Last August 26, Christensen, co-founder of MakerDAO (MKR), the project behind co largest decentralized market Dai (DAI), posted a proposal for a “floating” future of DAI on the MakerDAO forum.

Immediately, this proposal has aroused much controversy, and also revealed many deep stories behind it. The following article aims to sequence important events to help readers better understand the full picture of the conflicting debates surrounding the future of DAI in recent days.

An overview of all the events leading up to the “floating DAI” proposal

Maker's Endgame Plan

Endgame Plan is a proposal to overhaul MakerDAO comprehensively Christensen launched from June 2022 to divide MakerDAO's tasks for each specialized MetaDAO.

The core of Endgame Plan is the MetaDAO, which can be interpreted as “subDAOs” ( children) of MakerDAO, are dedicated organizations with a “realistic, profitable, sustainable, and completely decentralized” business model. Each MetaDAO will take on a specific function in Maker, for example, MetaDAO manages Maker (MATH, is synthetic copper on Maker), MetaDAO manages RWA, MetaDAO manages Maker's Node Network (MANO),…

Description of Maker's MetaDAO

The project's founder thinks that if "specialization" thanks to MetaDAO and its tokens, Maker can solve the problems the project is facing at the moment, including:

– growth slows down;

– the entire protocol depends on only a few large pools;

– ambiguity about the allocation of operating budgets;

– no sustainable business model;

– complex administrative activities;

– reduced dependence on MKR;

– low level of participation in the polls.

MakerDAO structure before Endgame Plan (left) and after Endgame Plan (right), as seen by Rune Christensen

The Future of Maker and DAI

Let's go back to Rune's suggestion.

According to Rune, there are two possible developments for DAI and MakerDAO:

One is, helping DAI to be widely used, supported by law, used to promote financial inclusion (Financial Inclusion), integration with real assets (real-world assets, abbreviated as RWA) while keeping the spirit of decentralization;

Two is, making DAI a completely decentralized currency that has nothing to do with government institutions or traditional financial assets through the “floating” the value of DAI, no more at the 1 USD mark again.

Up to the present time, the first development direction is not feasible for many reasons, of which the most important reason is the industry. has yet to create any substantial real value for the mainstream market. And while Maker has received a lot of support to realize the goal of “Clean Money” for DAI – making it a decentralized and absolutely fair currency – that goal still remains to this day. very far away by operating under the system making everything work in a very slow and difficult way. Furthermore, the demise of , , Voyager, Three Arrows Capital and a bunch of other scams in the market has tarnished the image of this asset class in the eyes of mainstream investors, and so it will now be difficult to convince them that should be “treated in a different way from existing financial services”.

However, so far, Rune has always wanted to develop DAI in the first direction, because linking DAI with the traditional financial world will be a strong basis for it to develop better in the future. But a major event happened in the past August that made Rune think again: the event of the US government's "blocking the door" to Tornado Cash.

Tornado Cash – the event that made Maker change direction

In the past, when integrating real-life assets through loans with Huntingdon Valley Bank or Societe Generale, the MakerDAO community has always tacitly accepted two main assumptions, including:

  • Regulatory attacks on RWA will be notified in advance to give users time to react;
  • Even if the asset freeze takes place, innocent users still have a way to get their money back (as in the case of E-Gold about more than ten years ago, after the user's assets were frozen, The US government has finally agreed with the directors of this company that the gold that the company owes to users will be returned under the supervision of Judge Hollander).

In fact, from the incident of Tornado Cash, it can be seen that the two assumptions above are not true. The government's imposition of sanctions through RWA is still likely to happen suddenly and without warning, causing damage to innocent people. Not only that, still frozen of all wallet addresses that have ever interacted with Tornado Cash thoroughly without giving notice that the number how will the other be refunded to innocent users. Next, the projects Largely boycotted Tornado Cash for fear of being implicated, causing users to feel the seriousness of a real attack on the decentralized nature of the industry.

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Unlike USDC, DAI's design doesn't allow it to "freeze". This is like a "knife" hanging over MakerDAO's head, because if this organization receives any orders from the government, they can't change that rule. And so, decentralization is the only way for DAI to exist, because then, if MakerDAO itself doesn't "save" DAI, it can still live.

The "floating DAI" roadmap

Before the events that just happened with Tornado Cash, Rune Christensen had to update the "Future of DAI" section to the Endgame Plan, which called for "floating DAI", ie not letting the currency go unnoticed. price in USD again. Rune suggested two tools to help realize the DAI floating roadmap, including:

  • MetaDAO and MetaDAO tokens: Create new tokens of MetaDAOs to encourage users to hold DAI, because in exchange for Rune, this is a "powerful" tool to attract users to use DAI.
  • Protocol Owned Vault: In this strategy, MakerDAO will hoard a lot to directly control the minting of DAI.

