Bankless - 87 - The Future of Maker | Rune Christensen

Starting point is 00:00:07 Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. I'm Ryan Chaun Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, we've got an OG on the podcast. OG from a founder perspective, also an OG protocol. This is Rune Christensen from Maker Dow. What did we cover? What were some of the highlights for you? Yeah, this is actually, I think, two podcasts in one.

Starting point is 00:00:37 the first half of this show is all about a tweet thread that Rune put out that captured both your and mine attention. And it was a technical argument about why things will likely collapse down to one single ecosystem. And so where previously, like, maximalist arguments have generally been one of mostly emotion and people speaking their bags, Rune does a fantastic job of actually articulating a technical rationale for why there will likely only just be one, layer one blockchain that will succeed, at least with regards to smart contract platforms that have defy on them. So he goes through the game theory about why defy apps might actually align themselves

Starting point is 00:01:22 with one specific chain in lieu of... I'm going to say it, Dave, because he said it. It's like an Ethan Maxwellist take, right? Sure, yeah. I mean, we also go through a section with Room about like, well, we can strip away the names of these things and just talk about the concept of layer one a layer one b layer one c one has greater levels of adoption one has minority levels of adoption but yeah if you want to add like names on to these things like ruin is saying well for maker dow putting maker dow first and being a maker

Starting point is 00:01:50 dow maximalist it actually game theoretically makes sense to commit to one chain and one chain only and so run takes us through that argument which i find personally i find very compelling um and that's the first half of the show second half of the show we go through Rune's recent proposal on the Maker Dow governance forums about making dye, quote unquote, clean money and pointing Maker Dow's abilities of being a capital generation facility, a credit facility, towards things that combat climate change and having Maker Dow being climate aligned and branding dye as this clean money that when you use die, you are actually helping combat climate change down the line. And the mechanisms for that are simply allowing capital to be directed and make

Starting point is 00:02:37 your doubt to fund things like solar farms or sustainable energy farms or things that actually help us fight climate change. And this has been one of the big bull cases for crypto at large. You know, back in 2009, 10, 11, 12, we had no idea how this would actually get done. But we did understand that crypto can help coordinate against problems that are larger than nation states. and to this day, nation states continually to illustrate their lack of competency with being able to tackle problems that are bigger than themselves. And so it's very, very cool that we're seeing a defy app on Ethereum take up the mantle of being the thing, the coordinating body that can actually go after climate change because like Rune says, so many people are just in denial about it or they've given up hope. Like he said in the show, it's gone from climate change denialism, as in just being. blind about it to climate change dumerism saying, well, we know it's real, but like it's too late

Starting point is 00:03:34 to do anything about it. And so it's optimistic. It's awesome to see something in the crypto world take the climate change problem head on, or at least that's what Rune has proposed. And so we go through his proposal and all the details around that. Yeah, absolutely. So bankless listeners, this is like a two-part meal for you. I think the first meal is where we talk about why crypto will have a layer one power law winner and why Rune actually thinks that might be Ethereum is probably going to be Ethereum, which is an interesting take. In the second course, I think counteracts a lot of fud that we've heard just in general, in the mainstream, let's call it, you know, maybe senators, politicians, regulators,

Starting point is 00:04:09 and just like mainstream institutional news that crypto is bad for the environment. Well, Rune is proposing that Maker become good for the environment. Every time you buy, die or own dye, that is actually a plus one. for reducing environmental externalities and helping climate change. So super fascinating conversations. Again, if you want to take this in two parts, that's probably a recommended way to digest it. These are all tied together, though, David, in one way,

Starting point is 00:04:38 which is the future of Maker. What is the future of this OG-D-5 protocol that's been with us since inception? And, you know, one, the answer seems to be Ethereum and layer two's. And the second seems to be this clean money. narrative, at least. That is what Rune is proposing. But what does he get to control? He's just another governor on the governance forums now that the Maker Foundation is decentralized. That's a fascinating conversation in and of itself. You are definitely going to enjoy this one with Rune Christensen.

Starting point is 00:05:09 Before we get to the conversation, we want to thank the sponsors that made this episode possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are massed. with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswop ecosystem is the Uniswap Grants program is now accepting applications for grants. We have been saying this for a while and we'll say it again.

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Starting point is 00:07:41 Bankless Nation, we are super excited to introduce you to our next guest. This is Rune Christensen. He is the founder of Maker Dow. He was building crypto before Ethereum. was even a thing. And he started MakerDAO before Defy was even a thing. Maker Dow has pioneered some of the most fundamental components of this industry, really the foundations of Defy. When you think about a decentralized stable coin, when you think about decentralized governance, when you think about Dow's, all of this started with Maker Dow back in 2016. It was actually

Starting point is 00:08:11 my first love and my first fall down the Defy rabbit hole as well. So we're going to unpack a lot of these topics with Roon, we're going to talk about some of his threads about layer one. We're also going to talk about the future of Maker Dow, how he sees it evolve into a green money type platform, a clean money type platform. There's so much to discuss on this episode. First, I just want to say, Rune, welcome to Bankless. You are an OG, sir. It's fantastic to have you. Really glad to be here. Yeah, I think it's going to be exciting. Okay, so I want to start with this question because, you know, you've been in crypto for a long time. I've been crypto for a little bit. Some years in crypto feel exhausting, right? Some feel exhilarating.

Starting point is 00:08:53 There are times in crypto, I feel like super optimistic about the future and the direction we're headed. There's other times where I just feel like jaded. Like I've done with it. Like the short term thinking and, you know, chasing after scams is too much for me. I want to ask you, is that how you feel as well? Like, do you ebb and flow between these things? And how are you feeling about crypto and DFI right now? I think rather than sort of ebb and flow between it, I more like have both feelings simultaneously at all times. I guess it's the best way to describe it. You know, it's like, I mean, it's like that bell curve meme, right? You really got all the extremes. You got so much of the most sort of inspiring and amazing stuff you'll ever see in your entire life.

Starting point is 00:09:34 You'll just scroll through that on Twitter coming from some weird avatars. And then at the same time, yeah, there's like the dark side of. crypto as well, right? It's like all the good comes with also an incredible amount of bad and frustration and scans and, you know, what do you can call it, incentivize stupidity and all of these things that really, you know, it's frustrating that that's how it is. But, you know, over my many years in crypto and, you know, my origin as a Bitcoin maximalist back in the really early days. I've just come to accept that that's just what it's like, basically. That's what this space is like. And you just have to sort of accept and live with that. And then I guess try to focus

Starting point is 00:10:21 on the positives. So you've come to peace with things then, it sounds like you've kind of reached this state of Zen where you can live with both of these realities simultaneously. And you don't let one get you down or the other get you like too excited. You're just like, you know, focused on the future. Yeah, absolutely. And I think you absolutely need to be able to. to do that too. I mean, work in the space and I guess especially to to build a project and try to really

Starting point is 00:10:48 make something new, right? I mean, that's something that it's sort of the, I remember just some advice, some wisdom on that topic, right, is from, I think it's from Kane from synthetics, then had this quote of something like, if you haven't been called a scam yet in crypto,

Starting point is 00:11:06 you know, keep working hard. One day you'll make it, right? Because that's a part of it right that there's all you know that that that's the thing about where the negativity the sort of the the bad side of crypto follows the the good side of crypto and they're both fundamental and interconnected and you have to be able to deal with that or you'll just it's just not for you right you shouldn't be shouldn't give away your life force to to something if you can't really handle it we absolutely close every single bankless episode with this line it's not for everyone right

Starting point is 00:11:39 But thanks for joining us on the bankless journey, and I totally echo that crypto is not for everyone. It's an emotional roller coaster out there, and things get absolutely crazy. But let's talk about something crazy that happened in a good way for Maker recently. You guys have been up to a lot of things this year, but something that more recently hit the headlines was Societ General S.G. will call them, which is a massive French bank, a bank based in France. they just posted on MakerDAO's governance form, and apparently they want to inject $20 million in collateral in their bonds as part of the Maker collateral platform. And this is so interesting to me, I want to hear the details from you about kind of the specifics

Starting point is 00:12:25 of what they're trying to do and why. But what's super interesting to me is we've actually reached the point where the banks are coming to defy. How crazy is that? But tell us about this. What are they doing here? Why is this meaningful? What is kind of the bond that they're proposing, injecting as collateral to back die?

Starting point is 00:12:45 Yeah, I fully agree that the most sort of shocking part of it is just like, what? Now the banks are coming to D. It just seems like it seems a little too early almost, a little surreal. But actually, for me, the thing that really was crazy about this is I had just no idea it was in the works at all. You know, so that's really the sort of showcasing, you know, decentralized organization, right? So I was like just super surprised to see it and just like, what? I had to like Google it and be like,

Starting point is 00:13:14 is it a real bank, this thing? It's the third largest bank of France. I was like, you know, that was pretty mind-blowing. But yeah, so what's going on is that it's Sosate generalis, how to pronounce, but it's their blockchain subsidiary, a sort of experimental subsidiary that's doing this kind of defy blockchain fintech you know cutting edge innovation and experiments and

Starting point is 00:13:43 trials with that kind of stuff and so apparently last year they created a tokenized bond so there's been this bond living in ethereum for quite a long time already that's basically yeah like some kind of real bond in a token format that's been done i guess under french law as an experiment, ultimately. And so now they've reached the point where they've, I guess, their study to look at, okay, we've created this thing, you know, can we actually go and use it in Defi?

Starting point is 00:14:18 And so, so I guess then they've been in, they've been working together with some of the contributors, the decentralized contributors and maker that are being paid by the protocol to, to, um, supported. They've basically been working together with this, society generalis, blockchain subsidiary to, yeah,

Starting point is 00:14:42 like prepare this proposal to maker. And, yeah, and one of the things that's also sort of another mind-blowing thing that also just really showcases the incredible potential of defy and really this fundamental power of money likeos, right?

Starting point is 00:14:58 Is that, so this token they made a year ago as an experiment, it's an ERC20 token and it just out of the box, it fits right into the standard maker collateral you know like like interface essentially right so like there's not even any technical work

Starting point is 00:15:16 in all of this there's like the work the sort of the barriers that were necessary to overcome for this were I guess basically the legal work on on the bank's side in order to figure out whether they could do this legally and then the work of like writing the proposal and that's actually that's it basically

Starting point is 00:15:34 which is kind of crazy, I think. And then, of course, when it comes to the actual, like the actual sort of the qualities of the collateral and how it's useful to make her, I mean, then I think one thing a lot of people immediately notice is that this bond they have, so it's a Euro-denominated bond with a 0% interest rate, basically. So it's basically like a bond that's not, that's not, it's like a five-year bond, right? So it's not super liquid. But it doesn't actually pay an interest rate. And that's, of course, because in

Starting point is 00:16:06 we've got some pretty serious negative interest rates going right now. So people will actually, like, they're very happy to just get euro at 0%. But of course, that means that it's going to be hard to charge a high stability fee from, you know, by Maker on this use, when this bondage uses collateral. And I really think the role that this kind of asset can play and also just generally this kind of collaboration between Maker and these very, very large institutions that are sort of sitting in, you know, squarely in traditional finance with all of the scale and sort of interconnectedness that entails is really that they can provide

Starting point is 00:16:47 liquidity to make it, right? So it's a way to basically have some of the maker and some of the die collateral in a form that is somewhat similar to the role that USTC is playing right now and Paxa's stable coin as well, where S.C is like liquidity. reserves that are sitting there ready to protect the peg and basically make die very liquid and very useful but then this would be a way to sort of take some of that exposure and move it over to you know to just like a completely different type of exposure right instead of being to a stable coin provider it's with a huge bank and it's a different jurisdiction right it's it's french french law and i think that's quite desirable because i mean that's one of the biggest topics in maker

Starting point is 00:17:35 governance for, well, very long time at this point is like, how do we diversify out of all of the USDA sitting there, right? So I think that's great. And there, I mean, that's a very clear sort of way that this is spent at a beneficial relationship that can be developed further. And, but I think the final thing that, you know, that's really the, what really matters of all of this is the precedent that it sets, right? I mean, one thing is the fact that you now have one of the world's largest banks and the third largest bank in France, they've gone through sort of the legal work of figuring out whether they can use their tokenized assets as collateral and maker. And basically, they're saying it can be done, right? I mean, that's why they've gone so far and sort of stake their reputation

Starting point is 00:18:19 on making this proposal, right? And that's really a huge deal. I mean, that's, it actually sets, not, you know, obviously it's not a strong sort of legal precedent or anything like that. It sets, right, it's not anything like there's been courts or, you know, law firms making legal opinions and publicly stating that this is legal or anything like that. But the thing is just, I mean, the way that the world works is when you have something like a huge institution, like a bank, they're, you know, they're part of this system, right? And it really matters when a part of the system starts to sort of reorient itself. It's going to, it's, you know, that's going to impact how easy it is.

