse pools that's sort of a new thing that's

pretty interesting that we're looking at so we're wanting to go wide with this and sort of just uh you know switch from you know lending out against like uh individual collateral assets and instead just sort of empowering others to uh get die everywhere basically yeah and i really want to hammer that point home it's really um maker can provide die liquidity as a service right um and so what really this does is it just you know this goes with the the kind of protocols like sync thesis that you were talking about david is it really puts maker on a base layer below any of the other secondary lenders right for a

primary lender only we can generate die like on demand uh secondary lenders need to source liquidity right from somewhere from users or from maker and so it's really quite synergistic right for maker to be able to have these distribution channels for dye right it's it's a specialization of saying what is maker good at well maker is good at having this uh really stable decentralized stable coin called dye and we're really good at providing you know hundreds of millions of dollars of concentrated liquidity wherever it's needed um and it's acknowledging that there is secondary lenders uh who are better at us in in other things right and they

specialize for example in in distribution right uh if you look at something like ave right you know how many chains has ave already deployed on right it's practically everywhere right and so you can have this really synergistic relationship right where uh ave can go and you know deploy on all these chains and we can provide targeted die liquidity there and we basically get a free distribution mechanism for dye i think a great model for understanding this it feels like a central bank with commercial banks where like compound and ave are the commercial banks that tap into the central bank's liquidity and the cool thing about maker and again the cool

ability that being able to mint the money being able to mint die it allows for maker to really be like a bulk order credit facility like i think it's actually kind of skeuomorphic um maybe not pseudomorphic but just like you know it's just a sign that it's early that individuals are going straight to maker dow to open up vaults when really it's far more appropriate for things like ave or compound or just like other larger organizations to come to maker to open up vaults and then give those like like you said nick distribution uh maker can use all these other applications as distribution to the individual uh how do we like that that frame of reference is calling like maker dow a central bank of defy like appropriate or how would you guys change or amend that

i would call it the central bank the decentral bank yeah monet uh tap us in here i would add that um i think maybe our our vision is bigger than just the central bank of defy like we already have um some of like the sort of titans of c5 um like nexo and celsius already do you know a lot of business with us among you know other d5 protocols as well but um you know that's already kind of like an interesting like cd5 scaling solution that they're running where um they're lending money to their customers on their their own closed platform but then they're sourcing all of the liquidity not all of it but some of it from maker and this uh this illustration of maker

as the decentral bank of the crypto universe gets even more uh exciting in my mind when we get to the topic of real world assets which i think we definitely will we'll get there here in a second um guys is there anything else that we should talk about when it comes to die demand where die demand comes from and like the long-term road map for inducing die into the world uh yeah one one thing i'll add is the die savings rate you know it's kind of gone away for a bit but i think this is a very very critical tool that when we reactivate it the uh value prop for dye is going to be huge compared to holding like a us dollar derivatives of other kinds why will it be so huge uh it's a risk-free interest rate right

it's just gonna like why would i hold say usdc when i could be just earning a risk-free rate on die right and and this again kind of goes and lends itself to like what is a new treasury uh this is the the new like native dollar denominated interest rate where i've always thought that uh there's going to be two major interest rates in the world of crypto economics there's going to be the eth staking yield rate which is going to be the risk-free rate of a non-store value asset non-sovereign store value asset but then there's also the die savings rate which is the yield that you can get on dollars in in d5 um uh as anyone want to riff on that for a second cool uh okay um

one okay yeah one last question i i have for you guys is like let's zoom forward and and like kind of and this will tee us up for some um real world asset conversations and layer two conversations but like let's zoom forward like 10 15 20 years what do you think is like in a in a world where maker is maximally successful and has achieved all this gold what do you think the collateral inside of maker dow looks like like what what would the maker overall portfolio look like in an ideal world where every everything about maker data was achieved is that something that is known or is that something that we kind of just need to iterate on uh nick i'll start with you um it's steak to eat bitcoin and real world assets just just

