Aligned Voter Committees are going to be “disabled” for the rest of the Launch Season, according to the newest scope edits proposed by Rune Christensen. At the same time the number of compensated delegates is reduced from 8 to 6.

https://forum.makerdao.com/t/mip102c2-spxx-mip-amendment-subproposal/23971/7

We had proposed a change to the AVC system before in this newsletter, and it seems the thought occurred to other members of the MakerDAO governance apparatus too.

This edition of the newsletter will be dedicated to reflect on our personal learnings from this experiment as seen from a contributor perspective.

We started joining the Composable AVC because composability is at the heart of what makes decentralized finance powerful. We also felt the other contributors were good thinkers in the overall governance space, many from outside of Maker governance.

The level of in-depth knowledge of the scopes and the Atlas required was quite substantial. Given that AVCs are meant to make specific proposals for changes to these documents, that is not surprising. But the reality on the ground was that some contributors didn’t have that knowledge, coming from the outside. And a few didn’t want to acquire it.

With the compensation for active AVC members, it could have been argued that it would be a well-paid full-time job in many, if not most, countries in the world (given today’s MKR prices). In some ways though, the compensation seemed to be elusive for many of us, which restricted the commitment to the work necessary. It seemed like even if the quarter was finished successfully, compensation was optional, and the experiment could end any day. This level of uncertainty necessitated maintaining other income streams, and not committing to the work as fully as we could have.

Nevertheless multiple AVC teams emerged and brought their very own perspective to the table.

• ReFi AVC with their focus on the “spiritual” side of things and weekly guests who provided deep insights.

• Growth AVC (for a quarter) by professional governance organizations StableLab and Flipside Crypto, with a focus on Growth.

• KISS AVC with a unique tech stack and a focus on producing tangible results in the simplest and most straightforward manner.

• Sovereign Finance AVC, powered by SEED LatAm members who made a splash with strong weekly guests and a focus on accountability.

• Composable AVC which existed for two quarters and focused on reusing knowledge in the DAO.

• Resiliency AVC with a hawkish focus on cost efficiency.

Each of the AVCs had up to 5 members, bringing the total of AVC members to almost 20. The opportunity was clearly appreciated and attracted many contributors from different ecosystems and specializations. The talent pool was a sight to behold.

Where we think the experiment fell flat is that AVCs were not given concrete path to make an impact and “dogfood” their work. If the pipeline from AVCs to Scope Advisors to Facilitators to Polls would have been more clear and outlined, the resulting proposals would have been more targeted and useful.

Facilitators could also have used AVC manpower to aid them in monitoring different aspects of the DAO, such as Arranger compliance, or to research and propose solutions to thorny governance issues. AVCs not being able to use their microphones on weekly calls, in order not to dox themselves was also a big blocker in the flow of conversations.

We think AVCs were a big success in bringing contributors from outside of MakerDAO into the fold. If it could be combined with

• a clear path to impact

• dependable incentives for actual, useful work performed

• decreased onboarding hurdles

the whole dynamic would produce much more return on investment.

We were thankful to be included in this journey and will continue to be a part of MakerDAO in any form we deem viable.

DAI supply update

Since the last newsletter (almost one month ago!) DAI supply increased by almost 800 million DAI! The whole trajectory seems to have changed. Combined with the chart shared on Discord, something seems to have fundamentally changed.

We really hope DAI can maintain the momentum, and branch out to other chains as well. We have seen Circle embrace new chains quickly and decisively and this has worked very much in their favor.

The ad sections this week is replaced with a meme. Joining an AVC now is not the best use of your time. Three more weeks to go 😭

The last two weeks were filled with a vicious back and forth on crypto Twitter and forums about Maker’s rapacious embrace of profits via Ethena’s USDe and sUSDe.

After a successful addition of GOV 12.2 to the Atlas, MakerDAO set out to capitalise on a current market inefficiency. The cash & carry trade, as it is known, is yielding above 30% and sometimes as much as 60% APR when going long ETH and funding ETH shorts.

From Investopedia:

“A cash-and-carry trade is an arbitrage strategy that profits off the mispricing between the underlying asset and its corresponding derivative. [It] is usually executed by entering a long position in an asset while simultaneously selling the associated derivative. Specifically, this is done by going short the market via a futures or options contract.”

Large inefficiencies like in the current ETH market are usually not available for a long time, which is why MakerDAO Facilitators decided to use a tokenized version of this trade in the form of Ethena Labs USDe.

From Coinmarketcap:

“Ethena's synthetic dollar, USDe, will provide the first censorship resistant, scalable and stable crypto-native solution for money achieved by delta-hedging staked Ethereum collateral. USDe will be fully backed transparently onchain and free to compose throughout DeFi.

USDe peg stability is ensured through the use of delta hedging derivatives positions against protocol-held collateral alongside a mint and redeem arbitrage mechanism.

The 'Internet Bond' will combine yield derived from staked Ethereum as well as the funding & basis spread from perpetual and futures' markets, to create the first onchain crypto-native 'bond' that can function as a dollar-denominated savings instrument for users in permitted jurisdictions.”

Maker Decided to fund MetaMorpho vaults with different Loan-To-Value ratios via a D3M to Spark, who would then loan DAI to USDe depositors. These depositors usually put the loaned DAI to use by purchasing further USDe and create leverage loops.

An initial $100m was filled within less than one day! You can find the first risk assessment by Monet Supply here:

https://forum.makerdao.com/t/risk-assessment-usde-morpho-lending-integration/23924/1

Capitalizing on the demand, Stability Faciliators approved a maximum of $600m allocation just two days later, with a D3M line at $1bn, so the $600m could be further increased without a further executive poll, if risk assessment was favorable and demand was high enough.

https://forum.makerdao.com/t/morpho-spark-dai-vault-update-1-april-2024/24006

It has long been said that good capitalists wait for a long time until the right opportunity comes a long, and then strike with rapacious fervor. This sudden move upset some of MakerDAOs partners. A Starknet lending protocol removed DAI because they feared a depeg of the relatively young USDe could now cause a depeg of DAI.

But the real drama began when Aave’s Marc Zeller proposed to set the LTV of DAI to 0 and Aave founder Stani proposed to offboard DAI completely.

Apart from insults hurled at Morpho Founders on a Twitter space with Zeller, Rune, and Ethena Labs, the really interesting contribution to the Ethena debate was the thoughful analysis of Ethena risks by Chaos Labs.

https://governance.aave.com/t/arfc-risk-parameters-for-dai-update/17211/22

I can recommend reading it because I think they really understand what Ethena does and also understand the inherent risks. I do not believe their recommendations are 100% correct, and are likely political. But it is important to understand that Ethena’s cash and carry trade will trend to lower yields over time, and that Ethereum funding rates were negative on a few occasions in the past.

We do not know if and how Ethena can redeem USDe at scale, because it never had to.

But I do believe that Steakhouse Finance and BA Labs have deeply understood the risks and set very reasonable parameters overall.

In addition to the post by monet-supply linked above, I highly recommend this post by Steakhouse to understand some of the choices that went into creating the MetaMorpho DAI/USDe and DAI/sUSDe vaults.

https://forum.makerdao.com/t/money-view-of-the-makerdao-morpho-ethena-drama/24026

Even with this fantastic analysis there are some issue to call out:

• MetaMorpho vaults are linked to a multisig controlled by governance facilitator JanSky. I do not know why this route was chosen, and it seems to introduce unnecessary counterpart risk.

