Rune Christensen: Maker DAO – The Central Bank of Web 3.0 (#298)

Transcript

[Music] this episode of epicenter is brought you by cosmos cosmos is building the intent of the blockchains an ecosystem where thousands of blockchains can interoperate creating the foundation for a new token economy if you have an idea for adapt visit cosmos network sloshed epicenter to learn more and to get in touch with the cosmos team and by Microsoft Azure do you have an idea for a blockchain app but are worried about the time and costs it will take to develop the new Azure blockchain dev kit is a free download

that brings together the tools you need to get your first app running in less than 30 minutes learn more at aka OMS slash epicenter welcome to epicenter i'm sonia agarwal and i am free to be kannst and today we are talking with rune Christensen of maker Dao and talking about many of the exciting developments and things that have been going on with die in the etherium ecosystem and you know about stable coins and the governance of the maker Dow itself so it's a really exciting episode before that though we have a couple of announcements many of them to do with the Berlin blocking week

first one has to do with Def Con so if Purdue given that gnosis is one of the you know co-organizers of a would you like to talk a little bit about that DEFCON is one of the conferences at Berlin blockchain week it's starts August 21st and is until August August 23rd and we have a 20% discount code for epicenter lessness so the discount code is epicenter Def Con 2019 no spaces we will also record a second edition of epicenter life with myself sunny and Sebastian at the DEF CON conference the last one that we had at the inter chain conversations was really nice yep and then a lot of us will be attending at you know many different

events throughout the week at Berlin vulturing week I'll be there at the better cartel demo day as well as the web 3 summit on East Berlin so you know we I think it should be a really exciting week so I heard many people show up and we'll actually be having our own epicenter event during that week as well where we'll be having our small Meetup similar to the one that we've had a couple of times that you know DEFCON 4 and at ECC it could be a drink speed up with the host and other listeners it will be on Thursday August 22nd the location is still to be determined but it will be pretty close to the location where Conn is so you know it'll just be

a quick walk over from the from the venue over to the meetup location that day finally uh the last announcement I have is not for Berlin blockchain week but for SF blockchain week which is quite a bit further out near the end of October but the Cesc conference crypto economics and security conference that's basically it's the UC Berkley academic blockchain conference and one with a blockchain at Berkeley throws annually we're currently us accepting papers for submission and so if you just go to CES CEO from that site you'll be able to find the link for how to submit papers and so you know we're open to papers on you know any topic with in the field of economics or systems designed game

theory and so I think I encourage as many people to participate as possible I'm gonna be well I'm on the program committee so I look forward to reading all of y'all papers so without further ado we'll go to the interview with Rowan welcome back to representer and today we have on with us a guest room Christensen who is the CEO of the maker foundation and the founder of the maker Dow protocol and so many people are you know probably pretty familiar with maker Dow especially you know it's probably one of the most popular products on the etherium ecosystem with the dice table coin and so Runa has been on the episode once

before back all the way back in 2016 before dye had even launched and you know since then dye has you know grown to become this massive project that has become you know very successful and so you know we thought it was time to bring ruin back on the show to talk a little bit about how their project has changed and what's what's new and how this massive surge and adoption has gone so welcome back onto the show rune can you give yourself can give it a listeners a little bit of an intro about yourself in case uh you know some of them may have not seen the last episode given that it is all the way back in 2016 yeah absolutely and yeah thanks for having me back here

it's pretty wild to sort of look back three years in time in the crypto space so this is a very interesting opportunity I think and just quickly about myself so basically I'm I did a lot of attempts at startups when I was younger and worked a lot of like Lord worked a long time in Asia when I then discovered blockchain technology and first got into Bitcoin got really into Bitcoin you know became like a real bit contrived back in 2011 2012 but then over time I discovered like I got somewhat disillusioned by bit coach volatility really and sort of though the fact that it wasn't seeing less kind of

the mainstream adoption that people predicted initially and I think to a large extent that was because of the volatility right because it's not it's more useless gold rather than regular currency so I got into stable coins and I discovered bitshares which was the first decentralized stable grant project but unfortunately due to many reasons bitshares never really gained the kind of traction that we hoped for and instead me and a couple of other people from the bitchiest community eventually pretty much switched over to a theorem and it kind of took the stable core component from pitchers and tried to implement it on a theory so were you actively involved with like the development of bitshares

no I you could say I was a very active community member and in Russ I mean many of these like fundamental ideas around make it out all come straight from from the like from the idea of pictures in particular right how like you have regular community members ultimately being like despite not being sort of an official development of the project right I still was very deeply involved in sort of the core of the governance of it which is exactly what was the power what is so powerful about Bloodshy technologies right bloodshed T's so the picture system you know they used their contract for different system you know can you get tell us a little bit about some of the things that why the chairs you know maybe didn't work and how that

kind of contributed to your design of the maker system with the CDP's yeah so there's really a couple of reasons I'm saying this this really three major reasons why like I mean the three major things that to some extent gonna be Shias way right so first of all was that bitshares was this it was not like a theorem it's my contract platform rather it was kind of like a Swiss Army knife so it's like a single platform or like a single project that tried to do many different things right so it's both it did Sabol coins which was mainly like was Canada's main product right and really the the biggest innovation of the project but it also did things like

privacy and like a very advanced privacy system and things like account names which is a time like instead of having the long strings like having actual account names was like very revolutionary and just like a whole range of other things like decentralized exchange there was even like some music related stuff which is I think it's funny it's like it's kind of related to what ended up happening with our chain many years later but I mean there's just there was a lot of tried to do a lot of things and as a result it didn't really like myths or will on any one specific product at least within the very early like big window of opportunity that it hit back even before he theorem launched and then secondly that there were some fundamental

problems with its staple kind design still chiefly Thetis table cards were based on a single collateral type right so they were only collateralized by the bitshares acid itself so actually similar to the current design of single metal die and the downside will that approach is that it really limits the level that the system can scale because once you get to a certain size you kind of create the systemic risk where the stable current failing could take down the entire platform and that's of course to like that's the really big innovation that we brought to the table in that we actually figured out how do you take this basic approach with a single metal type and you actually design a system

that has many different collateral types which can then diversify and really mitigate the risk that's the suit like that's inherent in having just a single level type and even branch out the use-case way beyond what was originally envisioned in terms of like even accessing real-world assets and all sorts of even more sort of futuristic stuff and then I think the final point that I think is also like has been really critical for our development and really a big part of how maker has evolved is that the bitchiest community enters the bitshares philosophy was quite extreme in that it was really like hardcore anarchism in many ways and and really by to some extent totally

detached from reality which then ended up just like you know turning off a lot of people who would otherwise have been interested in but assembly we're like turned off by like the the idea that if you want to use this super awesome technology you also have to like subscribe to all this ideology right which is not always in fact it's it's a pretty bad strategy for trying to get business adoption so maker did start off like very much derived from that and a kiss philosophy for sure but it was with the mindset that the end the goal is to make change in the real world and and that perspective then led us on this like ability to essentially grow up alongside the rest of the ecosystem right because really today the the