When the need Farming that requires too much DAI will lead to an asymmetry in supply and demand, so negative interest rates will be used to help mint more DAI since they have become cheaper relative to the value of the world's assets. accept is ETH.

The three phases of DAI floating will take place as follows:

3 stages for MakerDAO to "float" stablecoin DAI

Stage 1: Pigeon Stance

  • Timeline: at the present time;
  • MakerDAO will leverage RWA to maximize profits and to buy more ETH;
  • There will be no limit on the use of RWA as collateral;
  • The main goal of this phase is to promote the development of DAI, as much as possible, despite the risks posed by RWA.

Stage 2: Eagle Stance

  • Timeline: after 3 years from Pigeon, but can be delayed if necessary
  • Rebalancing risks from RWA with long-term development orientation for DAI;
  • RWA is limited to 25% in total collateral vault;
  • DAI can begin to float.

Stage 3: Phoenix Stance

  • Timeline: after Eagle, triggered when the risk of DAI being attacked is clear;
  • Development may have stalled, but DAI was then more resistant to sanctions (if any) from the government;
  • No more RWAs in the collateral vault;
  • DAI can be floated.

Questions for the future of DAI

No words could explain the magnitude of the new statement made by Rune. Basically, this is a complete change of opinion and upcoming orientation of Maker with DAI. Perhaps Rune has seen the fact that DAI will not be able to achieve decentralization as long as it is involved in assets that can be censored at any time by a centralized institution, even if it is not. be it real estate or bonds or dollars in a bank account. All of them can be easily censored, frozen or confiscated, with just a few pennies from officials sitting in the White House.

So what about other options? DAI can still be backed by an asset , for example ETH. This is also the solution that many people support push, because in essence, Maker will use USDC to buy ETH in the market, pushing up the price of ETH. ETH itself is also a coin that has been used as well as a solid foothold in the ecosystem , so there's no risk of collapsing and getting caught in a death spiral like what happened with the model back in May. However, anchoring DAI to ETH carries a tangible risk that DAI will be more susceptible to depeg, affecting the core function of a stablecoin that is to always be stable in value.

Floating DAI, on the contrary, will further make this stablecoin no longer a stablecoin. This can be compared with USD abandons gold standard in the 70s of the last century. Similar to USD, the value of DAI will be completely determined by the law of supply and demand and monetary policy. But unlike USD, DAI is not yet the dominant currency of an economy, still has its own competitors and limitations. No one can predict whether DAI will depeg and crash after floating, but it will be the real test of both Maker and DAI's ambitions in their pursuit of decentralization. If this stage is overcome, it can be said that DAI is a true decentralized stablecoin.

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Maker and the reality of "dividing rafts and pulling wings"

Luca Prosperi .'s perspective

Rune Christensen's process of changing his mind from "shaking hands" to "leaving" the traditional financial world through the twist called Tornado Cash seems to have gone extremely well, and that he has always been the an individual who worships the spirit of “decentralization”, the spirit of “all for the community”.

But if you read more about Rune's history of "shaking hands" with the traditional financial world from a different perspective, namely that of Luca Prosperi, who is responsible for overseeing MakerDAO's lending, perhaps we will see a very different picture.

Since Luca Prosperi was commissioned to review and review loans using RWA as collateral, he has noticed that “there is an absence of a healthy division of power between a single originator and a initiator, a builder, and a risk custodian in the Maker organization.” Since then, the idea of setting up a new audit department, called Lending Oversight Core Unit (abbreviated as ) LOVE) was born to help provide guidance, help evaluate, process audit reports, and monitor the process by which the DAO works with partners in the traditional financial industry.

In March 2002, a company called Monetalis came and asked Maker to support their lending platform. Specifically, Maker will support Monetalis and Monetalis from there to attract SMEs to deposit money to lend to borrowers. Luca and his associates' risk assessment for Monetalis is not very positive. An interesting thing that happened here is that, in Monetalis' shareholder meeting, there are also UDHC (investment fund (VC) that has supported MakerDAO a lot), Dragonfly Capital (with Rune as a venture partner), Pat LaVechhia – former head of Maker’s Executive Department, Claudia Rivero – current member of SES CU, and Rune Christensen herself is also a shareholder of Monetalis. The total MKR that these people hold is up to 140,000 (or more, if they have many wallets) – enough to vote what is in their favor. So, is it possible that the uneven distribution of shares has become a problem in the interests of the parties?

The conflict of interest has been going on inside Monetalis, and it's almost something that everyone soon noticed, despite the denials coming from this company. In the end, Rune had to say that he had sold off his stake in the company, in a "slow and disgruntled" way - as Luca describes it.

