Unchained - The Chopping Block: How to Manage MakerDAO, With Hasu and Rune - Ep. 383

Episode Date: August 11, 2022

Welcome to The Chopping Block! Crypto insiders Haseeb Qureshi, Tom Schmidt, and Robert Leshner chop it up about the latest news in the digital asset industry. In this episode, Hasu, the gourmand of governance and Rune Christensen, chief mischief maker at MKR, discuss how to manage a DAO, their respective visions for MakerDAO, and much more.    Show topics:   What MakerDAO is, how DAI works and whether it is the “central bank” of DeFi How the visions for MakerDAO of Hasu and Rune differ Whether Maker should only hold highly liquid collateral assets Hasu’s mental model of DAI as eurodollars The role of real-world assets in backing DAI What the purpose of a DAO is and how it differs from a legal entity Whether people behave in their purest form within a DAO How DAI can create positive externalities and make a better world How crypto holders are not only in it for the money but also for the philosophy  What the “decentralized stablecoin trilemma” is Whether there’s a need for dollar-denominated collateral for DAI to work What “clean money” is according to Rune Why Rune thinks having a single council is not viable due to the political risks and whether the solution is to have multiple councils How to keep the principal-agent problem in check, according to Hasu Why Hasu believes council members wouldn’t pursue their own interests and go against the benefit of MKR token holders Whether a council would be corruptible and the dangers that it entails What kind of interests should be represented in the council Whether Maker can create more synthetic assets The iron law bureaucracy and how it relates to governance How to design the DAO to be steered in alignment with the token holders Whether ossification is a feature to be pursued, and where innovation happens How complexity is very expensive for an organization Hosts Haseeb Qureshi, managing partner at Dragonfly Capital https://twitter.com/hosseeb Tom Schmidt, general partner at Dragonfly Capital https://twitter.com/tomhschmidt Robert Leshner, founder of Compound  https://twitter.com/rleshner    Hasu Twitter: https://twitter.com/hasufl   Rune Christensen Twitter: https://twitter.com/RuneKek Episode Links   MakerDAO Hasu’s governance proposal: https://vote.makerdao.com/address/0xafaff1a605c373b43727136c995d21a7fcd08989#delegate-credentials Rune’s proposal - the endgame: https://forum.makerdao.com/t/the-endgame-plan-parts-1-2/15456 Proposal to add a lending oversight core unit: https://forum.makerdao.com/t/mip39c2-sp33-adding-lending-oversight-core-unit-love-001/15098 Previous Coverage of Unchained:  Rune Christensen of MakerDAO Part 1: How to Keep a Crypto-Collateralized Stablecoin Afloat: https://unchainedpodcast.com/rune-christensen-of-makerdao-part-1-how-to-keep-a-crypto-collateralized-stablecoin-afloat/ Rune Christensen of MakerDAO Part 2: How Dai Stayed at $1 While ETH Crashed From $1,400 to $85: https://unchainedpodcast.com/rune-christensen-of-makerdao-part-2-how-dai-stayed-at-1-while-eth-crashed-from-1400-to-85/ The Rise of MakerDAO: A Personal Journey:  https://unchainedpodcast.com/the-rise-of-makerdao-a-personal-journey/ Real World Assets: Huntingdon Valley Bank (“HVB”) proposal: https://forum.makerdao.com/t/huntingdon-valley-bank-hvb-rwa-collateral-onboarding-risk-assessment/15828 $500 million allocation proposal: https://forum.makerdao.com/t/signal-request-asset-allocation-of-mip65-clydesdale/15922   The stablecoin trilemma: https://fluid.ch/stablecoin-trilemma/#:~:text=A%20deeper%20dive%20into%20the,decide%20on%20the%20stablecoin%20supply. Learn more about your ad choices. Visit megaphone.fm/adchoices

Not a dividend. It's a tale of two-quan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed the trading firms who are very involved. D5.Eat is the ultimate problem. D5 protocols are the antidote to this problem. All right.

Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider perspective on the crypto topics of the day. So quick intros. We've got some special guests with us here today. But first, we got Tom, the Defy Maven and Master of Memes. Next up, we've got Robert, the Cryptoconassur, and Captain of Compound.

Joining us today, we have Rune Christensen, Chief Mischief Maker at MKR. And joining him and his debating slash sparring partner, we've got Hasu, the Gormond of Governance. And finally, there's myself, Haseeb, I'm head, high man, at Dragonfly. So the three of us, the non-guests are early-stage investors in Crypto. But I want to caveat that nothing we say here is investment advice, legal advice. or even life advice. So today we're going to be doing a little bit of a different structure or kind of a different vibe, let's say, than the way we usually do these shows.

So generally speaking, we kind of just riff on what's going on in the news and kind of share with you the things happening during the day. But we've been really fascinated by all the drama going on with MakerDAO. And we thought, what better way to dive into what's going on in MakerDAO land than to bring on two of the loudest voices and two of the bitterest enemies in Onchane Governance, Roon, Christensen, and Hase. So let me start, before we kind of get into the meat of things. Let me start by giving some background, because I think a lot of people are maybe glancingly familiar with you guys, but don't have the full story or even the picture of what's happening in Makerland.

So let me start with Roon. So Roon is the co-founder of MakerDow. He was formerly the CEO of the Maker Foundation, which is now since dissolved. He's been working on DeCentraloastable coins for a long time, like since 2014 and like the BitShares era. He's become notorious for his views within the Maker community, specifically. his vision for how he wants Maker to reorient itself in a plan he calls his endgame vision. Then we have Hasu. So Hasu is a pseudonymous commentator, podcaster, Dow contributor, thought leader within

crypto. He's got a lot of hats. I don't know exactly how he describes himself, but he's done a lot of different things within crypto. He was a former professional poker player, which I also was, so we've got that in common. He's now a full-time contributor to Lido, FlashBots, and he's one of the largest Dow delegates within MakerDAO, and he has submitted his own vision for how he thinks that Maker maker governance should be reoriented. Okay, so quick background on MakerDAO before we jump into

the meat. So MakerDAO, for those of you who have been living under a rock, MakerDAO is a decentralized lending market that issues collateralized loans in its own stable coin called Dai. So die is an over-collateralized stable coin. It is the largest decentralized stable coin in existence today. It's also one of the cornerstone protocols of DFI. So it's very, very important to DFI. A lot of other things in DFI use MakerDAO. So people sometimes call it the central bank of DFI. Its governance token is MKR. The stable coin is called Dai.

So just some high-level stats on MakerDAO. MakerDAO has about $7.5 billion worth of die outstanding. It's got about $10.5 billion of TVL. It's one of the largest protocols in existence by total value locked. MakerMKR, the token, the governance token, has a billion dollars fully diluted valuation. MakerDAO, the organization, burns today about $43 million a year and has $150,000,000, full-time headcount. So it is a large and very expensive organization. Now it's not exactly, is it a Dow, is it an organization, how exactly to describe it, I think is one of the key things

that Rune and Hasu will be talking about today. So MakerDAO in particular is a fascinating case study in on-chain governance. As I mentioned, Rune was originally the shepherd of the Maker Foundation. MakerDow was originally a Swiss foundation, originally had a Swiss Foundation, but that foundation has since dissolved. And now the core teams, which work on Maker which are called the core units, they're all given budgets and they're funded every year by the Dow itself. Now, nobody is happy with how MakerDAO is governed. Everyone kind of finds something to be unhappy about.