bludgeons base is just very different from what it was even let's say back into sixteen yeah absolutely and we deep dive into how exactly the the the stability mechanism works in a second but just as a catch-up can you can you give us the 92nd version of what happened since we last had you on the show yes I mean it I think it is really mind blowing if you could go back to 2016 and then tell people what the landscape looks like today would like make her out in the world and things like compound and other defy projects all working together but just the very basic milestones right is obviously the

launch of signal Claire will die which was really to some extent the first launch of like I'm like the first successful launch of a major Thep and then followed immediately by the trial by fire as it had to survive a 95% crash in its collateral right just study immediately from its launch and actually singer felt I was able to you know totally like brush this off right so there was that complete crash in 2018 and at no point in time they did in any way so come close to threaten the stability of died or threatened the integrity of the pig so that really created this critical proof point that the technology did in fact worked work in the way it was

supposed to work which then led to just this greater sense of trust to the system and ultimately adoption to follow with that right so in summer 2018 the system hit its initial debt ceiling of 50 million and the governance had to actually raise it beyond that and then it went all the way to around 80 million died in circulation which is whit's sits today as well as something like I think it's more than 300 million dollars worth material blocked as collateral in the system right now and then what came next was the proliferation of the defy ecosystem right so this sprawling ecosystem of startups that could really be made by anyone right legs and that

can fit together seamlessly and because they have died as their source of decentralized stability they can actually provide very useful products and very useful services without giving up or sort of compromising on the decentralization which is otherwise often what you see is the the trade off with for instance something let me just with Bitcoin France that's right a lot of the very interesting stuff you do with that or just other other systems that are that don't that aren't based around smart contracts you very often have to give up decentralization to get more advanced functionality and I think this might be the first time where we've seen this like we've seen the opposite where we've actually seen that decentralization in fact adds to the functionality and adds

to the convenience of using these apps because they all fit together seamlessly right which is I mean it is really mind-blowing I think and it's not many people think about that also because maybe many people didn't really run around and let's say 2015 2016 when a theorem started but but it is pretty crazy that the ecosystem has actually been able to deliver on that promise of like this seamless interconnection between you know trustless and permissionless financial services and then finally I think 90 seconds now but the final and and perhaps them well in my opinion the most critical milestone is that the community was able to bootstrap the decentralized governance

of the signal collateral diet protocol and actually begin controlling the system directly through their care tokens in a very active and very well somewhat efficient manner although with a few pitfalls here and there but but that has really been I mean that is the most incredible thing of all because of all the things it is really decentralized governance that that kind of defines that make a project the most and it is the critical value proposition and the critical feature of the system that really makes it interesting because it it promises to deliver something that's completely different from existing financial systems right they're all like incredibly locked down and and

with with this like inherent leg of transparency and and very often contradicting incentives built into the system I mean this also is just one of the things that many people didn't believe it was even possible right like I mean in fact we didn't even really I mean we really sure if it was even going to be possible to do right if you could actually launch like a like a sustainable financial system and then just let it be controlled by random strangers over the internet as long as they have the right incentives by holding the right token but but it has actually played out right and and nowadays we've reached a point where on a weekly basis the MK Hollis actually managed the system actually this episode of epicenter is brought to you by cosmos

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cosmos network if you have an idea for a DAP and would like to learn more about the cosmos SDK or if you'd like to connect your existing dot to cosmos there's a cosmos network slash epicenter for represent our listeners the cosmos team will reach out to answer your questions and help you get started we like to thank cosmos for those supportive epicenter can you explain to us how this system makes sure that one die is always one u.s. dollar so I mean just for just just for the larger picture there are the stable tokens such as us CC and the Gemini dadada and tether that our supposedly backed by a dollar in the bank for each one of these coins that are issued so dye actually works differently and that it's backed

by crypto collateral so how does that work and how do you keep how do you peg the value to the dollar yeah very important question there's kind of two mechanisms to it right there's two sides to it so there's the there's the long term question of fundamental solvency and I guess you could say resilience of the system right which is like can it like is it really it's the real value there behind the toggle or is it all just like hot air right and that's where the answer is it comes from the unchained collateralization right so the reason why you know that there's real value on your thigh is because you can go to the blockchain you know right now go to and carry the tools for instance and you can

actually you know on your own do a complete audit of every single aspect of the system in real time even right and you can ensure that there's always this lip like this always this fundamental and inherent solvency in the system as well as a safe level of over collateralization so that despite the system right now be backed by only eath and the inherent volatility of ease this it's still able to remain stable even in situations such as the 2018 crash because the the risk parameters so they're kind of like the the safety logic of the system that keeps it safe from things like crash from a crash right is set correctly so that you could

have it you know you could have a significant fall in the price of eath but that's fine because there's about five times as much value of eath in the system as there is outstanding die in the market right so you could really the system can handle a very big crash so that's the that's kind of like the law you know that's the fundamental like value in the system that means that there's a potential here for for sort of for stability right but then the other question is how do you create short-term stability in one hand so like pact price right there's like that stays at the same price point but even more potently how do you create liquidity right so how do you make it possible to move large amounts of dye into eath or into another stable corn or even cash it out for fiat

and the answer is that it's it is like you said it's kind of the system keep this stable but perhaps a better way to think of it is that it's the governance that keeps us that keeps a stable and that actually make it takes care of this because it is managed through there like adjusting the rates in the system so basically the the cost of generating died primarily is how it works right now in the future it will also be the savings rates like the gains you get from holding die but it's not going to be available until a future version so right now it's actually purely done on the generating die side which is really it's similar to changing

the cost of borrowing let's say US dollars which is exactly how the let's say the Federal Reserve central banks in general they maintain the value of their currencies so what they do is they modify the interest rates and as a result they basically change how how likely it is someone in the market is going to borrow money which expands the supply right because when you borrow money in a fractional reserve system you you're essentially creating new money or will do the opposite right pay back their loans and actually just hold on to money if the interest rates are higher right so it's the same thing that the maker system does and that governance controls is they modify what's called a stability fee which is the the fee that

someone pays to essentially borrow die or generate die by depositing collateral into the system and then utilizing the smart contract system to to essentially print you die and then the stability fee is the price you have to pay for this for this service and it's that's what I was referring to that this is what's being actively changed like actively modified every single week right now by the decentralized governance this stability fee has gone up from I think initially something like five or seven percent to currently over twenty percent what do you make of that so what what what do you think this means for the ecosystem not in terms of how expensive it is to borrow money but in terms of