• In addition to the D3M to Spark/Morpho Andromeda is seeking another initial $50m in funding to acquire USDe. I don’t understand why exposure should be even higher and why an arranger with a 2,5% fee and with no exposure to $ENA airdrops was chosen. The airdrop could have gone a long way to offset the fees, most likely.

DAI supply update

There is a very healthy upward trend in DAI supply, which increased 170m since our last newsletter 20 days ago, likely driven by the high DSR of 13%.

Currently almost 1/3 of all DAI is staked in the DSR. A smashing success.

But it’s also clear that unless Maker can aggressively integrate with more chains and protocols and create lasting demand for DAI held this number will not move much. At the same time the competition is definitely not sleeping. Almost every other DAI sees a new stablecoin being born that competes for the same users as DAI.

Voting update

KISS AVC has proposed some clarification around how AVC members can step back and get removed from the pertinent scope language. We hope the poll will pass as it allows AVCs or AVC members a “right to be forgotten”.

https://vote.makerdao.com/polling/QmeGJyd2#poll-detail

There are nine polls in total for your consideration, of which six are Spark related and three are Maker Core governance updates.

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In order to prepare the Launch Season (see below) Rune Christensen introduced a couple of important strategies this week:

https://forum.makerdao.com/t/governance-changes-to-prepare-for-launch-season/23878

You can read the full post yourself, of course, but I will break down the juiciest parts for you in this newsletter. And there’s a lot in there that is revolutionary.

Clearly inspired by the success of Ethena’s USDe, Rune proposed that MakerDAO should embrace a similar delta-neutral strategy of funding shorts while going long, to juice up yields to solid double-digits during bull runs. At the time of his proposal the crypto markets was exuberant, and yields were above 20% for staked USDe.

Rune suggested that Maker could pump DAI into sUSDe/DAI vaults on Morpho, a new lending protocol, to access that yield immediately while developing its own strategy via custodians.

Risk management and monitoring would be outsourced to Ethena, and Steakhouse Finance is already familiar with the setup of Morpho Vaults. Funding the vaults would happen via a D3M Direct Deposit Module that should be risk managed to dial the exposure up and down quickly. In his latest Bootstrapping Edit, he proposed that the D3M be managed by a multisig controlled by JanSky, a governance Faciliator.

This is a controversial position, because until now MakerDAO has never given individuals control over funds directly, but relied on Governance. Our research has shown that Gnosis Safe can use Gnosis Zodiac App Suite to tightly restrict what members can do with funds, and we are certain a similar approach will be taken here, even if no mention of this security technology is part of the proposal.

This somewhat laissez-faire approach to risk management is definitely new to MakerDAO.

Rune also proposes adjusting the Maker Smart Burn Engine and make it more aggressive.

After the burn rate has reached 400m per year, the burn should be slowed as soon as MKR reaches 8000$. I believe the number is there to anchor expectations of investors at a much higher price target than visible today, or evevn historically. MKRs all-time-high is just above $6,000.

At the same time Maker will increase USDC reserves to prevent a liquidity crunch such as the one that forced Stability Facilitators to raise rates by 10% in a hurry, so Maker would not become illiquid over a weekend, when T-Bill sales are impossible.

Even more exciting than the potential use of sUSDe to boost MakerDAO profits is the launch timeline for SubDAOs. In a forum post complete with beautiful AI art, Rune let the community now that the rebranding of MakerDAO is imminent, and that subDAOs will launch this summer!

https://forum.makerdao.com/t/makerdao-endgame-launch-season/23857

As a result of the combination of bullish news MKR price picked up steam and is now at almost $3,000.

Launch Season will also introduce the Lockstake Engine, where MKR holders can stake their tokens (what will then be the new governance token) to farm subDAO tokens, new governance tokens and more. Users staking there will have to face an exit fee upon leaving, which should help to keep collateral locked, and create a demand pool for the tokens.

Other than that, SparkLends SPK token was mentioned. Spark was gracious enough to publish there Airdrop formula well ahead. Spark could set benchmarks for a fair token launch that way.

The post is well worth the read, if you want to know all the details. But Maker can become a flywheel of value creation, if and when subDAOs launch successfully.

DAI supply update

Since our last newsletter, DAI supply actually fell another 300m. The causes have been discussed on podcasts with Hasu and others recently, but the canon is that neglecting business development with Layer two protocols and even probably the DAI name not including the magic three letters USD were not helping.

The rebrand can not come soon enough, it seems. Maker has to focus outward and aggressively pursue deals with chains and protocols across the space to create demand for holding DAI. Users who want leverage do not help as DAI quickly gets swapped out.

Rampant arbitrage between Spark (6% borrowing cost before the rate hikes) and Aave (16% funding premium for USDC) also did a lot to depress the PSM and little to create demand for DAI.

Voting update

Rune’s recent Bootstrapping edit can be voted on currently. Please consider voting and using this short respite from high gas prices, or use gasless voting.

https://vote.makerdao.com/polling/QmQAtb17

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A recent MIP102c2 by KISS AVC introduced specific requirements for Ecosystem Actors to respond to qualified requests.

https://forum.makerdao.com/t/mip102c2-sp26-mip-amendment-subproposal/23348

In essence it would require parties that are paid for by MakerDAO to respond to requests by recognized governance participants within seven days.

The MIP was unanimously supported during creation and the RFC phase, but then voted against by some delegates on the grounds that it consituted “micromanagement” or at least a slippery slope way to the same.

This sparked a lively debate about what ADs should and can do when working with AVCs, which I will not go into now.

For this newsletter the more meaningful question is what AVCs can do, and what they can not or should not do. What is the separation of powers, so to say, between AVCs, delegates and Facilitators.

In my understanding AVCs role was there to make suggestions representing the particular outlook these groups of MKR holders have, on how the DAO should progress.

It would then be up to Facilitators to help promising suggestions to become part of the scope MIPs. KISS AVC took a more direct approach and proposed MIP102c2 change requests recently. After ratification these suggestions become part of the scope MIPs. Facilitators could help improve the change requests during the one month long RFC phase, and so could the rest of the community.

But since these MIPs should have direct effects, they need to be specific. Which opens them up to the criticism of constituting micromanagement. Maker’s constitution, the so called Atlas, is specifically prohibitive of AVCs assuming fine-grained control. This privilege is reserved for Facilitators and their Advisors.

Does that mean that AVCs should not propose MIP102c2 change requests at all? These requests will always contain specific guidances, or they would be toothless.

The ensuing dialogue has so far not conclusively resolved. I will try to offer my opinion.

It stands to reason that groups of non-experts, that AVCs are, should not try to direct experts, wherever possible. It would be very detrimental, for instance, to have AVCs try to set stability fees, or dictate smart contract coder, however well-meaning the intent was.

But for something that impacts them directly, like the response time of MakerDAO paid contributors, they are experts, and can reasonably set specific guidelines.

The more specific question then becomes not when micromanagement starts (which is very vague and subjective), but whether the proposed specific changes have a direct impact on AVC work, where AVCs are experts, or not. This is easy to decide.