It's kind of like Congress, I guess. But Roon and Haseu each have different qualms with the way that Maker-Dai works today. So Rune has generally critiqued its overwhelming and opaque complexity. Well, Hasu critiques its lack of vision and strategy. Now, I'm sure they both disagree on malinvestment or just, you know, other things. that at the margin, MakerDAO could be doing better. But there was a particular vote that took place recently, which was the impetus for us to want to bring these two guys on the show.

And it's unfortunately taking us a while, but we finally got them here. So this vote took place in June. It was one of the landmark referendums in the history of MakerDAO, one of the largest, highest turnouts in on-chain voting ever, with over 30% of the MQR supply voting on the question, which is about $300 million today worth of MKR was voting on this question. The question itself was a little esoteric, and we don't really need to go into it.

It proposed the creation of a new lending or a core oversight unit. But the spirit behind the question was exactly the spirit of the question that Roon and Hasu disagree on, which is whether to create more streamlined leadership and decision-making within Maker-Dow, which is Haseu's vision, or to keep Maker-Dow more amorphous and move toward Roon's stated endgame for the protocol. So the vote on the yes side came Hasu and many of the VCs, like A16 paradigm. on the no side came Rune and many of the early Maker team. The community itself was split,

but it was Rune who ultimately carried the day with about 60% of the vote against the proposal. But this conversation, this disagreement about whether Maker-Dow's leadership should become more streamlined or whether it should maintain its amorphousness and move more toward Dow's and sub-dows, that is the disagreement at the heart between Rune and Hasu. So with that preamble out of the way, Rune, I want to first give you five minutes and I will be counting, to state your vision for Makerdown and where you disagree with Haseau. Yeah. So I think the first and most important thing to talk about is this, I mean, I call it an endgame, right?

The concept of an end game, but in the past it's been referred to as governance lockdown, for instance, or even Ice Age. It has many different names over the history of Magar. It's always been this sort of this ultimate long-term goal. And the idea is you kind of, you want to get like something as decentralized. you want to get it to a point where it stops changing over time, right? You really want to have a certain reliability. So you can really count on it as like an infrastructure that doesn't randomly like rock pull or pivot to something else, right?

And that's particularly important for a stable coin, right? Because that's really something people need to be able to rely on and need to be, have stability. Literally everyone agrees with that, I think. Where I maybe have some, I guess, more extreme views is that I think that if there's even sort of a tiny sort of small. sliver of a kind of a centralization or sort of slivery slope towards centralization in any kind of ossified or sort of near like sort of a state that starts to to reach this kind of like lockdown

situation where it gets harder and harder to change things then in my view then you're guaranteed to basically get some complete centralization right because you can't always count on on basically like pioneers and founders and sort of thought leaders to just selfishly kind of like, you know, work to remove themselves out of, of a position of power, basically. Instead, what you're going to get is you're going to get just this sort of natural, you know, human process of consolidating power, right? So that's, that in by itself, it's like, that's a huge challenge, I think, right? It's a huge problem.

And I think basically it's the only thing that's really, like, justifiable to really work on to change things, right? So I think like all decisions, all changes, all sort of attempts to really change the status quo and maker has to move towards some kind of coherent vision, a coherent plan for how you're going to get this endgame, right? It's locked down and why that's going to be decentralized and why it's going to be safe and why I want a slimmery slope into capture of some sort. And then I see basically two ways this can happen, right? And so the first way is, I mean, it's sort of the clear.

classic vision for Maker, which is what I call sort of, I mean, very early on in Maker, we were just obsessed with this concept of like how blockchain had huge potential fundamental value, right? Like more efficiency, a faster settlement and transparency and security and all this stuff, right? The reality is you can actually build stuff with blockchain that just runs automatically, right? And I actually still believe that's possible. So that's why one of the things I'm sort of pushing is this possibility of what I call symbol die, which is basically pretty much take what exists the maker today and then get rid of the entire workforce, essentially, and then just let it run by itself. Of course, a few people need to remain, but basically

what's there today runs itself for the most part. And then you have this massive workforce on top of that, which was driven by a kind of desire to grow and decide to innovate and break barriers and break limits, right? And as it gets into a new frontier that we didn't consider early on in Maker, which is, you know, it's not just about building some fundamental value, like, build it and they will come, right, but it's also about intangual value, having a brand, having growth, having sort of a growth strategy. And that's something, I mean, in the end, that's something I'm even more excited about than just sort of fulfilling the original vision of some thing that just works, and then that's it. But I believe that to do that, you really,

I mean, it's an incredible, unbelievable challenge to try to figure out. how to do things like organize humans and organize what I call meta, which is basically this sort of the context of how humans and the community, how they work together. And then that's sort of this big vision I've come up with this using a tool called meta-dows, which basically recognizes that you simply cannot have 130 strong workforce in a down. It's impossible. It's not going to work. It's a total failure, right? It descends into like crazy politics, turf wars, power struggles. But if you, and the reason is because the context for all these people isn't compatible. Like they all come from different sort of walks of life in a sense, right?

They've all been onboarded in some kind of random fashion. So what I believe is the silver bullet potentially to this is to split it up into many essentially like siloed independent dials that are still tied together economically through like tokenomics and all this intangible value that all together I call it meta magic because you can sort of really do some complete sort of hacks almost right of like hacking human psychology with all these tools available in blockchain got it okay so you've presented your vision for makerdao haseau i'd like you to present your vision and where if you if you can where you think that rune's vision falls short of the way you think makerdow ought to be governed um sure i mean

i don't think we really disagree very much about uh the vision for me Maker dollar in the sense, you know, what it should be doing. And I can briefly go into that. I mean, there's a lot of different voices in Maker and also in the community surrounding Maker. So Maker, I think we all agree Maker is a decentralized bank. But that alone doesn't even tell us very much. Banks over the centuries have pursued many different business functions. I mean, custody, payments, consumer lending, commercial lending, corporate finance, investment banking. So when we say, you know, something is a bank, it can still mean, you know, a vast number of combinations of the above options. And so I think before you can really do, before you can, it really even makes sense to start about governance.

You need some alignment about what your project, what Maker should even be doing. And I think, yeah, that's why, for example, I suggested, so let's create a constitution for Maker in order to figure out what we even want. Like I know what I want, but I don't know what everybody else wants. And I can see that there's a lot of different visions. And I think it would be better if we would all run in the same direction, no matter what that direction is, instead of pulling the Dow into very different directions that sort of all neutralize each other. So what I would like Maker to be, I mean, I think Maker's most powerful vision is to be a shadow bank. I mean, that's how it's already used today, and I think that's where it has its highest potential. So Maker's product is dollar-denominated demand deposits.

I mean, Jenny, like listeners from TradFi, also called the Eurodollar, not tied to Europe. It's just dollar-denominated deposits that are created outside of the U.S. regulated banking system. And this product has a huge target market. It's extremely important to get right. There's huge demand to hold U.S. dollar exposure outside of this existing legal system. We'll get to this, I assume, but today we saw another example of why that is. Just U.S. regulators can sort of at will, you know, freeze any deposit that is sort of in their domain. And they cannot do this with dollar deposits that are outside of the U.S. legal system.