what does this say about the ecosystem what has changed what's the underlying metric that has changed yeah it actually started at 0.5% when the system was launched and the very like the very basic assumption that turned out to be wrong is that it the assumption was that there's going to be incredible demand for a decentralized stable phone and which is kind of like the simple use case right and sort of the basic value proposition of the maker protocol and then this the secondary use case of generating die which is a much more advanced type of way to interact with the system right which is it's and is similar to it's similar to borrowing money in the bank or taking out a mortgage or even margin trading in some

situations where you deposit collateral into the system and you generate die right and yeah it was just like first of all the interface to do this was incredibly complicated and it took about seven a theory of transactions to even have a CDP go through right and it was just also like it's very advanced and completely cutting-edge and a new type of service right like the very first defy app that had never been up before the term defy even existed right so we naturally assumed that it was going to be more difficult to people to do that part whereas it would be easier to get them to use the the most simple and approachable stable coin functionality and this was also the case very in the very beginning but very quickly they I

like the idea of defy of being able to in a decentralized system actually access financing for your inventory and taking on decentralized magic positions was was like it was a very powerful idea and it's essentially spread like wildfire with people teaching each other I guess how to do how to use this right even in the very first stage where were so different use so what ended up happening is that there were way more people interested in using the advanced dye generation functionality right to to borrow and borrow dye and open CDP's then there are people using that in Italy and then what the system does is because what this affects right it's like the it's the supply and demand

right so you have sort of the demand for dye which sits at some particular level and then you have the supply of that which which sits somewhere else and they're kind of independent of each other as in people who like dye are people who want to go out and use a stable car it may be spended people who open CDP's have a have a different complete different demand right they're interested in leverage they interested in financing so the way you and what you have to what has to happen is they have to meet exactly in the middle so they have to be exactly the same because if they're not the price won't be one dollar so if so let's say supply is higher and demand is lower the price will be below a dollar and if it's the other way around the price will be above

a dollar right and so what governance does fundamentally to kind of like tie them into sync is to adjust the stability fee so it so what that means is adjusting on the supply side how look like how interesting how how yeah just like the terms on which you can generate that right because if the stability is higher it costs way more to generate die and less people are going to be interested in it so that's why and that's then how you how we know that what happened is that there were tons of demand for generating time right because the stability features shut up which meant that without it like if the stability fee had stayed the same the system probably wouldn't be in sync today it would probably be like there would be way more die outstanding but

also the price would be below $1 so why was the stability fee the only way to modify the supply I mean and in a way what shouldn't we expect that you know back when the dye price dip to like you know 80 cents or something shouldn't we expect that the difference from the shelling point of one dollar should provide the CDP creators enough incentive to arbitrage that and you know maybe buy a bunch of dye close their CDP's allow the system to go back up and then reopen the CDP's when the dye price is back to a dollar yeah that and that's the basic

assumption of how it's a very micro scale the system remains stable right but the thing is that that assumption depends on the light if another subject right which is that governance will actually act to deal with imbalance right and that's that's of course in the early stages of the system that's there's less proof that got the governance actually works right so the fact that the selling point even is one dollar isn't really as established compared to you know after basically today right where people are a lot more willing to trust the fact that the price will go back to one dollar do you think part of the issue might be that the set of people who are able to participate in arbitrage is limited where you know I

guess what I was first learning about died like I didn't guess it and hit me and then when I was looking at it again like you know like a couple years ago it took me a while to realize that oh wait the dye holders actually don't have any claims to underlying collateral assuming you know except in the case of triggering of global settlement but because it's not possible for the dye holders to actually you know go against the thank you basically you know the only people who are able to arbitrage it are the CDP holders and they have to over collateralize so heavily and so that heavily limits the set of potential arbitrators thus making it a much more inefficient market what's actually being a betrayer and this is what's what's I mean this is the

part that can be very difficult to to sort of wrap your head around right but it really is the cost of capital so it's not a quick like because there is like there is no fundamental claim in any way to one dollar unless in the situation that should describe the global settlement right which is a very like niche each case that isn't actually meant to even happen my point is that even a CDP holder doesn't have some like direct way of saying if I have one die it sort of automatically unlocks one dollar value elsewhere I mean you could it does of course apply on the actual liquidation ratio sure but it doesn't like I mean in the end it's a different concern compared to kind of like the risk management at the larger scale right and in reality what they're what

they're really looking at is the cost of capital so what they're they're interested in is how likely are they going like are they going to make more money if they hold on to the cep and they hold on to the leveraged position of eath for instance in there and despite and paint whatever cost they have to pay on the both on the you know on this ability fee side but also on whatever potential you know arbitrage gain that would be and the thing is that in many cases you know the even if the a patrasche potentially huge it might not actually outweigh the this will have imagined to gain or like the projected gains of a CBP holder so that there's just so many dynamics playing into this where there's only one solution and that

is very proficient management of the stability fee and the monetary policy of the system but with that in place they're actually like it should theoretically be exactly as efficient as the current monetary system is in this regard but of course will the extra benefit of also being even more seamless and blushing based and so on so to make it as efficient as the current monetary system that would make the claim that the MKR holders are as proficient monetary policy as the you know the people at the Federal Reserve who are you know generally much you know trained economists and stuff two questions here one which is a you know question I've had for a long time and I just

unfortunately couldn't find any good resources answering it on the Internet is how was MP are distributed because you know those never any sort of ICO or anything done for MK are yeah kind of how those that distributed what percentage of it is still in the hands of the foundation as well as be seized or and then what percentage of is in the hands of you know the wider public and then to how do we make sure that the people who are holding this MK are are necessarily the most sound monetary policy decision makers yes this is really the fundamental question of the system right because like I said earlier the decentralized governance is the core feature and the I mean the the basic

underlying assumption is that if you have a proper like open and and like equal playing field I guess you can say for the the science and the knowledge related to monetary policy you always be able to beat any amount of experts right because you will have the entire global body of knowledge participating directly in governance which means that you could even have let's say central banks participating potentially right and they would all have the exact same point of excess in the sec same framework to participate as well every other central bank or every other commercial bank or every other like random econ nerd sitting in the basement that kind of like thinking about you know if new you

know ideas around it right and the thing is that in the end it's very hard to sort of say who is like I mean it's very hard to pick kind of like this the genius person who knows how to like run the world economy right because it's kind of it's it's you know global like metric economics and monetary policy it's is actually to some extent a bit similar to voodoo in that it's not totally like it's not you know it's like quite fluid and it's quite to some extent an art form as well right so what that means is that it's not really guarantee that kinda like the highly decorated ultra expert it's the guy that will prevent the financial crisis from happening it could just as easily be someone who's just seen something that

no one else saw because they all were locked in the old way of thinking or something like that right and the the core idea of the mega diode decentralized governance is that what we want to do is we want to create I mean what we really think of us as something like something similar to a scientific community right where there is a free again like a free playing field and free sort of open framework for all ideas to participate in in like a like an unbiased forum right where you can have like where every perspective gets a chance to participate right so whether it's established central bank or the sort of the more radical and more modern