Starting point is 00:19:01 for other parts of the system to do the same thing. And yeah, I mean, I think this is really, it really changes the landscape of which jurisdictions are friendly to defy. I mean, in particular, it makes France a lot more, like a much safer place, basically. But I actually also think it impacts the entire EU. So, yeah, so I think that's a huge deal. And it means that it could be a lot easier for future interactions like this to happen and maybe also not only would it have to be these kind of liquidity type of collateral assets,

Starting point is 00:19:37 but you could also have financial institutions offering other kind of stuff for Maker to use as collateral, maybe stuff that actually provides, you know, has the potential to provide real stability fees as well. Roon, this isn't just some like lucky happenstance outcome because some bank chose to do some defy stuff. Maker Dow as an organization has had its sites. on real world collateral for a long time now. And can you perhaps elaborate on the point as to why SG Bank chose MakerDAO instead of something

Starting point is 00:20:12 like compound or AVE or any of the other credit facilities in DFI? What about MakerDAO, the organization there made with such a compelling place to submit a governance proposal for something like SG Bank? Why Maker? So, I mean, I don't know because I wasn't a part of the process, really, so I can only guess. But I mean, I think obviously the one thing to really know is just like the sort of the age, the brands and sort of the history of makers being this sort of old conservative defy project, right? And then there's a fact that we've had this focus, we've had this sort of, you know, we've had a lot of communications and spend a lot of effort trying to educate and talk. talk about, you know, the potential of defy interacting with the real world.

Starting point is 00:21:04 So I guess on that sort of front, it's sort of the, when it comes to like who would, you know, who would a huge conservative bank choose as their partner when taking their first steps into defy, I think it makes sense that they would go from Maker because that's kind of, that's exactly the kind of role that we've been setting ourselves up for many, many years at this point. But I think an even more practical reason is because Maker is really the only place we can go with something that pays, you know, 0% interest and still get the, you know, people that are perfectly happy to accept that, right? Because we're sitting with so much USDC where we're makers out of the one place where risk really matters so much more than the return, essentially, right? So that's where a bank can really provide something that's useful, right? If they went to compound and avid, it just wouldn't fit into the systems because there's just no place where people will park money to get 0% in return, right?

Starting point is 00:22:07 That doesn't really work with their systems. And yeah, I think that, you know, it's also that because of DICE interconnectedness and sort of existence across DFI, it's also just a way. for them ultimately to tap into sort of the whole ecosystem, right? Because by tapping into die, they kind of actually end up tapping into activity across the whole space. I think this is a massive step for DFI. Maybe one of the biggest markers of, I guess, institutional adoption of a DFI protocol that I've seen. Like, I mean, it's a real world bank, one of the largest in the world posting on maker governance forms and submitting their collateral. Like, how crazy is that? How bizarre is that? How bizarre is it?

Starting point is 00:22:51 that hard to imagine back in 2016, 2017, when you guys were first firing this whole thing up. So super cool step. I'm really excited about it. Rune, want to hit on this next topic, which is super interesting to me. I came across a thread that you published, I guess, a couple of weeks ago. I felt like this thread hit really hard. This was a Twitter thread. And I'm just going to maybe summarize a few points.

Starting point is 00:23:15 Then we'll get into them one by one. But it was kind of a criticism of the multi-chain future. and also criticism of the multi-sig future that a multi-chain future inevitably brings with its bridges. We're going to explain that a little bit more. But just some colorful language, you called multi-sigs a dumpster fire, right? Their use as bridges, at least, not in general, but their use as bridges from chain to chain. You also said, and this was very provocative, on a very long time scale, only one layer one can survive. only one layer one can survive on a very long time scale.

Starting point is 00:23:51 You didn't just tweet that. You actually had justification backing up why you think that might be the case. And then you also said game theoretically, D5 protocols that are on Ethereum, they probably won't support other chains. It's almost like this version of, let's call it, ETH maximalism, light. I know we're not talking about toxic maximalism, but D5 protocols on Ethereum will want to have their home chain be the winner. So I want to dig into these topics, and maybe let's start with the first.

Starting point is 00:24:21 Let's talk about multisigs, dumpster fire, duct tape. What is a multi-sig bridge? Can you define that for our listeners? And then why do you hate them so much? Yeah, I mean, it certainly is a complicated topic. But actually, I think the most important thing to really define first, and that wasn't actually completely clear because of how these terms are used, right? But there's a multi-chain, and then I guess there's what I'm really talking about, which is multi-L-1.

Starting point is 00:24:54 Because the distinction between a chain and an L-1, that's very significant, right? And that's kind of what I'm really talking about is L-1s and what happens when you have multiple L-1s. And it comes from the fundamental perspective that an L-1 is essentially a blockchain that sort of goes out of its way to be independent and be and actually not interconnect elsewhere. So if you look at all the different L-1s, in practice, they're called ETH killers, right? And that's basically because they're positioning themselves, you know, as alternatives to Ethereum rather than as something that's fundamentally built to synergize and to tap into Ethereum's network.

Starting point is 00:25:40 Because I mean, and I really would argue that in practice, like if you're just trying to make If you just think coming from the perspective of, you know, I'm making, I'm going to make a blockchain. I'm going to make enable defy. I'm going to make sort of a, you know, blockchain business, blockchain economic ecosystem and all these things, right? Like the number one thing you're always thinking about is like if you're trying to optimize for a good blockchain, a good environment for people to build, the main thing people care about, which is why they're using defy and why they're using blockchain is, you know, interconnectedness essentially. right like this this interoperability right the synergy uh permissionless innovation money legos this is kind of the entire value proposition right so that the you know so there has to be like a really compelling reason to sort of deliberately exclude that which is then which then becomes this sort of

Starting point is 00:26:36 this l1 narrative essentially right which is this idea that you can be a self-souverin you know dominant blockchain essentially that can have its own ecosystem. So it's already like basically you're already from the beginning you're sort of defining these things as being separate and being distinct and being in some form of competition. And it's then from that perspective that you can then draw this you know, draw this conclusion of like the multi-sigs and the multi-sig bridges. Because I mean the basic idea is that when like the reason why someone uses blockchain and well, it's because they want interoperability,

Starting point is 00:27:16 but it's also because they want security, right? I mean, that's why they're not just going on some, you know, centralized, whatever, like some centralized service, right? They're actually going and finding, you know, using a blockchain, so they have control over their funds, and they have, you know, they have sort of an understanding of what kind of risks they're exposed to. And even if a user isn't doing that explicitly,

Starting point is 00:27:43 then instead what's happening is, using a platform, which is actually even more obsessed about what kind of risks is this platform, this maybe this custodial solution, what kind of risks is it exposing its users to, right? So security always, like it plays this fundamental role. And in particular, this sort of the task of like figuring out, you know, what kind of security are you expecting and what are the risks that you're willing to take and all of this stuff, right? And, And that's kind of where the problem comes in, because every single L1, they sort of offers their own perspective on this, right?

Starting point is 00:28:20 So Ethereum, it's like, you know, you have this, this, you know, you want the users to run the nodes and you have all these like sort of this more, I guess more pure approach towards decentralization, where instead, on the other hand, you have something like Solana, which is like, actually you don't need all that. You can have an L1 that just does X, Y, and C. And it's to some extent, it's like, users that use either, adopt either of those perspectives, they have very different expectations of what security means,

Starting point is 00:28:51 like what is security basically and what is decentralization. And so that's why basically all bridges, in my opinion, ends up being multisix. Actually, no matter how you construct them, you can pretty much think of them as multi-six, no matter what. And, Vrude, real quick, when you're talking about a bridge, you're talking about like, if I want to get my tokens, my dye, let's say, from Ethereum to Solana, or from Ethereum to Avalanche, or from, you know, Polygon back to Ethereum, that's the bridge that you're talking about. It's transmitting from one L1 to another L1 through some sort of bridge, right?

Starting point is 00:29:34 Yeah, and actually it's a little confusing because the terminology back in the day used to be that this was called a gateway. and then a bridge is when you do the kind of the swap. So you do an atomic swap cross chain. But I guess now it's sort of, yeah, like a lot of other terms, it's become a lot more sort of abstract, and you just kind of, yeah. What I'm talking about is are these transporting assets from one chain? So go into that some more.

Starting point is 00:30:01 Why do these bridges suck so much? And why do they become multi-sigs? And why do multi-sigs, like, create kind of a centralization vector? that's duct tape, as you said. Yeah. So it's basically that, I mean, I guess the best example is Ethereum and Solana. I think because that's kind of like, that's really the epitome of this whole sort of tension, right? We have Ethereum and sort of the incumbent.

Starting point is 00:30:25 And then you have Solana as this very, you know, very promising competitor that is providing its own complete ecosystem, right? And so the fundamental problem is that if you're transporting assets from, I mean, you can, and it's very concrete today how it works with Ethereum and Solana, right? Where basically the dye that you move from Ethereum onto Solana becomes centralized effectively because the die, you know, the dye doesn't actually leave Ethereum, right? Because it's, die ultimately is tracked on Ethereum, right? So the die actually is sitting on Ethereum, but in a multi-sig and that multi-sig then issues essentially an IOU on the Solana blockchain. And so what's happening is now you have, you know, you go from thinking of, you know, go from a security model of dye just being this is, you know,

Starting point is 00:31:17 dye has a security of Ethereum, basically. And now, so one thing you're doing is you're moving it over to a new security model, which is the security of Solana, first of all, right? So you have to consider that. And then on top of that, and this is basically the problem, in my opinion, right? You also have to deal with security issues of the bridge. And the security issues of the bridge are like pretty, they're just a lot more severe than the blockchains themselves.

Starting point is 00:31:43 So for instance, like on Solana, maybe you could, some would argue that Solana is less secure than Ethereum, but you still can't like, you know, you can't like lose your assets. So you can't like have a, you know, like a like a 51% attack on Solana that just straight of like steals your assets, right? I mean, there, like the blockchain is built to prevent that and you provide some guarantees that means the worst thing I can. happen as something like censorship or double spending and something like something that's a bit less severe than straight up like losing your tokens but unfortunately with a bridge that's not the

Starting point is 00:32:20 case like a bridge can like entire it can it can it can just go and take all your tokens the moment it's compromised right and that's because it has to really it has to actually control the tokens as they sit on ethereum when it's trying to when it's sort of providing them across a cross chain on Solana. And that's, and that's sort of the, I mean, it really is because you have these two L-1s, they don't have, like, they're deliberately built to not be compatible. And then you have to create some kind of system in between and then makes them compatible. And that system in between, it's, I mean, it's actually kind of like its own block,

Starting point is 00:32:55 you know, you can all of think of it as its own blockchain in one way, but, but in practice, it makes even more sense to think of them as multi-six. And it doesn't matter what form they take. So actually even if like, like even when actually are blockchains, that you can pretty much just think of them as like complicated multisix basically. Because in practice, as a user, you're not going to, you know, you're not going to sort of spend the effort of like actually figuring out the sort of the game theory and the crypto economic guarantees of some particular bridge.