However, the problem with these shadow banks has been traditionally that they are not FDIC insured. So in the past, sort of U.S. Central Bank has just sort of let them fail and let them sort of, yeah, fail on their customers. But now these shadow banks have become so big, so systemically important that, you know, in the last 10 years, the Fed had to bail them out with swap plans anyway. So I think Maker has this huge target market. It has many advantages over traditional shadow banks. because it doesn't actually need this kind of deposit insurance. It can just hold liquid collateral. And I think that's something that, for example, we are, we super agree on.

Like, Maker should only hold very scalable, very liquid collateral that we can always liquidate when we need it. But for example, this view, it's not like consensus inside Maker, you know, what we should be doing. So I think before we can even talk about how we should do it, how we, how we, how we, how we can get there and how we can design a system that achieves this purpose, I think we need to kick-start a process about defining sort of a common constitution, a common mission statement for what the DAO is supposed to do and to be. And I fully expect that, I mean, 20, 30 percent, maybe of the people involved, maybe of the votes, are going to disagree with any vision that is chosen and they will probably go and leave. And that's totally fine, right? Because at least now then they have the chance to

to go and do and pursue something else because, for example, they know that their vision of, like, for example, a Rye or an LUSD version of Maker, that's not on the table. And I think stuff like that has never really been communicated from Maker. You already touched on it very briefly, but I think sort of the main way that my proposal differs from Rooms is sort of it focuses on very specific tasks. It identifies very specific tasks that need to be done and create specific roles that they're are dedicated in order to filling these objectives. And this includes setting a strategic direction for the DAO, setting an annual budget, sort

of observing, you know, setting like a risk management policy for the DAO, hiring and firing core units, monitoring the financials and setting it like a legal strategy. And basically, so providing like high level strategy, but also oversight for the workforce. Yeah, so because I thought that this is all things that are currently missing from the DAO, I think that it would be really important that there is a dedicated role in order to steer the DAO from this very high-level perspective, right? Because what the token orders are that they can vote on individual decisions, but what they're explicitly not good at is like zooming out and not thinking like, what do I think about this one decision, but what do I think about, like, what is that even the design space for decisions and what do I think about this decision in the context of all other possible decisions that are not even mentioned here. And so I think like steering like system as complex as maker, as ambitious as maker is just completely impossible if you're like so low level. And that's why we need something like I call it a council council of makers to like take a very like deliberately bird's eye view on the system and steer it from there.

Okay. So if I can try to summarize very briefly the the two opening statements. So Rune, it sounds like basically your view is that look, you know, when we started Maker, we had a very simple idea of what we wanted to build. And over time, it's become more and more, I wouldn't say politically captured, but politically complex. It's become this big spider's web full of all sorts of stuff that doesn't necessarily need to be there. And your vision is one of, hey, let's return back to kind of a minimal viable maker. There are ways in which we might want to be more aggressive. But the first and number one thing is like, let's simplify a lot of the complexity that has landed within MakerDAO.

Hase of your vision is that, you know, look, right now MakerDAO is basically being decided by token holders, but token holders don't have sufficient direction and alignings. of vision to be able to build the right thing. And everything in life is about building the right thing. So you propose that they create a constitution that describes what the goal and broad vision for MakerDAO is and for there to be an elected or some kind of counsel of decision makers who are responsive to token holders, but it's not token holders voting directly on individual decisions. Yeah. So that sums it up. Yeah. Awesome. Sorry, Robert, you were going to say something. To flesh out the surface area of agreement and disagreement just a little bit more,

Hussu, one of the things you said was that, you know, you wanted, you know, Dye to be backed by liquid collateral. One of the things that I've seen happening in MakerDAO is that the collateral base of Dye over time has been moving in two directions. One is towards, albeit liquid collateral, like, U.S. D coin, which is, you know, comprising a larger, larger portion of the backing of dye, as well as less liquid, you know, collateral or things that aren't as on-chain accessible, which, you know, really falls into the more real-world assets camp, which is, you know, there was recently a Treasury to, you know, approach to start including treasuries and corporate debt as the backing, you know, for the system as well as, you know, real-world

assets, loans to banks and other, you know, off-chain entities, you know, how do you each see that backing of die? Is it positive? Is it negative? You know, how so you specifically said that, you know, you want to die to be outside of the control of, you know, the U.S. banking system and, you know, regulatory system, you know, but all of these things that are increasingly back and die are directly controllable by that system. How do you each see this transformation that's occurring? I mean, so I really think that, um, like, so first of all, I, one part where me and has to definitely agree. I mean, I think beyond this is just a sort of sense of there needs to be some stability, but I mean, and that's what's the constitution has to

talking about also brings to the table, right? Sort of ground rules. And basically you put the ground rules in place and then you play by those rules instead of constantly trying to sort of metagame and change the rules so they favor you, right? Which is kind of like what happens if you don't get some, some stability into the political dynamic, right? And I mean, and then there is a sense of like how do you really, like how do you agree on a constitution?

What's going to cause you to agree to some ground rules rather than try to game them for your own benefit? And that's where I really, it goes into. this concept of what I call the meta or the culture, the sort of the context of the humans basically involved, right? Because I strongly believe that a DAO simply cannot function if it's purely for profit. Like if it's simply a money-making enterprise, it can sort of logically show that it simply is never going to work. And that's because the definition of a DAO is that it's not a legal entity, right? There's no legal protection. And one of the consequences of that is things like

like corruption and embezzlement and theft and none of that means anything in a down right it's perfectly it's it's sort of if you can do it then the Tao sort of wants you to do it right that's that's the whole concept of the cornerstone of decentralization right and so in a situation where people only motivated by greed the the problem is that that you know there's never this sort of shared vision in that case right it's really always just an individual vision of i'm interacting with this thing to maximize the value I can extract out of it. And that's going to then sort of permeate governance, right? So people vote for whatever benefits them personally. But even worse, it goes into, it sort of impacts the workforce. It impacts the management, if you have something of that, right?

And it's just going to be, I mean, that's sort of endless free fall. And then that's why I think in the end, what you always get is you sort of cut through the insanity and establish some kind of real hierarchy, real centralization, and then turns it effect. something with real legal protections, right? And the solution to that is some kind of vision that goes beyond just making money and just being in it for profit, right? Which is, and I think, I mean, I think, you know, we sort of also like alluded to that, right? It's about having people that align about this is not, we're not just here to make money, we're here for some bigger thing. And not everyone can get aligned around that, but that's, it's so important to have that alignment

that it's actually worth it to basically find something where, enough people can be like, now there's a real reason for us to be engaged and contribute to this in a way I think is more altruistic, right? Actually vote what's good for the whole Dow, right? What's good for our vision, for our purpose? Bruen, hold on, that's such a fascinating claim. I've never heard that said before that, like, in a Tao, there's no such thing as embezzlement because a Tao is an extra legal concept.

It almost sounds like what you believe is that in a DAO, people are just like, it's pure state of nature, people are just doing whatever the hell they want. They are kind of, you know, stealing at the margin wherever they possibly can. Do you actually think that's how people behave within MakerDAO? I mean, I don't, so I don't think that we are, I mean, Maker is already sliding in that direction, but we haven't even seen the beginning of it, right? I mean, it will, and then, and that comes back to this cause. I mean, again, I really find this term meta, the sort of the context. the second order of what's happening, it can have a certain momentum, right? And one of the things you can do, it can deteriorate, right?