The separation of powers should be along circles of competence, very similar to how agile or other methodologies delineate it.

Two posts worth reading in detail are:

https://forum.makerdao.com/t/protocol-economics-report-2024-01/23751

TL;DR Dai Demand is still shrinking, but the protocol is very profitable.

And another great one is this post by BA Labs:

https://forum.makerdao.com/t/risk-month-in-review-february-2024/23760

BA Labs has a full-fledged protocol responsibility with Spark Lend in addition to Maker Core and is definitely capable of handling both extremely well, while developing whole new ways to assign risk parameters.

DAI supply update

Thankfully, DAI supply has recovered a bit and added 200M since our last newsletter.

Nevertheless, the overall trend is concerning. USDT has added 12% supply in the last 3 months, and USDC 19%.

It can be argued that we’re in the middle of the next bull market, and still DAI demand (driving supply) has not been comparable to the big two. We think DAI has in some ways already captured its entire market (ETH maxis with a focus on decentralization), while DSR rates are below what USDC and USDT holders can get (5.7% on USDC on Kraken, 11-16% for USDT on Binance).

Most likely, Maker or its subDAOs need to aggressively expand to other chains natively and court protocols there to be able to compete long-term.

Voting update

Apart from two SparkLend parameter changes, I want to point out this improvement to the SmartBurn Engine that is available to vote, now.

https://vote.makerdao.com/polling/Qmat6oFs

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In one of his sweeping MIPs, Rune Christensen redefined the role of AVCs.

AVCs would be required to participate in the reworking of the Maker Atlas, and specifically, in the work to make it fit for the upcoming Governance AI Tools (GAIT).

AVC members could also only work on these tasks and still be eligible for compensation.

Quote:

New participants can register as unaffiliated AVC member, and if their Atlas contributions are high quality, they are eligible to earn AVC Participation Rewards immediately in Q1, w/o needing to fulfill eligibility requirements for 1 whole quarter prior to Q1. If there are more eligible AVC Members than there are reward slots, new AVC Members in this group will only earn rewards if they are among the top 8 in terms of total MKR held. (Currently, there are a total of 8 AVC reward slots.)

AVC Members contributing work of exceptional quality throughout the Quarter will earn Participation Rewards without consideration of their total MKR held.

This is in line with GOV12 of the Atlas where the Bootstrapping process requires full support from all Alignment Conservers.

How can AVC members approach this task?

In our view, as opensky, we had read the intention of AVCs to be the spokespeople for the intent of MKR holders. Bound by the Atlas and the spirit of universal alignment AVCs should, in our view, be responsible for making sure the Scopes evolve towards a glorious future and the ultimate benefit of MKR holders and the protocol.

Re-writing the Atlas so it is better understandable by a potential future AI is - at best - tangential to this purpose. But it can also be a vehicle for expressing these intentions.

After further clarification by VoteWizard and LeBateleur it now seems like AVCs will be there to review the submissions of ADs mostly. This is very much in line with how we saw AVCs work with ADs in the previous paradigm. ADs where there to do the heavy lifting, while AVCs select the most appropriate contributions and offer guidance as to what MKR holders want.

The same can apply to the current work. In our view AVCs should behave as follows:

• Formulate strong and clear intentions about how the protocol should evolve, within the bounds of the Atlas.

• Review the output from the Atlas rework under the light of this intention.

• Comment meticulously, reiterating the intention

• Reject output that does not conform with the AVCs intention and offer guidance there.

In some ways this allows an unprecedented amount of control to AVCs. In other ways it requires a lot more work than before. Given the current compensation, the ask is certainly more than reasonable.

A proposal we read in a chat suggested that it would be an interesting experiment to radically rethink AVC compensation, and pay much less, to many more entities. Or pay for work done, not for a seat at the table. All in all this suggestion seemed very aligned and we would wholeheartedly support it.

We highly recommend these forum posts for the Maker governance enthusiasts.

One of the most prominent Aligned Delegates 0xDefensor has been derecognized. Sad to see a valuable contributor leave. The discussion is nevertheless a showcase in how careful Maker Governance is about how it operates and a testament to the high level of all participants.

https://forum.makerdao.com/t/ad-derecognition-due-to-operational-security-breach-02-02-2024/23619

The latest Clydesdale and Andromeda Dashboard by Steakhouse are a must-see for anyone who wants to know if they can sleep well holding DAI.

https://forum.makerdao.com/t/transparency-dashboard-on-clydesdale-and-andromeda/21716/17

What exactly does alignment to the Atlas mean? Or what is misalignment. Spun out from another thread, this discussion could help our fundamental understanding of the ethics of MakerDAO.

https://forum.makerdao.com/t/determination-of-misalignment/23637

In other news, Spark has already maxxed out the WBTC supply caps and is likely to ask for another extension. WBTC is certainly far from an ideal product. Rumors about the real or not-so-real backing of this token have swirled crypto twitter since it’s inception. So far, it has proven the doubters wrong every time.

Should Spark get more exposure than the 5,000 BTC it currently has?

Given the $3.6 billion currently supplied, another 200M worth of WBTC seem to be reasonably low risk.

DAI supply update

DAI supply has reduced by 400 million (!) since our last newsletter. We believe it is time to attack this number in earnest. The DAI supply is directly related to the amount that Maker can invest in yield bearing RWA and such directly related to profit.

We believe the recent increase in Stability Fees, together with the low L2 and dApp coverage of DAI, when compared to USDC and USDT mean that the coin is not participating in the overall ecosystem growth as much as it could.

DAI on Tron to the rescue? We’re only half (or maybe a quarter) joking.

Voting update

We want to point out this poll, as it has a wide-ranging impact on many aspects.

https://vote.makerdao.com/polling/QmQC7b3B

Other than that, there are a couple of Auction and SparkLend parameter updates for you to vote on.

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https://forum.makerdao.com/t/mip102c2-sp21-mip-amendment-subproposal/23039

The sweeping MIP reduced the number of prime and reserve delegates to four each, and the number of compensated AVC member slots to 8. Competition is a good thing, especially for delegates, who receive about $1M worth of MKR in compensation per year, at current prices.

AVC members get ranked by holding of MKR. In some ways, it seems sensible, because MKR holdings signify a conviction and dedication to the protocol. In other ways this could lead to well-endowed AVC members who perform little work, but still get compensated. We will see how it turns out.

Spark Lend has been going from strength to strength, and maxxed out the available DAI loaning facilities in rapid succession. Governance polls have made sure the first subDAO’s growth can continue unhampered and increased the funds available by another $400m to $1,2bn DAI.

https://vote.makerdao.com/polling/QmdQSuAc

The quality of contributions and research to MakerDAO decisions is remarkable throughout. BA Labs, MakerDAO’s risk management faciliator, has published guidelines for stability fees that are a sight to behold:

https://forum.makerdao.com/t/atlas-rate-system-for-stability-fee-research-introduction-to-exposure-based-model/23239

If you hold a PhD in economics and want to contribute, please read this scholastic masterpiece. As a humble AVC member we only have the ability to verify the base assumptions, which seem sound.