Starting point is 00:33:26 In reality, you have to basically, you know, think about who, who's actually holding these funds and are they going to steal them or not, right? And that's some of the calculation you have to make before using a bridge. And so what we're talking about with these, when you say multi-sigs for bankless users that are not familiar, right? These are kind of like, you know, accounts where it takes a certain number of individuals and their private keys to sign whether a transaction goes through or whether they can take your funds or not. So common multi-sig is like five of seven individuals all agree to a particular transaction. And, you know, that's it. So imagine taking your dye, moving it through a multi-sig-type bridge, putting it on some other chain, say, Salon, or something like that.

Starting point is 00:34:12 And it's a five-of-seven multi-sig bridge. That means it only takes five people who are probably friends, know each other in real life, like, to collude and take all of that die from you. That's essentially what you're saying. Or receive regulatory pressure. Yeah, exactly. That's what you're saying. And you're saying, Rune, that, like, that makes the weakest link. in your security chain, that multi-sig every single time.

Starting point is 00:34:39 And that's what happens when we get a multi-layer-one universe, right? Yeah. I mean, I think in Praxis, of course. So actually, actually, I'm actually a big fan of multisics as sort of solution. Actually, and that's kind of the thing that I mean, that's why I think it becomes so much about multi-six, because when you have this sort of situation where you have some unknown risk, you're bridging between sort of two different paradigms of security. It's too complicated for people actually like, you know,

Starting point is 00:35:09 figure out how to measure the security and the risks. And the best option really is to have like a bunch of trusted actors, basically. And then just being like, yeah, I mean, I just have to basically trust these people not to steal the money. And then, I mean, I'm not sure about the specifics with the bridge between Ethereum and Solana, for instance. But I would imagine that we're talking about like some of the top companies in the space. base, right? And there's this, like, there is this sort of intelligent design to it, right? Like, there's diversification. There might be jurisdictional diversification. So there, I mean, there's a whole bunch of optimizations that are made on this kind of construct.

Starting point is 00:35:45 But the problem is just that in the end, it's never going to be as, you know, it's never going to be as safe as sort of native security. And, and yeah, it creates this weird dynamic, right, where something like USDC, like centralized stablecoins, for instance, completely unaffected by this, right? They actually don't even need to use these centralized bridges. They just straight up sort of create their own centralized alternatives, essentially, right? And that's because they're just fundamentally centralized, so they completely sidestep all of these issues. But basically, for something like Dai, it really sort of undermines the value proposition in the first place because you just, the point of it is that it's a, you know, it's a system that actually runs. based on the security of Ethereum, not based on sort of the trust you place in the individuals that are active day to day or anything like that, right? But then now you're sort of reimposing

Starting point is 00:36:45 that kind of downside to it, right? By using it through a multitude. And ultimately, that just means that you can't really, you know, you can't really compete with someone who's, like you can't be an outsider on an L1 essentially. and then compete with someone who's a local because as decentralized projects, right? Because you're sort of a,

Starting point is 00:37:08 you're decentralized project that has become centralized essentially. And then you're trying to compete with a local that is just decentralized and that follows exactly the, you know, only the security model of this home chain that you're trying to compete for users on.

Starting point is 00:37:25 And ultimately, that creates sort of this, I'll call this sort of game, this game theoretic outcome where a project like Maker is just better off not even trying to compete on Solana. Or at least it's like it's a difficult decision to make because you're ultimately going to be at a disadvantage and going there and trying to actually sort of boost the activity there by growing your own market share. You know, you're always going to have that inherent sort of disadvantage.

Starting point is 00:37:58 But then what you're actually doing is you're sort of. growing the home chain of your own competitor in a sense. And that ultimately can lead to the situation where like Solana as a whole could like become a thread to Ethereum essentially. And then I even, you know, I talked about this in the tweet thread as well, right? In the worst case scenario, if Solana, for instance, just became too big, right? If it became the real sort of ETH killer and really just like supplanted Ethereum as the main blockchain into the hub for all of D5, then you would, you know, it would not be viable anymore to be an

Starting point is 00:38:35 outside of this ecosystem, right? You'd have to be natively there because that's where the marketplace is, that's where the users are and they, you know, they're going to demand decentralization sooner or later, right? Whether it's directly as end users, whether it's the big platforms to decide what they're going to integrate under the hood. And theoretically, like, you know, Maker would have to undergo some kind of migration, which is not even really, I mean, maybe that's not even really realistic. But then the alternative is something like wither out and basically get out competed as Ethereum gets out competed by Solana.

Starting point is 00:39:14 And so that's ultimately what creates this incentive for Maker to, instead of trying to, instead of trying to benefit ETH killers that are basically undermining the thing that Maker needs to survive, basically, which is a strong Ethereum ecosystem. strong sort of home field advantage, right? Maker is way better off, you know, supporting L2, right? And trying to build out the Ethereum ecosystem because that's where Maker has this sort of home field advantage, right? And then it's going to be the, you know,

Starting point is 00:39:46 it's going to be the other projects that kind of have to eventually go through this kind of, you know, painful L1 migration potentially, right? If it turns out that in the long run, it'll only, you know, it'll be Ethereum, that ends up winning out in the, what you call it, the power law distribution of which ill ones are going to see activity. Rune, I want to summarize the thought process so far just to make sure that I've got this right and hopefully for the listeners as well. At the beginning of this show, we talked about why SG Bank might have chosen Maker

Starting point is 00:40:18 and it was because of Maker's risk aversion, right? One thing that Maker has done very, very well is optimize for risk and controlled risk. And then same thing with the Ethereum blockchain itself, right? Ethereum is supposed to be maximally decentralized. We encourage people to run nodes. We try and do our best to make running a node as easy as possible. And for the Ethereum L1 client developers, for the last like three, four years of their lives, have just like ground out client optimizations, client optimizations, client optimizations,

Starting point is 00:40:48 client optimizations in the name of decentralization. And so when you say like, okay, cool, we have Maker, which is this very risk-controlled application on top of this very secure decentralized blockchain, if we want to export our dye, which is Maker's product, to the rest of the crypto ecosystem, all the L-1s. We can do that,

Starting point is 00:41:06 but then instead of all of this effort that Maker and Ethereum have put into controlling risk, all that just goes out the window once you put dye into a multi-sig to port that over to Solana, because all that security, like Brian said,

Starting point is 00:41:18 it's the weakest link. And as soon as you have a five-of-seven multi-sig, that's like, well, Ethereum might as well have just had seven nodes and all of this like client optimizations for the Ethereum blockchain have just gone out the window, as did all the risk control that MakerDAO does. And so what you suggested then next is like, well, we can just build a native clone of MakerDA on Solana and not have to do any of the bridges. We can just have two makers and they'll be the same entity, just one will be on Solana and one

Starting point is 00:41:47 will be on Ethereum. But the problem you said with that is that, well, then that actually increases is the adoption of the non-home field advantage chain, right, this alternative L1. And then there might be a time that because of the actual deployment of Maker Dow onto these other chains, you actually bootstrap that chain into its success. And then we have a messy outcome where the actual home field where Maker started with is now the minority chain. And now there's this whole mess where you have to migrate from minority chain to this new L1 chain. And that's true for not. not just Maker, but for all of Defi. And so what you're saying is that it's actually game theoretically rational for Maker

Starting point is 00:42:28 to just pick one place and optimize for that one place and make sure that the home base, the home field advantage for Maker, stays as strong as possible. So Maker doesn't have to deal with this whole, which L1 do we call home? How do we optimize for, like, making sure we pick all the same L1 as everyone else? Is all of that correct? Yeah, I mean, one thing I want to add, Yeah, and again, it is a very complex set of interactions.

Starting point is 00:42:57 But one, I mean, one thing to mention is you're talking about this, like deploying an alternative to maker on Solana, by instance, right? And actually, this concept of like the copy, already there, actually, we, you can't even really do that because the problem is that you just cannot, you just cannot sort of bridge decentralized governance, right? or rather, if you bridge decentralized governance or any kind of bridge, any kind of decentralization,

Starting point is 00:43:26 the level of security you end up with is the security of the bridge. So you can't have like two separate maker instances that are not beholden to the bridge, essentially, unless they actually truly are separate, meaning they have completely different sets of governance tokens. And then they actually just become competitors, I believe.

Starting point is 00:43:48 I mean, I don't think anyone's run those kind of experiments, But I think in practice, I mean, they're just not, you know, they're just going to, it's basically going to be equivalent to sort of just creating a competition in that sense, right? Because they no longer have economic alignment. Right. Yeah, right. Like you lose, you sort of lose the economy. You get misaligned economic incentives. Yeah, exactly.

Starting point is 00:44:09 Right. You spin up an identical twin, but it's your evil identical twin. Yeah. It turns on you later. Yeah. Yeah. I mean, and that's also the thing about all this is that we're, we're just. talking about like looking really far into the future right so in the short run none of this

Starting point is 00:44:24 stuff really applies it doesn't really have sort of short-term consequences but you know that's the thing about maker and me i guess we're kind of obsessed about the very long term and that's really mostly what we care about and it's from that perspective basically that i mean my argument is essentially that you're just you're just going to be better off trying to yeah like you know pick the pick the you know try to pick the l1 that wins and uh and stick to that, I believe, because if you pick sort of the wrong one, you're not going to have a good time, you know, changing your mind later if another one ends up being the winner. And there is absolutely this possibility that, I mean, there is this vision of like the multi-chain future.

Starting point is 00:45:07 So that's what it's called, right? The multi-chain future. That's sort of the phrase that describes this, like what right now I think is actually the main belief of most people, right? That you will have all these various L-1s and they'll just, and defy, and sort of the ecosystem will just interoperate across all of this. And that's kind of what I call the multisic dumpstify. Because then basically what that world would actually look like is you would just have this endless sort of complexity of like where, you know,

Starting point is 00:45:37 what's actually the trust assumptions of all these things. And yeah, I mean, yeah, it's actually like if you sort of start to really dive into it, it's actually really hard to even figure out what does it actually actually actually converge to. And so my conclusion is in the end, you just always end up with everything converging to sort of the one place where everybody agrees, okay, this is

Starting point is 00:45:59 what we trust. Like this is kind of, this is the common ground. This is where we sort of, you know, when we interoperate with something, we interoperated under these conditions because we don't want to do it with, you know, interoperate under conditions that we do, you know, with security,

Starting point is 00:46:15 sort of a security setup that we don't understand because yeah I mean you need to in the long run you have you know in the short run in defy nobody really cares much about security right it's it's more the DGN spirit that sort of rules everything but in the long run

Starting point is 00:46:30 it's the opposite you know the DGent spirit can only take you so far right and then you have to actually really start to worry about risks and that's when I think it'll just you know it'll set in this sort of requirement that yeah probably my guess is

Starting point is 00:46:46 it'll be Ethereum but of course I'm completely biased. That's kind of the thing, right? I'm already locked in at this point because I'm exposed to Maker and right. I'm, you know, financially and emotionally, basically, I'm fully invested in Maker. And that just means that my own interests requires Ethereum to win. So it's impossible for me to, you know, it's very hard for me to, you know, not sort of double down on that belief, right? And but, but that's kind of the point, right? That, that, um, that, um, the place where people will be mostly invested and where people have the most exposure or the most desire to sort of see succeed, that's where, that's what's going to be the standard

Starting point is 00:47:30 in the long run of like how apps interrupt rate. What's so interesting about this from my perspective, Roon, is like, I've never pegged you previously as any kind of maximalists, in particular an Ethereum maximalist. And what was interesting about your thread is it was more sort of a game theory case on like playing out on the long time horizon what's going to happen. And you're basically saying that all D5 protocols that are Ethereum-based will protect their home world, right? We'll protect Ethereum and will want to work to make Ethereum succeed because if they move

Starting point is 00:48:09 to any other chain, then, you know, essentially they compromise security and they will lose like to local competitors. is what you're saying. So that's one implication. Another implication is on the long time scale, as you said, only one L1 can survive. And I think what you meant is like, not that there won't be other L1s, but that there will be a clear power law winner, say somebody with like 70%, 80% of the value capture in the market share and the mine share behind this. And this is interesting as well. Number three, because I think this doesn't just apply to Maker, of course. This applies to all Ethereum DFI protocols, whether they state it or not. And what I really appreciated

Starting point is 00:48:53 about this thread is like, you actually came out and said it. It's like what everyone in the room is kind of maybe thinking or theorizing, you actually said it. Or I feel like some other DFI protocols are kind of taking a wait and see perspective and maybe they have plans behind the scenes, but they're not really executing them. That's another, I guess, takeaway for me. Number four, I guess the last takeaway is, of course, none of this applies when we're talking about Ethereum layer two, right? So when we talk about a multi-chain future, I think a lot of people mean what you said they mean, which is like all of these different layer ones, kind of interacting in some way, right? Another definition of a multi-chain future is we have essentially, it's all

Starting point is 00:49:38 in kind of the Ethereum ecosystem, but it's a whole bunch of different layer twos that aren't in any conflict with Ethereum, and they have a different bridge, right? Their bridge is not, you know, 5-07 multi-sig bridge. Their bridge is based on the underlying security of Ethereum, so ZK. Roll-ups and optimistic roll-ups take this approach. They have very sturdy bridges that don't compromise on security. So those are some of the takeaways in my mind from this thread and why I found it so insightful. Anything to add to that? Yeah, so I think one, I mean, then another sort of factor that I haven't really mentioned, but that also plays a huge part in all of this, is the role of the native token as collateral in Defi.