or whatever new innovative approaches of course there has to be like I mean once you sort of open that Pandora's box there's so many questions there's just if moderation and like priority and so on right that needs to be considered and in the end and that's maybe also like a like a critical other piece of it is that you have to of course you have to ground yourself in a conservative mindset right because of course if you just go out and sort of do radical monetary policy you very quickly end up looking like Venezuela Turkey or something right where people try to defy gravity which of course you can't do right yeah like the basic answer really is that you could say that like even if a Fed had the world's top economists and monetary policy gurus

they will still just be a subset of the people who will be able to participate and have direct line like both have direct access and line-of-sight to make a governance but also have that direct ability to actually influence the governance itself then comes back to the question of these senseless governance and them care holders and how you actually implement this in practice right because many people think that the basic idea of make your governess is just MKR to hold us just vote and decide whatever they want right they basically do whatever they want and that's the end but it's actually a much more sophisticated framework where it's more it's more that em care holders have this role of trying to surface that you know like the key

rational points made in this scientific framework and no and only sort of by going for this rational approach and trying to reach something that's as objective and us as vetted as possible are you able to actually reach a selling point where you can even get consensus around the direct approach before we dive into the governance Sonny asked earlier um so how are the maker tokens actually distributed initially so who are these people who actually Howard maker there was initially 1 million in care terms where I created by me really and there and a couple of other guys in the early days and we knew like we knew from the very beginning that because

again like there Carol cat circles are not meant to kind of like run the system through a popularity contest but they are of course very important in in that with the wrong set of stakeholders you could have you could easily see how the system could fail right so we knew very early on that it would be too risky to just do for instance an IC o---- and try to pump the token and then get a bunch of of speculators in right but rather it's all about choosing the right set of stakeholders so the very first approach was to to distribute it directly to people who volunteered to work on the project contributing with like with like science or engineering or just like various forms of contributions to the

project and then also selling directly to to some like engaged community members that work like essentially like a part of the early into the core engaged group right which is very different from how an ICU operated because the early major project actually distinguished yourself by some almost doing negative Marketing like Fight Club style like it was actually meant to kind of be a bit of a secret club where the right people needed to get some space to get their head around it before the the masses came in I guess you'd say right and of course after a while the system grew to a point where the community filled confident enough to kind of open up wider and and make the project more widely known which actually coincided

with then when I did those very early podcasts including here on epicenter right this came at the same time as like the increased scrutiny of the Bloch in space as well as new regulation and new kind of like concerns around you know especially totem distribution right so so basically once like once we reached that point it became very clear to us and from the perspective of a legal strategy that the only reasonable way to distribute tokens it's like it's over like MPI would be to sell it to like essentially like you know like like established and and just like the you know very very proficient institutional

investors right so so in the u.s. accredited investors for instance right and just in general the kind of like the kind of stakeholder where you can you could you could sell them a token and they could go totally poof and be worth nothing and everyone would be like that was your own fault right because you knew what you were getting into and you did your own research right and on the other hand if you actually tried again like if you try to sell to the masses and things blow up it's a little bit different like there's a level of trust there that's kind of expected to be to be maintained when you're doing it which is awesome where we saw the whole ICO craze go wrong right but the biggest of the like the biggest event of when we started this

new approach of selling in care to large established stakeholders was of course when we sold actually a total of six percent to add recent Horowitz which was among their very first purchase of digital assets and to this day is kind of like one of the absolute core pieces of their with a crypto portfolio also really put the project on the map right because it was a huge stem for pool in the more established VCE and the crypto world and even wider financial space of tech space to get a tryst Horowitz buying into this project and also participating directly right like in terms of promoting it and sort of

talking about the implications of the project and as well as supporting the foundation and all sorts of activities we were doing so like I mean today it's basically a mix of kind of like early community contributors early community like buyers like people who've bought on the secondary markets especially in the early days there's particularly a lot of Chinese people who did ball in like that so there's some actually a very significant Chinese community in the making our ecosystem and then there's a lot of these institutional stakeholders including andreessen horowitz which is

one of the biggest but then also actually a lot of other smaller like I guess you can say medium-sized institutional stakeholders this episode of epicenter is brought to you by Microsoft and the azure blockchain workbench getting your block Tang from the white board to production can be a big undertaking and something as simple as connecting your blockchain to IOT devices or existing ERP systems is a project in itself well the folks at Microsoft have you covered you already know about the Azure blockchain workbench and how easy it makes bootstrapping your blockchain Network pre-configured with all the cloud services you need for your enterprise app their new development kit is the IFTTT for blockchains suppose you want to collect data from someone in a remote location via SMS and

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dive into what exactly governance means in this instance and what MKR coders can actually do with them their maker tokens the civility fee that is generated currently still goes to make her holders right it doesn't go to the diet or as it goes exclusively to make her holders what was the rationale behind that designed is behind that design decision where you made it it's really the fundamental economic dynamic on a system that kind of makes the that makes it go around in a sense that it aligns incentives between the different participants in the system right so it really it's very basically that em care wholeness they sit sort of at the and yes you can say this is the

core of the system and they they fundamentally perform the governance functional system rights if they decide really how it like the business logic of the system and what it's actually doing so it includes like stabilizing the price of dye and so on by levying a stability fee on GDP holders but also in the future other more advanced functionality such as also setting the dye savings rate which and and and a whole range of other stuff more advanced governance but most crucially the thing that they like that they're doing right is that they're setting their collective risk parameters and sort of the logic around how do we keep the system safe from a crash right so how do we make

sure that we don't put all our eggs in one basket so that we're only relying on you know a single cryptocurrency as collateral even when we are the scale of several billions because that's when you really get that systemic risk right that could just see the whole thing wiped out and also the ratios are set correctly so that you know like I mean you you have the right amount of buffer you know in excess of a particular position the system where you've put in some collateral to generate diet and you care holders then make sure that when you do that the excess collateral that you put in is enough to cover the volatility of that asset right and if and then they and then the key aspect is that if they set this incorrectly right so if they fail to correctly protect the system

from excess risk they have to absorb that excess risk so let's say that they allow a cryptocurrency that's not particularly good into the system of collateral and they allow it in with like a very small gap right so you can generate a lot of die from that cryptocurrencies and it then just like goes poof right it's gone there's no money left then what you what you end up with is is bad debt right on uncollateralized unpacked debt and in and without any other measures you actually have installed in that case right you actually have a situation where there's no longer guarantee that all dies backed by by Unchained collateral right but then that's where the MPI talking steps in