Another great team, PullUp, released their report on development activity, which allows us to take a peek under the hood of what it takes to keep the machine going.

https://forum.makerdao.com/t/pullup-labs-quarterly-update-q4-2023/23382

And last but not least, we want to point out the call recording of Powerhouse Ecosystem Actors.

https://www.youtube.com/live/jglU0Nu4Dj4?feature=shared&t=735

Well worth the watch. The team has been developing a trove of dashboards to make monitoring of the DAO easy.

DAI supply update

DAI supply has reduced by ~200m since our last newsletter. We would love to see some research into the root causes. With stable coins the driving force for this number is demand. Leverage mostly get’s swapped out directly and doesn’t move the needle.

sDAI is a great too to drive demand, but the current rate doesn’t seem to move people off of USDC, UDST, USDM or other stables. Binance offers up to 11% variable APY on USDT with daily withdrawals on their platform, for example.

Maybe Maker can find other, more institutional ways, to boost demand for those that aim to hold $DAI.

Voting update
We want to point out two polls. Four are there for your consideration, currently. Including the MIP authored by Rune.

One is the increase of the WBTC cap on SparkLend. The facilities are maxxed out, and with a Bitcoin ETF finally approved, the demand and activity around the “orange coin” are at an all-time-high.

https://vote.makerdao.com/polling/Qmc3NjZA

The second one is using a $1 fixed oracle price for USDC and USDT on SparkLend.
From a game-theory perspective, it will be fascinating to think about what would happen in the case of a depeg of these coins. We could see a considerable amount of arbitrage as traders could buy dollars for cents on the market and then lend out other collateral….

https://vote.makerdao.com/polling/QmTauEqL

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13 is considered a lucky number in many cultures, in others it’s a number to avoid at great cost. There are hotels in the United States where the floor numbers jump from 12 to 14, because too many customers would request room changes when assigned to a room number starting with the number that is the result of adding 1 to 12.

The year 2023 is coming to a close, and we want to give a top level overview of our particular, and individual, perspective on what happened in MakerDAO.

As the current crypto market is re-entering a phase that is more froth than substance, we see a certain need to start with token prices.

Here is the chart of Maker’s arguably most important token, year over year.

Which token did you expect? 😇

At first glance, this chart might be dull, but looking closer, the whole year is visible.
Silicon Valley Bank’s almost-failure, dragging down USDC to $0.86 and with that, thanks to an uncapped PSM, DAI. This event, more than any discussion prior, made it clear that Maker had to move up the food chain in it’s dependencies.

https://forum.makerdao.com/t/emergency-proposal-risk-and-governance-parameter-changes-11-march-2023/20125

Thanks to Clydesdale and Andromeda, Maker has two powerful structures that can interact with the US treasuries markets and buy treasury bills directly. Two charts tell the story.

And Andromeda follows suit…

Now MakerDAO is dependant on the quality of US-Treasury bills, but this is the same dependency the US-Dollar has. In terms of peg-stability, this is as good as it gets.

Further down the DAI chart above, we see a ever so slight downward trend from DAI being worth slightly more than USD 1.000 to being worth slightly less. This makes perfect sendes, if we recall Maker’s history and the black Friday events of old.

The PSMs were introduced to counteract this possibility. It seems that decentralised collateral has the tendency to not scale quickly enough with demand. And now DAI price represents a very small risk premium to US-treasuries.

Now, let’s look at the other token, right 😎

It seems investors across the spectrum are very happy with how Maker has managed it’s expenses, dependencies and scale this year. At the same time MKR liquidity has increased thanks to DAI/MKR Uniswap pools.

We are certain that the MKR buyback resuming has played a not insignificant role.

On the organizational front, the Endgame plan has progressed. AVCs have established a good rhythm and are developing guidelines for facilitators. The Atlas is being reworked, and Spark has exceeded the wildest expectations in market acceptance.

2023 was a very good year for MakerDAO.

Let’s make 2024 even better.

DAI supply update

DAI supply and stablecoin collateral have not changed much. We would like to suggest that this is a sign of success. The current market makes investing into digital assets attractive, but we are not at the peaks of leverage-demand yet, or any close to what we have seen in past bull-markets. Maybe investors do learn, after all.

Voting update

Since MakerDAO entered the yearly governance pause, there are no new votes.

The year is slowly coming to a close, AVCs, like KISS AVC are using the time to tighten their scope proposals and this newsletter will have one more edition this year.

Thank you to all the readers! We look forward to serve you next year, too.

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As the latest Maker executive vote went live on the 29th of November, it contained a surprise for two of Maker’s veteran service providers.

Steakhouse and TechOps DAI and MKR streams were being cut. The teams were not offboarded, nor was there any doubt about the work they delivered. But their budgets were part of MIP113, the governance scope. The were no longer listed as facilitators in that scope, and rightfully so. Their removal as governance facilitators, which was a stopgap way to ensure operational continuity, meant that their payment streams no longer had a basis in ratified governance output.

https://vote.makerdao.com/executive/template-executive-vote-psm-gusd-a-debt-ceiling-reduction-coinbase-custody-debt-ceiling-increase-various-parameter-changes-rwa-foundation-dao-resolution-andromeda-legal-expenses-vesting-stream-updates-and-spark-proxy-spell-november-29-2023

The teams work is still needed, and MakerDAO is happy to have professionals of that caliber, so their work is going to get funded from the Launch Project budget going forward.

The only wrinkle in the plan, is that Maker is undergoing a governance pause, scheduled for December of every year. This means that the Launch Budget can only be voted on after the pause, leading to a full two months of pause, before a new payment stream can be executed. (Delays, or pauses, compound…)

Apart from these dramatic news, we want to point out the stellar output of BA Labs this month. Specifically their Spark Liquidation Simulator.

As the name suggests, this simulator empowers users to gain insights into potential liquidation scenarios within the Spark protocol. (Quote from the post)

https://forum.makerdao.com/t/introducing-the-spark-liquidation-simulator/23064

Spark protocol has clearly filled a need in the market and attracted $2bn in supplied tokens since it’s launch, less than a year ago. If all of Maker’s subDAOs perform likewise, the Endgame plan will enter the history books for organizational change.

Please also check out their November 2023 review.

https://forum.makerdao.com/t/risk-month-in-review-november-2023/23065

The amount of research that goes int the Smart Burn Engine, especially, is quite astounding.

Speaking of research, for those that want to go down the DeFi rabbithole, this forum discussion is the place to go:

https://forum.makerdao.com/t/methods-for-improving-yield-on-protocol-owned-mkr-dai-liquidity/22997

As part of the Endgame, Maker has started to provide MKR/DAI Liquidity to Uniswap v2 pools. Impermanent loss is real, as anyone who ever LP’d over a longer timeframe knows from painful experience. In the thread, Rune prompts research into how to optimise these positions. This is great reading for anyone thinking about LPs and DEXs in general.

Quite interesting is the notion to capture MEV in “private pools”, and this answer by Markus B Koch in specific Balancer V2 pools that Maker could use.

http://forum.makerdao.com/t/methods-for-improving-yield-on-protocol-owned-mkr-dai-liquidity/22997/5?u=opensky

Balancer seems to be the DEX that can do it all, and still doesn’t find nearly the use of Uniswap. First mover advantages and network effects, plus strong innovation are hard to go up against.

