J3 FA 07 Rune Christensen MakerDAO and DAI stable coin

so hello everyone my name is rune Kristensen and I'm the founder and CEO of maker Tao and today this talk is called mega Tao and the dice table coin and the goal is really to just give a very you know high-level basic overview of what this project is and so bear first I'll just like explain let me use this explain maker itself right so so maker or make a Tao you know Dao decentralized autonomous organization is it is actually the first of that kind or the first Dao in the history of aetherium it's actually a year older than the Dow itself and what it is is you know a platform for stability so right here and it's a platform in the sense that it's a smart contract system that's live on aetherium right now and you know so it's like fully decentralized system with a number of smart contracts that people you know thousands of people are using for their stability needs but it's also a community that's supporting this platform and basically together these two things form this concept of a Dao right like a fully autonomous system that provides some service through blockchain technology and so this stability service that maker Tao provides is something very specific namely the dice table coin so the dice table coin is actually the first ever decentralized stable coin for a theorem and the most important thing to know about die is that one die is worth one dollar one die is equal to one dollar and you can actually go check right now and like Carl Meyer cab and check the price and you'll see that the price is well it's very close to one that let me call this soft pick because there's always going to be some fluctuations and this is incredibly useful because it means you have you know a cryptocurrency with all these characteristics of you used to of crypto right you can send it instantly it's an easy 20 token can hold it in any wallet and you can use it with with depths and you can do all this without having to worry about the volatility of cryptocurrencies that you normally have to deal with when you use any sort of blockchain application and yeah so I mean so why do we need stable coins right and this is just a random like little funny picture of the etherium price at some crash about a month ago but it could you know this could equally will apply to to you know these past couple of days right we probably all felt well that was like you know what this was but this kind of scenario feels like and now you know so imagine being someone who's like a DEP user or a business using trying to use cryptocurrency in their daily operations or something like that and having to deal with this right it's not really optimal but now let's have a look at what the dye price was like during this crash so that's what the dye price looked like right and and like I said this system is live right now so this is actually the real price on the market right that people were exposed to if they held and use died during this supposedly terrible crypto crash that was happening and this is you know that's just really why this stuff is so important right because it means you can now actually use crypto without having to worry primarily about volatility and bubbles and crashes and that kind of stuff which really is right now what mostly characterizes a space right it's like icos hype bubbles crashes but all this stuff when it should be you know technology innovation new applications and all of this you know potential that's lurking just you know behind the he you know the the horizon so to speak right it's like it's there but it's not really being seen just yet and we actually believe the main read for this is because there hasn't been a real stable coin yet right so there just hasn't been this opportunity to build something real that you can then go and you know get real uses to use because a real average user who wants to you know use some application to make their life easier in some way no matter what you offer them they're not gonna they're not gonna accept it if they have to deal with crazy volatility so dye really solves that problem completely and basically you know it's like a new error for blockchain technology because it's something everyone will be able to use like I said is in the ERC 20 token it's fully centralized it's live right now and it's in the in the process being scaled and I'll get to that in a moment but it really will just unlock you know the next stage of blockchain technology but first let me just talk a little bit about the history of the project because it's actually one of the oldest projects in aetherium and in fact the stable coin movement as a whole is extremely old and goes back to the very early days of Bitcoin so as its so you know it's written here right it's um like originally there was this market crash Marx crash that led to to this 2014 year where the entire year bit color was going down all of cryptocurrency was crashing back then there wasn't really any interesting off point though so there was mainly just Bitcoin but this actually led to a lot of people forming and and joining this new project called bitshares which was the first stable current project that actually attempted to create a real stable coin and many of the major tower team were a part of this bitshares community and then as aetherium came out what happened was a lot of us sort of migrated over to a theorem and realized that a theorem was really the place where it would be possible to sort of bootstrap and and enable this stable honey ecosystem and really have it realized its true potential so we just went to work before etherium was even launched actually like I said it was one of the oldest if your projects and we are just about to have our three year birthday this March 26th but yeah for those past three years what we've been doing is basically just heads down working on developing a system because one of the things we realized very quickly and us was really shown with the Dow hack is obviously that if you want to make a fully autonomous system security is so incredibly important and it's something you can't you know there's no easy path to like make a secure system it's just really difficult and hard work and takes you know like very like a long time and sort of like very iterative approach where you just do you know I mean ultimately you have to just like make sure everything like everything is done right right and there's no like little small flaws or holes anywhere basically in the entire system so yeah so we realized that it's about you know focusing on building stuff focusing on you know just like taking taking like step taking step by step right so one of the first things we did was we build actually the first decentralized exchange for theorem which is called Oasis