and takes the loss essentially through an automatic like fully autonomous mechanism that what it does is it's just a sprinting MPR to raise funds so basically it prints them care like automatic like the system detects that there is a loss right the Texas this is shortfall then it prints fgr and then it automatically sells in the market to race to race die from the market right - yeah basically raise the same amount of die as there's a shortfall in the system and then it uses the die that is raised to essentially cancel out the shortfall by by burning the diet like by removing the die from circulation so that it can kind of like they have the two things

equal out and make sure that now the amount of collateral the same system is is congruent with the amount of toilets in circulation so is this lender of last resort functionality actually implemented on the current live maker contracts no so in signals a little die there's actually this additional mechanic called piff and all of this logic is implemented more under like the eath CDP holder side with a I mean it's actually it's just it's a suit it's like it's a functionality that that sounds very complicated when you explain it which is like that that this aspect of the forced dilution of kinda

like the underwriter of the system sits with the people also hold collateral in the system in the event of a serious crash so I guess my question is that in the moment in the single cloud will die instance is there any risk that the MKR holders take on because currently the lender of last resort risk is passed on to the to the CDP holders so what is the risk that the MKR holders are currently being rewarded for yeah this is a very I mean this is a very common concern I guess use a point made about the system right but if you really think about it then right now as an f Kerala you're taking more risks that you ever will right because at this stage in the system's lifecycle there's

a way larger probability that will just completely an outright fail right and that's the big like that's the big additional dynamic of samkhya talking today right that because you're acquiring it Carol that's I guess you'd say freshly-made right because the system is it's brand-new there's a way bigger risk that you're not really you know you're just buying into an experiment right and not of course it is by far the most established experiment on a theorem right but if they're I'm still is just I mean defy really is this still like its thing that has yet to fully prove itself so from that perspective I mean and care holders really that would I mean they still take my father largest risk of anyone in the

system right because I would say that there's a bigger risk of mpr I mean it's a like a theory of as a whole is obviously better established than MPL right so the damit dynamics of the system yourself still doesn't directly impose a loss on Keolis right but of course if you had the system wipe out it would sort of I guess as a second-order effect also just wipe out Nepgear too but I mean the thing is that none of that really it doesn't really matter that much right because we're just talking about the very early stage it's sort of microcosm of the system and it's really you know it's like it's yeah it's like it's kind of like initial phase where it hasn't yet scaled right so

these dynamics become a lot more important once we actually hit a larger scale where you have to you know whether also is a real job from careless to doing this in the sense of doing proper risk management by diversifying different assets so let's talk about what the Mk I hold is what the scope of their governance currently is so there's a couple of parameters that can be set and reset in the system can you describe what they are and how this voting or casting a spell happens yeah so I'll I won't explain all the parameters that can be modified by governments because there's actually a huge amount and the system is incredibly modular but the the source standard risk parameters right so the standard things

that MK us they they they deal with in the current system yes so there's the stability fee right which is the the cost of generating died from a CDP then there's the debt ceiling which is the total amount of data that can be generated out of eath and then there's a liquidation ratio which is the sort of buffer between debts and collateral you need to have an ax C DP before the system liquidates your position and and so governance really I mean if the job of governance is to modify all of these primarily obviously it's the stability fee because that's how you stabilize the market price in the world and then there's a debt ceiling which is more like a fair it's like a routine thing to do as the system grows you kind of like evaluate the

overall risk just to allow it to grow to a larger size and you were still I mean you would very rarely see something like the liquidation ratio be adjusted in the in the wild in signal that'll die because of the this significant the rect effects it would have on CP holders who were actively holding a CP who can have the is fixed effectively have the rug pulled out from under them right so so it would be it would be quite unlikely they were actually see the liquidation ratio changed and then there's also some other like some other more administrative things that that dem careless could do such as changing the set of Oracle's right and choosing picking the Oracle providers that hasn't

happened yet though so the Oracle's that exist in the system today are the same Oracle's that it was launched with and then there's also another very critical functionality which is emergency shut down so the ability to shut the system down in the face of some sort of like I mean the the main reason is you want to use that in the face of a crypt economic attack or perhaps a book found in the system or some other significant problem or maybe even a run on the bank and which is where you then establish this direct ability to turn the die into other like little so how does the voting system itself work if I'm a make a token Hoda how do I participate in the governance there's

two aspects to that right so there is the unchain infrastructure which is it's very simple so it's basically a constantly it's like a vote that's constantly happening inside this my contract called the chief where what the the governance participants do is they essentially you could say they stake they stake their care inside the chief although that's not real like it's better to think of it as they just participate in voting and it's just like a technical fact like I said it's a technical detail that they actually move their MPR into the chief but once they've done that then then PR is able to vote and then they're actually able to essentially point their votes on any smart contract on the entire theorem

blotching and the system then is constantly keeping track of like which smart contractor which etherium address has the most votes and whichever has like this the single address was my contract that has the highest number of votes on the entire block chain above all the votes in that's happening in the system is then given direct admin access into the call single time so the way that you for instance modifies the building fee is that you the way it works is that you you have a smart contract that basically says target the like like it says send a message to the core of single that will die that says

racist ability fee by two percent or something right all right let's have this ability v2 14% if that's what you want to do right and then once that's my contract gets the highest number of votes in the system so it gets the admin axis then anyone can then go and poke it essentially which is called casting the spell cuz it's like a technical term for this kind of smart contract you spell right so what happens is anyone is able to then just like trigger the proposal from like trigger the execution of the proposal and the transaction that's it into the system to modify the internal state of the system so that's the and that's the smart contract infrastructure right so then just very

briefly there's a layer on top of it which is this use of friendliness layer right and right now it's the the foundation is the only one who maintains this kind of front-end but really what it is is like a voting dashboard where you can like see different options for voting and like you can see different like there's even like both at this both the polling system so sort of like a pre vote and then there's the actual looks like system voting as well where you actually execute on decisions made in the community and it's not presented through it like an easy and secure interface that allows a larger amount of the community to participate quick what percentage of makers typically pointed at proposals that then become the front

front-runner and become implemented so right now similarly between five to ten percent and you also have at like you have this important dynamic of around and also five to ten percent of people are always voting at it kind of like the current active proposal which then sets the bars like you have to get at least as a seven percent of the world to be able to to like trigger a new proposal in the system and kind of like it really acts as a quorum in that sense you said earlier that Andreessen holds 6% of the maker tokens and there's a couple of other maker wares as well as

well right so basically what it would only take one or two of those to actually force a proposal through right yeah I mean theoretically it's possible for someone to in the current system try to like pass a minister proposal right and then the reaction are like the response to that would be to then trigger an emergency shutdown right and actually try to shut down the system from the from the Crypt economic perspective right but the challenge in the system right now is that the where's in in the multi level die when the final version of the governance system is implemented right there's actually some incredibly strong game theoretic checks and balances in place that makes this