DAI supply update

In the middle of what seems to be a “bull market” of sorts, with Bitcoin climbing above $42,000 and Ethereum cracking $2,100, we can see DAI supply trending slightly upward. We would have expected a bit more here, as the appetite for leverage returns. But maybe sentiment has not moved as quickly as prices.

Voting update

Since MakerDAO entered the yearly governance pause, there are no new votes.

The year is slowly coming to a close, AVCs, like KISS AVC are using the time to tighten their scope proposals and this newsletter will have one more edition this year.

Thank you to all the readers! We look forward to serve you next year, too.

Ad section

If you have MKR and want to make a difference, join KISS AVC. The Keep it Simple, Stupid, AVC focused on effective governance. We meet every Thursday and don’t bite. Come by, say hi.

Any organisation must spend some of its work to know itself. Measure efficiency. Measure how close it is to its goals. Enumerate steps it needs to take.

MakerDAO is not different. If anything, the need to measure with accuracy is even higher than for a traditional business. Since it is a DAO, and token holders are not CEOs, but instead have many other priorities beside the DAO.

Where CEOs read executive summaries to decide where to spend their time, token holders often have even less attention available.

Last week we mentioned two interesting dashboards by Ecosystem Team and Steakhouse Finance, and this week we want to point out further resources.

One is the Ecosystem Actor and Alignment Conserver Directory developed by Endgame Edge.

https://forum.makerdao.com/t/ecosystem-actor-directory/22752

The other is the Expenses Dashboard by Powerhouse

https://expenses.makerdao.network/

Focused on who is contributing to MakerDAO and is getting paid for it, the two resources offer a glimpse into the colorful workforce that keeps the lights on in the premier stablecoin of DeFi. Thanks to the current RWA deployments and a high interest macro environment, the DAO is very profitable and easily able to pay for the services, and distribute additional resources to savings DAI holders.

When we speak about the macro environment, it becomes clear that MakerDAO does not operate in a vacuum, but in a free market.

BA Labs’ monetsupply published deep research about the current market conditions and possible futures. We recommend to read it in full. It has certainly helped us make allocations with better knowledge and conviction.

https://forum.makerdao.com/t/market-conditions-and-competition-analysis-20-november-2023/22829

The TL;DR is that the yield on treasuries is still high, and unlikely to fall in the near term, even though the FED is changing its strategy. Maker PSMs had reached the point where some USDC had to be drawn from Coinbase Custody vaults via an out-of-schedule executive spell.

The flows from Coinbase Custody to the PSM and RWA to PSM both worked as intended according to predefined rules. Arrangers followed the rules and the system kept sufficient amount of Stability Reserves in PSM at all times.

A stress that of sorts that resulted in a satisfactory upgrade of operating procedures.

AVCs are in the middle of the second round of scope discussions, focusing on Protocol Scope. Security especially for Endgame smart contracts that break new ground, but also for multi-chain strategies and bridges, play a significant role in discussions.

Bridging remains one of the big challenges of a multi-chain world, as massive hacks on these central pieces of technology have proven time and again.

DAI supply update

DAI supply is up by ~32M since last week. The withdrawal of USDC from Coinbase custody is clearly visible. Since then 180M have been returned into the vaults, and stablecoin collateral is at a low 13.5%. The last out-of-schedule executive had clear directions to the trustee to keep the levels within bounds ensuring DAI stabilty.

Voting update

No new polls have been added this week. We remind readers to vote if they hold MKR.

Image credits: Bing Image Creator

If you hold MKR and want to participate in governance, please join KISS AVC.

Due to some operational issues on our end we did not publish a newsletter last week. Instead, this week is when our tenth edition is being released.

Maker doesn’t stop! Ever. Instead both the DAI stablecoin and the many diligent contributors keep going. The last weeks have seen a slew of amazing reports that we want to showcase here.

The first is a PSM dashboard that ensures there are always more than 300M in the PSM, using Coinbase Custody and the JAT3 trust to either withdraw or deposit USDC.

Ecosystem Team has published a dashboard and Telegram alerts channel that issues instructions to the Trustee to keep the PSM at optimal levels. It’s simple, effective, and beautiful.

Steakhouse Financial released the Maker Protocol Economics Report for September.

Well worth the read the biggest takeways for us were:

• 20% increase in DAI demand vs Q2. The DSR is working!

• A major portion of DAI is more than 1 year old. DAI is sticky

• The protocol is profitable with 1.3M DAI in net profit in September

• DSR holds 1.7B DAI, up ~700% from Q2

Please check out the report, it is well made and contains a wealth of information!

Also courtesy of Steakhouse Financial is the RWA report from October 2023.

Since an image is worth more than a thousand words, we want to include this dashboard.

Last month saw a slight decrease in RWA holding because Coinbase Custody withdrawals to replenish the PSM. This happened via an out-of-schedule executive. Maker is in a unique position to profit from high-interest environments. Very different than many other crypto projects that rely on cheap capital for inflows. If (or when) subDAOs unlock broad retail and insitutional adoption, this is a rocketship.

Phoenix Labs published how they will calculate the anticipated SPK airdrop. Token airdrops are one of the magical things about crypto. Spark has achieved $1.5bn in supply in less than nine month. We expect demand for their token to be high.

https://forum.makerdao.com/t/proposed-spark-pre-farming-airdrop-formula/21786

Two Aligned Delegates (Navigator and PALC) have been derecognized due to an operational breach.

https://forum.makerdao.com/t/ads-derecognition-due-to-operational-security-breach/22532

Maker is serious about operational resiliency. ADs are tightening their procedures now, thanks to guidance from governance facilitators. The bounty systems seems to have the right level of incentives for checking on AD wallets and producing on-chain evidence.

After Robin Nagpal another community member built an AI product that makes MakerDAO governance more accessible.

https://app.x23.ai/makerdao

Reminiscent of Messari governor, users can see forum posts and sort them by engagement and divisiveness, plus getting an AI generated TL;DR.

LLMs and governance are a great match, and progress is swift.

DAI supply update

DAI lost 200M of supply since our last newsletter. We hope that the current bullish price movements will entice token holders to open vaults.

Stablecoin collateral is up, as the PSM was replenished to more sustainable levels.

Poll update

Three important polls are available for MKR holders at the portal.

All three are MIP102c2 proposals, changing scope language and furthering governance through clarifications.

Most important seems to be the clarficiation on advisory council / scope advisor engagement. And we’re proud to have KISS Q3 position document play a major role in this proposal.

https://vote.makerdao.com/polling/QmNjTZZm

Consider casting your ballot if you are an MKR holder.

The last week was dedicated to discussions of the Stability Scope. An unstable stablecoin is like yesterday’s papers. Useless.

Risk management is a key element of DAI’s stability and MakerDAO is happy to have BA Labs as advisors here.

Another important aspect of stability is managing and monitoring what RWA arrangers are doing. After all just two entities, Monetalis Clydesdale and BlockTower Andromeda manage the majority of MakerDAO’s RWA allocation. While the trust structure’s and investments are transparent, tight monitoring and reporting are essential to make sure everything stays above board.