Dix and that has been live for about two years at this point and nowadays it pretty much looks the same as what it did when it was first launched but there's actually some exciting improvements coming to a sistex in the near future but that's that's something for another day then last summer actually so at this point about nine months ago we actually launched the very first version of dial you can say which we called sigh because we want to sort of emphasize it was an alpha and like I said earlier right we have this like very careful step by step approach so we've been you know we've been very focused on making sure that we roll this stuff out very slowly and avoid anything that looks like you know a Tau disaster again so si was launched last summer it ran for about six months and worked flawlessly basically it you know we had these stable coins and they were worth one dollar and we use them for our internal like budgeting and there were a few uses of it the market cab ended up being something like two million dollars at the end of the the Alpha and then December 17 we launched the current version of that which is now live on the blockchain and it yeah I mean it's been working since then right like I showed there was these this showed the price graph before right it's it's holding its pick at the one dollar and it's actually grown quite a bit more than that what wheel outside grow there's currently about twenty million dollars worth of dying existence which of course is still you know peanuts compared to what the system we're building is actually able to handle because ultimately this stable coin system and you know in fact pretty much all of luck changing now is about this like immense scalability you can unlock right where you can actually allow everyone to to sort of hook into the same single system right and just like use one infrastructure that can then handle any level of you know pressure on it without failing to like failing due to take not the technological reasons but in particular also because there's not this central you know centralization risk that makes it sort of safe for everyone to rely on the same system and so what everything is building towards right now is this great launch of the multi collateral version of a system that's coming this summer so that'll be one year after the launch of the initial alpha will actually release the final version of the system which is then this you know this is scalable application that will take to the mass market so what I'm going to talk about now is this scalable future version of the system and yeah I'll explain exactly what the difference is but but so so here's how it works right like now so you know the basics basically system symbol you have one die it's worth one dollar that's all you need to know if you're use of the system if you're you know like an expert or some financial person or you'd like a blockchain douchiest or an advanced use of the system you of course want to know what's going on behind the scenes right and how is it possible to actually create a decentralized stable point and yes so the most sort of basic principle that's important to understand is to think about the principles of the you know how money works during the gold standard right like during the gold standard basically if you had some money you could go to the you know go to like the Federal Reserve and you'd get gold and return for your money and it is this you know basic principle that there's some valuable thing behind my currency that makes you as a regular person able to really trust it right because you know okay this that my money has value because there's something else that has value behind it and that's what makes me trusted and that is really the you know the principle behind die except it's not just gold that's backing it but there will actually be gold backing it but in addition to gold there's also you know like eath assets there is going to be a whole range of other things for instance any other token on theorem but also stuff like in a short cut in the short run will have some real estate related assets will have possibly have actual fiat currency so it'll be like like so part of the the dice table coin will have real fiat backing it and what's really cool is all of this backing of the of the stable coin it's done you know an ad by a decentralized system and it basically works like a big automatic balance sheet that's like taking care of all of these you know like like basically ensuring that for for all the stable coins that exists there's going to be there's going to be even more collateral in the system right there's like even more valuable assets behind the stable coin and overall this system is always solvent and it's something that anyone can verify you know like going an audit in real time at any time they want the sort of individual like entries in the balance sheet you could say are called collateralized depositions and collateralized depositions are sort of the the part of the system that advanced users interact with because they can actually go and they can use these these smart contracts actually right so they're sort of individuals my contracts in the system advanced users can go and they can actually use them to generate dye through the system itself right so anyone actually has the ability to generate diet through system you know as long as they make sure to put enough collateral to back that dye and that's really the key point of system again right is that there has to be you know for every stable kind exists there must be even more collateral of like you know good collateral behind it making sure the system as a whole remains solvent and sound so this is just like a really basic overview of how sort of the like the use of flow of generating dye and then later like repaying it and getting your collateral back so basically the way it works is that you have this collateralized deposition right like you create the smart contract then you put in some collateral so you can see here so this is like a pile of collateral and that could be something like gold or eath and then and so in this case someone put in three hundred dollars worth of collateral once you've put that in the system the system then allows you to generate dye up to some amount that's less than the term collateral so in this case one hundred and eighty five dye has been generated with this $300 as collateral and that means you as a user now suddenly hold 185 die in your hand that you can go out and spend on stuff or yeah I mean you can go out and use it to to buy you know go for spending like real worth spending or you could do something like purchase even more of the collateral asset if you want to go leverage like if you want to leverage your position so the system