Starting point is 00:50:25 And I actually, so I would actually disagree that this applies to all or most Defy apps, like this concept of sort of, what do you even call it, like incentivized maximalism or something like that. So I think as, in fact, most of the apps kind of because many of them don't, you know, like much of what people are using today and what's coming. out today, it's not so focused on like security or decentralization necessarily, right? A lot of it is kind of a, I mean, it's sort of closer to, you know, it's more about building these sort of high risk, high reward things. And in that situation, you know, it really makes

Starting point is 00:50:58 perfect sense to sort of be all over the place, right? Be super fast, cutting edge, not worry too much about bridges or anything like that, right? But I think in particular, you know, like, it's really when you get to sort of the type of role and sort of the type of product that Maker is providing, right? Where we're talking about this, like maximum stability, maximum security, maximum conservatism. And that's also where we then get into a concept of the native token, because the native token just plays such a huge role in this, in sort of the ability to create decentralized stability, basically. In fact, are you talking about the native token of the layer one or are you talking about like the native token of maker or some other defy

Starting point is 00:51:43 protocol yeah sorry so the clever i'm talking about i'm talking about eth right so in the native token of of the layer one like so and because i mean that's why everybody wants to be an l1 right it's because a native l1 token is just so much more it's the single most valuable thing that's ever been invented in blockchain right and i mean and you even have the like it's so valuable that even you even have Bitcoin that has sort of a, let's call it a terrible business model, right? It's like a system that's just losing money, basically. Yet

Starting point is 00:52:14 just that sort of the native token characteristics of Bitcoin makes it insanely valuable, right? And then you have Ethereum, which is like, you know, not only do you have this potential for very powerful unit economics almost,

Starting point is 00:52:33 right? Like, a very powerful sort of just basic economic framework where this profits, there's surplus, and it actually goes to the holders of the token. You have that, and you combine that with sort of this native, you know, self-sovereignty of also powering and running the network itself. You really get something that is just incredibly, incredibly valuable, first of all, and liquid, secondly, right? And well, and then finally, secure and decentralized, which is the whole point of it. And that's the thing that is actually also so incredibly, sort of interconnected with all of this stuff, right?

Starting point is 00:53:09 I mean, one thing is that Maker is sort of on the Ethereum blockchain and it's on the home chain and so on. And so on it, this is what the kind of security that I use is expect and all that stuff. But the other thing is, like, in practice, Maker just cannot really actually migrate away from Ethereum because it has so much eth sort of backing all the dye that you can't, you know, the act of sort of defy migrating away from Ethereum is going to have implications for the price of Ethereum, of the ETH token, basically. And so the act of like maker migrating away from Ethereum could sort of itself, like that could just itself, you know, impact the stability of that, basically.

Starting point is 00:53:53 And this might actually be the biggest factor of all, basically. Because it's sort of the hidden, the invisible hand that runs crypto communities and really runs all of crypto, right? Is that the fact that, you know, Indyrum is a huge deal. There's so much innovation because, first of all, it's super open to people to come and build stuff. And then everyone's actually got sort of a, you know,

Starting point is 00:54:14 they've actually vested, have a sort of vested stake, right? Everyone's holding ETH. So they're not only like benefiting from what they do directly. They're also benefiting from being a part of the whole that where everyone's contributing to what's this, with these in line incentives, right? And it's kind of the same factor as well that there's this play here. And I mean, and so, you know, and that's, it bridges once again are a problem here because you just like Solana is an amazing blockchain, I think, right?

Starting point is 00:54:43 It's like super advanced technology and it's like a very clever tradeoff, I think. So I'm actually, you know, and that's why I'm a weird, let's call it a very weird Eve maximalist, right? Because I really think that Solana is a very strong sort of contender and a very, yeah, like a strong. blockchain and so on, right? And, and, and I, like, if you look at the Sault token, it's a, it's an amazing token, I think, to, to use as collateral for the exact same reason why Ethereum is an amazing token to use as collateral. But try to move it across a bridge and suddenly it's, it's really not that appealing anymore. That's basically the problem, right? So, so it's a, it's not so easy for Maker to, to, I mean, it's just not that attractive for Maker to like

Starting point is 00:55:29 stock up on, let's say, Sol tokens as collateral backing die. Like, you could have some, sure, but like you wouldn't have, you're not going to, you're not going to feel good having like a huge portion of, of the collateral portfolio of a decentralized stable coin, be

Starting point is 00:55:45 basically a blockchain token that's held in some kind of, either it's a multi-sake or it's some kind of very complicated technological machinery, right, that where ultimately there's all sorts of risks that you can't really, like, you can't directly, analyze them game theoretically. You have to just

Starting point is 00:56:01 basically put your faith in it, right? And so in the end, you can just think of it as basically like a multi-sake of a bunch of factors that you hope all are going to work out. But basically if they go wrong and you can't really can, you can never know exactly how and why that would happen,

Starting point is 00:56:20 then you could lose you could just lose the assets entirely, right? And importantly, that's just not true about ether when Maker is on the Ethereum chain, right? the properties of ether as collateral inside of maker dow hold a lot more monetary premium due to its nativity and its nativity to all the other defy apps that are on ethereum unlike the sole maybe there is a monetary premium behind the sole token but the value of that monetary premium

Starting point is 00:56:45 is just thrown out the window when you establish a bridge yeah so i mean i think that uh like a maker clone i'm not sure if there's yeah there is there is a maker clone on salana but it works a little bit differently works based on derivatives. But I think just like a system that just generates a stable coin by accumulating huge amount of salt tokens natively on Solana, that's a very, that's a strong model, I think. But I don't exactly see a stable coin on Solana, you know, sort of carrying across huge amounts of ETH through the bridge onto Salana to then have a bunch of centralized ETH iRUs sitting in a a decentralized stable find over there, right?

Starting point is 00:57:28 So, Rune, does this mean all these chains fight to the death? Is that how it's going to play out? I think, well, I would say that Ethereum, you know, I mean, I said this, you know, what is in 2015 or something, I made this, like, original Reddit comment about synergy of, you know, synergy in blockchains. And later, you know, I ended up becoming, you know, was called defy and money legos and all that right but basically i think that ethereum just has this completely unstoppable momentum already so like in practice it's just already the like it already is the

Starting point is 00:58:09 standard essentially um and and uh you know it's just it's growing so fast so like i don't think necessarily that other blockchains will will sort of fizzle out necessarily but i think we've seen it happen with something like u s for instance um Whether it will happen to, like whether it's a possible outcome for Solana, I don't know if that's the case. Like, Solana might have hit critical mass where it's just, it can only, it's going to grow from it's where it is now. But the question is, is it, like, I mean, is it ever going to actually be something that can sort of surpass Ethereum and be the new standard that Ethereum is today? And, yeah, I guess it actually comes down to the L2s, right? So, what means?

Starting point is 00:58:57 And really sort of the optimist role-ups and, like, you know, Stocknet and CKSync and these things that are coming. Like, if they get adopted, I think it's game over in the sense that, you know, you'll never, it's just, you know, the window of opportunity for Solana to surpass Ethereum is sort of right now, basically, right? We would have to see sort of migrations of applications from Ethereum over to Solana. we'd have to see sort of the cutting edge of innovation happening on Solana rather than Ethereum. And sort of an kind of an irreversible trend towards that, you know, needs to occur before the roll-ups.

Starting point is 00:59:36 So, you know, start to develop a critical mass of being able to properly tap into liquidity on the Ethereum mainland and then having the user experience and all these things. And yeah, like I think, I mean, yeah, so it's not, it's not, it's not, it's not, not about fighting to the death. It's more like fighting to see who gets to sort of really, you know, bank the unbanked. That's a weird analogy. Like who gets to really sort of blockchain the whole world, right? Like, what's, you know, so, and I mean, maybe a society general, that's sort of the, it's a good example of that, right? I mean, the question is, so now they did it and there'll be another, you know, a hundred banks doing the same thing soon. enough. And the question is, are they all going to go to theorem, or is it actually going to happen

Starting point is 01:00:25 that, you know, that over time the gravity, the center of gravity will be on Solana, for instance, and you would actually see this sort of large scale global adoption happened with Solana instead? Previously and also generally, the maximalism arguments have kind of been like emotional ones or subjective ones. But Rune, my take on this is that this is actually more of a technical argument as to for maximism, right? And we can actually even just ignore the names of these systems, right? We can ignore the fact that one of these things is called Ethereum. We can ignore the fact that one of these things is called Solana. And we can have the same exact conversation just saying like L1A, L12, because bridges are agnostic constructions. Blockchains are

Starting point is 01:01:11 agnostic constructions. But the patterns being described here as when you compromise security going from blockchain A to blockchain B is the same. Do you agree that this is actually just like a more technical argument as to why 1 L1 will quote unquote rule them all, regardless of what that L1 actually is? Yeah, I think, I mean, I think so. And the thing is the way I'm coming from, I mean, you sort of mentioned this liberally, right? That I'm not, I'm just not someone who's, so has traditionally been an eth maximalist. In fact, I've sort of been the opposite.

Starting point is 01:01:43 So I've always been sort of advocating for the multi-chain future and, and, and, you know, But I've always had this. I mean, and the reason why I've arrived at these conclusions, which by the way are my personal opinions. And it actually really doesn't reflect what other people in, you know, contributing in the maker ecosystem thinks. It's very diverse, I guess. But it's it happened because I was spending so much time trying to figure out how do we really, you know, how do we get our arms around this multi-chain future, right? How do we become the stable coin that's sitting on Ethereum, but it's actually available everywhere, right? You don't have to worry about which I'll one will still be available, you know, with native security.

Starting point is 01:02:25 And then the problem was basically turns out you just can't, the native security thing, you just can't really do that. I mean, you can do some. And, you know, there's a, there's this whole side argument where some people will come in and then they will start talking about like Cosmos, for instance, or basically these very advanced bridges, right? And the argument goes something like, what's going to happen in the future is that everything will be sort of multi-chain, and users will be completely fine bridging across one blockchain to another,

Starting point is 01:03:05 because when they bridge, they're using Cosmos. So they know the bridge has this sort of native security. They're very comfortable using Cosmos, because they trust that and they're used to that. But actually what they're basically doing is they're kind of engaging in the same, they're engaging in the same kind of L1 warfare in a sense, right? Because they're just trying to argue that cosmos should be the L1. That's basically how I see a lot of this stuff happening.