Allan Pedersen published his idea of Policies, Procedures and Guidelines (PPG) for MakerDAO Arrangers on the forum last month.

https://forum.makerdao.com/t/clydesdale-tool-policies-procedures-guidelines/22143

His call out is to give arrangers some degree of autonomy how they conduct their business while making sure the community is in the loop on what PPGs are in place.

KISS AVC discussed this at length in our latest meeting, and some come to the conclusion that autonomy can only happen in the context of radical transparency.

We, opensky, posited that without transparency the community could not correctly assess when to stop an experiment and when to reign arrangers back in. Given the absolutely essential amounts arrangers manage, there is little to no room for experiments to go haywire.

Conversely, experts know best how to run their business, and the token holders should not micro-manage them, but pick the best and let them do their thing.

Some housekeeping

In our last newsletter the post-mortem of the Matrix and Discord communication issues contained some reports that turned out not to be accurate. Here is what really happened, thanks to IAmMeeoh.

At about 14h00 UTC the matrix server HackLiberty.org went down. This appears to be a rare event. The server came back online about at 16h30 UTC . This meant that all users who registered their accounts with HackLiberty could not log-in.

Users whose accounts were registered with other servers were unaffected.

In Matrix channels are not bound to any specific server. They are "replicated" across all servers having at least one user in the channel. This is what is called a "federated server" structure.

This means that all users not registered with HackLiberty.org (including the Discord bridge BOT) could still access the " #KISS AVC Weekly Calls " channel and communicate.

Users from Hackliberty could not login. As emergency solution, they used the Discord channel. The bridge bot, which could still access Matrix (since the server t2bot.io was UP), did its job of bridging messages between Matrix and Discord.

We had some issues with formatted text, but plain text messages were bridged without any issue.

Towards the end of the call, another very rare and uncorrelated event occurred. MakerDAO's Discord admins made a series of human mistakes, which resulted in several users being kicked out of the Discord channel, including the bridge bot.

This was a human error, since confirmed by TechOPs, and uncorrelated to Hackliberty.org being down.

When (the day after) MakerDAO's admins fixed the Discord issues, the Bridge bot joined the Discord channel again. However, the Discord admins forgot to give the bot "write" permissions, leaving it unable to perform its duties.

KISS AVC decided that ADs and AVC members should create accounts on two Matrix servers as fallbacks. Matrix, with its federated server structure, is a decentralised and resilient communication infrastructure.

We, opensky, would like to see MakerDAO run a set of its own Matrix servers and leave Discord behind on its way to true decentralization.

Another hot discussion topic we want to focus on is whether or not a veteran bug hunter was getting paid enough for finding additional exploits, recently.

https://forum.makerdao.com/t/request-to-change-incorrect-bug-bounty-decision/22440

theexplorer argues that finding two bugs in the Emergency Shutdown Module should have earned him 160k DAI, but he was awarded only 15k DAI.

Immunefi spokesperson psychnaut argued that the 160k was the theoretical limit, and a governance attack would have been required to trigger the ESM, making the possible damage far less. If the ESM is triggered, the DAO has essentially liquidated its entire treasury.

Security is the result of a lot of eyes looking at the same attack surface through different lenses. It is unrealistic that any single entity can detect all possible ways of how an attacker could think and go about his craft.

In that regard, MakerDAO is fortunate to have Immunefi, but relies on bug hunters like theexplorer to care enough to go about their difficult work.

While budgets have to be managed carefully, we believe bug bounties play a very important role in responsible disclosure and hope theexplorer sticks around.

Rune Christensen’s GAIT example collection elicited a lot of great responses and is scheduled to go into the next round this week. Human’s training AI is a novel way of toolmaking that we are especially excited about.

We want to commend BLUE AD for their exceptional work in that we point out here:

https://forum.makerdao.com/t/atlas-and-gait-call-tasks-for-next-week/22458/16

DAI supply update

DAI supply is down 77M since last week. We can not certainly say what caused this. We hope the DSR is still attractive enough, even though Coinbase offers the same rate for USDC holders.

Stablecoin collateral is down to 9%. The last time it was that low was in 2020, on 11 September.

Poll update

There are no current polls on the portal.

Image credits

The image is by BING Image Creator, a free version of DALL-E3.
The prompt used was: stability, security and deep work, in a vibrant, upbeat mood

Outro

If you are an MKR holder and want to contribute to MakerDAO governance, please join KISS AVC.

MakerDAO co-founder Rune Christensen is now hosting weekly calls to further the development of the Governance AI Tools (GAIT).

Recently all delegates and facilitators have been tasked to prepare material for the AI system to digest.

https://forum.makerdao.com/t/atlas-and-gait-call-tasks-for-next-week/22458

But first, we want to ask our readers to apologise the missing edition of this newsletter. Last week saw us confronted with an endless stream of obligations both private and work related, and finally ended in a weekend recovering from a short, but unpleasant illness that made writing coherent text seem undoable.

We did use the occasion to come back to publishing on Monday, which had been the original plan, and, in our mind, is the best day for this publication.

The task set out by Rune to ADs and facilitators is in-line with one of the major challenges we saw arise out of the field of AI technology: Training data.

LLMs such as ChatGPT4 are incredible at processing vast troves of data and then becoming something like jack of all trades, but masters of none.

With governance, especially MakerDAO governance, we need GAIT to be a master of this very specialised matter. While it may appear that Maker Forums and Discord chat provide seemingly massive training data, the reality is that LLMs are trained with multiple powers of ten times that.

So the training has to become more specific and more effective. Rune and his team have devised a clever, JSON like way, to make the ATLAS and derivative training data more readable for the LLM and are asking the community to help train it.

If you have some time, please head over to the forum post linked above and submit an example. We will do so too.

A lesson in resiliency

On last Thursday the KISS AVC call was scheduled to take place in the Element room we usually use. Due to downtime of the hackliberty.org server, some members, who’s home domain this is, were not able to communicate via Element.

Many switched to Discord for the discussion, and the Discord to Element bridge made sure that users on matrix.org, another Element server, were getting the messages relayed, mostly…

We first started to notice some delays, and finally the Discord bridge stopped working, and pulled the KISS_AVC meeting channel on Discord with it into the digital abyss.

Two ADs reported that it was still visible on Linux, but most others had no way to communicate anymore, except the public channel.

Thankfully this happened two minutes before the end of the meeting, and we adjourned earlier.

While it is always unpleasant when things break, we learned a lot:

• Two tightly coupled system can be less resilient than a single one

• Employing two systems can still be useful if they are independent

• Establishing a protocol for switching channels is key

• The communication about switching can not take place in either of the channels

We’re looking forward to furthering our resiliency in communication and are happy for suggestions and best practices.

DAI supply update

The supply gained another ~100m since our last newsletter. At the same time stablecoin collateral is at a new low, with only slightly more than an 8th of DAI being backed by stables.

DAI is uniquely positioned to profit from the current high interest environment, and it shows.

Voting update

There are no open polls as of this Monday.

We write this newsletter as a newfound member of KISS AVC. We do not represent the AVC. This reflects our own thinking and opinions, as a MakerDAO governance participant.

But this week also spawned new beginnings of another kind. The beginning of GAITs, as governance AI tools are called.

