[Part 3] Talk About MakerDAO’s Controversial Governance Vote

Please read Part 1 and Part 2 before reading this analysis. In this section, we will present the views of the two MakerDAO founders and how MakerDAO approached CeFi.

What Is The Cause Of The Current Situation?

From the above circumstances, everyone can clearly understand that the causes leading to this massive incident stem from the following factors:

• The contrast in thinking of the two MakerDAO founders
• Luca with a community-oriented mindset
• Rushing to implement Rune .’s Real World Assets project

The Contrast In Thinking Of The Two MakerDAO Founders

Nikolai needed a truly decentralized DeFi, while Rune took advantage of the strength of having a large number of votes to achieve what he and the large MKR holders wanted. 

Luca With A Community-Oriented Mindset

Luca Prosperi with a desire for a highly objective testing and evaluation department to minimize possible risks to the MakerDAO protocol and community. 

Lending Oversight (LOVE) is a project that can help Luca realize his wish by effectively supporting Real World Assets ⇒ community must be the centre for MakerDAO to develop sustainably. 

Of the 4 Luca initiatives in LOVE, all of the watchdogs are credited with supporting community decision-making who voted ⇒ the proposal was in their favour ⇒ they helped the protocol grow. 

In A Hurry To Implement The Real World Assets Project 

The Maker core team was too hasty in implementing the Real World Assets project without properly assessing the associated risks that could put Maker at risk. 

From Rune’s point of view, the task of a CEO is to successfully implement an important project of the company. Specifically, conducting RWA with great benefits for MakerDAO. Then the RWA project will create value for the community and MKR holders to develop Maker. 

However, since we really don’t know what Rune’s intentions are, it’s important to ask some questions about what drives Rune to do these things. 

Such as:

• Is it necessary to quickly implement the above project while accepting risks and sacrificing your trust in the community? 
• How important is the RWA project to Rune that you can abuse your authority and help so many proposals related to this issue pass? 

What Is Real-World Assets (RWA) That Makes MakerDAO CEO Impatient To Deploy? 

MakerDAO’s eagerness to launch the RWA campaign is understandable when the position of one of the largest stablecoin issuers in the market and the RWA market is still very potent. 

When implementing proposals on RWA, that is, lending to companies in CeFi, MakerDAO will be one of the pioneers in capturing market share in this lucrative “RWA pie”.

Read more about RWA: MakerDAO Report on RWA

The sooner MakerDAO works through these proposals:

• The earlier their access to traditional asset classes ⇒ diversified risk. 
• Bring in revenue and profit for the protocol.
• The market share in the RWA segment will be larger. 

In addition, RWA is an important part of CEO Maker’s End Game plan (the team will publish an article on this topic soon). 

The Author’s Perspective On The Management Drama MakerDAO

MakerDAO CEO Didn’t Put The Safety Of The Community First

Although it is difficult for us to make an exact judgment about Rune’s thinking and behaviour, however, in the spirit of being a builder with the desire to contribute value to the construction of the project. No matter how much you want the project to grow, if you don’t serve your user file properly, it will not bring good results. 

Because the community or users of the product we create, as Luca mentioned, they are kings. In Vietnam, we often have a saying: “Customer is king”.

This was not applied by Rune when he went completely against the interests of the community. Rune has defied and abused its authority to approve profit opportunities that pose a great risk to the MakerDAO community. Especially when these risks are predictable through Lending Oversight led by Luca. 

⇒ This is considered a betrayal of the common interests of the MakerDAO ecosystem and shows disrespect of the community by the MakerDAO CEO.

Is The Credit Worth The MakerDAO Trade-Off?

Creating an RWA proposal will allow MakerDAO to connect CeFi and DeFi and they will now act as a bank. Possessing a huge budget, MakerDAO lends DAI to CeFi organizations. In return, the parties will mortgage certain types of assets. The nature of this is to serve the borrowing needs of some institutions and bring profits to MakerDAO. 

If you watch the recent market like stETH losing peg, Celsius stopping deposits, 3AC is at risk of default. We will see a similarity with this event, which is credit. This has been the source of many recent crashes as asset prices plummeted (resulting in mortgages being liquidated). 

Note: If only MakerDAO allows mortgage of assets with high liquidity and stability, risk, and reputation such as US government bonds, and T-Bills, .. then it is safe for Maker. However, the proposals from CeFi partners (the party that wants to borrow) did not meet the risk requirements but “still passed”. 

If the bluff in approving loans from CeFi partners continues to take place just for the immediate benefit without paying attention to the consequences.

⇒ Future risks are huge for MakerDAO as the Lending Oversight (LOVE) watchdog is not established because the majority “voted against”. 

⇒ The bubble named MakerDAO will be able to burst in the near future. 

⇒ MakerDAO faces the risk of collapse if users want to redeem in bulk like Celsius’s case, …

SomeN about MakerDAO’s RWA Implementation

MakerDAO lends $100 million to a 151-year-old bank

On July 7, 2022, MakerDAO approved a loan of USD 100 million in DAI. Specifically, the proposal for deploying DAI vault is for a US bank called Huntingdon Valley with an initial loan ceiling of 100 million USD and may increase the loan ceiling to 1 billion USD in the next 1 year. 

The bank will use the assets and deposit off-chain into Maker as collateral. 

According to the bank, the proposal will make MakerDAO’s name better and improve the project’s balance sheet. 

The lending partnership with Huntindong Valley is one of the first steps for MakerDAO to approach its Real World Assets (RWA) ambition, meaning risk diversification and a solution to help MakerDAO generate more revenue from assets in the market. traditional school. 

Verdict

Thus, I have provided an overview of MakeDAO’s management drama that has caused a stir recently. Thereby, we can see that there are still individuals who uphold the noble qualities of transparency, community dedication and decentralized spirit of core blockchain technology. 

As for the project, this Drama took away many things from MakerDAO such as: 

• Trust of the community, users, investors
• The sustainability of values ​​comes from the community
• MakerDAO’s reputation (an intangible asset) is ruined.  

They show a bad image of a decentralized autonomous organization (DAO) but highly centralized with the aim of benefiting a small group of powers. This has tarnished the transparency of blockchain technology and affected the industry as a whole. 

If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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