So corruption in an organization spreads because you see everyone else doing it, and then you start doing it yourself. And it's, I mean, in Maker, there's nothing like that, right? You don't have anything like real embezzlement, real corruption, anything like that. But what was happening for a long time was this memeification of decentralized as I would call it, right? So once upon a time, decentralization was taken very seriously. But then for all the people that have to actually do things, it's super super inconvenient for them, to constantly have to deal with all this like decentralization, maximalism, and larping. And over time,

it started to sort of slide as a principle, right? And then you actually started opening the door to things that could really sort of irreversibly centralize it now. And I think the exact same process, I mean, will certainly play out for things like, like accessing budgets, right? Like at first you're sort of thinking about I'm going to get this budget for what's best for the whole organization and I'm all about, you know, doing contributing value. But then if you see everyone else sort of, you know, building up a fat buffer and a fat budget and there's no, I mean, it's just, you're going to naturally going to, you're going to

naturally to be working in that direction if there's no counterforce against that. And that counterfalls, it cannot be that we're here to make money because there's just, I mean, that's exactly the thing that's going to drive that kind of sliding, right? It has to be some kind of greater purpose. And so, I mean, so what I've pushed in the past, what actually was my first realization that this is so important was clean money, right? So this idea that you can have the collateral itself of die and sort of what die actually, in a sense, physically is, you can have that be the purpose, right?

And have that be sort of the reason why it has to be die that should succeed, right? and why it has to be died that people should work for and volunteer and contribute to, right? Because you can literally create a currency that produce positive externality, right? In the same way that the current financial system is like destroying the world, right? And producing negative externalities all over the place. You could actually reverse that process and create something that just makes the world better sort of automatically, right? Driven by the power of blockchain, right? And I think with something like that in place, you're going to have actually,

the possibility of creating a real like ossified constitution, right, where you're going to get the system to a place where everyone's involved because it's doing good and because they think there's some real purpose for this beyond just making a bunch of money. So they're not, they'll not accept somebody coming and being like, oh, let's mess with them budgets, let do some stuff over here, like some, let's do some, pull some tricks here and there, right? Regardless if they try to like bribe people or do some propaganda, all this stuff that absolutely will happens and will happen in doubt politics, right? Because in the end, there is a tangible sort of upside that goes beyond just what's in it for me, right? And I think that's how you really

get, yeah, I think that's how you get this sort of stability. And to draw a comparison, I think that's something, like that's what, for instance, makes Bitcoin totally, you know, unassailable, right? Everyone's just like, they're not just in Bitcoin for the money. I mean, it's a big part of it, even the maximalists, right? Of course, they're all there to speculate and so on. But there is also that sense of like freedom and sovereignty and living in the mountains out of reach of the government, right? And that causes, I mean, that creates a meta where the exchanges are not going to, you know, the miners and exchanges, they're not going to collude because they know that like the entire world is going to be against them, right? The second order of sort of feedback is that that everyone else knows that nobody else is going to mess with Bitcoin. So nobody's going to try, even if theoretically they could for it and introduce inflation or whatever, right?

But it simply won't happen. So, Roon, it sounds like a lot of your view about MakerDAO and Dow governance generally is driven by this skepticism about human nature, let's say, and about kind of the purity of incentives, quickly getting eroded when there's power to be had, when there's money to be made. Hasew, what is your take? Do you disagree with that? Or do you largely think that Rune is basically correct, but you think that the solution

to this problem is different than what Rune's presenting? I mean, I thought the original question from Robert was more interesting. So let's go back to the original question. You were asking about collateral, right? I mean, I can briefly sort of, there's a bunch of things we could like talk about. But I thought your original question is very interesting just because it's so timely. Like you were asking about the, whether like we should have real world assets and in Mekka and such, right? And like stable coins backing the die.

I think might be interesting just for the audience to be about this briefly. Like because this is actually something that I think Rune and I are in complete agreement about. And Drew actually had this like super insightful tweet about this earlier. I would call it like this decentralized stable coin trail Lama almost. You can have a coin that's stable slash solvent. You can have a coin that's backed by non-US dollar collateral and you can have a coin that's scalable. You can have only two or these three properties, but you can't have all three.

So any stable coin system needs to sacrifice one of the three sides. I mean, Maker has decided that it won. wants, you know, to be a stable coin. It wants to die to always be at a dollar. They used to be a huge debate about this in the past, but sort of the site that wanted died to be one dollar. I think that in hindsight that was a very good decision. It does sacrifice, you know, trustlessness of the system necessarily because you have to

then, like once you made this decision, you need to decide like, do we want non-USD collateral in maker or do we want maker to be scaled? And from, from that point on, basically we have to pick one of the two sides. And Maker chose scalability. Because in order to, like, for Maker, it's not just enough to be, like, you can make a system that's useful, very useful for a few people. Or you can make a system that's, you know, potentially useful for the whole world. And I really think it depends on what your, like, your objective function is. And I think Roon's vision and largely the vision of the maker community is to create a global currency, a currency that is accessible to anyone in the world.

And for that, it needs to be, you know, very liquid and it needs to be have wide distribution and so on. So there's only one way to guarantee that. So dye deposits, if you use a traditional sort of asset liability model, then, you know, dye is a liability of maker. And right now it has sort of on the order of like $5 to $6 billion of USDC backing these demand deposits. So anyone can take one die, you know, go to. go to Maker and, you know, withdraw one USDC for that. And that's really important in order to, you know, create stability at the pack in order to basically create this guarantee that,

that people can always withdraw one dollar of collateral for one dollar of die. And if you have dollar denominated liabilities, then you need dollar denominated assets backing that. And so the, you know, the amount of available collateral. Wait, wait, why? I'm going to interject, why? Ether is not dollar denominated per se, right? It's an arbitrary asset, right? Ether has exchange rate risk relative to the U.S. dollar. It's wild. And it's great collateral. So why do you have to have dollar-denominated collateral for this to work? Okay. So there are two ways to create die. The first is, and this is how Maker used to work in the early days, and this is you have someone who deposits collateral, such as ether, and then they borrow.

die against that collateral. And by doing that, they go short Eve USD because they have a sort of they borrow USD against Eve and then they sell the USD. So this this is one way that die can go in circulation. But this way of creating dye is sort of extremely, you know, it's purely dependent on the demand to, you know, borrow dye against USD, which is like really small. And it's not at all matched with sort of the demand to actually hold dye. So you need a way for the demand to hold dye and for the demand to borrow die against Eve. You need these to be sort of in some kind of equilibrium with each other. And so the much more scalable way of actually meeting the big global demand to hold die

is to allow dye to create it from other dollar, like, stable assets. And this is what the PSM does and make are the Pact Stability Module, which is if demand for die ever goes above, let's say, like one dollar one cent, then it becomes profitable for arbitrageeus to deposit one USC in the system to mint one die and say the one die for for one USDC and one cent, right? And then profit one cent. So you basically have infinite scalability as long as you have dollar collateral backing this. But like we don't want us DC like we want don't want the current dependence on us DC that we have like we want to replace us DC

not just because it's a huge central point of failure, but also because USDC doesn't pay us any yield, right, on this. So Circle is making 3 to 4% on all of these deposits that they hold in the bank. And Maker is getting zero of that. So Maker should, in theory, it does allow you to expand the dye supply without dropping interest rates, right? And I think that was part of the whole thesis, which is like, you know, Yeah, that's a good point, Tom. Yeah.

