MakerDAO Breaking down the DAO and Road to Decentralisation - Jocelyn Chang

foreign [Music] and I'm the APAC growth lead from make it out so today uh I will talk about some of the challenges that make it out actually face uh when we are transiting to make it out 2.0 uh and to talk about you know how much decentralization is enough and how does make it out focus on building a stronger governance structure and finding ways to balance profitability with decentralization which is I think it's a constant struggle for a lot of dials in the space uh so before I start right how many developers are there in the audience oh everyone uh Community Builder no okay all right um all right um so so obviously that was uh here today and it is an emerging part of the ecosystem the ethereum ecosystem so today there are about five thousand dollars out there uh that you can potentially be a governor of and uh obviously some might be focused on um you know fundraising or investment and then well others may be focusing on just specific verticals or social causes so I actually took this diagram from git coin that report that they published last year um I mean this goes to show how complex you know Dow decision making processes right if you look at that model on the left uh as a splice of uh a vote delegation data so each node is a folder and each Edge is actually a delegate a delegation transaction and uh and and imagine this is just get coined out you know voting uh decision um so so why do we want to learn about Tower um obviously by studying different dials you know we get a better understanding of uh the various ways in which they are structured and governed and for example some dials may have a more democratic decision-making process and then some of the dials may be a little bit more uh centralize or you know like a hybrid you know like decentralized centralized uh uh governance uh structure um so so that was essentially enabled by the smart contracts right and they're supposed to be self-sustainable but uh but but the thing is you know like I think I figured that a lot of doubts out there today they tend to actually focus on you know a lot of short-term plans for example building the culture building the team you know um you know building the product roadmap and then obviously fundraising um and think about and and scaling the protocol itself so um and a lot of times you know um you know like basically mapping out like long-term strategy for the protocol get left behind for example you know building a sustainable doubt right like because it is supposed to be self-sustainable like you know it's powered by a set of smart contracts um so um uh yeah so I'm just gonna share a little bit more about um um make it out uh Journey itself uh before diving deep into the governance the new governance structure actually so if you look at uh back in 2017 you know Psy which is the first version of die back by just ethereum was launched in 2017 by the maker down foundation and then uh in 2019 we have the multi-collateral dye launch uh which is backed by various types of different decentralized uh collateral types for example you know your LP pools and curve you know Eve stick Eve and then like stick Eve and then some other governance tokens for example uh you're in finance uh mana decentraline mana token polygon Matic uh uh as decentralized collaterals and then fast forward to 2021 the foundation dissolve um so the foundation was set up in a way where you know like we had always one set up in a way where you know eventually the foundation will be dissolved and it will become a doubt it is in the name itself right make a doll so um so in 2021 the foundation steps down and actually hands over I think 80 000 of mkr token to the dial and transferring the full power to to make it out token holders and uh in mid 2021 uh that's where we go on a full download um so we went on a full download where I think they're like about 10 different core units being established for different various purposes you know we have the protocol engineering core unit which is in charge of building the smart contracts for the protocol and then we have the growth core unit which I'm actually currently working for which will be dissolved in two months and um so we um I mean essentially you know like uh core units are just you know like departments you know within the dial itself uh uh uh uh you know con uh yeah contributing to to the protocol so and then um and last year uh we had a new end game plan and that was introduced by um the founder roon Christensen so roon actually came up with a new End Game Plan uh which I'm gonna share a little bit more about uh End Game Plan later on and um and then we have the maker institution approved uh early this year and then um right now we are going to uh we're in the midst of actually restructuring the governance model um right so the existing governance model uh it's powered by three pillars right which is for example you know like we have contributors like me you know contributing to the protocol we get paid for for for for working for the uh for the protocol and then we have the maker Improvement proposal similar to the ethereum foundation ethereum Improvement proposals where Partners can actually put proposals those and uh and and to drive uh uh yeah to put for different proposals to to get decisions um um uh to make decisions about you know various different parameters