those three things just everything else will look infinitesimally small uh relatively in my opinion can you elaborate on that why why will those three things be the dominant things um well eth is the uh e is kind of like to to me just the the the future-proof kind of network of networks right it's the internet was is a great network but it has some shortcomings right uh it doesn't really have integrated identity and it doesn't really have integrated payments um if eth literally just becomes a network that has integrated identity and payments

right it's already um it's already like such an order of magnitude improvement right and then you start adding in okay well eth is this global network that right anyone can uh can can connect to right uh you have for the first time this concept of like a globalized liquidity pool rather than like this fragmented kind of regional nationalized kind of liquidity um and to me it's just it's just clear it's it's obvious there's there's no other alternative for for the real world asset side it's really just acknowledging that maker right has the superpower of right and

our superpower is that we can just mint die right and that there is incredible amount like deep deep liquidity of diet of dollars and as long as we have that superpower right we have we have no cost of capital right so unlike um a traditional lender a right which would need to somehow kind of source capital right to to give out loans or to uh to finance something right maker doesn't have that um right we don't have that overhead and so we're going to be able to under charge on on these rates and that you know on on the macro scale is just going to allow us to be incredibly incredibly successful when it comes to financing

uh real world assets i really like that line you're going to be able to undercut the rates because you can mint die you can always out compete other lenders because getting receiving capital for maker comes for free it's just like one single transaction that mints a bunch of die and maker doesn't actually owe anything to anyone because it has the power to mint die so like the the jeff bezos yeah jeff bezos's line uh your margin is my opportunity definitely comes to mind where if some commercial bank offers four percent well maker can always offer three um monet uh monet sam any of the last comments before we go into the second half of the show no i'm good well all right guys okay so there's some really hot topics coming up next uh

wormholing between all the layer twos and the other layer ones is definitely something that we're going to talk about uh and we've definitely touched on real world assets but we're going to dive head first into the topic of real world assets because i think that is something that no other credit facility no other defy app is really tapping into in the same way that that maker is and it's really the untapped field of opportunity that really only maker seems to be capturing uh and and then of course we're going to get into the mkr token the current tokenomics for mkr and perhaps how that might stay the same or might migrate into something else moving forward so those are the three big subjects where all the alpha is we're gonna get into those subjects right after we talk about some of these fantastic sponsors that

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ago i think it came out yesterday and nick i want you to take the lead on this one uh maker dow is giving a line of credit to tesla facilities make a nick can you kind of unpack what's going on here and how what are the details of this um yeah so uh like you said we we just announced this uh this deal yesterday uh really huge news um and it's basically facilitated by one of our real world asset partners uh 6s capital led by a guy called matthew rabinowitz and uh he's been a maker community member for a long time and and so this this is like one of those like really cool

uh kind of success stories where he saw the the vision of maker and d5 so early and then one day kind of a light bulb when offram was like wait like i can actually use this um and so what what uh success capital is is kind of doing here is uh they're kind of acting as this go-between liaison so maker can effectively interface the maker protocol can interface with uh you know borrowers like uh like tesla uh so in particular what's happening here is that tesla wants to build a network of collision repair centers uh i i

believe right now in the u.s but i think eventually it's supposed to be a global thing um but they don't have the capital right to uh to build all of these things themselves um and if you think about like them doing a capital raise right them trying to take out debt well debt on your balance sheet isn't uh isn't the best thing right from uh when when you start like analyzing the health of the company right and it would really slow down their ability to to execute on this right it shows up as a capital expenditure um so what they're doing is they're using credit tenant leases um in order to raise uh the cash to

build these uh so what a credit tenant lease is it's essentially saying that um if someone were to finance uh the construction of this then tesla will promise to pay a certain amount of rent right uh every year um for x number of years and maybe the amount increases by y percent every year right it's uh it's kind of uh each one's a little bit unique in that respect and and now right this isn't debt on tesla's balance sheet right it's not a capital expenditure and now it's an operational expenditure right and so opex and capex are treated very very