So it does have some benefits. I mean, it does on the other side, it introduces a lot of sort of existential risk and creates the narrative that like dies just to rap to USDC and such, right? So I mean, in theory, like instead of just USDC, Maker should be backed by a range of different stable coins that all have profit sharing agreements with Maker on the year that they generate from the money that is ultimately sitting somewhere in the banking system. And then maker should also be backed by commercial bonds and governance bonds because these are,

you know, some of the, these are some of the sort of safest and most liquid U.S. dollar denominated sort of yield-bearing assets that there are. And I think, you know, this is something that, like, nothing that I said is sort of controversial among, I would say, like, 80% of like MKR. This is like something that I would say that we all agree on. And sort of anyone who disagrees with that is sort of already like... Well, in the spirit of this. being a debate. Let's maybe try to zoom in on the controversy, which is why we brought you both on. I think it's also important that like people understand all of which is not the controversy because I did see today on Twitter like a lot of people saying, okay, so like this proves that

Maker can't be backed by USTC, Maker can't be backed by reward assets, etc., etc. So just want to make like for like these reasons clear that that's not the case. I really like to dive into like, you know, RWA stuff and USTC at some point. But I am. kind of curious, like I think so far, you guys have been talking a little about your respective visions and I think also your blog posts go into a lot of detail, or the forum post rather, going to a lot of detail around how you sort of see the world and like what you want to see. But I'm curious like what more specifically you disagree with, right? Like there's one thing to say, hey, here's generally speaking how I think, you know,

maker should go. You know, here's what I want to do with metadataows. But like, I'm curious, and this is for both of you, maybe starting with Rune. Like, like, what specifically do you know, disagree with most in, in Haseu's, uh, host and Hasu's point of view. I mean, I think what I think I can respond to is like what has it was just saying, which is like, so I think I agree with like, I think the way it has related up is like, I agree with this and it's like that's the most, what I would say, um, but of most, uh, I don't

right, that's sort of enlightened kind of like this is the obvious kind of, um, business as usual where, where maker, we've already been seeing Maker going. It's like, of course, met like, there's this whole thing about, uh, just like, Eath is a perfect collateral, but it doesn't scale. Getting bonds on chain, getting like, getting access to the yields and centralized stable coins and unchain, all of that stuff is like, it's amazing. Like, if you could build something on that and just scale it up and, you know, become sort of the stable coin of stable coins or stable coin of bonds and it's all unchain, like,

that is, that's an incredible product. Unfortunately, I don't think that it's going to, you know, I don't think, I don't think it will be a stable equilibrium essentially, right? I mean, because or rather, it's like, it's not guaranteed that it will basically be allowed to exist, right? I mean, we're already seeing in the US, I think it's basically been decided that

they're going to, they're going to stump on the stable coins, basically. Like, they're going to, like, not just die, actually even USTC. They're going to turn it into something like eMoney in Europe, which is like an unviable business model, basically. I mean, of course, we can hope that this the latest stablecoin bill, whatever, it doesn't pass, right?

But it's being brought forth with like the momentum of, you know, that's like what they decided to turn Luna's collapse into, right? They're basically trying to sort of not actually ban, but practically ban stable points. So I think, and I mean, in Europe, we've got Mika, Mika is actually really, really awesome because it exempts Maker specifically. It nukes pretty much everything else, but Maker, which is like,

I would argue in its current form or something very close to its current form where it's fully decentralized. It's being actually accepted and actually gets into a very nice spot. But the same thing is happening where there's all this discussion around, well, how do we actually kill it? Because that's what they actually want, right? And I think increasingly, I mean, they've been moving further towards actually, let's just kill it. That's the sense I get in both in the US in Europe. And we've seen like struggling economies around the world. they one of the first things they like to do is is to ban all crypto right and and as things are

going to get worse in the west we'll see the same kinds of things right so i think first of all the first thing that i wear sort of i mean i basically disagree with hasu that it has to be only liquid like or rather i mean this maybe not the way to put it but i think that what i call clean money is basically collateral where you deliberately you deliberately use stuff as collateral that you you wouldn't use purely for financial reasons. And you use it essentially for like, I mean, well, I would call it for meta, for meta reasons, right, but for sort of PR and political reasons, not to mention internal governance reasons, right? But essentially we need to like prove to the world why they shouldn't shut us down, right?

And why the politicians should understand that they'll actually get more votes. If they allow something like Maker to exist rather than if they shut it down because we are able to sort of show to regular people that there's some real value for them in this, right? Such as here's a technical solution that can help with the huge coordination problem of climate, right? But beyond that, I also think we need to be

like properly prepared for like a full sort of failure of these legal systems that right now we feel very like it's very convenient to sort of rely on an increasingly build on top of. I mean, not just these political attempts to destroy

stable coins. But I think even like a social breakdown, right? Because as I said earlier, once you start to see the cracks showing in an economy, they're going to, they really crack down on crypto. That's one of the things they do. And I view that's really what I view like die should really be, you know, the currency that doesn't die in that situation, right? So you know the old good old die or die, right? We need to figure out how to navigate past that. And I think to do that, we have to tap into these like not just the basic fundamentals of efficiency but we have to figure out how to all like how to get the community to come together basically and how to tap into these these new

frontiers of what you can do with blockchain and and web three and metaverse and intangible value and you know the ability for humans to organize with all this stuff and so run how do you think has who's idea of there being a sort of council of elders for makerda how do you think that plays into those political risks that you're describing. I mean, so I mean, I think also, like, so I actually, I sort of amended my own plan to actually include something called councils, just because I think it's like a great, I think it's a great term. It's a great term, right? Like, I think it's like a completely, like, I don't think it's viable to have a single council,

basically. Like that sort of directly goes against what I believe is sort of possible. I mean, or rather, if you have a single council, well, either you will have. have like you will literally just have all value going to that council like they'll basically sort embezzle all the value in the system or more likely they'll do that and then there'll be some kind of backlash scandal type of thing and then that's going to result in some sort of legal framework being imposed on this identifiable group right so the solution as i see it is you have a ton of like many councils and you also kind of um you know you put checks and balances in place to their

powers and you make sure they, you know, they set the high level, they sort of help with setting, they provide expertise for the high level direction and implementation and sort of what, what conforms to the constitution and what doesn't and these kind of very important high level questions. But you, you know, you sort of balance it out so they don't also sit and are involved in like, I don't know, making deals or engaging with counterparties to the point where they can build up. Yeah, I mean, yeah, something are called private entanglement. But, basically a kind of power, like a kind of leverage that you can get in a Dow that makes it very difficult to kind of undo. Once you build it up, it's very hard to unwind again. And that's

one of my biggest fears and why I come back to this thing of like you have to put in place something that is so decentralized, it can be cracked. Because any kind of crack, you know, once it starts happening, it'll only go one way, I think. So Haseel, let's get your response. It sounds like Grun believes that your proposals don't sufficiently take into account the political risks, both of the existence of a single council, but also the political risks that are imposed on MakerDAO's just continuing existence. Yeah. So I think we both agree that something has to be done, that there are sort of, I mean, large inefficiencies in Maker, not just inefficiencies, but also sort of large voter apathy and like entrenchment of the token holders and the borrowers,

that all of this stuff is sort of, you know, it leads to sort of a slow death for Maker, and it also makes it much easier to capture by regulators. So I think something that both of our proposals tackle in their own unique way is sort of how can we create strong checks and balances in Maker. So I think both, both sort of proposals have at their core something close to sort of, I like to call this like owner-operator separation, where sort of the owners of the Dow,

