The article analyzes the governance vote in June 2022 by MakerDAO, which has become a hot topic and it has raised scepticism about the decentralization of the DAO.
Where did this fact come from, and where are the factors that lead to scepticism about decentralization? All will be summarized below by Coincu.
MakerDAO is a smart contract platform built on Ethereum. Maker is the issuer of DAI, a stablecoin with price stability against the US dollar and a Collateralized Debt Positions (CDP) mechanism.
The two main and essential components of the project that DAI stablecoin and MRK (MakerDAO’s governance token).
MakerDAO was founded by Rune Christensen, he currently serves as the project’s chief operating officer (CEO). In addition, Maker also has a founder, Nikolai, who is no longer active on the team and has moved on to another project.
To understand this issue deeply, we need to go back in time to connect the details that lead to the present context.
Luca Prosperi – one of the key people in the Project Real-World Sandbox (PRWS) proposal. First of all, we need to understand Real World Sandbox – the project that allows industry experts in TradFi, with a deep interest in DeFi, to participate in MakerDAO, which was conceived in December 2021.
Accompanying the development of Real World Sandbox is Lending Oversight (LOVE). This is an agency with the function of process audit, supplementary assessment, high-level guidance, and monitoring of MakerDAO’s activities for partners in the traditional market.
This idea was secretly developed and tested before the official proposal to add this agency.
Monetalis – a lending company asked MakerDAO to help them with funding. Specifically, providing escrow support of about 100 million euros a month to lenders serving the small and medium enterprises (SMEs) segment in the UK.
Process: Maker → Monetalis → lenders → end borrowers.
The first support request is a back for a 400 million DAI loan with a 2% fixed fee and other fluctuating fees.
⇒ Luca, as the head of LOVE’s supervisory board, assessed the funds sent to Monetalis as unsecured to minimize risks for MakerDAO’s review.
He also suggested points that Monetalis can do to help reduce risks and ease the two sides to come to a mutual agreement.
A. When the DAO doesn’t carry its inherent meaning, MakerDAO Governance where the relationship “takes the throne”
However, although Monetalis does not meet the hedging requirements, the holders of Monetalis shares are related to MakerDAO, including the following names:
Based on calculations of on-chain data by Luca Prosperi, all of the above names hold about 140,000 MKR, enough to dominate all proposals with overwhelming votes. After that, the proposal to support Monetalis was also approved.
B. One heart for the community = Long-term success of the protocol
Luca himself shared his disapproval of the voter’s decision with the reason: “The MakerDAO community is those who wear crowns (i.e. kings), what harm or disadvantage. to the MakerDAO community will jeopardize the long-term growth of MakerDAO.”
He wrote: “Investors who do not follow the censorship process will be recorded as voluntarily engaging in behavior that “deliberately” harms the public interest.
The event was supported by a number of parties in the community such as a16z and Monet Supply (one of MakerDAO’s proxies). The MakerDAO CEO has confirmed that his investment in Monetalis has disrupted and affected the company’s process in its quest for RWA and its plans to sell these shares.
Luca argues that these investors are not listening to the community. It is shown by the fact that they give mixed opinions to Real World Finance and Lending Oversight (2 independent agencies created with the aim of increasing the connection between DeFi and CeFi and monitoring the process of relationships. above).
Specifically:
More than 50% of Luca’s work time is spent incubating Lending Oversight in providing a review of Monetalis’ proposals and defending his professional views against multiple voting rights holders.
In addition, Luca also reviewed two proposals made by Oasis Pro Market, whose core member is Pat LaVecchia – the owner of a large amount of MKR in Maker. These two proposals are related to the issue of assets in the CeFi market such as bonds, namely:
These proposals were voted on with a majority of disapproval but still passed.
C. Luca Prosperi .’s point of view
Luca is interested in blockchain, a decentralized environment and where he thought decisions would not be governed by groups that owned absolute power.
However, MakerDAO let him down because large MKR holders can give priority to proposals at will, to serve their purposes and not for the benefit of the MakerDAO community.
On 11/5/2022, the proposal to add Lending Oversight started with many initiatives put forward by Luca.
On June 13, 2022, after many months of incubation, Lending Oversight was officially voted on-chain and opened for comment.
Through previous testing activities, LOVE’s intention is to provide more information to MKR holders so that they can decide to support the project’s proposals in the most objective way.
However, along with the supporters, there are also many enemies.
Part 2 will present the Governance Event of MakerDAO.
If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.
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