Missed the call yesterday unfortunately, but the first call (gov/risk) had a lot of good questions regarding the stability fee and how large the moves are when it moves. Velocity of changes wanting to be made, etc...
I think for the MakerDAO team, if they set a baseline of priorities over the short/medium/long term. Starting with those, and working backwards basically. These also may very well exist, but if not, here's some examples.
Protocol goals --> Categories involved --> Choose the optimal which will only amplified +EV the more that time goes on.
Protocol Goals
// Examples //
Short term (<18 months): "We are prioritizing new CDP creation from unique wallets, as opposed to growing the market cap of Dai. We feel that planting this groundwork while we're still early from McD, and collateral selection remains to be finalized, the most value is to bring more and more CDP's into the picture. In the future, this base has better changes to be more distributed in accessibility. Some markets can appreciate it much more, and the more knowledgable and active CDP users there are, the faster we get to reach these markets that can take advantage of it.
Medium term (3-5 years): "We wanted new CDP's at first, because that was to plant a base of educated users, that will help others understand faster, while also having a large count of CDP's can allow for a broad distribution where Dai can be drawn down.
Long term (5-7+ years): Create a global currency that is supported by the participants and not a select few. Ensuring stability, borderless distribution. Delivering much needed financial services, for underbanked in established economies and unbanked in 3rd world countries. Decentralized, distributed, borderless. Fair.
Verticals For Consideration
Dai market cap.
Given the size of the market today, the actual markets overall sentiment it seems like it's a great chance to stay methodical and diligent as we see an increase in the growth of the protocol. If there's another bull-run on the horizon, then doubling down on things that have been out in the wild for a period of time (ETH cdp's to generate Dai) doesn't seem like the correct play. Appreciate the "quiet" (crazy level of adoption for you guys even in the bear market) time to stay heads down crossing t's and dotting i's if you're given the time. Whenever the next bull run is, seems like late next year or the following year, then utilizing this time should be largely on things that you don't want to be putting into production a week before things start 10x'ing m/m and lasts about 12 months. Yikes!
McDai Asset Critera
- Digitally native (ETH, REP, REN, ETC, BTC).
- Digital representation of non digital currencies (e.g. Fiatcoins, Digix, etc...)
- Digital representations of assets (Security tokens, property ownership put on chain, etc...
Multi-Collateral Dai rollout
I'm ultra bullish in the team knowing best on these things. I feel like that's largely the sentiment of many other community members backing the core team. Collateral selection is not easy, but when it's coupled with a set of chronological priorities it can drastically reduce the risk of the (Maker) DAO drifting off it's initial trajectory. If it was all about Dai in circulation, then tokenizing the empire state building would be a quick path to that mark. That said, you'd want to be looking for what can carry the largest amount of value over the longest amount of time and (ideally) across the most diverse set of conditions.
Optimal Asset - Bitcoin. Why?
// Very specifically talking about Bitcoin in a trustless implementation, not in the IOU sense which would be closer to wBTC's implementation. Which btw, I'm thrilled to see, as progress is better than no progress. I'm thrilled. I'm not suggesting that an ERC-20 token is bad, this would be an ERC-20... But the security and trust mechanisms that surround it feel troubling to a lot of the core value that Dai drives to many of the users.
// wBTC introduces the most desirable honeypot, amongst a large number of participants operating in a DAO, and minting/burning etc... Not as a knock, but if something were to go wrong, it'd come back in spades from the users effected. In the world of stablecoins, the best thing you really have is reliability. This approach feels like a bigger risk than many are considering. It's awesome, but all the patience in execution, and years doing things insanely diligently it seems like this is a potential hand grenade!
The case for Bitcoin - (Category: Digitally Native).
Bitcoin has the lowest education barrier for acquiring new users.
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Bitcoin is likely to appreciate in value if crypto is going to stay around. Dai's market cap gets to inflate on the back of this. Considerably large upside before it's reached any sort of maturity in distribution/adoption/liquidity.
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It's native from day 0. This is really important, especially for Dai. The separator between Dai and the rest is that it's unable to be frozen, or compromised in the real world which impacts it on the technical level.
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The largest amount of trade activity on a daily basis is Bitcoin, covering 60%+ on any given day. Big push for the ecosystem and can provide a much longer term benefit into a bridge between key protocols.
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Large amounts of holdings, true to the term "hodl'ing" means there's a perfect opportunity for a trustless, secure solution where anyone that is hodling, can scoop up extra gains if they were collateralizing into CDP's etc...
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BTC-20 will also capture rapid adoption as most exchanges running multiple chains are dealing with significant amounts of edge cases for each daemon (Bitcoin, Litecoin, etc...). This slides right into the format they're primarily using for trading activity under the hood.
Stability Fee / Savings Rate.
The cross-over between these two. Subsidizing from a higher stability fee to deliver on the Dai savings rate. going to incentivize capital from other assets into Dai (great, grows the market cap, right?) Well if the team believes that the single best thing that can be focused on to provide defensibility/scalability/etc... Then this wouldn't align with that obviously.
As the broader market evolves more aggressively with fiat-stablecoins, the competition to attract AUM is going to end up becoming a rev share game. More AUM means a better savings deposit rate from the bank partner, that means more incentives to subsidize users to choose [insertCoin].
This isn't a bad thing to any extent, though it's something to be considered with every decision. The threatened outlook says that someone could come along and take the market opportunity away from Dai to be the leading stablecoin. Maybe that's USDC, maybe that's GUSD, sUSD, who knows. The opportunity with those events unfolding is that the hardest leg of the adoption is now being outsourced and distributed. Getting a person to convert from GUSD to DAI is much much simpler than trying to get a PayPal user to go from PayPal to Dai. Worth keeping that in mind :)
Sorry for rambling!
I'm pretty much the biggest MakerDAO fan around, and just thought that I'd share how I evaluate things for myself (not that you asked hahaha) and if there's holes in my approach and/or if I'm overlooking/underestimating various pieces of this gnarly puzzle!
Also - Not sure if others consider the premise of a systemic level problem, but the premise of state backups every n blocks, or insurance contract, etc... Would be interested to know, or maybe I'm just being a little over-cautious?
Likely you didn't make it this far down the post. If you did..... /tip +0.1 Doge
All of the above is intended to be a way to spark some thoughts and discussion. My faith sits totally with the MakerDAO core team. They've demonstrated patience, and pragmatic decisions for maintaining their pace to market and scaling. Totally rad!
*Edit: FYI, this stuff has literally never been done before. So that means that there is going to be changes, there's going to be ambiguity and uncertainty at times. Which is 100% part of the process :) So if you're tough to stomach the rollercoaster (which is 100% understandable) then you're never far from pushing pause, and coming back into this ride at a later date! Either way, the team's probably not a fan of the unknown curve-ball/rollercoaster situations so they're doing their best to consider risks in the unknowns, strategy, speed, sustainability, and trying to come up with one that provides the highest level of confidence I'd imagine.
- Manage expectations - Ambiguity and uncertainty is part of the process.
- Plan for the worst, hope for the best - Crypto could implode in a heartbeat.
Thanks!
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