differently so that's why credit tenant lease is like a very attractive option for tesla to scale and build out this network of collision repair centers like extremely quickly and so essentially right uh what we can do is we say okay well we know that tesla is going to be um right paying a certain amount right and that's generating uh yield uh so essentially you can kind of almost like treat this as a as a bond right there's it's a fixed income type of product right and that has a speculative value to investors and so maker is willing to write supply the uh a die loan right against that kind of

fixed income stream um and so uh we're we're start i think right we just announced the first deal and i think the amount is like 7.8 million dollars but this is just the first one we have more deals or well success capital has more deals in the pipeline with tesla that they plan to close in the next quarter and the next two quarters uh by the end of the year so really this is an opportunity that we once it gets going it's a flywheel and we're just gonna snowball this up right and you know the amount that maker can lend right we we said it's near limitless right we can just mint as much dye

as we want and so really it just comes down to the risk perspective of how much risk exposure does maker want to have right to these tesla collision repair facilities um and that's that's a really good problem to have right where you're saying uh right oh there's too much growth and we from a risk point of view we have to throttle the growth but the opportunity here is is absolutely huge and we're uh super stoked that uh that this uh finally went live renee i want to get your perspectives in on this how does this how should we be thinking about this in in the frame of defy i think a lot of like um you know

cypherpunks would have be puzzled about this it's like wait a second how are we getting real world assets into the world of diva how does this even work uh can you just like give us your thoughts on this like how how does this uh illustrate the story of maker down and what it's optimizing for and just like how bullish is this yeah i think um i think maker dao you know by and large has taken the approach of like engagement and hopefully we can influence the entire economy that we're you know that we're living in in a real world um to operate better rather than trying to like strictly bifurcate ourselves or like separate ourselves from real world assets or

other stable coins or anything that you know the government might be able to touch through a couple layers of of interference so um yeah i think we're we're taking the path of engagement um i think maker does have like a really unique opportunity though compared to um if you look at like a lender like compound or ave they always need to maintain you know and let enough liquidity so that people can withdraw their money if they want to when maker is you know much less much less constrained about that so um you know some of these these you know real world asset deals like lending to finance building something um they're gonna need that money for a year or more

um and and we have like a really unique opportunity that we're able to fund stuff for a longer commitment and um other other protocols you know they they kind of have to adjust how they work to really do that effectively i think a lot of people are probably wondering how like legally or technically this actually happens like how do we how does tesla pay money to make her dow like what are there there are legal structures in place uh i i'm pretty sure as well and like just overall how do real world assets become collateral inside of a defy app how does how technically does this even work i'm not sure who's most equipped to answer that so i'll let you guys kind of figure that out so david um

it is enormously complicated and uh we could probably spend a whole hour talking about well this thing talks to that thing is subservient to this and there's an outside auditor here um stuff is to say that this is a structure that was purpose-built around real world assets and there was purpose built for the dao to effectively have as much control over where the money goes where the money can't go um and how uh it can be handled right um this is this didn't just kind of you know pop up out of thin air this is the culmination

of you know over a year's worth of like blood sweat and tears and an enormous investment of of you know resources of capital right to to create this structure um and i would say it's probably the most advanced um real world structure like asset structure out there today um and of course it's going to be iterated on right um we're going to want to you know diversify uh to different jurisdictions as well right you don't want to just have concentrated uh you know risk just in a single jurisdiction but this is a huge first step right because it shows that defy is not

just right a tool for speculators and you know traders or whatever right to to get margin and to get leverage right it's really a tool that can be used in the real world you know to fund real tangible things and so you know even though the amounts are so small uh the symbolism of what it means and of what defy can can grow into become i think is extremely significant nick you said it was uh extremely complicated i just want to reiterate that it's complicated on the meat space side this isn't like a technical smart contract complication this is a network of legal structures uh that you've alluded to are complicated but if i

could just press you on this what are just really the main components that really make this thing work like what what are the key unlocks that allow for real world assets to come into a smart contract in defy like where are the where did the actual assurances lie that these real world companies are actually going to pay a d5 protocol are there any just like key components of these legal structures that that stand out that we could talk about um so i i would say of note is that there is a fiduciary right who is not who is you know kind of like think of them as like an independent kind of party