essentially enables margin trading because then of course what happens is this 185 die that you've generated it's sort of recorded in the system right in this balance sheet and then the the basic mechanism is that if you you know you have this $300 worth of collateral but you're not gonna be able to get it back unless you actually go out in the market buy back the same amount of die that you initially borrowed then paid back to the system so you sort of remove your tap again and you're able to retrieve your collateral so actually a really easy way to to make an analogy of this is is how a mortgage works right basically what happens is you you go to the bank you show them your house basically they they take a look at your house and decide how much they think it's worth and then they say you can you know we'll lend you this amount of money if you put your house as collateral and now you have a bunch of money you can go out and spend it but obviously you're going to pay back you know the debt that you now have to the bank over time because you want to retain ownership of your house right you don't want to risk that yeah the bank will actually go and sell your house which is what will happen in the system if you know like or in the in a mortgage situation in certain scenarios right so one is that you don't pay your debt and the interest rate you know like the debt just keeps growing over time and eventually it's sort of like the debt sort of goes up and hits some some critical point where there's no longer enough collateral to back the debt or the other option is that like the other scenario is that the value of the collateral Falls right I just shown here like so suddenly the collateral is only worth this much right so when that happens basically there is this this point we call the liquidation ratio like there's some level of collateral to debt where the collateralized debt position as a whole is no longer considered safe and it is in this scenario that the system then sort of uses this it's you know autonomous you know ability to to you know like it's a smart country right can actually do this as you know even without being controlled by humans or anything like this this works completely automatically and what it does is mainly goes out sells your collateral retrieves enough money to cover the debt and then gives you whatever's left over and this ensures that even when if the price of the collateral in the system Falls the system sort of balances out the you know equalizes a balance sheet over time and make sure that this balance is maintained where there is always more collateral and there's that and we you know we've seen that happen in real time you know for nine months at this point right so basically what happens is every time there's a crash in the price of eath there are some people who has to say flew a little too close to the Sun basically and kept like too small a buffer of extra collateral in their position and then they end up getting liquidated by the system and and that way that's why you know we can maintain this like stable price even regardless of what's happening to these rice butts going up if it's going down it doesn't matter the system sort of continuously keeps everything in balance and maintain surprise at one dollar of course it's not you know just just using liquidations alone isn't going to always guarantee that no matter what the system will remain stable and so there is this concept of the Black Swan event which is basically that something extreme and severe it happens in the market that sort of the the traditional financial thought isn't able to preempt basically but it also really like in it's also another way to say this jump to default right like it's just like where it's where something like a collateralized debt position like in the concert graphs system rights where a collateralize deposition basely sees it collateral suddenly plunge to basically nothing before the system even has a chance to react and sell it off in a market to recover the the capital for the debt and so there needs to be some additional mechanism to deal with that even though it's a very unlikely scenario right it says here this like like right now with what we with the system we've running right now we need to see an instant 70 percent fall in the price of e so that's like a 70 percent crash from one second to another and you know we've never even seen really a 70 percent crash ever really happen mean like anything you know like you need you know to believe something like that happens over a very long period of time or at minimum a couple of days and as long as that's the case the system can actually totally handle it but there's always going to be like regardless it's still something that needs to be dealt with for some you know in order to make something that's truly scalable and and trusted by you know an entire economy or you know global finance or you know all these long-term potential there is for like a truly scalable and reliable financial system right so there's a number of precautions that we are taking that you know that make that that makes it possible to deal with this risk and the most important is just to diversify the collateral right so and in fact that's really the main thing that keeps like the system as a whole safe and really keeps die as a reliable and stable and you know safe store value is that the assets that backs it is not just going to be like a bunch of coins or something or like a bunch of you know only precious metal or something right it's actually going to be the most possible diversified and like wide-ranging different types of assets so even if there is this you know jump to default black stone event happens happening somewhere in the economy it's still only going to affect a smaller portion of the overall collateral portfolio and as long as that is the case we can actually deal with it you know we're actually able to to design a system in such way that it can recover even from like a sudden crash in some of the collateralized depositions and the way we do that is through maker itself essentially right so like the final component of the system is this idea of like the maker Dow that's behind the whole thing so basically so so what maker is on one hand is like is community of people right it's currently more than 4000 people who hold a bunch of these MKR tokens so there's there's a million tokens in existence in total what it doesn't say here is that 350,000 of those are still held by the foundation on a being distributed over time well the rests are all in the hands of the community and our trading freely and have been trading for for three months at this point it's a very high-risk asset but potentially also is very high reward because it but and also it's