MakerDAO co-founder Rune relased a ChatGPT based version of an AI versant in the depth of the ATLAS, with which you can interact and ask questions to. You can find instructions about how to access it here:

https://forum.makerdao.com/t/atlas-and-gait-call-friday-oct-6-8pm-cest/22337

Almost at the same time, community member Robinnagpal released makerchat.org. A chat based AI tool to interact with the content of forum posts and Discord chats.

While announced as early alpha release, the chat bot had extensive knowledge of Maker governance, but sometimes was unsure whether posts were recent or not.

https://makerchat.org/

Robin came to the AVC call and is excited about the possibilites to improve the tool and make it more relevant for the community. You can interact with him on the Forum in his thread announcing his work:

https://forum.makerdao.com/t/maker-ai-chatbot-governance-ai-tools-gaits/22373

Powerhouse, the ecosystem actor started by former SES core unit contributor Wouter has asked for feedback on priorities for the DAO Toolkit. Please take a minute to participate in this survey here:

https://powerhouse.frill.co/b/j0xd92vq/feature-ideas

And Monetalis’ Allan Pedersen started a good discussion about the Policies, Procedures and Guidelines for Clydesdale. A mighty tool that allows the community to communicate what it expects from the entity managing so much of MakerDAO’s RWA exposure. Make sure to comment on this forum thread, if you have knowledge about the subject.

https://forum.makerdao.com/t/clydesdale-tool-policies-procedures-guidelines/22143

In the field of governance the new facilitators have picked up steam and clarified AVC membership guidelines considerably. AVC members that were active in the last quarter also were entitled to a sizable compensation in the form of more than 20 MKR tokens.

https://forum.makerdao.com/t/avc-member-participation-rewards-q3-2023/22349

DAI supply update

DAI supply plateaued this week, and so did the Stablecoin ratio. It will be interesting to see if facilitators BlockAnalytica will recommend to change the DSR or if they will leave it as it is.

Poll update

This week has no new governance polls, and the Executive Poll scheduled for 11 October is delayed to 13 or 16 October due to last minute changes of the spell contents.

If you are an MKR holder and want to participate in governance, please consider joining KISS AVC! Here is a video explaining the advantages, courtesy of BLUE.

Composable AVC changed… it became part of something bigger.. and more complete.

Alongside us, opensky, LDF, stefdelev and our most recent AVC member TB stepped down form Composable and joined KISS AVC alongside IAmMeeoh and DAI-Vinci.

We felt that our agendas naturally complement each other, and by combining forces we would create something more powerful and more beautiful.

KISS with their focus on simplicity and their excellence in execution

Composable with their focus on scalability and their unique culture

This recap is therefore more personal and introspective than previous ones. This is not business as usual.

Because we write this publication from our personal point of view, we can take the liberty to alter the format at will. To follow our impulses. We can hope the reader enjoys this freedom, too.

This newsletter will be used to recapitulate on our quarter as an AVC.\

The quarter began with us, opensky, manning the meetings alone. We had lost communications with both other members, LDF and David Phelps.

Phelps was expected, the Discord server had banned him for his last name containing “help”. LDF was unexpected. In some ways, she had been the voice (literally) and the soul of these meetings and had moderated them. We stumbled along and the delegates humoured us. Some progress was made. Penguin Soldier joined the AVC as a delegate. Our second. BLUE AD was the only one left after the anonymity requirements had forced most of ours out of the DAO.

Thankfully LDF resolved to come back in force and from there on we made good progress. With her stefdelev joined and later TimB, a true Maker original.

We now had a true force.

We managed to put our heads together to produce the required output, and it turned out very much to our satisfaction.

You can read up on it on the Maker Forum:

https://forum.makerdao.com/t/composable-avc-q3-aligned-scope-proposals/22186

https://forum.makerdao.com/t/composable-avc-q3-aligned-governance-strategy/22185

If you want a more chronological approach, you can read our discussion on a meeting by meeting basis here:

https://forum.makerdao.com/t/composable-avc-q3-23-discussion/21383

So why did we decide to merge? Did we betray our ideals?

In a nutshell, we felt the full effect of the African proverb:

“Alone you can go fast, together you can go far”

We felt we could profit from KISS’s process and deep technical expertise. And we also felt that our culture and focus on reusability would take these qualities and amplify them.

After some deliberation and a emoji poll we decided to merge. Thankfully IAmMeeoh and DAI-Vinci welcomed us with open arms.

One door closes, another opens.

On to new horizons.

DAI Supply update

DAI supply was trending slightly downwards this week. It is unclear whether this is because Coinbase now also offers 5% on USDC or if there are other reasons. But stablecoin collateral has reached a new low. Clydesdale and Andromeda deliver.

Poll update

Four new polls entered the voting cycle this week. We would like to point out two of them:

https://vote.makerdao.com/polling/QmUqRvBm

https://vote.makerdao.com/polling/QmX95EAi

Spark is further coming into it’s own, and onboarding these two stablecoins in eMode will simply strengthen this trend. Please visit the portal and vote, if you have MKR.

It’s only governance if you govern, we heard.

Recently discussion about requirements for Aligned Delegates resumed with vigour as part of the thread started by SEED Latam on the forums.

https://forum.makerdao.com/t/participation-requirements-for-ads-that-follow-sovereign-finance-avc/21800

The main point of contention was SovFi’s requirement for ADs to hold MKR in the same amount as members of the AVC. A larger discussion about inclusivity ensued, because potential delegates without the financial means to purchase enough MKR would be excluded.

From our end, we welcome the formalization of requirements. KISS AVC has also implemented a procedure for their ADs and ReFi has a structure in place as well.

Delegates in MakerDAO can be highly compensated, and AVCs should benefit from their work by requiring a certain amount of output so they can generate the best possible scope proposals in turn.

As luck would have it, a new AD joined MakerDAO. Welcome, Ikegai. We hope you live up to your name.

KISS AVC demonstrated their governance prowess by publishing their position documents on the forum. Congratulations.

Especially the proposals for concrete budgets for advisory council members. Maker Endgame depends on quality ACs and their output, and this is a great step in the right direction.

https://forum.makerdao.com/t/kiss-position-document-for-q3-09-21-2023/22147

Polling overview

As can be expected at the end of a quarter, polling activity is subdued, as most governance participants plan their next three months.

A single poll is available for consideration, with the most likely outcome being a vote in favor.

https://vote.makerdao.com/polling/QmPoLbah#poll-detail

In this poll, both the Clydesdale and the Andromeda RWA vault would have increased debt ceilings of three billion DAI, with a 50 million gap. It seems timely as DAI supply increases thanks to a generous DSR.

DAI supply

DAI supply reached a new high this week, with the stablecoin collateral bottoming out a low point. The eDSR seems to be almost optimally calibrated to sustainably attract users.

Photo by Simon Berger, Pexels

Another week where RWA developments made most of the headlines in MakerDAO.

Khan published an insightful forum post about Centrifuge’s new technology to bring RWA reporting on-chain. Some similarities with Chainlink’s proof of reserves can be found, as both use oracle technology to report about underlying asset prices.

Centrifuge has been at the forefront of RWA development and is also partnering with BlockTower for project Andromeda, which is responsible for holdings of more than $1bn in US Treasuries for the DAO.