Starting point is 01:03:32 I mean, and you actually see this stuff all over the place. And this is, I also wrote that in the Twitter through, right? This is what I call multi-cheon propaganda, right? Because you really want to kind of adopt this like, you know we're working to i mean yeah right just this is this s curve of platforms right like in the beginning a platform wants to collaborate uh you know with with sort of the things that build on top of it right so at first yeah right an l1 will will want to not present itself as like an l1 but rather as a whatever l whatever anything else than an l1 basically but in the end i mean i'm you know if cosmos

Starting point is 01:04:11 is running all these bridges all over the place, they're going to have, you know, they're going to have some, they're going to provide their high level security by paying people, right? Like, there's going to be costs related to providing that security. And that's actually what it all comes down to. It's like, who gets paid for, like, providing the ultimate security? Like, the thing that's sort of like, when I get this stamp of approval, I trust it and I know everyone else also trusts it so that we can interoperate.

Starting point is 01:04:39 and who gets sort of that premium of like being that final stamp of approval, right? And today that's Ethereum, right? So that's the ETH token. That's what's making the ETH token so valuable, and that's what's making it so great collateral and so on. And the future, it could be that it's actually not, you know, it could be that it's like cosmos or something on that, right? Solana, whatever it is. But the point is that I don't believe that there's going to be more than one of these ultimate stamp of approval sort of

Starting point is 01:05:09 systems basically because it just I mean it's just not going to be as efficient to have multiple pieces of them and it may work in this form of like it's all bridges and so on but they're actually all cosmos and everyone trusts cosmos and everyone's paying cosmos but yeah like that brings us back to L2 and Ethereum right because that's exactly what Ethereum is basically doing with

Starting point is 01:05:31 with roll-ups in the first place right that you can you can actually have a multi-tained future that is decentralized as long as everyone's sort of making sure that they're getting the stamp of approval of the Ethereum gene, which is right now the defecto sort of, you know, truth machine. Rune, let me ask you, this might be sort of a chink in the armor of your argument. I'm wondering what your reaction is to this. So I read a tweet recently that said basically people who keep harping that whatever is not

Starting point is 01:06:02 decentralized enough are just blinded by ideology, right? And the tweet goes on to say, what people really want is open money plus monetary incentive plus community. You don't need decentralization for that, is what this person said. You said earlier in our conversation that for assets like USDC, it really doesn't matter, whether it's Ethereum or Avalanche or Solana or name your other L1 chain. Why? Because ultimately, it settles back in a Coinbase and Circle bank account, right? It's outside. It's a foreign citizen to the defy community, right? So it really doesn't matter for those assets.

Starting point is 01:06:42 What would you say to that reaction that, hey, basically, decentralization doesn't matter as much as you think it does, Rune. And, you know, people are just here for kind of the open money, the permissionlessness, and this kind of whole incentive compatible community layer that we have. Yeah, I mean, I agree with it that most people don't care about decentralization. and most cases it's not actually needed. The thing is just that ultimately decentralization, that's what a blockchain provides.

Starting point is 01:07:15 So, you know, you don't actually, if you want to provide a future of open money and open all this stuff and you don't care about decentralization, you don't need a blockchain to provide that, right? I mean, let's say, I mean, like a perfect example of something like FTX, right? That's a really cool example of like,

Starting point is 01:07:33 this is where you have a regular company just doing all sorts of crazy financial innovation, right? And that's what actually really hooks people, right? Like, they've got a huge user base. They're incredibly successful, right? And I think that's exactly because they're sort of tapping into that concept, right? Of, like, people just want cool financial tools to access. You know, so much.

Starting point is 01:08:02 I mean, we were talking about the good and the bad of blockchain, right? I mean, the reality is that almost everything that's happening in blockchain right now, like there's this massive sort of, it's a hurricane of like, you know, basically projects and and like tokenomics that ultimately aren't sustainable, right? Like so much of the activity happening in blockchain, they are like people getting yields from like yield farming or something like that, right? ultimately, that it just fundamentally, the reason why it's happening is because it's like the Wild West and we are on the frontier and all these things are happening today that they're possible

Starting point is 01:08:42 because, I mean, they were enabled by decentralization, but they don't really sort of, they don't really need it. They just need, they just need sort of enough of it and enough of a headstock to not get like shut down, for instance, right? And over time, that's not going to, I don't think that that's going to, it's not going to last forever basically. Like probably a good analogy is something like we're before the dot-com bubble still, right? We're still in this sort of era where things just haven't really converged.

Starting point is 01:09:13 And I think in the longer term, they'll, there's just, I mean, there's going to be this kind of pressure where on one hand you have basically, you know, the decentralized networks and sort of the legitimate activity that's happening in fully decentralized systems that are, you know, like defy stuff like, you know, where Maker is trying to, you know, like improve finance through better, you know, through smart contracts that just create better financial primitives and these sort of really solid use cases. And then sort of all the way on the other end, you just have like straight up like Ponzi schemes. And basically the Ponzi schemes, what they're really going to be running up from.

Starting point is 01:09:58 in the long run is like regulation, right? And people suing them or whatever it's going to happen to them, right? And the way they protect themselves is ultimately with anonymity and decentralization. And you can kind of compromise on decentralization as well when it comes

Starting point is 01:10:15 to creating schemes or ponzi's or whatever. But there's a... I mean, over time, there's going to be... I think there's going to be a limit to that. And you're really going to see that a lot of this middle ground activity we see today is going to kind of bifurcate into sort of just regulated stuff that's centralized and then, you know, decentralized stuff that is either not regulated at all because it's completely cut off from the physical world or that is regulated in a way

Starting point is 01:10:46 where it's sort of the pieces that interact with the real world that get regulated. Rune, one part of your tweet thread, which you hinted at a second ago, which I want to touch on before we close out this section and move on to. clean money is the whole Trojan horse multi-chain propaganda part of your tweet thread. My interpretation of this is that if you're a new chain with lesser adoption, you're like a minority chain and there's a chain out there that's bigger than you, you are game theoretically incentivized to say, oh, it's a multi-chain world. There's many chains and we're one of them. Come come do your things on our chain because we're part of this multi-chain world.

Starting point is 01:11:23 and that's rational for a chain with lesser adoption to promote that sort of narrative towards, you know, the greater conversation. But then if you're a chain with a greater level of adoption, you have an incentive to say it's a winner take-all environment. It's a power law distribution. We are in the lead. We are going to stay in the lead. We're going to consume everything. And I think what you're implying is that, like, if you are a lesser chain, you want to promote this multi-chain narrative until you have sufficient adoption that you actually become the dominant chain. and then you swap and then you say, well, no, it's actually a winner-take-all environment.

Starting point is 01:11:57 And then you rugpole the narrative and say, now that we've forgotten all the adoption that we have, like, turns out it's actually a power law distribution. And you are also saying that, like, things ultimately collapse down towards that final stamp of approval, right? The strongest stamp of settlement assurances that a blockchain can provide. And those assurances get stronger and stronger and stronger with greater and greater network effects. And so going back to, like,

Starting point is 01:12:23 The last comment I brought up is like, is this kind of a logical conclusion of L1s, right? Like L1s all collapsed down towards a maximalist tendency or network effects or to whichever one can create that the strongest settlement guarantees, the strongest stamp of approval. Ultimately, the game theory of all these competing chains collapsed down to who has the best stamp of approval. Is that like the simplest way we can like collapse all of the things we've been saying is like, well, it's ultimately the thing. game is who has the strongest stamp? I think you can argue that to some extent. But I mean, but there's just so many factors involved in all of this, right? And, and, you know, one example I wanted to make is that you can also think of it as like,

Starting point is 01:13:13 when you have this sort of, you have this this lesser chain, right? Like a new chain with sort of less security essentially, right? That's not considered the, it's not considered, yeah, like, it doesn't have that sort of final industry standards stamp of approval characteristic yet as a result you don't really care so much about what's coming through the bridge like I maybe that I mean I guess maybe today is a little bit different right but I think early on with salana especially you know you'd be able to be like well salana itself pretty much looks like a multi-sac right there's a bunch of big nodes and all that you know so what's the difference

Starting point is 01:13:45 between going through there sort of this the actual multi-sick bridge and then just like being on the native security of Salana, there maybe isn't that much of a compromise in the beginning. But that's basically the thing you could really say, right? That when you're sort of the underdog and you're transporting from stuff from other chains, you just don't really mind, you know, because you're basically, you're trying to cultivate it.

Starting point is 01:14:15 You're trying to bootstrap a different kind of community that's just more have higher risk tolerance anyway, essentially, right? And then, yeah, once you're the incumbent, it becomes the exact opposite. You kind of want to, you're the incumbent, so you really want to emphasize that being, you know, being the, I mean, that's exactly what's the case with Ethereum today, right? We all hold ETH. Everyone's in Ethereum. We all ETH, right? It's so freaking important to be ultra secure, right?

Starting point is 01:14:41 Like, security is the most important thing in the world and, you know, like this sort of diamond-level security. It just, it really makes sense that that is just so. freaking important, right? But I think if you're, if you hold, if you hold, if you, all your exposure is to some new L1, then it's just not, you know, you're not going to have the same mindset until, you know, your own interests align with that, basically. And, and yeah, it all comes down to the bridges, right? Because the bridges, they kind of, they just fundamentally, they will always have a different, like, they always mean adopting an, and, and, and, an inferior security model, basically. And once you're, you're, you.

Starting point is 01:15:21 used to an environment of very high levels of security, that suddenly becomes a bad thing, right? And yeah, I just really think that you would, you know, over time, you would absolutely expect to see that on Solana, for instance, users will prefer, when they're looking for something decentralized, they will prefer stuff that's native because they will just not consider the bridge to be as decentralized as the stuff that's a truly native following the real rules of Solana and being exposed to only Solana and exactly that. A super fascinating discussion. I've not heard someone articulate it in quite that way.

Starting point is 01:15:58 So, you know, thank you for that. And I think to distill this down, because this is partially a podcast about the future of Maker, right? And what you're saying is basically you think the future of Maker is Ethereum and should remain Ethereum for the game theoretic reasons that you outlined. Hey, guys, hope you're enjoying the conversation with Roon-Krichitsyn thus far. Like we said, in the beginning in the second half of the show, we turned the conversation towards Maker Dow as a green machine and die becoming clean money. And both the rationale as to why Maker Dow needs to become a purpose-driven Dow,

Starting point is 01:16:33 as Roon said in his blog post, and why that purpose should be climate change. So stay tuned for the second half of the show coming up next. But first, a moment to talk about some of these fantastic sponsors that make the show possible. Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first got into crypto in 2017, and it's been my main exchange of choice to make my crypto buys and sells. Gemini is available in all 50 states and in over 50 countries worldwide, and on Gemini there are markets for over 30 various different crypto assets, including many of the hot defy tokens, and it's one of the few

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Starting point is 01:18:59 AVE. With AVE, users can do this in one seamless transaction, saving you time and gas costs. Check out the power of AVE at AVE.com. That's A-A-A-A-V-E-E.com. Let's talk about the next subject in the future of Maker. And this is a couple of days ago you published a post and Maker Governance because now that Maker is decentralized, I guess you're just another guy in the Maker Governance forums, right? Just another guy posting.

Starting point is 01:19:27 But you do have some clarity of vision and some great ways of articulating yourself. And you wrote this post called The Case for Clean Money. And this is basically the thesis or the idea that dye should become clean money, that it should become greener over time or environmentally friendly in an ESG type of asset.

Starting point is 01:19:47 if you will, are backed by ESG-type assets. This was a statement I'll just pull out to kickstart this conversation because we want to dig into this post some more. You said at somewhere near the beginning, to truly reach its potential, Maker needs to become a purpose-driven Dow. A purpose-driven Dow. Let's start with that fundamental foundational thesis there.