within uh the protocol itself for example die um I mean like for for that to be minted um you know a vault holders will have to over collateralize at 150 percent today uh but for different collateral type um other than ethereum you know the the collateralization ratio could be higher so these are being these are the decisions being made uh uh by the the mega token holders right and uh we just yeah which is the third pillar you know we have the mega token holders and their delegates coming into uh make decisions uh to to make important decisions for the protocol itself and um so yeah so late uh so this end of the year we will be launching uh six confirmed sub-dials so they're essentially like you know smaller down coordinates within the protocol itself um there you go so and for all adults including make it out right uh the key goal for a dial is really to you know balance uh decentralized governance and operational effectiveness today if you look at you know how long-winded or slow the governor's process is it is because you know those are very much relying on decentralized governance and uh and because you know we don't that there's no uh you know CEO you know in charge of you know anything so so decision making process becomes very uh slow and contentious and and another goal for Dallas is also to balance uh the trade-offs between decentralization and profitability of those right for example for make it out we have uh centralized assets backing die today so like usdc and um so so I know I do know that a lot of community sorry make it out community members the against you know the idea of having collab uh centralized collaterals in the system backing die but the thing is if you look at um say tokenized lower assets today tokenized real world assets for like tokenized bonds uh uh uh actually bringing in 75 of revenues to the protocol so we have been actually working with different banks right in Europe and us you know but in Europe uh with Society general which is the second largest French Bank uh it started out as a pilot you know recently uh they mentored 30 million die against uh tokenized bonds backed by Consumer loans and then we have Huntington Valley Bank which is a tier 2 Community Bank in the uh in the US they likewise use tokenized syndicated loans as collateral in the system to mend 100 million worth of diet so that's a lot of revenues for the protocol and uh yeah so so that's something that we need to balance you know like basically the profitability and uh and and decentralization because ultimately I think Dao is still a business you know we need to make money to pay contributors and to make the mega token holders happy and uh and yeah uh so so so that's something regulatory risk um thou exists in a very very gray uh area today because there's no legal structure to to determine what a Dao is and uh for a dow to basically you know like it's like you know how how do Dao even actually function without you know traditional corporate management structures right um and and you know what is how does the legal status uh uh uh be be defined and uh if there's something happen to to a Dao you know if the the funds are stolen from the protocol who are accountable so these are the different questions uh that uh uh that you know I think even People Like Us in the space contributors Like Us in the space uh trying to figure out you know addressed uh and policy makers and Regulators are also slowly looking at regulating dials uh in the U.S I know that they have a Wyoming down law and uh yeah so so so I mean that's I think probably the first uh uh first of regulatory framework put for for dowels right so um so the key challenges that we're facing today is obviously you know like I said you know uh the very slow and contentious contentious decision-making process uh and it is difficult to achieve like decentralized environment because it is just too slow and uh yeah and as um that as the dial or or the protocol actually get more users you know like uh you see a lot more nuances in the Forum so uh it's very difficult to actually filter off all these proposals being put forth by both the partners and also the noises on the Forum you know the feedback okay I wouldn't say noises yeah and yeah so and that also slows uh slows down the decision making process uh profitability again like I said you know it's very difficult to balance uh uh the desire for profitability with the need for decentralization because like all the dials um at at least for Mega doubt right uh the the the the the the the purpose of launching maker has been always you know like for decentralization maybe along the way you know we have we onboarded some centralized you know like collaterals in the system you know but uh essentially I think what we are trying to aim here is really to build a decentralized protocol where it is 100 censorship resistant and that is also why we are going through this transition right now to build a stronger governance structure to take that complexities away from the current protocol because we have way too many you know centralized verbal assets that are exposed there uh to to to to the real world regulatory risk um yeah and uh so so um as you know uh you know you guys know you know I I think it is very clear today that you know how regulator rules will actually change the Dial's Direction uh and therefore I think it is very important to take in consideration