and they are you know legally required right to kind of do uh what is in the interest right of their uh of of how you've structured this agreement right and so it doesn't matter what uh some meat space partner wants right it is uh the fiduciary has to execute like the uh the the the kind of legal will of like this constitutional document and so every step of this has basically been designed to protect maker right and so how the the money can move and how money

can be replaced right there there is literally a mechanism for the dao right to do a governance vote to send a message to someone who then and that message is required right to execute on an action right they're legally not allowed to do anything without you know this this signal by governance so it's literally been designed end to end just to have uh maker's interest basically uh aligned at every step and protected yeah so there's smart contract innovation in d5 but this really seems like legal so i mean legal contract innovation in in the real world and when we we get into the subject of bridging

real world assets into defy we must ultimately talk about normal paper pen and paper contracts not just smart contracts renee i saw you you raised your hand do you want to add anything onto how this kind of legal structure works um no but i was well i guess just a short thing is that i think it you know maybe for d5 native people it helps to like think of this kind of like a bridge where like you need some sort of um like almost like an oracle uh to kind of take the messages from from the blockchain like how maker dao is voting and then execute that uh in another domain uh in the real world um but there are

there are companies that you know in a more like tradify context have been doing this for years like trust companies basically they're just supposed to like take info from one contract or like another domain and then execute it um so i think that we're just figuring out how to like use all of these pre-existing mechanisms to to our best effect nick you said that this is a really complicated how easy is this to scale out like if it's complicated is it easily reproducible uh you talked about like you know perhaps we can iterate on this model and make it more efficient uh how is this going to go i think you said something like seven million dollar deal with the first tesla uh facility but then that can roll from there is this model that this legal

structure that's been created can this just kind of be like replicated over and over and over again for many many different types of real world assets how easy is it to reproduce this in order to scale the size of real world assets inside of maker down um it it's totally replicatable right the the difficult part is constructing it right and is uh ensuring right that it works right that all the parties um right are are doing their their roles and are comfortable with with the actions that they're supposed to take right but once you have this up and running right uh you can definitely just clone this to different parties and so uh i wanted to go back and take a frame of reference as like the decentral bank of the internet but now put this

into a context of there are our bridges as monet said there's bridges between real world assets and like this decentral credit facility that's based on the internet uh if you talked about like one of the long-term goals of collateral inside of maker is bitcoin ether and real-world assets like is the position for maker dow to be to kind of like drug pull the actual central bank and allow people to rather than having to go to their commercial banks or or even the commercial banks having to go to the central bank is is like maker dow positioning itself to be the new credit facility of the digital age i i i wouldn't describe it as a red pole right it's just uh it's just more

competition and uh consumers will win right because ultimately it'll lead to lower rates for for everyone right so that's how that's how capitalism works right and uh you know lower rates right we can uh we can fund more things we can do more good in the world right and uh the world can can advance and innovate quicker okay you said innovate uh and compete with the central bank of the united states of america and like the thing about the central bank is that it has a complete monopoly because it is the only bank in america and in the west that can print money except for make or doubt make or doubt the only other like institution that i

can think of that can print new money is maker doubt i mean there's other decentralized stable coins like ust and we can talk about that but like this is at the new level of competition that the central bank of the united states has never ever had before because no one else has the legal right to print money but now in the world of defy we we have this ability to do that and so this is kind of one of one of the bold cases for maker dow is they are the first credit facility to offer competition to a whole entire central bank that controls the world reserve currency um uh any any comments or thoughts on that i think it's uh i think it's very collaborative too as well as competitive though

um i i look at makers sort of like a little bit like commercial banking where we can we can mint as much die as we like but we do actually need somebody who is willing to own that die um to kind of balance the the supply that we're making versus you know the demand that there exists in the market um so we're we're operating a lot like commercial bank um you know we we create money but it's all still kind of underlayed by the actual you know us dollar that that's getting made by the fed um i think the the collaborative part is that we're totally expanding the the breadth of people that actually have