kind of behavior even if you had let's say like anonymous actors holding let's say 50% of the terms right or even like all the children's well okay I mean just like significant amounts of the totals right you still have just like like incredibly rigorous game theoretic systems in place that prevent anyone from actually acting maliciously in the system in the current in the current state of the system rather than like a key defense comes from the fact that it's it's known to the foundation for instance like the from rather the Vantage that's been very careful in who it has sold to these likely sludge blocks - right and it's and it doesn't involve like I say a nation-state actor which could for some reason decide that

they want to shut down the system right and kind of like vandalize it rather it is just very rational economic actors that you know wouldn't wouldn't harm their themselves by by burning the system down but they're like I mean it's that's always a dynamic of all decentralized systems right and all these centralized governance is that by the very nature of having the governance be fully decentralized and having the they're the sort of the final and the fundamental control the system being available to a decentralized community you always have this element of like allowing people to shoot themselves in the foot if they want to the question always is what percentage of people actually have to collude to shoot everyone in the foot and one would wish that in the inner system that

creates so much value and holds so much money it would have to be more than five to ten percent so can you tell us what's going to change for the new governance model that that you talked about yes it's really like there's a wave with that we saw this problem right it's really based on two fundamental approaches right like two fundamental constructs the first is what's called the governance security module so this idea that like this this like it's my contract where it kind of sits between the voting system and then the core system itself that's kind of a security buffer right a firewall in a way and it works quite simply it's that when you create a proposal and you execute a

proposal the voting side then passes into the governor security module and then sits there for some predetermined amount of time which initially would likely be between 24 hours and up to a week and then once it has sort of run its course in the government security module and and--but subject to the security delay it then executes an interest there the core system and so you have this this approach combined with what's called the emergency shutdown module so which is really just an upgrade of how emergency shutdown currently functions in the system and what the emergency shutdown module does is it allows a much smaller like it it allows a fixed and and quite small potentially percentage Medicare

holders to trigger an emergency shutdown which right now it's it's at launch it's going to be 5% and so what that means is that any like any constellation in the community that's able to muster 5% of the total and care supply will be able to counter and malicious proposal that's sitting in the government security module right so so if someone tries to let's say yeah it is like burned down the system or steal all the collateral or somehow like try to harm the system then they will need to you know they will need to first of all let's say by 51% of all them care or maybe if there's only 15% boating than 50% of them care right but some significant amount of um care and then they use that to trigger the proposal but it then just goes into the

governor's security module and the meantime the honest actors in the system can then essentially Rayleigh and and respond by triggering an emergency shutdown of the system and what that happens is the system shuts down right it totally unwinds everyone is able to exit the position and at the technical blushing level but in practice the way it plays out is that you immediately deploy a new system and then you provide what we call a smooth transition right so you we provide this this what's really more like an upgrade process where you can transition from the old system that is now shut down and then to the new deployment as seamlessly as possible and this is also how we for instance do the upgrade from single hello to multi collateral die right the

point is obviously to make it as painless and as seamless as possible for their juicer but the really critical games theoretical piece to this is that in the new deployment because anyone is able to do any deployment right it's it's just an open like you just deploy some open source code right but the community will ultimately will in most situations reach consensus and kind of like equilibrate towards a single successor deployment that then just becomes the new maker system and this deployment could in response to for instance an attacker just blatantly blatantly trying to attack the system right a steal the collateral or harm system in some way and using a significant amount of care for that in response so that is heck you can

actually just burn there and care on the new deployment like you choose to what you call honor the care of everyone else but you can choose to kind of like let everyone else's self-care transition over but obviously there's not really a good reason to allow a clearly malicious attacker who has voted to harm the system from gaining governance power right so what do you then get is that you get stronger governance with a bad actress cut out of the system and you also get like a significant MKR burn right so you get a significant reduction in total supply which then makes up for all the friction that having to go through this whole process cost you right and the same dynamic also actually exists for someone who abuses in the first place its power to do an emergency shutdown right so someone goes

on kinda like let's have fun and shut the whole thing down because it's quite easy to the the barrier for doing that is still its initially for instance 50k MP yeah right so it is still which will then not be honored in the new deployment if it was purely a troll attack and then again you have this dynamic where yeah like the attacker did manage to shut the system down but there was a smooth transition to a new system and it costs them a ton of money and that money actually went to MP elders so who decides whether a shutdown was in fact a troll attack whether a proposal was malicious because they could have been just a bug in it or the people honestly thought that that

the system was under attack so who actually determines whether to penalize make a holders or not so it's quite a complex question really rather quite a complex issue right but the basic answers of the community decides right because because anyone can deploy a maker system at any point in time right because the chrome is open source you could actually very easily imagine that immediately after an emergency there might be 410 or like a thousand new deployments right and everyone's saying this is my you know all super awesome deployment right where I haven't you know and then maybe I mean there might be people trying to like give themselves extra of care or there might be people too trying to like cut out and care of people they don't like or something

right and the question is which new MP our distribution is able to basically you know get the faith of the overall community and the economic majority of the ecosystem right and in most cases like in in clear-cut cases such as someone blatantly attacking a system it's really obvious that you have this I mean you essentially have the like a governance conventional you can even call the social convention that if you try to attack the system you don't deserve you care right and and there's a good reason to migrate to a system that doesn't include and care holders that have proven that they're malicious to the system right so it really comes down to like the dynamics of what do the users of the system think is best for

them when they went there peeking what system to migrate to and that's also actually about like that is actually like maybe the most fundamental point of maker governance right because that is the point where you actually see that the power of M care holders isn't infinite they don't actually decide everything like they kind of run the system on a day to day basis until the moment that a very significant event happens right until it like to the point where the governance has to kind of like fracture and and reassemble itself and then what happens is the power actually falls back to the economic participants themselves and if Carol does become totally powerless and the only thing they can do is kind of like point to the past actions and say

hey I was so good at governing the system right so I should totally be a part of the new deployment so what's the worst thing that they could get away with so could they for example steal all the collateral by like setting the stability to 100% mr. Bob you'd be 200% ones that get away with that like what would be the potential reward that they could get away with with an attack like if there was no response from the community yeah it could actually be anything like it could be printing like I mean this system is like because the system completely relies on this dynamic of you know triggering an emergency shutdown within the timeframe allotted by the government security module like because it would be impossible regardless like

so there's no attempt to kinda like restrict what kind of technical axis governments already behest right the question is is that outcome ultimately going to be better for like the average user and the average and care holder in a system right and anything that isn't following the regular governance process right so like actually trying to scientifically optimize the system and following the consensus of the community is always going to make people worse off right because it breaks the fundamental social contract and so this dynamic of like a blatant attack also works on sort of smaller levels right because the you know it's not just that it's not just a dynamic where you know you want to protect the system right like you want