Their new technology should enable MakerDAO governance and Arrangers to see important information at a glance but also maintain confidentiality requirements.

In other news the peer to peer lending optimizer Morpho has posted about opportunities to use sDAI on their Aave optimizer. Morpho allows for greater rewards by optimizing asset utilization.

https://forum.makerdao.com/t/collateral-opportunity-for-sdai-on-morpho-aave-v3/22121

The reason we’re talking about this here, is that this proposal shows two things:

• DeFi is permissionless. Protocol building upon others without need to go to the CEO or other key gatekeepers.

• DeFi is composable. The building blocks can be stacked as high as the moon if profitable, and manageable.

• Maker remains of utmost importance to the DeFi ecosystem. DAI is and will likely remain the number one decentralized stablecoin. The eDSR continues to make the currency at least as attractive to hold as USDC (5% rewards on Coinbase).

The governance season is nearing it’s close and AVCs are working overtime to get their position documents in shape. Tune in to a meeting of your choice, or, if you hold MKR, delegate to an AD or join an AVC of your choice!

We recommend the Composable AVC and Penguin Soldier as an AD.

DAI Supply update: The supply has topped the high of August, 2023 recently and is currently plateauing. The next weeks will show if the upwards trend can be resumed or not.

The stablecoin collateral ratio, however is consistently dropping, with the dynamics picking up a bit of steam. Another great week for MakerDAO.

Cover Photo: Pexels / Shyva Smith. Free to use.

The last week Sakura subDAO announced its launch and Maker celebrated the subDAO genesis event. SubDAOs will allow Maker to simplify and ossify at a much higher pace, while pushing risk and complexity to the edges.

You can find more information on Sakura in the Maker Forums, or join their Discord.

The rumor mill is in full swing, with the imminent rebranding of the veneered Growth Core Unit as a topic. The details have not been revealed, but in a presentation to SoFi AVC a pronounced focus on Asia was teased.

The quarterly governance cycle is slowly coming to an end, and AVCs are working on their scope proposals. With the onboarding of ecosystem actors Maker’s Endgame governance is set on course for full decentralization.

Another hot topic was this post by Steakhouse Finance’s Sebastian Dereveaux.

Seb is asking a pertinent question: Should Maker Core work with arrangers who buy T-Bills or should it buy tokenized offerings by third parties. The advantage of buying tokenized bonds is that Maker can outsource the regulatory and operational load while focusing on being a protocol and nothing else. The disadvantage is the added risk by trusting these third parties to operate dutyfully.

DAI supply is reaching recent highs with a refreshingly low stable collateral ratio. It seems the eDSR is set to a good point currently, attracting users.

Picture on top courtesy of Pexels / Petabay. CC0.

GovAlpha, the veneered institution that is the blueprint for DAO governance operations across the industry are no longer the key governance facilitators since last week. Patrick_J and LongForWisdom stepped down, and two new governance facilitators are set to onboard thanks to the ratification of MIP102c2-SP16.

JanSky and VoteWizard are the new referees and have been tasked with stewarding governance into the next phase of the Endgame. The full reason why LeBateleur was not included in the list, even though they went through the rigorous ten week training course and were voted in previously remains unclear and caused a fair amount of finger pointing and drama. Please read the forum post replies and bring some popcorn.

Speaking of drama. Rune announced Solana as the most promising candidate for MakerDAO’s NewChain. The result was a deeply researched thread of industry leaders espousing the merits of their favourite chain or stack. From Ethereum rollups to SVM on Ethereum, to Cosmos, to SEI to other, Move based, chains…. The discussion was deep and fruitful. The development has a few years to go, so no dice have been cast yet.

If you want to educate yourself on the advantages of different types of chains, this forum post and it’s replies might be the crash course you were looking for.

The AVC cycle focused on Real World Assets (RWAs) mostly and more specifically about how to monitor them. PaperImperium gave a presentation on the Composable AVC meeting and had long and hefty discussion with Steakhouse Financial contributors about the real yield of the different trust structures MakerDAO employs to manage treasury bill exposure via outright purchase or ETFs.

He proposed that RWA collateral to have more stringent and standardised monitoring in his forum post here, that will go to poll soon.

More and more AVCs now have written requirements for their ADs and Rune is also thinking of tightening the necessary output so the DAO gets a good deal for the pay it provides.

KISS AVC have a highly developed structure to their meetings, and require delegates to provide scope language as well as short explainers of relevant topics. Sovereign Finance AVC also requires some written output from their delegates.

It seems sensible to manage expectations in that way, and we’re certainly thinking about similar measures for Composable AVC. Currently delegates give input for this newsletter.

We’re excited to see another week in MakerDAO. A lot is at stake and the incredible talent here is like nothing else.

If you have some MKR and want to guide the direction of the DAO. Reach out to .opensky on Discord and join Composable AVC. The place where governance becomes efficient and fun.

Composable AVC is one of the bodies that develop strategy and vision for MakerDAO.

Composable AVC was started by LDF and David Phelps from jokecouncil and soon included opensky, the author of this recap.

Their mission is to make governance more efficient. With the right tools, the right mindset, and foremost by making sure information is as accessible as it can be. DAOs thrive through communication. Without a centralized source of truth it is up to processes to surface what is important and to help participants synchronize on common goals.

This newsletter aims to be a part of that puzzle. It does not try to give a complete picture of the what’s happening in the DAO. Instead it uses the discussion in the Composable AVC meetings each Friday at 1500 UTC on Maker’s Discord to recapitulate our own, specific and necessarily somewhat biased view of the whole.

The week before and a bit longer was dominated by the introduction of the eDSR, a beefed up and more flexible version of the popular DAI savings rate. In an attempt to attract new users, the eDSR was initially set at above 8%. The rationale being that Maker would have to offer substantially higher yield than T-Bills to attract inflows of new funds.

The funds did come, and in spades. DAI supply shot up from 4.4bn to 5.5bn within a matter of days. Is it fair to say the experiment was a raging success?

Not so fast, unfortunately. A few massive DAI whales found out that the new yield was so high, that it paid to open new vaults with massive amounts of decentralized collateral because the yield was higher than the stabilty fee. This can be seen as a success of some kind, but is not sustainable, because Maker would bleed itself dry to make a few ETH whales wealthier.

Underneath the relentless arbitrage was a trickle of new users, though. Currently the eDSR rate has been reduced to a more sustainable 5% APY, which seems to attract a steady, healthy inflow of DAI.

Aside from the big DSR fireworks, there is ongoing concern about some of the older, more complex RWA collateral types, mainly ConsoleFreight and FortunaFi.

The Composable AVC discussion last week revolved around the Protocol Scope.

Specifically how the DAO can ensure that the maintenance of its codebase is as decentralized as possible. Currently Dewiz and parts of SES are crafting the spells, with a lot of the discussion happening in GitHub and in the #new-spells channel in Discord.

Composable AVC will look into the process and try to come up with concrete suggestions how to make the flow of information that goes into the spell-crafting process and out to the wider DAO as transparent and accessible as possible.

We’re happy to include relevant discussions and topics concerning MakerDAO in this newsletter. Please come to our Friday meetings or message @.opensky in Discord.

Cover photo by Antony Trivet, Pexels