the ability to own us dollars um so people in you know venezuela or other latin american countries or just any anywhere around the world where um dollars and reliable you know financial services are not available now they can they can own die they can use die and um you know that ultimately does kind of anchor back to the the us dollar system at least while we're we're pegged to the dollar so i think it's um you know i think it's kind of uh giving competition to like commercial and central banks but also um kind of a tailwind for for the u.s economy i would say

so i think one last angle on this real world asset conversation before we get into layer 222 stuff um i think some people would say like oh like if you're going to integrate real world assets you're just going to become regulated right your the real world instantiations means that the regulators are just going to it's going to be super easy for the regulators to come knocking uh and so you know the bear case is that we'll make her dao will just become you know a regulated defy entity and that's not really crypt so that's not really you know defy that's not really crypto um the other the bull case the bull argument i think is that well if you integrate so much of real world assets into maker dow you kind of become too big to eliminate from a regulatory standpoint and you actually are playing

very very nicely with the real world abiding by like real world legal structures and playing inside the real world game so i'm wondering your guys's thoughts on on this like this bear versus bull debate about what it means to uh actually integrate the real world into the maker system is it does it provide like a regulatory shield or is it uh regulatory weakness as in like it's actually a risk for maker dow from the regulatory standpoint uh who wants to take this one sam uh yeah so in terms of regulation i would say sort of uh in what jurisdiction that's it that's important so like if we were just in one jurisdiction i mean this could be a problem um but like

i'm a big fan of we need to play nice with regulators but if we go wide in terms of uh like geographic political uh diversity um they'll be incentivized to play ball with us right and we're like i'm not a big fan of sort of like you know crypto anarchy and stuff like that and fighting against regulation i think we should embrace it and we should work with regulators to make sure the whole world can benefit from defy and not just keep it as sort of a niche product yeah so do you think some like the the products that maker dao is building with for real world assets will make a people like elizabeth warren warmer to defy is that perhaps an angle we can take i don't know about warren but i think um

i think it can win hearts and minds generally maybe for people who have like less personal stake in uh in sort of combating crypto but um yeah i think it's you know when we can show hey like we financed x many hundred jobs in your district uh for like all the different people who are working in government it's gotta have an impact all right guys i think it's time to get into the layer 222 side of things and sam i'm going to throw this one to you generally speaking what is maker's layer 2 strategy and is this time to talk about wormholing uh yeah sure so i'll pull up a diagram here um so yeah maker is uh incredibly

focused right now on sort of the multi-chain future uh we see it as all but inevitable at this point um so like initially uh we are we've deployed uh canonical dye bridges on optimism arbitram and uh stark net but the plan is to basically go to wherever the users are and this includes side chains if people want to use it you know maker should be available there um it's up to the users um so like this this kind of plays in with this if you see in the diagram sort of like this uh d3m module type strategy where we can basically just have the core of mcd uh extend uh

credit out to these uh uh what we call domains but you can think of them as chains uh to arbitrary optimism stark net polygon avalanche whatever it happens to be and then empower these other protocols that people are using and they love to basically meant die of course we have to take risk into account so we extend only certain uh levels of credit now with wormhole this is the other uh new product we've been working on for the past year which we're actually just rolling out the first phase of this uh just in the coming weeks so once wormhole is fully deployed across all these chains what it allows for is essentially a super highway of liquidity between all these chains

because again it goes back to our superpower we have the right to mint we can we have zero cost of capital so that if somebody wants to jump from arbitrary optimism uh all they have to do is signal to us the intent and then our oracle network will basically say uh sign messages saying this is okay and we can mint the die immediately on the other chain we do not require liquidity providers and uh so we think this is our big advantage essentially uh other than some sort of technical details we can offer uh this for free people can go from chain to chain with and is once the security models are solidified for these l2s in particular uh the debt ceilings can be raised to

pretty much infinity as these uh chains basically inherit uh ethereum's security at that point so let me make sure i get this right for every single like evm compatible chain or anything that can hook into ethereum uh there is the ability for uh maker dow to like replicate its credit facility on every single chain uh so die minting can happen natively on every single chain and it's the same dye across the chain and so you don't actually do how do the actual canonical bridges of layer twos like between the ethereum layer one and optimism or ethereum layer one and arbitrarily are how are these relevant or are we just like skipping right over