it like from from very powerful attacks you also actually want to kind of like police and and and try to catch people from breaking the the social contract and sort of catch them in the inter act of doing something where this is situation where the users most likely wouldn't like will most likely actually consider this behavior like like negligent or malicious to them and as a result migrate to a system where there's actor care of this actor isn't included because that's then you have this very strong dynamic right where people have to be very careful about like carelessly trying to push some proposal through that could actually get the shale system shut down and maybe even get them penalized for being responsible for it quit so there are two very significant

updates coming to the maker system soon and the first one is the interest generating die can you talk about what that is and what made you roll that out yes so the dye savings rate which is what allows you to hold dye and actually get like get a savings return on it as you hold in your wallet for instance is a really fundamental feature because it's kind of the counterpart to the stability for you right so right now when the system is balanced you have like you can only change the stability fee and then you can modify the supply and then the downside of that is that that means that when the system really grows but the supply grows more than the demand your only option is to pull down

on supply so you kind of have to let the system become a victim of its own success right and unofficially restrain the growth of the system which is what's happening right now where the interest like the mr. bilder fee is just incredibly high right and it's actually really yeah it is kind of great a lot of people coming you know why are people even generating died when the fee is just that crazy high right and it's amazing to see the people still are using it but the problem is that that the system has no way to spur dye demand right there's no way to kind of like make it more attractive the whole time and that's what the dye savings rate solves so instead of just pulling down on the stability fee side when the system is

growing you can pull up on the demand side as well right so if you had like the mismatched like this you can pull it into sync like here and actually see overall growth of the system the actual effect of that in practice could very well be quite you know quite a quantum leap in terms of hitting some sweet spots in in product market fit where the system suddenly becomes interesting to a lot more people right because in one hand you get you get the the CDP functionality which is right now incredibly popular even with these ridiculously high fees you can get that down like you can well rather you get the because you can you can get that down to a much lower rate because you can now suddenly make dye it credibly attractive right because when the

stability fee of twenty twenty percent for instance on generate dye theoretically and I mean this is as an educator like if it wasn't wouldn't actually happen right but they're ready there is at twenty percent like this of twenty percent available to give to die holders right so imagine if holding that I gave you a 20% return and this was without any additional risk whatsoever right it was just like holding a regular diet like it just gave you this massive return right you would immediately see tons of people moving them the savings into this because they would want to take advantage of that very high savings rate quick question about this though like about how this works um doesn't isn't the stability fee paid in MKR and then the die savings

rate would be accumulated and die how does that work the transition from the stability fee from MPR does it have to go through some exchange or something to be paid out the feature of the fee being paid directly name PR and singled is it's kind of one of the features that were in the end not done for any like business reason or any any use of facing reason but rather because it was easier to implement so it was easier to get single little like done and get there get the this you know system live and rolling and sort of see it play out and in the real world right it wasn't that the ablation Airy aspect of NPR because the fee is burned also important to the economic design oh absolutely but the

way it's going to be implemented in multi-leveled is just a more like a most sat like a better approach overall right which is that the system takes in fees and die and then what it does is it accumulates kind of a pool of dye called a buffer and when the buffer hits a certain size it triggers what's called a surplus surplus auction and the surface oxygen is then where the Empire is burnt and then what the means is that buffer is also available as kind of like an account where that I can also be taken out of and put into the die savings rate for instance and actually today you can also pay the stability Fionna CDP with died because it is actually super frustrating and was one of the biggest concerns all the users head that they

had to let go and you know they have to use eath to open a CDP and then they get die the second token and then they also have to go and get a third token like some dust get dust right to them pay the fee to retrieve the collateral out of it right and it's just like incredibly you know user unfriendly really and as a result the feature to pay the civility fee but I was added to the front-end and kind of like me is that it takes care at automatics good bye and carry on an exchange and then pay disability fee for you but that that convenience functionality is moved into the core of maker in multi colloidal die so that release that that also supports the daya savings rate and is then fundamental to facilitating the die savings rate and the flows of money that

that really go from from CV holders paying the stability fee right and then a part of that going to die holders and another part of it going to have gay elders what happens if people don't actually use this ability fee and so you know you promised the the locked die this interest rate but then it turns out there's not enough people actually you know closing their CDP and so this you don't actually have the money like isn't there other colleagues concern here like you know what happens we know how the money to actually pay out the interest rates that were promised yeah there would be if it used the current model where you pay all the fees yet would you close the CP but in the next version of the system they're counting is

continuous so you actually see the die like rather than a CD P accruing you could say like a fee over time right there so sits there and has to be paid what a CDP does in multilateral dices actually continuously generates more and more time so it doesn't kind of like accumulate a fee you have to pay it just generates die and your behalf that is then sent to the buffer so what that means is there's just like the direct like when the DSR pays out that died has been directly generated out of the CD piece at that moment in time so there's always like real time solvency in the system right because of course that's necessary or you could run into these weird edge cases that sounds like a very major upgrade one thing I'm curious about so in my understanding to actually

Jeff your die generate interest you have to put it in a particular smart contract and only then does it does it generate interest why was that design decision made why don't you just have all die in existence generate interest or at least have a tokenized claim against that die in that smart contracts similar to what compound is doing with seed I because that would let people's not just have died sitting there but also let them be able to use it in depth yes is really the short answer is that it's for the sake of like use of friendliness because well it sounds

great to always have like a TSI accumulating there might be many situations where for instance if you're trying to write a small app or you're trying to like create a smart contract or you're sending some bound or you like there could be a lot of situations where you don't you know you just need to send an exact amount of money and you don't really care about getting some small savings for like let's say a couple of days also that I feel that there might be an issue here you know just you know we've had issues like this in design of Cosmos as well where it's like you don't want to iterate over all die holders every single time you want to pay out interest and the problem is you know okay maybe you can pick it so you add it

to a pool and what actually happens is die holders have shares in a pool but then the problem is then die is not stable anymore that that's defeated the whole point of what we were trying to do with creating the stable coin so I'm not sure how it would actually be possible to have it go to all die holders in a computationally efficient way and there are a lot of use cases where currently you're locking up die so for instance say you'll use it in a prediction market as collateral for instance and and you really want it to be in a to be to be generating interest and don't you kind of push people into compound and into using compound die for this instead of interest generating die yeah I mean that would be a like that

could totally be a cancer but the thing is that it is actually implemented in a way where that is completely possible so you would see you know you would see let's say the prediction market implement on their end there like an integration where the moment you deposit dye onto the platform it's automatically sent into earning the dye savings rate and on top of it it is even technically possible to create this concept of the of the you know the see dye with the diese where you actually can use the dye directly in the DSi as tokens and the long-term vision is in fact that like one day far out in the future right when the ecosystem is way more mature and the you know the standards are able to handle this I can't like the accounting