different possible regulatory stances or uh scenarios and plan ahead your uh development roadmap or you know like even protocol roadmap so so these are the three different stances of collateral backing die itself um so this might be outdated but then I think it's a good idea to actually showcase you know how we take into consideration all these different possible regulatory uh environments and basically make and adjust you know the different collateral types in the protocol itself so for the first three years pigeon stands is that we maximize a full growth within the the protocol so we doubled down on all the real world assets uh collaterals in the system for example you know like uh uh you know all this tokenized railroad assets that we have an onboarding uh in collaboration with um centrifuge and and we will use that income which is the revenues to acquire more if so basically going back to the Genesis time would die or Psy was just backed by ethereum because today we have like more more than just ethereum right and then so ideally after three years which can be delayed by governance uh as uh more like a balance between you know growth and resilience where we will where we plan to actually reduce the the railway access exposure to to just 25 so that is only if we find that you know there's maybe a slight I don't know like authoritarian threat you know to the protocol that's that's that's what we will do which is to to to reduce rwa exposure to 25 and potentially free floating die away from the US dollars but again like I said right it can be delayed by the governance and obviously uh it very much depends on the regulatory environment and then so if the threat of authoritarian or regulator attack grows uh what we will do is that we will basically uh I mean we will still have like uh variable Assets in the system backing die uh but we will Implement uh physical resilient collateral centralized collaterals in the system which means you know like uh uh you know uh yeah which means uh Regulators cannot seize all these assets right um you know it has got to be on chain you know somewhat on chain and uh and uh yeah again you know free floating die away from the US Dollars it's also likely if that happens um so what is the Mega new end game plan so the new end game plan is it's to break down uh the doubt into smaller doubt core uh Dow units right uh for example uh you know like there are I think four sub-dials now uh being spun off um I don't think we are the first to actually uh spin off sub-dials but for us I think the aim is really to overhaul like how make it up functions in its core uh you know core units which is the existing structure can be uh you know dig a little bit gatekeeping sometimes because uh because I mean looking at the amount of proposals being submitted to The Forum someone has got to do the filter right and the core units which is the core country uh contributors or Workforce um will have to do that you know like I don't know filtering so sometimes we can be deemed as um gatekeeping but then uh but I think uh you know at the beginning when you launch a dial when when when there are a lot of proposals I think there there must there must be a filter in a way I mean I mean that's that's also the very reason why we recognize that you know it is an issue you know like core units and core units cannot be submitting proposal on the Forum and also EX at the same time executing it so so that's also the very reason why we're spinning off all these different sub-dials with different uh Scopes and Frameworks foreign basically to remove all the complexities and you know keeping the core protocol lean uh the core protocol is essentially just make a protocol uh which users can go to and borrow die or men die against ethereum so so that's the end game you know like uh for Mega down and then you know all these sub-dials will be in charge of say for example you know the tokenized role assets and then uh you know incubation of other different protocols built on top of Mega dial so and all these sub-dials are supposed to you know adhere to the make a constitution so the maker Constitution is um essentially you know like guiding principles to lay a new foundation for the protocol's governance uh development and Investments of its reserves within the treasury um and then it is also a set of official documents right which consists of 12 different articles to lock down all the rules and scoop areas of Mega dials operations so so this is what I was saying um so while we are entering the new end game era for make it out this is something that we are in the midst of doing basically to restructure the protocol governance itself into a constitutional both the Committees and constitutional delegates so what is constitutional voter committees um and my view they're like political parties so basically you have different political parties you know forming different strategies you know uh which is aligned to what uh the mega token holders want and then the you have the members of which is the politicians joining this cbc's you know like um making sure uh uh to uh so CVC members which is the politicians discuss the vision and make sure that the Constitutional delegates actually follow the CVC strategy and then uh so in another words cvcs are like uh political parties like I mentioned before and then CVC members are like the politicians and CDs with just the Constitution