the bridges yeah this is an important point so uh in order to make die fungible uh and give minting rights on it on these other chains we need to deploy what's called canonical dye this is slightly different than your sort of uh out of the box uh what we call wrapped tokens which are basically just generic erc20 bridge where people can deposit lock their funds in the uh l1 and then mint new uh tokens that look and feel like the original one we do a similar thing but we also get this uh we also can pre-mint some extra dye on the l1 escrow and then give minting rights to multi-collateral dye which is deployed on the l2 so it's a little bit different in that regard

okay okay well and so what would happen if the canonical bridges broke for example uh would is that a risk for you know that's a risk for most people because that's how they get to and from the the layer one to layer two does that change the risk parameters for make or doubt yes so uh people just bridge normally uh it's it's you know it's permissionless it's up to them if the chain they're going to is compromised uh user funds will be lost and you know we have no control over that nobody does it's like just the permissionless nature of the ecosystem now for dye that uh we pre-mint into the uh bridge that could potentially be stolen and that would be in the sort of worst case scenario where the chain is compromised now how we

limit that is we use debt ceilings on all of these as chains sort of solidify their uh security um we can continually raise these but if we're uh concerned about these types of hacks we can limit our exposure uh via debt ceilings and on the wormhole in particular we can say you know from this chain uh let's say i don't know i've got some side chain that's you know not very well known and i'm wanting to go to arbitram we would set the arbitrary die that we're minting from that source chain that we're not too sure about to some low number so people can do it but if it's compromised we'll shield ourselves in that way and the bottom line is that maker holders are uh responsible for this loss we make sure

we do not uh put this loss on the die holders uh so the maker holders are making a decision on which the debt ceilings are they should be responsible for the loss if they make a mistake can i put like ether into the ethereum l1 maker instance and then mint die on like any of the other maker replicas like if i have a thousand dollars of ether collateral in the main maker dow can i mint 500 die on like arbitrary yeah this uh cross uh sort of uh lending thing i've been hearing more about that we have no plans at this moment uh but it's something we're sort of initially investigating uh it could very well be in the near future neat neat uh monet or nick anything you guys want to add to

this layer two conversation uh no spam is the sam is the layer two man he's uh he's our god i think um maybe only one thing i'd add is just it's like exciting to think that we can kind of balance uh liquidity needs and rates across all of these different domains not only with wormhole but we can use stuff like the d3ms to target specific interest rates on different platforms um so yeah i think you know we're just going to bring a ton of utility to all of these ltu's amazing all right guys this is uh i want to bring us unless there's anything else to talk about in the layer two section i

think we want to get into the final topic which is the mkr token and mkr tokenomics first question i want to ask is how much revenue is maker dow as a platform making right now and then how does that relate to the value of the mkr token in its current form um money can i throw this one to you yeah so um i think we're earning currently around um like 60 million dollars in profit um and then we on a yearly basis on a yearly basis um and you know we have overheads we have um you know numerous core unit teams that were were paying for um so the actual amount of stability

fees that we're earning is is significantly above that i want to say it's over 100 million or i'm not actually certain right now but it's uh it's a pretty significant amount um so yeah we're we're very strong from like a revenue and earnings standpoint and then how does all of this revenue translate into the mk the value of the mkr token on the secondary markets so in theory um if we have met our goal for how much we want to have saved in that surplus buffer anything above that we use to buy back mkr tokens and and burn it um and you know as a regular mkr holder what that means is that your percent

ownership of the protocol goes up a little bit whenever maker is burning tokens so it's almost like you're passively being you know distributed that income [Music] i think at the moment we're actually not burning because we want to build up those reserves even more so that we can you know take on more risks and then hopefully over time just kind of accelerate our earnings potential uh even more is this going to be the tokenomics model for maker going forward i've heard some clamoring some there's been debate about the how the the burn the buyback and burn model maybe doesn't um actually capture value all that well i'm wondering if you guys have any thoughts on on the uh the