that, okay, Atopno does no longer have to be the ones that are operating it day to day. And this was already sort of kicked off with the introduction of delegates, but it would sort of be taking further with the introduction of one council or several councils, right? But once you start to delegate and sort of say,

okay, so I'm appointing an agent to, you know, manage a DAO on my behalf, or at least like this small subpart of the DAO, then it's really important. to get, you know, the sort of make sure that, you know, the print, you have, you keep the principal agent problem in check, you know, that, that you keep the incentives of the two parties aligned with each other. And that's where I think actually that my, like that the simple makeup proposal that that I put out is actually, I mean, it sounds simpler, but I think it's actually, it's a much cleaner and actually does this job better. Because it's, it's way easier to provide oversight on one council for. for MKR token holders than on 20 councils. Like you need way fewer eyes, you need way fewer people to be engaged

to observe sort of the output of one group than of many different individual groups. Why do you think it won't be the case that this council will not just embezzle or enrich themselves from their position as council members? Well, so there's a couple different reasons. I mean, for one, in my vision, the council can only make recommendations to token holders.

So it can create, I mean, it can create proposals that then, but these have to still be voted on. Every single proposal still has to be voted on by the MKR token holders. But it's sort of presented in a much more high-level way. So it becomes actually much easier to, for the token holders to understand what is actually being voted on. So for one, they never give up control, but they also gain sort of so much context and like bird's eye view on every decision that is being made. because the council only makes like very rare, occasional, very high-level decisions. So, for example, when the council would create a budget once per year

instead of sort of continuously, or maybe once every six months, then it would have to, you know, in all of the budgets for the different core units and the different initiatives that make it us, they are all presented and negotiated at the same time. And sort of anybody can look at say, oh, yeah, I think, you know,

Is this like, are we spending too much in total or not? Like, where does this money go? Like, and if I want to give more money to this coin, then I have to decide I want to take it away from this other coordinate and so on. So I think that we're actually making the decisions much more transparent and actually much easier to oversee. And that we are adding a lot of accountability to the MKR token holders, which don't exist today. Because I agree that this is all makes sense on paper, right? But what I've seen in reality, because I mean,

actually think the same logic, you could almost apply the same logic to the coin themselves, right? In the end, they, I mean, they can't push anything through and they have to come back to get their budgets renewed and so on, right? But what I really think is a central issue, like a really big sort of corner we backed ourselves into is that, yeah, again, it's the, it's the context of this, right? So the real context, right? So on paper, they're supposed to blah, blah, serve the Dow and all about decentralization and all about cutting costs and so on. But when push comes to shop, you kind of see this like the way the dynamic actually is that it's like, you know, here's the thing we worked on and it's great and here's a budget, there's a bunch

of money and we need some here here and we made it and, you know, we were chosen because we're the smart ones that know how to do this. So here it is. And basically, you know, this is the thing, right? And then if people sort of push back, it's like, oh my God, you know, you're a careholder, you're no clue what you're doing. You all just want to cut budgets and, you know, cut, and that's going to harm growth, but you have no sense of thinking about long term, right? And I mean, there would be this, I remember these cases of like people coming into the discord, right? And sort of asking why the hell is the budget at 50 million, right, or 30 million or whatever it was it? And then you had like one guy asking, why is the budget so high? And then immediately

you get like 20 to 30 like full-time employees, right, who's in full-time job is this stuff swarming and be like, budgets are great for growth, you know, budget, budget, budget, right? And nobody wants to participate in that kind of situation, right? Like, no one wants to be like the volunteer sort of idiot that's carrying all the other free riders that are not even speaking up at all, right? And then you have to fight politically against like 30 full-time experts who live and breathe this stuff, right?

And I mean, the only thing I can imagine is worse. than that is like going up against like a council of like the seven makers right who has been sitting on this post for 10 years right and you think you're coming to whatever right like in practice even if someone sort of had the like the power to kind of I mean so let's assume right I mean of it's a hypothetical scenario right but let's imagine they're like super corrupt and they've been that for like a decade and someone's like able to kind of like get in there and figure generate some kind of leverage as like, okay, now, you know, like, finally I can like, I don't know, replace one of them or something like that, right? It's just, it's like, and of course, I mean, I know that, of course,

I mean, okay, so this is an unfair. I mean, I recognize this is totally unfair example, right? But the point is like, I think that, like, if you're already seeing all this, that everyone's just looking out for themselves, like, what's going to cost you to then do it for sort of the greater good and to undo all this corruption? Like, I really think the people would do this so they could get a cut, right? So you may be going to replace someone on the council, but the person who gets in there, I mean,

it's going to be like Russia or something, right? And the new king or whatever will just take over the, you know, the ability to extract value. And I think the only way to get out of this is to basically, I mean, so obviously we disagree on this, like this agent owner separation, right?

But I mean, there has to, obviously there has to be like experts because M.K. can't be the experts because but but I think you actually must have what I call I mean basically volunteers like like semi altruists I call it right like people who are sort of they're in it because they can benefit through appreciation of them K out token but not for some kind of special interest they have right so they're really just looking out for the token and then because they're looking at for the token they're looking out for the users the dieholders because the token is linked to

the dieholders right and we have to build systems where you can't get and lean back and it will work even if the MQI holders are totally out of it. That's kind of what I, I mean, that's what I discovered. Like, that's why I got back into it like six months ago. It's because I noticed that there's literally not a single person active that wasn't getting paid in some shape of form, right? So the whole like the inmates were running the asylum, right? There was actually nobody watching out at that point. Like, because you can't, you know, you can't go toe to toe with people that are full-time professionals,

especially when the whole thing is set up to sort of give them the momentum and give them the initiative. And so that's what I believe we need to do. We need to build something where you sort of put the MQR holder on pedestal in a sense, right? Like the people who actually volunteer who are not getting paid, who are there sort of to simply vote and participate and basically sort of do their duty, almost like jury duty or something like that, everything must be set up for them and for them to be able to actually interact anywhere they want. and for them to kind of like match all the full-time professional actors in terms of like the ability to to politically clash in a sense, right? Well, let's give, let's give Haseau an opportunity to respond. Yeah, I mean, I basically completely disagree that, you know, MK. I would be put on a pedestal or that they should, that they really have like a ton to add to the operation of Mecca Dow. I think the project is way too big, too important and too ambitious and too complicated.

it like for anyone who isn't sort of a full-time employee or like a long-term expert in in the field. And that's, that really is a very small sort of intersection of people that sort of even qualify for, you know, steering mecca Dow in a meaningful sense. And I just think like the intersection of like these groups who are also then, you know, large MKR holders is basically zero. If the project is supposed to have any future, then I think we make it, we need to. to make it possible for experts to drive MakerDAO, and we need to make it extremely easy for MKR holders to hold these experts accountable and to audit the whole system from different angles. So, for example, the council or councils, I think they should not just contain MKR holders, for example, or like, not just, like, shouldn't just like contain like people who

make like strategic decisions or financial decisions, et cetera. You should also have sort of, you know, someone in there who represents, for example, dieholders and one who represents the interests of borrowers and maybe one who interests, you know, has the interests of like the underlying blockchain, like the Ethereum ecosystem, for example, in mind. I think definitely you should sort of factor in all of these different viewpoints. And that's something that we also do at Lido, sort of the dual governance approach and optimism does with their, you know, house approach. And I think that's, that is really the future, like having strong division of power, but sort of in at least like one side of it have sort of experts driving the ship.