delegates are like uh experts that are hired to um that are tasks with removing all these different proposals and strategies um understanding them and making sure that uh they will vote according to the CBC strategy that they're following um and yeah because I mean as the protocol actually grows uh it becomes way too complex and uh and this is something that uh that that that that that the new governance Proto uh structure um that's doing to help you know uh taking that uh yeah to basically decentralize the protocol more so these are I'm just gonna quickly go through a few of the key changes right but then uh the Constitution so you have sorry 11 constitutional articles and 12 scope Frameworks and uh one of the key changes is to invite constitutional concept uh conservors uh which is the external parties to facilitate governance operations and then we are also allowing delegation of Mega tokens as collateral because today um mega token holders will have to stick the Omega token uh in order to vote and uh but that comes with an opportunity cost right because you know like um there's um you know with the current market environment there's a lot to do with their governance tokens so so this is a big change uh to to to the Constitution allowing um uh voters to be able to use maker tokens as collateral to men die and um so we'll be launching six sub-dials uh by end of the year alongside with the activation of end game and uh yeah I think that's pretty much about it um for the Constitution so there are about 12 different Scopes um yeah these are the different Scopes and Frameworks uh uh which is established uh I mean which is to establish the functional limits that make out the protocol and die must operate within uh so these Scopes also outlines uh the specific areas where contributors can focus their efforts to improve the systems uh while staying aligned with a maker Constitution and end game goals so there are four ecosystem actors if you look at these five different companies being spun off right uh is uh it's it's basically they have been incubated and onboarded by the mega governance um and so basically the work previously handled by the core units right is being moved to all these multiple independent companies today uh independent Contracting companies today to to basically improve decentralization because you know like you have you know all these companies that are not part of uh part of the core dial so the corridor will will be just you know make a dial die ethereum and uh so the structure will become more Project based I mean as in a lot of all these different companies right they will be paid on a project-based funding um and uh so basically having been involved with the in in both systems right I think this one is already looking to be much more efficient because um I mean as the protocol actually develops like Mega Dao um we have a lot of things that are already built and I think the the things that we need to improve is actually governance process so for example you know we're protocol Engineering Building um multi-collector or a multi-chain strategy um and you know those uh separate projects right you know like they're not they're not they're not I mean they're not part of the core protocol in a way uh yeah and so um so all in all um and sorry this is what make a two make it out 2.0 will become um it will become a third-party ecosystem um it will be formed by third party ecosystem players to create Solutions on top of the makeup protocol um all these independent companies rendering services to make it out and it's sub-dials and then we have uh an obviously right now we're you know going through this restructuring um you know we're building a more decentralized robust governance model and uh with this stuff that was being spun of uh there will be a new tokenomic system for all these top Downs so meaning that they will be having their own governance tokens so with that um yeah let me just end this presentation with a quote from laozu um the Journey of a Thousand Miles begins with one step because um I think dials are still a relatively new area and uh there's so much to be learned and explored uh in terms of their potential and limitations so if you are decentralization Maxis you know Taos this is just the beginning I mean you know like if you're building a dial you know there's there's so much to learn from other dials and I think as long as our intentions are pure um you know making sure that you know when you're building a decentralization a decentralized protocol meaning that you're building one and not you know like just I don't know like you know a hybrid one um and as long as we continue to experiment with um all these new building blocks and and new structures uh to to to to to improve uh the shortcomings I think Dao's in the very future can very well become a uh the only way to actually organize that communities right it might not be I don't know now it might be I don't know a decade or two decades from now right so so I so so I think what I'm trying to say is that Dao is still very very very very new even for make a doll being the oldest down in the space yes um yep that will be all for me questions from the floor no oh yes the orsup does being spot and this if you're curious of this for um so so there's a refi uh subdial and then there's also a railroad assets sub-dial and uh the other two uh wait hang on let me see yeah I mean