future of the nkr tokenomics model so so there's been several um new tokenomics uh kind of proposals um actually there was there was one i think even just like a couple weeks ago from um from addressing horowitz from from a16z uh where they came up with a model and i believe even uh roona right bruno is the uh the co-founder of maker even uh leaked kind of some uh some of his own ideas uh i think yesterday or two days ago in the discord around uh some some potential token exchanges so um i i would very much say there's a lot of different ideas on implementations um

but i i wouldn't say there's a solid consensus yet on on which direction that the community wants to go yet is there a consensus that uh change is wanted even though we don't know what the change should be is there consensus that we should move into something else i i think so um i think the burn mechanism was um was was good for uh when it was created because it showed a clear uh transfer of value right from the protocol back to the token holders uh remember that you know in 2015 2016 you know uh this was when you had utility tokens right you know you uh

people were trying to make their tokens as useless as possible right you know to uh make sure ensure that you know this could never be misconstrued as a security right so uh the the burn mechanism at the time was already fairly i think revolutionary in that respect um but i think it's it's shown to be rather dated right um and because it incentivizes the wrong things right um when you're burning mkr right you're really um what really happens right is there's an auction that gets triggered right there's a certain amount of dye that's up for auction and people bid with their mkr right and uh whoever wins the auction right they get the die and the auction that the the

the mkr that the auction return from the bitter right that gets burned uh the the problem here is that this kind of incentivizes right uh the people who uh are selling their mkr and this is almost like the the wrong incentive that you want to create right you don't really want to um you don't really want to incentivize people to sell right if anything you want to incentivize the holders right and so i i think there's a lot more interesting crypto economic kind of uh innovations that we've had like in recent years right that we can um that that we can implement um primary one being right you wanna you wanna incentivize the holders right so you

wanna incentivize you know uh locking up and serving as some kind of sponge or sink right for for the tokens on the on the sell side one of my favorite things about the maker dow protocol is there's just so many data and so much data and numbers to be able to consume uh one of my favorite websites is uh makerburn.com which i'm gonna ask first uh sam to pull up here in in a second uh there's just so much so much numbers to be able to look at uh and uh this uh definitely what kept me entertained during the uh the bowl the bear market of 2018 to 2020. uh i just want to kind of zoom out and get like a gist for the fundamentals right the current state of the fundamentals of the mkr token sam can you kind of just walk us through what

we're seeing on the screen here and allow help viewers interpret what it means to uh what what the fundamentals of the mkr token are uh yeah so uh as you can see some of the stuff we previously talked about um as you can see in the top uh you know there's a countdown to 10 billion die there's the surplus buffer which we talked about previously we can see the total die supply which we're just shy of 10 billion i think we actually crossed it not too long ago but we've slightly retraced um as well you can see the system surplus which is actually uh kind of synonymous with the surplus buffer this is the amount of uh sort of extra die we have to take on losses and protect the

system um we also have annual profit estimate here uh this is uh you know maker burn the guy as he's like compiled everything right like it's sort of uh you can see it here actually takes into account stability fees uh liquidations uh even sort of uh stuff that's kind of a little bit off chain uh sort of how much the core units cost um as well as like maker vesting and uh the dsr so this is actually a profit estimates it's not revenues um so that's pretty interesting you can see like pe numbers and stuff here um it's pretty low um then you see the maker price down here um yep let's go back and make our burger tokens burned so far

on the bottom right here uh so we've burned 2.24 percent of the supply um there's some amount sitting in the treasury as well um yeah 83 000 these are sort of like famously uh given from the foundation to the dao uh back in i think that was august of last year as the uh maker foundation dissolved um so yeah this site's really great for a breakdown of like what's going on in detail uh the guy who runs this uh he's doing an awesome job and so i i think this uh gets me into my very last set of questions the costs of the protocol there are maker dial core groups is what i think you guys call them and it's one of the very unique things about the dao the

