0/🧵Last week saw the most participated / contentious vote in the history of DAO governance happening at @MakerDAO
I have now had the time to absorb a lot of what happened in the past days, and being at the centre of it with my proposal for a Lending Oversight unit, my take 👇
2/🧵I have spent many years in credit, and when I saw @MakerDAO's attempt to onboard real-world use cases I immediately got involved
Almost immediately, @MakerDAO_SES sponsored a research project ('Real-World Sandbox') to understand Maker's position along the lending stack
3/🧵Our ambition: develop an independent Lending Oversight unit (LOVE) that would have provided second opinions to $MKR holders on complex lending collateral, as well as process auditing and strategic oversight
The review of Monetalis was LOVE's first meaningful assignment
4/🧵Monetalis was asking for an initial $DAI 400m check for a unitranche loan at 2.0% fixed + variable. Not little money
Its start-up nature, as well as cap table, complicated things. Most shareholders were also large $MKR whales, including the founder
6/🧵Following the publication of independent negative reviews by myself and others, the Monetalis team and some @MakerDAO $MKR holders asked for several fast tracks, alternative processes, amended requests to onboard the company
This wasn't the only case of entanglement interest
7/🧵When LOVE came up for ratification. I knew I made friends and enemies. Many interesting things happened:
* @MakerDAO's founder took back delegated voting and dinged the proposal
* Pro Monetalis vote followed
* Maker's co-founder came back online
* $MKR lending activity spiked
8/🧵On the other side, many large $MKR holders came in favour of LOVE. @a16z and @BlockTower made their endorsement public, but several large VCs voted *YES* without it
LOVE became soon proxy war of narratives: founder vs VCs, oversight vs community direction, TradFi vs DeFi
9/🧵Vote was participated by record c. 300k $MKR. Ultimately *NO LOVE* won vs *YES* by 60/40:
* All delegated votes were re-shuffled by founder to ensure alignment -> not great for representative democracy
* Co-founder aligned with founder
* Clear signs of concerted parties
10/🧵LOVE was defeated. Many are debating, but here's what's important to me:
* Is @MakerDAO a true DAO or a de facto company with clear control and no supervision?
* Is Maker truly censorship-resistant or too prone to lobbying?
* Can Maker's governance onboard complex cases?
11/🧵So many are arguing this, including:
* @RuneKek as founder thru his Endgame Plan
* @hasufl as researcher, delegate, and proponent of an alternative
* @MonetSupply as researcher and risk professional
1/4 🧵And so my days as CU facilitator @MakerDAO are over - before starting 😂
The ratification vote of Lending Oversight ❤️ attracted 294k voting $MKR - huge record. Most of institutional crypto backed the idea of financial oversight, but that wasn't enough, @RuneKek didn't
2/4 🧵 Worth noting:
Insane active VC participation
Founder re-centralising vote in Shadow Delegate
Previously ostracised co-founder resurrected -> his comeback message is a bliss
Tons of proxy voting
Concerted parties (borrowers too)
Last-minute re-delegation
$MKR borrows
🧵3/4 -> Many questions about REAL centralisation vs. entangled interest in crypto arise, and we should try to answer if we don't want another blowup
DeFi remains extremely immature and dangerous land, but we should all keep working hard
🧵/ Shared a week ago my thoughts on the need for a new stablecoin taxonomy - given the importance I’m doing it again
Using *ALGO* (@terra_money) vs *OVER-COLLATERALISED* (@MakerDAO) is improper and redundant. We must do better
So here’s my take 👇🏻
1/ Every pegged currency has an algorithmic component - @MakerDAO itself is 50% backed by other stables thru algorithmic incentivisation
The key difference, instead, resides in the nature of collateral used for backing
To me it’s about *ENDOGENOUS* vs *EXOGENOUS* collateral
2/ What is *EXOGENOUS* collateral?
My ‘exogeneity test’ is simple: is the stablecoin project itself existential for the survival of such collateral guarantee? If so, it is not an exogenous asset
Hint: exogenous assets are good guarantees, endogenous ones not really
0/ At @MakerDAO we are exploring the possibility of kicking-off one of the largest fund raising efforts in DeFi in order to boost the System Surplus and turbocharge Maker's growth plans. This would be much more than a plain vanilla raise of cash through VC funding 🧵👇
1/ @MakerDAO's System Surplus (SS) is the closest comp to a bank's Core Equity Tier 1 capital, a buffer to protect the protocol against the unknown unknowns that might hit us if the over-collateralisation proves not to be enough. That SS currently sits at 69m
2/ SS 69m is 0.8% of total outstanding $DAI, or 2.0% if we exclude stablecoin-backed $DAI. This compares to 12-15% of traditional banks. Sure, @MakerDAO's over-collateralised model is more transparent and solid, but collateral risk is not the only risk the DAO is exposed to
0/ When your kids swipe 2.5b per year on your protocol card, you got a problem. @terra_money hijack of the liquidity sitting in @CurveFinance’s 4pool is the move of a bold but reasonable father. But why-how-what it means. Thread for the uninitiated🧵
2/ The 4pool would substitute the 3pool as THE liquidity building block of the @CurveFinance system. Today, 3pool-based meta-pools are heavily subsidised via $CRV issuances, partnering at @ConvexFinance level would reduce the ‘bribing costs’ and suck the air out of @MakerDAO $DAI
0/ The math connecting lenders <> borrowers on protocols such as @compoundfinance and @AaveAave comes right after @Uniswap's constant product function when it comes to influencing the whole DeFi industry. Strangely, it hasn't been challenged the same way. This might change 👇
1/ The size of the bid<>ask spread on those protocols is a measure of the space still available for optimisation. And the guys at @MorphoLabs listened. What is Morpho? Morpho is a front-running peer-to-peer lending overlay to @compoundfinance and @AaveAave, with huge ambitions
2/ How will @MorphoLabs work? Simple and genius. Sitting on top of lending protocols such as @compoundfinance - and mimicking all their parameters, they can intercept borrowing and lending asks and match them at mid rates for as long as they want, dramatically optimising rates
0/ @terra_money has established @anchor_protocol has a simple and powerful entry gate to the ecosystem. Fast-forward 10b later, questions arise about the sustainability of the famous 20% deposit yield on $UST. We must pay attention 👇
1/ As a reminder @anchor_protocol is a borrowing protocol, although different from @MakerDAO, in the sense that it is not the ultimate minter of its own currency, and also from the @AaveAave / @compoundfinance, in the sense that it lends out only one asset - $UST
2/ It (mainly) retains most of the generated yield from the pledged (bonded) collateral tokens, like $LUNA or $stETH, as well as the borrowing rate for $UST lent out, while it pays out a generous fixed c. 20% yield to $UST depositors