And then everybody else, you know, gets a really clean look at, you know, what the experts are doing and that they are steering in the right direction. And along with that comes the, you know, the ability to, to fire the council, you know, at will, right? I mean, not just approve anything that the council does. everything needs approval, but also sort of the ability to like unilaterally like replace council members or fire the entire council. I think, yeah, I mean, I think that this stuff is really important to get right sort of the checks and balances. And this is actually where we get to my my biggest sort of problem that I have with ruins endgame vision. And that is that it's too complicated for me to understand. I think it has now sort of five posts. I read the summaries.

Summaries alone are like there are five summaries there together like over 100 pages. And for me, it's just too complicated. Like I can read it, but it's too complicated for me to like look at the whole system and say, yeah, this is definitely going to work. Like this is definitely, you know, not going to be exploitable. And it's fundamentally not the way that I, would, you know, design a system. I think my approach to system design is, you know, first define sort of the objective function of the system, decide where we want to go, then think of the design space for, you know, what are sort of the different governance systems that you can put on top in order to get us there and really keep it as simple as simple as possible because complexity is such

a big risk and such a big danger. So the biggest unspoken danger of all, you know, systems that pride themselves on, you know, their resilience and such. And I think for Maker, it's extremely important that it is resilient. That's one of its most important features. For me, I couldn't vote for, you know, this proposal because of its complexity. To me, that's sort of its big shortcoming. And I think a lot of work, like, Rune, you have to put a lot of work, you know, into greatly, greatly simplifying it before I think it becomes sort of viable for, you know, many voters like me. Yeah, that's also feedback that I've also, you know, given you already sort of six to nine months ago.

Can I ask one question about the end game plan that jumped out at me from it that I really liked? And I'd love to get Haseous thoughts on this as well. So one of the things that I found really exciting about the end game plan was to mention that, you know, eventually MakerDAO could move beyond a simple synthetic dollar asset, which was, you know, part of the original vision of MakerDAO that got me excited years and years and years ago to creating new synthetic assets, you know, whether it would be like a synthetic euro or a synthetic ether or synthetic Bitcoin or synthetic, you know, equity index or whatever. Roon, like, you know, do you think that that's crucial or core to the vision of MakerDAO

and Hasey? Do you think that that is crucial or core to the vision of Maker now? So there's a whole bunch of stuff to talk about with that with synthetic assets because that's actually been, like that's been, that was part of sort of the vision from the start, right? And actually, I would say nowadays, synthetic assets is part of what I call the Trinity, which is this concept invented by Frex, that there's this sort of natural law, gravity around what are the obvious? Once you reach a certain level of complexity of governance, you do risk management,

you have this trinity of stuff you kind of always want to build up. Both me and Ahsu, we're basically saying, look, we need something that is possible to kind of like audit and control and have certain guarantees around it. And in order to get that, it needs to be simple. And complexity is the enemy, right? And then the main difference is that, so I think the real, like, I don't think that 100 pages of sort of technical design or constitutional design or even 200 pages or how many pages you want.

I don't think that is complex at all compared to the complexity of human incentives, basically, and not just human incentives, not just like selfishness, but even like, you know, irrational malice, you know, in terms of interpersonal conflict and, you know, beef and insanity and mental illness and, you know, this whole this good thing around like the number of CEOs that are psychopaths and all this stuff, right? That's what I think is like the challenge that MPR holds need to be able to deal with. Like I'm not so not even close to word about MQLOS being able to risk manage. I mean, that's also a great challenge, right? Of course, risk managing liquidation of assets that have some massive scale.

But dealing with people, right, and especially dealing with people in the total absence of legal frameworks, of shareholder protection, you know, like fiduciary duty, that's what I think is like the almost impossible challenge, right? And so to bring it back to what Hsu talked about with the council, right? And then you put someone who represents dieholders, you put someone who represents eth holders into the council, right? But I mean, I'm assuming that those people would still get paid, right? In which case, they're not, they're going to represent the bureaucracy, right?

I mean, that's the reality of how human behavior works. It's like literally one of humans, one of one, right? And I mean, more than anything else, they're going to be subject to this very good old thing called iron law of bureaucracy, which is that, you know, which is again, there's the context of an organization original, like a bureaucracy or an organization is created to do X. But the internal dynamics in practice sort of empirically, you just, we know that in almost all cases, what happens is the sort of individual replacement of people and the individuals of power struggles of people in an organization, in a sense, sort of represent the organization itself rather than its purpose gaining power, right? Simply because it's, again, it's something like a loss of like a gravity, natural law in a sense, right? So I think that you would have like someone representing dieholders, someone representing Heath holders, some representing whatever, Ethereum blockchain, working together with counsel representing real estate and blah, blah.

And they would all like, what they would do is they would like secretly collude to produce propaganda, making it look like they are whatever, whatever the people, whatever they think will keep people to basically shut up and let them do their thing. And then they'll, you know, they'll like their objective. would always be to just maintain sort of like indisputed like I mean sort of risk like their goal will be resilience but it would be their own resilience right and and I think the only way to prevent that is to build up something I mean that's basically more like it looks more complex in terms of of sort of mapping out all the pieces but it's but what we're doing is we're making

explicit the structure that becomes sort of you know let's employ in this kind of structure where you sort of count on people taking care of it. I mean, so I would take the other approach and say, you know, let's not just say that shareholder protection doesn't exist in a DAO and can't exist and that fiduciary duty can't exist in DAO and that DAO can be transparent, et cetera, because I think we can just design the DAO in order to have all of these properties. And then you can actually have managers in place. and like people steering the DAO on behalf of the token holder.

And they are accountable to these token holders, you know, that they are working for. So that is that was kind of, that was my starting point, to be honest, like that you can have these things in the DAO and that you can design simple systems that create them and that you can tune these systems over time as the need for that arises. And I mean, what I think we completely agree on is that we want to minimize, the surface for governance, you know, as much as possible, right? We, we both want to build a system that can grow to, you know, a trillion, a trillion dollar in die circulation.

And, you know, there is a lot of tail risk from something going wrong. I think that, like, the risk from something going wrong and die is like, you want to minimize sort of that risk a lot because you're dealing with people's savings here. And you want this currency to be very, very reliable and you want it to be resilient to internal capture, but also to capture by nation state attackers. And so, so I think we completely agree that we want, you know, the core maker to ossify as much as possible and then sort of have a lot of expansion, a lot of initiatives on the edges, right? And I think, and I haven't seen sort of an actual spec for the

concept of a metadata now and what that would look like. I don't think it exists yet. But I mean, in theory, this is also an idea that I think has been discussed before and that I'm high-level supporting, right? Like a metadata is just being sort of the high-level idea that you have, you know, an organization that, for example, from Maker gets the ability to mint dye up to a certain debt limit, but it has to put up some of its own collateral first. And so if they, if something goes wrong with that die, then, you know, they are on the hook first before sort of it affects the maker community. for me that that looks for example also like a good scaling model but then you still need like you need a central in the central hub you need someone to pull you know the strings and like set okay so what is the risk limit for that metadata going to be and and if we have sort of this budget you know and they are 10 metadata supplying in which three should we fund etc so I think you do need someone taking the central position because it does exist and you you very aptly described earlier what happens if that doesn't exist, which is you do see budgets spiraling out of control. Because of course, for token holders, every new proposal from a core unit looks amazing and looks like we need to fund this thing now.