like a high responsibility as it you can say as well because basically MPR holders have the right and the ability to vote directly in this autonomous system and actually like they set the rules directly through aetherium transactions and they set rules for instance for how the system is diversified so they basically say we want this and there's an it you know this these types of collateral we want and this you know we don't want this is too risky and and and like that basically on one hand and on the other hand a set of the individual parameters for each type of collateral saying something like with gold you need you know 10% extra collateral right but with eath you need 50% extra because we think eath is more risky than gold for instance and that's all great as long as everything is going well they actually will earn a continues income because MKR is necessary to pay the fees in the system but if they make a mistake and there is you know a Black Swan event and there's this like like insolvency basically where there is some collateral that's not enough to cover the dead of the system MKR holders are forced to bail it out directly themselves and you can basically think of it like this right so basically when the system is going well the total supply of NPR continuously decreases over time and everybody's happy but then if there is some mistake or there's an unforeseen crash something like that the bad depth has to be recapitalized through the dilution of the mpi acid so the MKR supply will spontaneously increase as the system autonomously prints a bunch of mpr and then sells it on the market and then like brings in a bunch of new funds that are then used to you know keep the system fully solvent so here's just like a final overview of the system as a whole right so basically you got the dice table coin that's worth one dollar it's backed by collateral that are held in a CD piece and anyone can use these CD piece so that's anyone like so there's open access so that you don't need anything special to be able to to use this part of the system and they can generate dye as well as you know putting this collateral here that guarantees the price of the dye and they do they do this on on terms set by the MPI holders who you know they managed they you know the the terms of the CV holders and then in return they get this stability fee that is paid with mki acid but then ultimately the MPR acid is also in return for the stability is forced to act as a final guarantee for this price as well and one of the great things that this creates is this you know like this alignment of incentives where MPI holders have the same incentive as tie holders to make sure that the price of dye remains stable in the long run okay I think that's all I have time for yeah we still got we get okay then let me just actually very quickly yeah just very very thought about this okay so here's a bunch of industries that are going to be massively disrupted by die and stable points right remittance is a really obvious one because it's you know it's actually happening right now even with volatile assets that like even with volatile cryptocurrencies that you can send money really easily if you buy Bitcoin in one country and you sell it in another country now you suddenly instantly move the money there but and there's a big downside currently and that is the volatility of Bitcoin and eath and and the other fixed supply cryptocurrencies mean that there's a pretty high spread you have to pay when you do this and that's obviously solved by diet because it's a stable corn so the spread is incredibly low against fiat currencies and we're working with a number of ribbons companies who are all you know incredibly excited about starting to use diet just because they can it's so obvious how this is solving a major pain point with them supply chain is another industry that's it's just like majorly disrupted by a system like maker and diet because not only is it really useful to have a stable point for settlement in us in you know an industrial supply chain but also there's like typically big issues with financing especially for smaller participants in supply chain where typically they're sort of squeezed financially by their business partners who all want to pay pay everything upfront but refuse to pay them any money until something like six months later or whatever you know like just always try to sort of squeeze them on the terms and that means if you're a small business in a supply chain you typically have to borrow a lot of capital at a high borrowing cost because the banks as well they're like well your small company I'm gonna give you a high interest rate and and with our system we can actually come and really disrupt this because because of how you know we in a bowl basically credit creation because you can take collateral and you can use that like you can take real assets and can use them to unlock liquidity through our CD piece and we have this recently announced partnership called the stable fund which is a partnership with elf for one of the really big blockchain incubators it's based in Canada and anyone who is doing basically any sort of crypto project that's folk on solving real problems and you know doing something real in the real world she'd come to us because you'll likely benefit from integrating a stable point in your system possibly even integrating CDP's or other parts of the system because there's actually many different ways that you can build on the maker platform so you can go to stable dot font and we'll fund you and we'll you know support you with technology support your business model and basically everything you could need and so this is just a screenshot from from the interface of the system as it currently runs on systems and here you can see there's like the heated says of 17 million outstanding died and I think today it's like 20 million so this is a little bit old but yeah that's that's what it looks like and what's cool about it is it gives you like this full insight into what's going on in the system right you can see exactly how much collateral there is at the time this was taken there was 70,000 eath backing this this 17 million died and in now it's not possible me but you can actually go to this website you can actually scroll down and you can see the individual collateralized depositions and how they are individually collateralized and actually any of you could go to this side right now you just have to go to dai right die maker.com and you can actually check it out even without like a that browse or anything you can just like you know aw did the system essentially and see that it works how it's supposed to okay that was my presentation yeah unfortunately I don't think I can take any questions [Music] [Applause]