Starting point is 01:20:10 Why do you think that's true? Why does Maker need to become a purpose-driven Tao? why can't it just go seek profits and make that kind of the short-term pursuit? What is it with the purpose-driven thing that is so important? Yeah, so it's kind of a, you know, it's actually really exciting, you know, the world we're in now with Dow's evolving and, you know, sort of new forms of human organization. And with Maker, like this proposal that I've made ultimately as sort of,

Starting point is 01:20:46 you know basically as my opinion as an mk i holder basically on how i can how i can and sort of contribute and and support the project as much as possible um which i do obviously hope and i'm glad to see already it's getting some traction but um yeah so there's a whole range of things that i've been thinking about basically the whole time i've been in the foundation right that a bit distilled out and ultimately I came up with this this concept of sort of centering everything around this this clean money vision and this the question of like the dows like how a dows should organize and this concept of a purpose driven dow versus i guess yeah you can say like a profit driven dow or something like that that's actually that's like a really age old

Starting point is 01:21:38 kind of issue and dilemmers that that we've been dealing with in makers since actually the very beginning and it's it just comes that it's you know the very simplest way to think about it is just the the really the fundamental game theoretic problems with with douse are basically things like governance attacks right and and and and so the tragedy of the comments where um you have this you know you have this sort of shared public infrastructure like project that you're using and then you're counting on all all sorts of individuals to coordinate around how to grow the thing as a whole kind of in a way that benefits everyone. And you're worried about

Starting point is 01:22:19 individuals, instead of doing stuff that benefits everyone, you're worried about them doing things that just benefits themselves disproportionately, right? And I guess the most basic sort of example of this of all is like the, you know, the governance attack where you could have, in most DFIR protocols,

Starting point is 01:22:37 if someone actually control the majority of the voting shares, they can just straight up like steal all the assets in that protocol. Maker actually has protections against that, so it's more like you can end up into this kind of this basically

Starting point is 01:22:53 the crypto economic death spiral kind of where what ends up happening is the protocol shuts down and everyone is settled out and has their funds return. So people don't actually lose money but you can have the whole protocol actually shut down as a result of a governance attack.

Starting point is 01:23:11 But you know so that was like it was already clear from the beginning that there is this problem of like people have to participate honestly and they have to kind of like you know there has to be this element of like basically the whole right that you're a part of a DAO and you're contributing a part you know for the as a group and you have I mean and in the very you know the real the predecessor to to DAO's which was bit shares that really invented these like very first um Yeah, like Dow is basically called Dex back then. You really had this concept like, you know, the community spirit of a, of a Tao, right? And of like, you know, people holding held together by the token. And you even have that like, I mean, even in Bitcoin, right? Bitcoin itself is driven by the same thing of like the, the, yeah, the maximalism in a sense, right? Like the toxic maximalism is actually a kind of like a way for, you know, for Bitcoin is to sort of, you know, work together.

Starting point is 01:24:12 towards a greater good, right? A greater as a whole. And, yeah, like, for, it was clear to me that this is actually fundamental for DAO's to function. Because the, okay, so the basic problem with everyone just being driven by money is just that you're just, you know, what,

Starting point is 01:24:35 if it's about making money, the problem is that's just never, that's not a shared thing ultimately, Right. It's like making money is something that happens individual to you. So you're, you're going to cooperate with the group. You're going to, you're going to work together as long as everybody, that's how everyone makes the most money. But if you're ultimately there for the money and you're given an option to make more money for yourself at the cost of others, then if that's the only thing that drives you, that's actually the, you know, that's what you, what you're going to

Starting point is 01:25:04 choose to do. And yeah, so in maker now, we have this like very, very complex, very advanced governance process and even a governance bureaucracy that sits around this process with people that are actually being paid by the protocol and you know that are the full-time employees right like getting getting money straight out of the protocols revenue and I think that that's like getting for instance like being able to organize such a bureaucracy it really starts looking like the kind of challenge that you have when you just try to create a you know like a startup for instance or a company, right, where you really need, you need some, you need sort of a North Star, you need some way to really align people. And in a normal company, you can do that through, well, you can

Starting point is 01:25:49 just have a, you know, centralized organization, right? You can have like a leader. In a Dow, that's not, it's not that simple, right? Like, even if you have a leader, over time, that leader is going to disappear, right? The Dow is supposed to still function even without the leader. and that's why I think that really the best option then is basically to create a you know like a vision and a purpose that just actually makes sense to people so that when individuals they contribute to a Dow and in doing so sort of contribute to the greater the greater good right like the thing that inspires and to do that is they know everyone else is doing the same thing and it's like I'm not only like when I'm sort of honestly participating in governance and actually voting and considering what's best for everyone else, even though ultimately that is sort of an act of altruism. It helps myself, but it also helps everyone else. And to a large extent, it's everyone else against the most of the benefit.

Starting point is 01:26:49 If you're doing that in an environment where you're helping everyone else make money and you're basically not really making money by doing that, and it's just about the money, then there's a mismatch between, there's a mismatch of the incentives there and sort of the outcome. And instead, if you have a situation where there really is an actual sort of vision and purpose that everyone can follow, you're just going to have an easier time getting a critical mess in a community where people will actually collaborate rather than the defect in the game, I guess you can say.

Starting point is 01:27:27 One point we always hammer on at Bankless is that this whole cryptocurrency, revolution thing. The thing that it does the most is that it aligns human values with the market value of our assets. And that's kind of what I see with this proposal of saying, like, hey, let's align Maker Dow with being green so that we can actually align more people under that shared banner, under that shared goal. And we'll come back to the subject towards the end of this conversation because I do want to ask, like, is this the vision for Maker Dow that is actually putting MakerDAO first. Like, is this altruism or is this actually just the most optimal strategy for MakerDAO growth? But before we get there, I want to unpack this whole

Starting point is 01:28:10 green money approach first and foremost. And in your blog post, and again, when we started this conversation, we talked about Society General, you said the recent governance proposal by Society General, one of the world's largest banks, proves how Maker has the potential to impact the deepest layers of finance as a new financial back end. And so my question is that are you saying that Maker Dow can actually influence the outcome of the real world by picking and choosing what collateral it accepts into its protocol? I mean, that's the potential if it scales enough. And I think, so, and I mean, you know, that's sort of, it's hard to sort of navigate just

Starting point is 01:28:55 all the different complexities that exist and all this, right? But I actually think one point that's, that maybe makes the most sense to focus on is this concept of, you know, of like altruism versus sort of the greater good versus your own good, right? And because, you know, we are, the thing about climate change is that it's just really, really serious. And it's like, it's reached the point where it's so serious, it's so severe that you're really you know people go you know it's sort of the story goes that that people have sort of gone from from you know it used to be that that the sort of climate denialism was the big issue right the people like sort of just denying that it's happening and now the big issue is

Starting point is 01:29:42 sort of climate sort of a dumerism basically right that like it just seems impossible to deal with so we just got to give up and resign to our fate kind of and and just uh yeah like ignore it in a and yeah like the problem is it's not you know it's not a good thing and and if you're someone like me that has has kids it really you know it's it's it's tough to accept but the reality is that we're just in for some very hard times basically and and that's where it kind of gets back to this you know the you know the concept of the Tao as a as this sort of a bounded group of people that have to work together and you know you want to you want to do what's best for yourself but then the whole thing sort of falls apart because if everyone just what does what's best for themselves that

Starting point is 01:30:33 the Dow can't even function you have to kind of reach this this um positive nash equilibrium right where everyone works together and contributes their part and then it works and yeah we're in the same situation global you can think of the whole world basically as a Dow in that sense right that's right now failing, failing horribly at choosing to collaborate, unfortunately. And yeah, so, I mean, so from that perspective, the question is basically how can, you know, how can we as individuals change that? Because we, I mean, it's actually about like our lives. It's about like our homes, right, and our children. And, yeah, like, um, The good news is that Maker uniquely is in a really interesting spot to be able to actually help with this kind of systemic change, right?

Starting point is 01:31:29 And yeah, like, I mean, good example is that banks actually want to interact with Maker, right? So you have potentially a way to, if the banks want to access cheap capital for Maker, maker might be able to turn around and then, you know, ask for collateral that is, that is sustainable, that doesn't have negative externalities. And Maker in turn, by virtue of being a decentralized currency, does have an ability to somewhat capture the value of preventing negative externalities and creating positive externalities. Because it's basically the, like, the the viral effect, like the viral potential of currency basically, right? The sort of the network effects of liquidity and of sort of trust in currency are so incredibly

Starting point is 01:32:24 powerful that like, you know, promoting a currency on the basis of this currency is, you know, it's good for the world, is actually very viable because it just, that's actually what people would expect if you're asking, if you ask them to adopt some new currency. I mean, that's, you know, that first of all, they don't care about money, you know, it's the most boring thing they've ever heard. So it's like very hard to even get people to think about something like that. But then, like, if it, you know, if it's actually going to happen, then, you know, like the banks right now, you know, in the end, the way it works is who's offering, you know, zero point, whatever percent more in, in the interest rates, right?

Starting point is 01:33:06 And they sort of all just follow the same fundamental paradigm. people don't change the banks, for instance, right? And I think that that's where you can, you know, you can come with a, that's exactly what Defi has this potential, right? Of, like, showing you look, this is a way for us to realize that the whole world is in this, is actually a big interconnected, yeah, we're always thinking of it as like a big interconnected organization, right? Where everything does ultimately have to work together or we're all going to destroy each other because we will negative externality each other to death, basically.

Starting point is 01:33:44 And Defi really, yeah, it provides a very powerful tool to try to change this, because first of all, you can program it into the money, right? You can provide the banks with cheaper capital. If the people are willing to access currency that they consider to be clean money, right? That means that you get more adoption, then you're, you can turn around and you can use that to actually affect the change in the system, which then leads to even more adoption.

Starting point is 01:34:14 And that's kind of on the, I guess, the branding and marketing side of this, right? And that's a way where it's a very unique way that you can use DFI to actually, like, capture some of the value that, you know, some of the positive externality that normally would only go to everyone else. And as a result, you have a, you know, nobody's got an incentive to do it. but in this case there's like you know you can sort of you can basically say look we can use this value to try to bootstrap a world currency basically um and yeah then there's like all these sort of other um like there's there's these sort of knock on effects on on on how it you know how it can

Starting point is 01:34:56 actually make a difference right so um there is the like there's there's also the you know there's also the that not only can make her sort of try to affect more sustainability through how it allocates capital but then there's also this concept of climate alpha basically where the current financial system basically has to sort of ignore what's going to happen with climate change and it's really really bad it's like you know it's literally it's like worst what's happening is like worse than the absolute worst case scenarios that were predicted right so we're like sort of off the scale bed, basically. And the problem is it has implications for it.

Starting point is 01:35:40 Why do they have to ignore it, Rune? Why do you think the traditional... It's because if you start pricing in climate alpha, and if you start sort of making the calculations of how much does it cost to sort of pull the CO2 out of the air and the fossil fuel, you know, the fossil fuel companies are creating now. And like the math of like how the global economy works, it basically doesn't check out.

Starting point is 01:36:04 So, like, you know, what's happening is people are then just not even making the calculation at all, right? They're just focusing on the short term. And, yeah, you know, this system is sort of finding all these creative ways to kick the can down the road. And really, I think the number one, I mean, yeah, the number one thing that that's really happening is basically people are assuming that there's going to be this kind of silver bullet that will emerge, basically. So the silver bullet is sort of the way that it's being explained. way because yeah and often it's called the technological solution or something like that and arguably the reason why this is happening and the reason why people accept this and like the financial markets accept this even when we're talking about like you know it's basically ignoring huge risks

Starting point is 01:36:50 and sort of betting your money on the wrong horse basically based because you you know because you basically the implications of accepting that those risks exist just means that you you can sort of the whole thing can sort of come crashing down, right? But I think that the reason why the concept of the syllable of the technological solution is so appealing is because we're so used to this kind of exponential, I would say exponential innovation that happens when it comes to digital technology, right? So things like Moore's Law and how crazy the iPhone is now compared to whatever, right? and the internet and all this sort of virtual stuff that's just like you know every year it's just

Starting point is 01:37:37 a new you know blockchain itself maybe the best example ever right of just like how you just have these complete paradigm shifts um but the reason why it's like it's so severe and happening like that is because it's we're talking about in you know technology that relates to information ultimately right so it's not bounded by physics but we've really become used to these kind of massive transformations. And, yeah, climate alpha or sort of the, you know, the reality of climate change is that that's not possible in the physical world, unfortunately. You don't get these like complete exponential transformations.