But it doesn't factor in the next three budget proposals and the previous three budget proposals. To be honest, like a lot of mistakes have been made in Maker's governance systems, not predicting these things, which, like for me coming in late is very hard to believe that, for example, it could be allowed that the budget isn't decided, you know, once every six months for all core units. That there is this, that there even is this like rolling window of approvals for all of these things. And I think we, I mean, this is like the really, really low-hanging fruits that we should clean up first. Yeah.

And I mean, and I think that comes back again, what I call a context. Or in this case, I mean, you could say sort of the culture, right? But once it's like, oh, we're just doing some budgets, you know, then. As long, once you open the door to it, it's all over the place. And I mean, one of the other interesting observations of this kind of thing playing out is something around, like, what I think it's called like the contingency buffer or something. That the core units had like a contingency buffer. So like they sort of loaded up on like a buffer and then that buffer is supposed to kind of like, yeah, give them a buffer. Right.

So if something happens, they have some extra money. But they sort of load it up over it over a budget period. And then I think literally every single core unit, they roll that over. that buffer just so at one point the finance core unit then one day they like did the numbers and they were like oh there's like 20 million dyes sitting out there in these buffers that have just been growing and growing and growing right which is exactly like if i mean if one one part is doing it then then everyone's going to do it and it's like yeah so i mean i said agree that's and this what i talked about in the very i mean what i really keep coming back to that like it's a slimmer slope kind of thing where

you have to have this like it needs to be completely impervious right which is again what I think why you need to like spell it all out have really every single thing of like if this happens well then you you know if you see this kind of behavior then you know like like secrecy or any kind of like whatever right like something that basically is like in the moment maybe could be justified as oh we're getting some things done you know we had a quick you know this is the one I know can do it They just did it. We didn't go through the open transparent process. We did it the fast way, right?

And maybe that makes sense in isolation, but it has this second-order ripple effect of suddenly you've opened a doll to this kind of stuff, right? So I totally agree that you can engineer something that looks like a fiduciary duty kind of thing because that's also the big problem. It's like in Maker today, it's like whenever we see these small slimmer slope, you know, little sliding things,

like all we can do is like basically well we can fire it we're going to be like oh you just you know didn't publish some message so that wasn't transparent so now you're fired right not just you in fact your whole core unit has to get fired right we can't do anything less than that currently so and that's a terrible dynamic right so then what happens is this opposite behavior where then actually the incentive is for the mpkow holders to like close their eyes and look the other way and be like oh nothing's going on right everything's fine because it's not like they can shut down a core unit because or some random small thing. And so they'd rather just make everyone else think everything is fine to try to pump the price essentially.

So you get this very bad negative dynamic that goes against trying to enforce this currently here. And so with the meta-dows, right? So just to this example you were talking about, right, the whole idea is to have basically, like instead of having like individuals, like humans, having their political drama interaction to each other and with the empire holders, they basically have like entire like dows do these interactions. right so so i mean so yeah so like so that's like different classes i call them of the meta dows right and so there basically some that do the sort of the actual work and then they're the ones i call governor dows

and so the governor dows they're the ones that for instance like run the councils and run the core units and then the idea is that the the metadataow is the one responsible for kind of like adhering to the the best like the constitution essentially and then so and then everyone who works in a core unit or council or whatever for a particular metadata, they get a bunch of tokens for that metadata. So they don't get MQR, right? They get the metadata token, which is then sort of indirect exposure to the metadata itself. And then if there is kind of, if something goes wrong, there's a best practice, didn't, wasn't followed, or even there was maybe corruption or something ridiculous. Like, I mean, but it could even be something like some kind of like small thing of like going down

this library slope. Then maker can. basically put penalties on these governor downs, right? So suddenly the dynamic is flipped, where it's like super easy for Maker to be like, oh, we don't, it's, you know, is it like, here's the problem, right? Let's find any kind of tiny flaw, and let's go for that and be like, smack a penalty on you.

So the government, so suddenly it's like, the dynamics flipped, it's really easy for Maker to find reasons to basically say something's wrong. And then suddenly the core units, the councils, the metadata, asked, like, their main concern is always, how do we, like, absolutely do it one trillion percent by the book? Because, like, that's the starting point for doing anything, is to really just, like, adhering to the constitution, basically. And that brings us back to this kind of, like, really solidifying this stuff, right? And then you have...

So, Rune, let me, let me, let me pause you there. It seems like the crux of what you guys are describing, and I want to, I want to wrap up on this. It seems that the crux of what you're describing is, how do you do manage... in a DAO. You know, for a lot of very early DAOs, you didn't really need management. It's kind of a trope that in startups, you don't really need management when you have like seven people because everyone kind of knows what to do. Everyone kind of feels like they're part of the same team.

But as organizations grow, they become more complex. They require more hierarchy, more structure, more different kinds of affordances that we don't really have a handbook. We don't really have like a, you know, when Andy Grove from Intel wrote high output management, that was like one of the bibles of how you manage large organizations. We don't have any concept like that for DAOs. And one of the largest and most complex, and as you points out, one of the most bureaucratic Dow's today is MakerDAO.

And we're seeing, I feel like what we're seeing play out between the two of you is this fight over the soul of how do you evolve a bureaucracy to prevent the bureaucracy from becoming stale in different ways. And I think each of you has a different kind of fear about what can go wrong in a large, complex, bureaucratic organization. But it's pretty clear that the answer is not that the complexity goes away, because MakerDAO has irreducible complexity. If we all agree that MakerDAO needs real world assets, if we all agree that it needs to continue underwriting new collateral, if we all agree that there are all these complicated questions that need to it's adjudicated by experts within MakerDAO, that this is a really hard problem, and there's

no simple solution to it. That being said, I want to give each of you kind of, as a very kind of cute last word, I want to have each of you give one sentence of what you think was the best counter argument by the other person toward your side. So, Rune, I'd like you very briefly to start. what do you think is the best counterargument that Hasu has made towards you in one sentence? I mean, it's obviously that complexity is very expensive. I mean, so what you just said, Haseeb, of like, it has to be complex. I don't necessarily agree with it. So I was sort of getting in on that early on that.

I think that there is a possibility that we have to just cut back our ambitions for how much stuff is going to be going on and make her. And I believe that it's like either you do. you know, a massive workforce, you go the whole way and you actually make the, like what we were just talking about, this thing about decentralized fiduciary duty and all this stuff. And if you can't do that, I don't think you can go halfway. And that's what I would basically, yeah, I mean, but no, but the point is going the whole way, that's very, very complex. And it may not be possible. But, I mean, I think it is and I hope it is. I think it's worth it to like really. Okay. Hossin, what would you say was Rune's best counterargument toward your position?

I'm very better thinking on the spot. So maybe I think of something better later, but I mean, I really like the emphasis that that Roon's proposal puts on, you know, creating strong checks and balances for the workforce. Okay. Well, look, obviously this is a, this is an evolving conversation. It's one that's not ending anytime soon. So we look forward to having this conversation continue in the maker governance forums. So for those of you who are listening, if you haven't already, you should go Google the Maker Governance forums. It's where all the most important conversations on maker governance are happening today.

Thank you both of you for coming on and being good sports and engaging with each other's arguments. I learned a ton and I imagine our audience did too. Thanks, guys.