After the above event, it was clear that Rune did not like the individual risk monitoring unit that Luca had set up.

For that reason, when the approval for LOVE took place, Rune delegated the majority of her votes to a character named “Shadow Delegate” who, according to Luca, was also Rune. The Shadow Delegate voted heavily against the establishment of LOVE, but hasu and ElProgreso (who are also among the Rune deputies) did the opposite – they approved LOVE.

The battle between supporters and opponents was quite tense with the participation of many whale wallets and even individuals representing large funds also came out to express their support for the policy. this issue (specifically a16z's Porter Smith and BlockTower's Kevin Miao voiced support for LOVE).

Luca does mention the return of Nikolai, the co-founder of Maker, but it is not clear what his stance was on the founding of LOVE. Luca also hinted at Nikolai's intention to vote when he saw that "someone borrowed up to 9 million MKR on ." ” to vote against the proposal of LOVE, even though the interest rate at that time was up to 60-70%. That frenzy probably prompted Nikolai to show up and vote in favor of LOVE.

Allocate MKR votes for and against Maker's LOVE proposal. Source: Luca Prosperi

Many other whale wallets then voted in favor of LOVE, until Nikolai decided to withdraw his tokens. A spectacular position change, because now LOVE has almost no chance of winning.

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At the last minute, while Luca was busy writing thank-you letters to his supporters, Rune tried to change the number of MKRs he had authorized for different subjects in order to widen the gap between votes. for and against.

As a result, LOVE received a painful slam from Rune – it didn't get through.

To be able to clarify the extent of LOVE's controversy, at the time of voting ended on June 29, 2022, more than 293 thousand MKR had been mobilized to participate in the vote, with a total value of more than 260 million dollars. This is a governance vote that attracts the largest amount of assets in the history of the crypto industry.

Maker's LOVE vote results

Political factions in MakerDAO

According to Greg Di Prisco, who stands on his observations as a person who has been a part of the Maker community for a long time (who served as Maker's business cooperation director), as well as supported the project to implement the RWA strategy. , then community MakerDAO are extremely divided into different groups with different orientations, goals and agendas. However, it can be divided into 3 largest groups as follows (the naming, classification and characterization of each group is entirely personal opinion of Mr. Greg Di Prisco):

Group 1: Futurist (Futurist faction)

The right wing, represented by Rune Christensen and most of the Maker team, put the interests of MKR first. The team believes in Rune's Endgame Plan, in which Maker will include multiple subDAOs with a more compact design to make decisions faster when faced with new business opportunities. The Maker team will stand in the middle and be responsible for the direction of the subDAOs.

Group 2: The Centralist (Neutral faction)

Almost like the moderate faction, flexible in politics but always aiming for the benefit of MakerDAO. This team always wants to solve everything as quickly and efficiently as possible, including sacrificing decentralization in exchange for positive changes for Maker. Members of Centralist hold many key positions in Maker, and are accused of being pro-VC. (Based on the classification, it can be concluded that Luca belongs to the Centralist group.)

Group 3: The Decentralist (Decentralized faction)

This group is like the left, promoting the decentralization of DAI, aiming for the sole benefit of DAI.

In the beginning, the Futurist and Centralist groups were on the same page when it came to a joint goal with RWA because it will be very beneficial for Maker and DAI: First, DAI will no longer have the burden of depending on USDC; secondly, for Centralist (pro-VC faction), the advantage here is that they can help extend Maker's network to the traditional financial market and in return, they can have the opportunity to buy tokens at a discount from Treasury of the project without affecting the market. But after the Tornado Cash incident, the Futurist team realized the risk of RWA, so they "jumped" to the side of Decentralist to protect the integrity of DAI's decentralization.

In short, it's…

In essence, the interests of all groups revolve around MetaDAO.

For the Futurist team, when those new DAOs are established and launch tokens, it is Maker who will benefit the most by acting as an advisor (in exchange for tokens) for the sub-DAOs. What the Futurist team worships is the Endgame Plan, before or after, not RWA or decentralization.

Similar to the Centralist team, they will also benefit from MetaDAO, but perhaps the traditional way of working in finance requires a lot of rules about risk management that makes them gradually become "discredited" in the eyes of investors. Futurist. Tornado Cash may just be an excuse for Rune to have the opportunity to "turn the bet", "stop playing" with RWA in a righteous way and also for him to attract more support from the Decentralist faction.

The Decentralist faction benefits from DeFi tokens, of course. They profit directly from farming new tokens from MetaDAO, but if sub-DAOs operate within the legal framework of the traditional financial world, the token price may not have the opportunity to skyrocket like before. Decentralization is just an excuse for this faction to get rid of the shackles of profit rates of assets in traditional financial channels.

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