Starting point is 01:38:17 It's very sort of incremental what's possible to do. Right. Because climate change is not digital. It is physical. And what you're saying is like these paradigm shifts, these zero to one moments, they've all been in the digital world. And you're saying people are used to having these zero. to one moments, but forgetting that like the zero to one moments that we've all been happening in, like,

Starting point is 01:38:35 our digital devices, our digital lives, our digital internet. And so what you're saying, room with this climate alpha is that the market is just not pricing in appropriately, the future, the negative future that we have with climate change. And I'm kind of reminded of our episode with Kathy Wood, who talks about like one of the reason why Ark Invest has done so well is because she has priced in components of the future that so many of the legacy institutions of the world have completely forgot about. So what you're saying is like there is a certain amount of alpha that's out there and available and no one's capturing it because if banks or financial institutions actually started to

Starting point is 01:39:12 price in risk associated with climate change, well, they would actually be like at a net loss in profitability. They actually wouldn't be able to sustain themselves. And therefore, the global economy wouldn't be able to sustain themselves. And so everyone is just ignoring the costs of climate change in order to make sure the economy actually works. And I think what you're saying is that that leaves an arbitrage opportunity for Maker Dow to lead with assets and financial opportunities that do answer towards climate change. Is that all right? Yeah. And I think you can really compare it to the financial crisis, right,

Starting point is 01:39:47 where it just, you know, nobody wants to look into sort of the mortgage-backed securities and all this stuff that's happening while they're making money, it all works. And the problem is if they suddenly start looking into it I mean that it would be very uncomfortable because they've got so much the system is just so stuck in the way it's running right now and yeah

Starting point is 01:40:07 basically what I think is going to happen is that there are certain physical assets in certain locations which are sort of very basically very far north and very far south in areas that will be able to remain

Starting point is 01:40:22 you know have a yeah basically remain very stable even if if the rest of the world starts to really unravel and become very unstable. And so it's particular land and sort of very, you know, physical things like food production is a very basic stuff in these places. It's just, you know, it's going to be really the most important thing in the future. And what I think that the role that die can replay in all this is that when you have people, you know, let's say in near the equator, right, like that are probably going to, you know, they'll become climate refugees sooner or later. It's just not be possible to survive there, especially to be sort of a regular person.

Starting point is 01:41:09 What a really important role that make a complaint is basically so when people from these areas, they have to escape and they have to go to places that are, you know, that are actually climate resilient and that are still livable. The problem is all of their own assets. If they're all stuck, if they all build their assets and all their money and maybe they barely have any money in the first place, right, there's going to be people that the, you know,

Starting point is 01:41:40 because that's kind of the problem with climate change as well. It really is very unequal the way it affects people, right? But if they already don't have that much, And then the few assets that they do have sort of lose their value because now they're, you know, they have land in a place that's now desert. I mean, that's a really big problem. They're not, because they're just not going to be able to sort of pay their way to escape that, right? And what what die can really do is it can play this role of identifying the climate alpha before the system, you know, the rest of the system is able to. and actually allow people to

Starting point is 01:42:23 to in a way sort of protect themselves against this future, right? Because if you hold your, you know, if die is backed by assets that'll be a climate resilient, then, you know, even if, you know, as long as you hold your money and die, then even if,

Starting point is 01:42:39 you know, you lose everything else, at least you know you're going to have money that they'll accept in, you know, New Zealand or something, right? Which may be the place you want to get to. And I think that one of the things this can lead to then is a way for kind of, you know, it just means that you can really equal the playing field a little bit between sort of regular people and the elite, right,

Starting point is 01:43:05 that are going to be much less affected by climate change, among other reasons, because, I mean, what they do is they just build bunkers in New Zealand, right? That's sort of one of the big stories of climate change, right? And a regular person doesn't have the ability to build a bunker in New Zealand. But they should be able to at least hold money that is backed by agricultural and real estate assets in New Zealand or something like that, right? I think that's going to make a big difference. So, Ruhn, let's get into the specifics of how Dye actually becomes clean. You've said a number of different strategies, but I just want to actually kind of take it through the story of how this actually happens.

Starting point is 01:43:42 So we have the Society General as an example using MakerDAO as a facility to get access to capital. So how do we use that strategy to actually impact the future outcome of the rest of the financial system? It's like, do we accept like carbon credits as collateral? We have ESG collateral. Like what are the actual prescriptive details as to how Maker actually generates clean dye? I actually think that sort of the real endgame is that and, you know, and this is basically the reality of climate change, right? is that the whole world needs basically what, you know, total war approach, right? So it's, it's, you know, fundamentally the way that economies and businesses function is just that they have to start considering negative externalities when they do business.

Starting point is 01:44:34 And I guess that means, you know, ultimately like governments regulating them or something like that, right? But the way we can get in that direction is actually for, you know, it could be something as simple as maker, providing different like basically different terms, different cost of capital, different risk parameters based on also accounting for externalities, right? So not just

Starting point is 01:44:59 the sort of the direct risk of an asset, but then also kind of the external risk that this asset produces for everything else. And in practice, I mean,

Starting point is 01:45:15 I think the Societ General relationship for instance. And I wrote this in the post as well. I think the place where that actually fits in is not necessarily, like it's going to be a while before, you know, Maker gets to bus them around, right, if it ever happens. So it's not, it's not like we can sort of, it's not an effective place to try to really have an impact,

Starting point is 01:45:39 I think, in terms of having, you know, I mean, certainly if Maker becomes another voice, and sort of the growing momentum for climate action, that does actually create some tiny indirect sort of pressure on society general and all the other banks to also start to really consider EST, like really consider externalities and how they do business. So what you're saying is that the legacy financial world is taking advantage of not having to answer towards its own externalities that it costs,

Starting point is 01:46:14 and that leaves an opportunity for a maker to do that. And so like maybe some scapegoat for carbon production, let's say some car company comes and this is a car company that has not committed to electric vehicles and they're doing combustion engine only. And they're asking for a million dollar loan. And then something like Tesla comes to Maker Dow and they're also asking for a million dollar loan. You're saying like Maker Dow could charge a stability fee for this carbon emitting company that's 10 times higher than the stability that they would charge for Tesla, which produces electric cars. And these numbers will be measured by the externalities that maker governance attempts to measure and calculate. And that hopefully just tips the playing field towards capital being allocated towards companies that are doing things that are climate aligned. Is that the model?

Starting point is 01:47:03 Yeah. So, yeah. So I guess that's the point that like when it comes to initially, when it comes to working with the big institutional partners, there's no way to really impact them directly. But yeah, like when it comes to. sort of allocating a lot of the, basically just a lot of the capital that's sitting in Maker. And I think in particular right now, what's very sort of pressing is all the USTC, right?

Starting point is 01:47:27 Then what I'm arguing for is that Maker takes a more, instead of today, where the collateral onboarding process is sort of, it's very, it's just not very, it's sort of reactive in a sense, right? So Maker receives all these applications and then somehow tries to prioritize them and somehow like figure out how to,

Starting point is 01:47:47 how to price the risk of every single one of them. And there's, I mean, first of all, it's very sarcotic and not very efficient to just consider sort of any type of proposal is coming in. But this, another really big issue is just that like, it's like, Maker is right now sort of set up to have to try to figure out how to really be an expert on literally any subject, right? Like to receive any type of proposal and then actually know how should I price this, which, I mean, either it's not, it's just going to go really, really slowly or even worse, Maker could jump into all sorts of deals that the communities doesn't understand.

Starting point is 01:48:28 So one way to look at it is this is just, we really just basically need to like narrow down what are the areas where Maker wants to kind of specialize and actually know what it's doing. And that's where I think that when it comes to picking that anyway, sort of, then you you really should pick basically sustainability projects like sustainable energy production. And I think primarily that's because that's kind of, that creates, that really helps with the brand, right? Like it's very, you know, it's very powerful if you're able to save this money back by clean energy. You can sort of show it, right? You can show people, look, what Defi can do is it can build this huge windmill, right?

Starting point is 01:49:15 all these wind farm with 10 windmills, right? That they were actually funded through a computer program, right? That is programmed to basically fund these kind of things, right? And I think that that's, you know, that's actually something that people understand can, you know, can impact the global situation when it comes to climate, unlike something like paper straws, right, which is sort of this corporate scam almost of like making people feel

Starting point is 01:49:45 guilty, but also being like, yeah, this is not, you know, the world is ending and you're going to be sitting there sipping on a paper straw, right? And it's not going to do anything. But yeah, like, I think like being able to sort of, you know, really showcase that, that ultimately is just a coordination problem. And we simply have, we can, we need to figure out a way to coordinate and we can do that through money, right? And yeah, I was going to ask about that, And so, like, you know, narratives are so important in just for humanity, but also especially maybe in the crypto space right now, right? So nascent, right? And so ETH has developed this ultrasound money type narrative a bit more recently, right? So you're talking about DAI as ultra

Starting point is 01:50:29 clean money and developing out that narrative. And my question is, do you think that will be a demand catalyst for die, right? You know, certainly good for the crypto industry at large, which I want I actually ask a next, but do you think just people will want to hold and spend die because it has a positive social impact and reduces negative environmental externalities? Yeah, I mean, I just want to, like, first of all, I really agree that crypto has truly proven that attention and narrative and, you know, yeah, like the sort of, you know, well, there's this concept of the attention economy, right? It's like, this is what drives everything, especially sort of capitalism today, right?

Starting point is 01:51:13 I mean, you have examples like, you know, GameStop or something, right? Showing that it's really, that's what really matters. And all over the place in crypto, right? You just see it again and again and again that really it's the attention. It's sort of the, yeah, getting the focus attention that that generates value in financial markets today, right? And so already there, I think it, you know, I think it's like it's somewhat like a proven model. You could actually think of like, I mean, arguably I think Tesla's success and the fact they became the most, you know, valuable company in the world. Like so much of that was exactly that it was exactly this, you know, it was the narrative of the altruism or sort of the positive benefit to humanity that they create, right?

Starting point is 01:52:02 more so than, I mean, well, rather the fact, you know, and the fact that it, it, it combines with the business model itself. And that's just, that's a very compelling thing, right? I mean, that's the kind of, that's the kind of story, that's the kind of story people want to hear right now, right? They want to hear some kind of realistic way that we can, we can do this without having to sacrifice all sorts of, you know, sacrifice all sorts of stuff, right? And we've actually seen this play out in our world as well. When NFTs took off, a lot of people heard about Ethereum for the first time. and a lot of people started boycotting NFTs because Ethereum is under proof of work.

Starting point is 01:52:38 And so we've actually already seen this impact our industry because people are decently motivated to align with their values. And there's a decent amount of people out there that have the values of not destroying this planet due to climate change. And in your post, you actually cited that like the same sort of reaction. In 2008, we had a housing crisis due to the nature of the financial system, the black box nature. And as a result of that, there was Bitcoin was created. And like people talk about this relationship between like, well, there was this massive problem that this financial system created. And then the people of the world as a reaction to that created Bitcoin.

Starting point is 01:53:14 We use that as a solution. We're actually also seeing that same thing in Defi, where the current financial system is so closed, so gated, so unwelcoming, that Defy has been a reaction towards that permissioned financial world. And one of the reasons why DeFi has been so successful is because people have been longing for something like DeFi for so long as a reaction to how just close and gated the traditional financial system is. And so I think there's room where if this is successful, the branding of dye as clean money, the narrative of die as clean money can be successful

Starting point is 01:53:46 as a reaction to the rest of the world, just completely ignoring this whole climate change thing. Is that your take as well? Yeah, I think, I mean, I have high hopes that I don't, you know, that this is a way to really drive people into crypto that, you know, right now just don't see the point because basically it's about money and money and money and money and not everyone cares about that, right? And being able to show, look, you can do more than, can be about more than money, right? It doesn't have to be all yield farming and compounding interest and collateralizing something into a vault and then drawing, you know, you know, doing, going through 300 different smart contracts to get the most

Starting point is 01:54:27 crazy yield you've ever seen, right? Like, a lot of, you know, a lot of, you know, you know, doing, going through 300 different smart contracts to get the most crazy yield you've ever seen, right? A lot of people, they just, that's just not, you know, that doesn't appeal to them. It's not relevant to them. But climate change is increasingly becoming sort of very relevant to a lot of people around the world. And I think, I think there's some places where it's still sort of less so. And, you know, I think America is sort of unique in that I don't think climate change is nearly as much on the agenda there as it is, you know, in other places. I mean, I'm from a country that's literally, it's just going to disappear, you know?