systems and even the accountants can sort of wrap their heads around it you would have all died in real time always generate the same extrange right because rationally there's no reason to do it if it's if there's no friction in doing it but the fact it's just that today if you try to force it on people it would like it would create more losses through friction and confusion that it would create like the diversity you know create the gains of like let's say you know like when you're sending die to your friend instead of like pulling it out of the die savings rate sending it to him and then the day later he puts it into the die savings rate right like here you can you can save you can save like or you can sort of gain one day extra of interest earned by just

sending it directly but the problem is that what you then create is like a much bigger burden on the wallets to properly imprint agreat and implement this so that's really that's the big trade-off in the beginning right that is actually simpler technically to deal with kind of this fixed idea of the die savings rate where your deposit you die into and you pull it out when you then want to send it around rather than you always have to account for the the this savings rate accumulating because it is actually it is it is implemented and exactly the way you know you describe right that it is this it is a share in like a pool I mean that's a very rough and like very

simplified explanation of right but it's like it's it's it on the back end it doesn't actually change over time but the front end kind of updates the value so it looks like it's kind of like a transaction that's happening right but in reality it's really just kind of like numbers that's modified and you know various ways right which is exactly actually how this ability works right now since the bill if it doesn't actually update individually on every CDP it just looks that way and in reality it's a single number called accumulator that's that's updating and then it's displayed across all CDP's when it gets updated do you think that over time that you know currently what what maker Dow

essentially is is this like decentralized sent central bank right at the central bank do you think that over time maybe there might be competitor to central banks that kind of compete with the maker system and you know maybe they claim that they're got whatever their governance processes that they use might be more better than what the maker Daoist immed uhz I think this is actually kind of what the Libra project from Facebook is kind of going down that route a little bit and so how do you think the maker ecosystem will react to alternative D Central Bank stable coin designs whether that's you know a copy of the maker system with you know a different governance system or you know

even a different system altogether kind of more like the reserve system which uses you know slightly different mechanics yeah I always expected that we would see like copycats and competitors and similar types of systems much earlier right and it would really be this like big space and there would be just like a lot of different versions all competing and it's quite interesting that the reality ended up being that maker pretty much became the only decentralized stable card with decentralized governance and then the whole ecosystem of centralized stable clients was what ended up completely exploding but you're totally right that like that the way that like the thing

that that makes maker thou unique is the decentralized governance and the way that you would sort of have something that would actually be a competitor they were actually operate in the same space as make it would be by having a different type of decentralized governance that could somehow add more to the table right and be more efficient or better at managing risk or something like that and I mean I don't think that's so far there's there's really nothing like it yet I mean there's no attempt at actually creating this type of of self self organizing and self sustainable community that that we are trying to bootstrap right and if you look at something like Libre for instance I would say that like it is actually quite different so based on my my not totally perfect understanding of Libre it hasn't

a bit more of kind of like a fixed like monetary policy where it's kind of predefined and based on the individual actions of of the the participants in the ecosystem so they're not really they don't have the same like it prioritizes the quiddity as I see it but it what it what it sacrifices is kind of like a coherent and unified monetary policy so you end up having a the end of having a collateral portfolio and you end up having an inflation rate and a pick that's a little bit more random because you're prioritizing this ability for anyone to always create them by with you know by pledging collateral into a system without any sort of framework to do that within and that's what I think I

mean ultimately I think that's what is my father most powerful right because that's what also what you know thousands of years of traditional finance coalesced that right and what you need to then do to make something that's better than maker is you need to get better at still playing you know like creating like operating within that framework and kind of like setting that framework correctly so that you do get this like optimal the quiddity optimal pick point right optimal inflation and the best risk management the question is whether you can kind of like innovate on top of this idea of having token holders ultimately curating the decisions right maybe there's something like paying for votes or like paying for like or

rewarding activity or paying experts or something and all of these ideas is actually also something that maker governance is very heavily focused on trying to innovate right because of course this is only the very beginning of decentralized governance let's fast-forward maybe five or ten years so you just added six tokens for mighty collateral die the choice of tokens or that move to add exactly six tokens makes me think this is the first of many additions to come so basically if you look at the market cap of the six oaken's that you are adding they're only on the order of a few percent of what the Ethier market cap is so at the collateral that was already available the last version of the system that was

technically much simpler what are you plans for expanding the scope of collateral in five years will I be able to use my house as collateral on own maker yeah the short answer is that yes that would absolutely be the dream right that where the project is going is that it's kind of trying to break beyond the boundaries of blockchain and crypto and just like I mean to some extent the bubble that crypto still lives within right but instead try to reach out to the real world and integrate with a real financial system the real global trading system and most importantly have real

assets and real value in the real world actually back die right so it's not just hard crypto air but it's I mean which actually does have its own in very unique benefits and very unique risk characteristics right but ultimately you want as much diversification you want as much kind of like like as many different perspectives and avenues of stability as you possibly can behind a stable coin right so and there is actually some incredibly exciting and quite a fast-moving innovation happening exactly within the space of like figuring out how do you how we do we make it so that you know five years this may be a little bit optimistic right but potentially five years from now you can kinda like

open an app on your phone and then you click a button and that app it uses some sort of third party service to legally connect the ownership and the deed of your house to token which is then directly set to some sort of automatic or automated you know risk assessment function that's connected to maker that kind of like does an assessment of your house and the value of your house and the risk associated with a house and then ultimately creates a new CD p-type unique to you and kind of like your house and your risk parameters and your sort of conditions as a depth alright and then ultimately you can deposit the token again with a single click on your

app into maker directly and generate die directly and go and you know like reef well maybe refinance your current loan or something like that with it right I mean that is certainly like very cyberpunk and very like a really cool I like very a concrete way that you could think like you could actually imagine that you know the bomb and pup-pups of the future would like have blockchain directly in the face because that's how they would do their you know their mortgages right but of course the steps along that way are most likely going to be a lot more about integrating on the backend of existing financial infrastructures right so it's a tough stretch to take it to the end user and really make it like usable and

accessible and powerful for them they're sort of the regular in a retail credit seeker right but it's a lot easier if you start trying to implement it to something like large-scale trade finance or even just like large-scale securities bonds repo markets because there's so much like institutional capture and like lock-in up the platforms right now in those spaces and there's so much I mean really like paperwork and bureaucracy and just like both thinking around it that it's it's you know it's it's incredibly ripe for disruption by by just model technology maybe let's end on this very cyberpunk notion I think those

are fantastic closing words thank you so much for being on the show this was super interesting and I apologize to our listeners for going over a little bit I hope you're all still here yeah sorry that happens quite often for me that's the nature of maker being so calm thank you but thanks a lot for the great questions and a great conversation oh thank you guys for listening and uh next week we release new episodes of epicenter every week click here to subscribe for hundreds of insightful interviews with some of the leading minds in blockchain and crypto you can also listen to the audio version of the

podcast on iTunes Spotify stitcher and other podcast apps click here for a full list of places where you can listen thanks for watching at the center and we hope you'll join us for our next episode