maker dao in the sense that it's not you know a discord with 10 you know 50 people all doing work it's actually different organizations that are all focused on their one particular set of goals and then they lobby the central or the central dow for capital right saying hey this is the work that we're doing please give us capital can you guys just talk about that model and how it's unique and and uh also can we illustrate some some like um these are these are the cost of the protocol right the we got to fund the salaries got to pay the bills uh so how much do all of these core groups cost the protocol and maybe you guys can just talk about why this model of a dow structure is advantageous at large uh who wants to take this one uh i think i can do it right uh so so

david right what is the what do what are dows optimized for right how are dows different from companies right uh companies optimize for efficiency and dao is optimized for resiliency right so if you're going to do a dow and then still just be some kind of company in on the legal end uh it doesn't really make any sense right you're kind of just doing dow like decentralization theater right if you want to be a real dao if you want true decentralization you cannot have a top-down hierarchy you cannot have right everyone in in this same legal entity like to get that resiliency you

really have to have this type of hub and spoke model where it's really just these different autonomous groups right um you know it's almost like right to if if something happened to me right it wouldn't be a problem right because uh someone else can just come in and be like well you know we're uh i'm i'm leading the oracle core unit now or um if i go you know rogue or i'm deciding you know i hate this or whatever right anyone else can go and just like say like you know what hey dao um i'm gonna do oracles for you from now on right and this is the amount of budget

i'm gonna need in order to pull it off right do you approve right and what you eventually want to build this into is you don't even want just like you know one like smart contracts team one oracle's team one risk team one real world asset team you really want just like redundant and redundant layers of different teams right in different geographical areas locations right um all kind of uh you know just adding layers and layers and layers of extra resiliency and and that's really where this this core unit model comes from um it's just these these isolated operating units and while i would say that you know it's it's not all flowers and rainbows right

you know there are there are disadvantages to working in this kind of like distributed fashion i would say coordination right becomes uh is something that centralized corporations do a lot better than kind of like distributed decentralized dows right uh that's that's just the trade-off you make for resiliency um and so i would argue that anyone who's doing a dao that's not doing it this way right is is really not being true to you know and taking advantage to the innate benefits of being adele sam or renee you guys want to add any perspectives as to the structure of makerdale um

yeah i think [Music] in my view maker has like a really good balance of trying to not be too um like centralized and too hierarchical like a company but then also um not trying to be too flat of an org like some dows i think um you know it ends up just kind of everything is like bike shedding um and i think we have a good balance of you know we have clear accountability that runs up to the the token holders and the delegates um teams have their own kind of accountability that they are able to like figure out themselves because they're kind of self-sovereign um

and yeah i think it's it's like a really good mixture of like really distributed but also not not falling into like the flat org uh like curse or psyop or whatever you want to call it damn i want to let you uh take this home for us let's zoom all the way back out and just view this whole entire episode this whole podcast from a bird's eye view and especially make her doubt from from you know a bird's-eye view why bullish maker dell um i mean so many things uh from like i guess our strategy to branching out into the real world um sort of uh there's just so much opportunity out there like we are just scratching the surface and you know maker uh as usual

is kind of taking the lead we expect others to come along with us uh but yeah it's sort of getting into this much bigger market that's like sort of spearheading that um and sort of providing i would say the uh backbone infrastructure for modern-day d5 which i view as sort of incredibly uh diverse set of uh chains and sort of connecting them all together provide like these basically being the liquidity powerhouse of uh multi-chain uh d5 guys this has been a fantastic panel thank you for for coming on and helping me uh illustrate the bowl case for for maker dao bankless listeners you know what to do uh like and subscribe that's how we get the views and uh if you guys like i said

in the beginning in the intro if you think that there's a dow or organization or token that has really bullish fundamentals yet the market isn't appreciating it assemble a team put up put some notes together hit us up on twitter and we'll make a show about this sam monet and nick thank you for coming on and kicking off this new series that we're doing out of bankless and then really helping us illustrate the the bowl case for maker dao thanks so much david all right cheers guys uh bankless listeners thank you so much for for tuning in to the show as always this is not financial advice crypto is risky bitcoin is risky ether is risky defy is risky maker dow is risky uh you can lose what you put in uh but this uh we are

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