Starting point is 01:54:58 Like, it's actually, it's going to go underwater the, you know, Denmark, which is kind of, you know, there's a, there's a big difference between, you know, like how much people, how close it is to people. But I remember seeing this, there's this recent study, where basically some scientists went out and asked a bunch of young people what they think of climate change. And it was like, more than half said, the world is doomed, you know, So there's a lot of, and that's this sort of dumerism that's happening today, right?

Starting point is 01:55:30 That is actually very, it's causing a lot of personal stress sort of to a lot of people, right? And what I'm really hoping is that we can basically use D5 just or rarely the people that today believe that we have to just give up, basically. We can't even do anything. We should go out there and we should tell them that, look, we do have this one thing called defy which allows us to control some you know a little thing called money which is actually like the thing that makes everything work and act right and is

Starting point is 01:56:04 you know in some ways you could say it's the you know it's money it's the way money flows around the economy that's directly what's causing the coordination problem in the first place but you know like what's kind of like something that's kind of built into the plan I guess you can say is a sort of a hedge as well where we just don't, I mean, there's a good chance. It's just not, you know, maybe people just don't care,

Starting point is 01:56:30 and it's just still too boring. You know, money and finance is too boring. People don't care. It doesn't even matter if it's clean, whatever it is. You know, they're just too focused on whatever, their TikTok or something, right? And people just don't care. And if that's the case, the thing is, like, the less sort of climate action that's out there, let's say, the less excitement and sort of the less adoption,

Starting point is 01:56:53 of Maker there is based on the climate message and this rallying cry for climate solidarity the greater climate alpha will be, right? So Maker can sort of get to benefit from both of the outcomes in a sense.

Starting point is 01:57:09 Either Maker will grow significantly because it's it sort of manages to tap into this zeitgeist and bring thousands of people into blockchain. Maybe the whole world becomes powered by blockchain as the way to, you know, overcome the transition away from fossil fuels.

Starting point is 01:57:31 Or the other option is that the world basically ends, and Maker was very early to buy up all the, you know, the good assets, basically. And, yeah, it's, you know, it's unlikely, but, you know, it's possible to imagine a future where no other currency manages to really hedge against just how bad things will get. And you'll end up with, like, Maker, as like this ultimate currency that just happens to be diversified across the, you know, the places that remain as very stable economies. This is very long-term thinking, sir. And I love that because it sort of fits the motif of Maker from the general direction. I mean, you know, two other things I love.

Starting point is 01:58:15 One, this kind of flips the narrative, at least in the U.S. we've seen senators like Elizabeth Warren come out against cryptocurrency and say it's energy intensive, it's wasteful, right? Well, now we have a flipping of the narrative potentially, Ethereum transitioning to proof of stake, right? Also, projects like Maker Dow may be putting a flag in the ground and saying, hey, we're going to be clean energy, right? This is going to be like ESG friendly, environmentally friendly currency. We also see projects like David talked to a project called Klimadau doing a little something on this too. And I feel like this totally disarms them and totally flips the narrative, right, among politicians and their support for this system.

Starting point is 01:58:55 Rather than Bitcoin, proof of work, which they've seen for the last 10 years, we've got like an Ethereum system that consumes very little energy, almost nothing. And also, we are actively improving, you know, the climate in all of these various ways. So that's super exciting. The second thing that I think is kind of maybe unique to Ethereum culture right now, which I absolutely love, is. I feel like very much Bitcoin culture is a bit more like that New Zealand bunker that you were talking about earlier, right? It's like, where's my Bitcoin Citadel? I'm just going to buy up this Citadel with all the Bitcoin I've hauled it that's gone to the moon and I'm going to wait for the world to burn because it's going to burn. Whereas the Ethereum ethos is like, hey,

Starting point is 01:59:37 we don't want the world to burn. We have these coordination tools and this coordination technology. We can be an active part of the solution of putting out the fires and make sure the world's doesn't go to hell. Like that to me is incredibly important and something that I see in Ethereum culture, particularly the past few years, that is like completely a 180 difference than previous Bitcoin maximalist type culture. We don't want citadels. We want like solar punk cities. That's what we're aiming for. And I think that's awesome. So plus one on that, sir. And I hope other DFI projects start to explore this area. I think it's fertile ground. Anything else you want to say on that? I've got one last question around your post, and this is in respect to new tokenomics for Maker that you also

Starting point is 02:00:23 kind of proposed. We don't have time to get into all the details, because I know that's a huge thing to unwrap. But tie off anything else you want to say about clean money, and then give us a sneak peek, just some quick bullet points on what some of the new tokenomics behind Maker might look like in the maybe medium to future, the thing that you're proposing anyway. Yeah. So, well, I mean, I'm a huge fan of like clean it out. And there's a whole range of extremely innovative climate-focused blockchain projects out there. That I think, I mean, it's kind of like it's just happening. And now they're really starting to pop up, which is probably related to basically the trajectory of the climate as we now have experienced.

Starting point is 02:01:10 But I think that there's huge synergy between many of these different climate-aligned. projects. And the best possible example is Klimado and then sort of the the clean money direction of Maker because basically Maker is really like what what I'm proposing is that Maker really focuses on sort of building out the infrastructure needed in a in sort of a decarbonized world. And what Klemadow is really focusing on is basically trying to to sort of incentivize people to do that in a sense. So there's actually this really interesting synergy where the kind of of assets and the kind of collateral that maker would want to put money into and sort of creating clean money would be exactly the kind of assets that massively benefit from a higher carbon price

Starting point is 02:02:07 in the carbon trading systems, which actually climate is going to contribute towards. So yeah, I think, I mean, I'm both, I'm really excited about that product specifically because I just love the idea of putting like crazy tokenomics and then just putting them towards a good purpose. I feel like that's the, that's really, that's the way to do it basically. So I love that. And then also the fact that there are just, I mean, it's, I think it reveals something about, it actually goes all the way back to this with the coordination, coordination problem and this question of like, you know, focusing on yourself or working. together and how when people are aligned around this kind of common goal, it's just very, it's very natural that you would have all these synergies would emerge from doing that, right? So I plan to just research a lot more on the various initiatives out there and try to figure

Starting point is 02:03:00 out how Maker can really tap into and sort of collaborate with those projects, which is often the case with Maker, right? Because one thing we really can do is use other other assets as collateral, for instance. and that's a very sort of obvious way to to synergize. And yeah, like, I mean, yeah, I basically can't, I don't think I can really get too much into the tokenomics, basically, because that's like its own crazy topic, and we've been going on for a while, like two hours now.

Starting point is 02:03:28 So, but the basic idea is that I don't, you know, buy and burn is like possibly the oldest tokenomics ever, basically. And I think it has some, like, it has some, yeah, it just has a bunch of downsides that, one really obvious downside that I think is very bad is if the price of MKR is very high, it's kind of like, buy and burn will just waste money by sort of buying the top, right? Which is a really dislike the specific characteristic because like there's no, it's not even like a, you know, we're not even talking about something that's rational to do, but just looks bad to the market.

Starting point is 02:04:05 We're talking about something that's straight up not very rational. It's just not a very good idea to be buying and burning tokens. if the price is high, basically. But more importantly, it's just, defy has really created this tremendous innovation. And I think, you know, I was basically, you know, I just think that it's time for Maker to try to tap into that. And so I came up with a system where the idea is basically

Starting point is 02:04:32 to incentivize people to lock up their MQR tokens for a very long time, and then get an ability to directly borrow die and preferential terms from the system when they do this which sort of would feel like a like a dividend type of cash flow right where you're just getting getting cash continuously but the difference is it's actually you're borrowing money from the system with your mkr you're not actually getting that that money and yeah just there's a lot of implications of that but i i think i think basically that's based on everything i've studied and learned from the defy figure system this is like the most powerful toconomics engine that is entirely set up to focus on basically long-term thinking

Starting point is 02:05:15 and long-term community participation. And that's what I love about like to economics, right? You can actually code economic interactions and money, you know, cash flows and have them directly affect human behavior, which I think is, you know, that's the kind of stuff we need to tap into if we're going to try to, you know, turn the ship around with regards to the global climate change and, you know, a broken financial systems and all of that.

Starting point is 02:05:41 Right. So I'm very excited to dive into that. That is super cool. I think people forget that, you know, tokens and DFI projects can actually change their token economics and actually can improve their token economics. And if listeners want to find out a bit more about what Rune is proposing on the governance forms, it's under the title, Sagittarius, I believe. And you can check that out for yourself. But Rune, it's been a pleasure to have you. And we've really enjoyed this conversation. And we've covered so much. I know you're very clearly a deep thinker. We've got a lot of wisdom for us. You're a defy-o-G. So I want to kind of close with this question.

Starting point is 02:06:18 What do you think of everything that's going on in defy and NFTs today? Do you have any hot takes for us? Do you have any advice for some of the early projects or the users? Just anything you would leave our listeners with? I mean, I think that I've come around to this idea of the super cycle, right? That there really is this, you know, we're seeing this. small mainstream type of adoption

Starting point is 02:06:43 into crypto so I think it's like now is the time to really be being crypto basically and not ignore it

Starting point is 02:06:51 like NFTs is something where I mean I just didn't get it and I really you know I also didn't get

Starting point is 02:07:01 all the modern defy and all the tokenomics and sort of all of these things I was basically like the boomer that just you know didn't get it

Starting point is 02:07:08 and sort of thought it was going to it was going to fade away but I think there's really been, you know, there's some fundamental value and some real sort of powerful potential that's being uncovered here that, like, I don't think that the industry really knows exactly what it is yet. And once we figure that out, that's going to be kind of the, I guess, the dot-com bubble moment and so the post.com bubble era will be basically when we sort of get a, you know, the real understanding of what is it that actually makes NFTs valuable, for instance. And what is it that actually makes the, you know, tokenomics be beneficial to real projects

Starting point is 02:07:51 rather than being sort of Ponzi schemes, right? And, yeah, it's, it's, it's, it's, it's just so incredibly complex and mind-blowing what is, what has occurred now that, you know, that you, it's every, you know, you know, it's, you know, you really need to sort of study a lot and pay a lot of attention and be very critical, I think, to not fall into some sort of trap when inevitably there is a lot of whatever, a new bubble or whatever is going to happen next. Absolutely. Well, Rune Christensen, we will end it there.

Starting point is 02:08:30 It's been a pleasure to have you on Bankless. Thanks for joining us for this conversation. Thanks so much for having me. All right, Bankless listeners. Roon's advice was get in now. I can echo that, whether that's just from an individual. investment perspective, whether that's trying these D5 protocols as we advocate every single time on bank lists, or whether that's maybe getting a job in crypto, go join a Dow, go see what's up,

Starting point is 02:08:51 go tap into a Discord channel. Some action items for you today. References from our conversation today, you can read Roon's Clean Money Post. We'll include a link in the show notes. We were talking about that. Also, that hot thread on multi-sigs. We were talking about one layer one to rule them all. We'll include that thread in the show net. We'll also include the SG proposal to maker in the governance forms. You can check out all of that. Of course, guys, none of this has been financial advice. It never is on bankless.

Starting point is 02:09:22 Defy is risky. ETH is risky. Bitcoin is risky. This whole thing is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone. But thanks for joining us on the bankless journey.

Bankless - 87 - The Future of Maker | Rune Christensen

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