uh Viridian is the rwa subdial and then Phoenix Labs oh yeah and Phoenix Labs the new uh uh lab similar to like uni swap labs to incubate like protocol so the new protocol built uh uh that will be built by that will be incubated by on launched by Phoenix Labs will be a protocol called Xbox protocol which is an Avi Fork yeah so yeah I mean keep a lookout I mean there will be a lot more protocols you know like being being incubated by Phoenix Labs uh I can't remember the other one yeah um well I mean looking at the current regulatory climate right or even economic climate it's just doesn't make sense for us to look at you know some other risky assets because uh in the past we have been working very closely with centrifuge tool to use their tokenized invoices as collaterals um you know and uh those actually uh has some wrist to it right you're talking about you know like a company uh defaulting on the loans and stuff like that so so the Korean I mean the current the current strategy is really to use uh the 1.25 billion usdc and the pack stability module and use that to deploy into uh short-term money market funds uh and uh us tbos you know that is giving like fetching like about four point five percent five percent yield right now uh you know and basically use that revenues you know Pump It Back to the protocol pay the contributors I don't know burn some maker you know make make the token holders happy yes um something like that yeah so so uh but I do know that uh yeah I think one of the subdels will be spun off to basically focus on decentralized uh collaterals so we have been actually in the process of off-boarding a lot of decentralized collaterals uh this weekend last week yeah so yeah thank you as to how delegates um yeah I think if I'm not wrong right I do know that cvc's uh CVC members or facilitators I mean I don't know what is the the term for it or they will have to stick their maker they need to own a certain number of Mega tokens in order to to set up a CVC a committee yeah delegates same thing I think yeah yeah so I don't know like there's a lot of things going on right now I mean like uh yeah but if you um if you want more information I can actually send you a link yeah yeah afterwards yeah and the bottleneck well I think the bottleneck is still the governance right uh too many people making lucky decisions and then that slows down decision-making process uh yeah and uh and the thing is I think as the protocol become more complex um you know there's a conflict of interest or even you know like a incentives uh uh I mean the difference of incentives you know uh incentives are not aligned with all these different makeup the stakeholders within the protocol uh it's it's very difficult to to yeah to I don't know like yeah I mean it's just yeah I think that's the key bottleneck I think the only way to really move forward is really to you know take away that I don't know independent delegates uh delegates these days right I mean they're also sort of I mean I don't want to say the wrong thing um I mean I mean okay I'm just gonna be very honest with you because I think the group is very small here so I mean a lot of people actually see Mega as the most decentralized Dao and the space right I mean we are struggling with you know the whole centralization within the protocol because you often see you know certain decision being made by you know a party or you know a group of delegates that are that are being delegated this much Mega tokens you know so um yeah but I guess you know when Dao's uh progress you will you will start looking at it like a country right you know you have all these different political parties and then you know and they have different strategies of making sure that you know uh the the country does well so uh this is what I think that will become in the future yeah um still doubts but see I think at this I mean I think there's a different definition of Doubt all right I mean if you come to think about that like um I always tell people that Dao it's I mean Dao doesn't mean that you cannot have a leader I think it is still very important to have a leader to set the direction for the protocol because no one else will do that trust me like really I mean like I mean that's why people call it leaders in the pack right I mean there's always a leader in the pack you know so um and uh does that mean that it's decentralized it's not decentralized I don't think so because you know decentralization can take uh uh I mean they can be in the form of decision making process right instead of just one CEO of a group of board members making decisions for the particular subject you know you can like I don't know like maybe hundreds of different token holders voting on the decision yeah I think it boils down to definition and uh like I said you know like I think and over a maker I think is essentially what we are trying to do is really to build just one simple base layer of you know make a protocol powered by uh back by just ethereum that's it yeah or you know like uh uh or or physical resilient collaterals where it is it is not possible to be seized by regulators yeah and then you know if you if you want to like you know work on it or expand on like tokenized world and said that has got to be that will be handled by another stop down or or or an independent company yep no okay that's it I guess all right thank you everyone thanks for your attention