Exclusive Interview with MakerDAO: Solana is not our only choice.

Jackand others4Authors
23-09-15 11:10
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Interview: Jack, BlockBeats
Compiled by: Sharon, Luccy, BlockBeats
Editor: Jaleel, BlockBeats

Since "Escape from Ethereum", discussions about MakerDAO have been ongoing.

Maker is the oldest DAO, with an annual revenue of 142+ million US dollars and project expenses of 44+ million US dollars. At this scale, MakerDAO has been struggling with coordination issues for many years.

In order to solve the governance problem in the MakerDAO ecosystem, this veteran DeFi project announced that it will use the Endgame project. This move has caused dissatisfaction among a group of VCs, including a16z, who sold all their tokens.

On September 1st, MakerDAO founder Rune Christensen published an article titled "Exploring the Branch of Solana Codebase for NewChain," which caused a huge stir. Ethereum founder Vitalik sold 500 MKR worth approximately $581,000 the next day and exchanged it for 350 ETH, leading to a lot of talk about MakerDAO "leaving Ethereum" and "offending Vitalik."

Related reading: ""Offending" Vitalik? What is the future of MakerDAO?"

The encryption community has various speculations about the future direction of MakerDAO.

Today, during the TOKEN2049 conference in Singapore, BlockBeats exclusively interviewed Rune Christensen, the founder of MakerDAO. We can explore some of the stories behind MakerDAO's governance and public chain disputes from the interview.

Through Endgame, MakerDAO seems to have found the answer

On August 7th, Rune, co-founder of MakerDAO, introduced the upgrade of DAI and MKR to a unified brand on Twitter. The temporary codes are: NewStable (NST) and NewGovToken (NGT), as well as all key elements of the Maker Endgame.

Endgame is the actual implementation of Alignment Engineering for the Maker ecosystem, and will develop the ecosystem in four main areas in the short term. Each will be gradually implemented over approximately one year. Previously, Dai and Maker were separate brands, and so were their user bases. MakerDAO hopes to change this by creating a new unified brand, which will bring more consistency between users and governance.

The most important thing is that DAI and MKR will continue to exist! Upgrading is an option. The new unified brand will focus on making it as easy as possible for people to start using stablecoin products, DAOs, or both.

The temporary codes are: NewStable(NST) and NewGovToken(NGT). The revaluation of upgrading MKR to NGT is 1:12000. NST will be able to mine NGT tokens.

Other than that, subDAO is undoubtedly the biggest feature of Endgame. After all, one problem that any cryptocurrency project cannot avoid is community governance. MakerDAO clearly has a deep understanding and experience with this issue. Rune believes that in order to govern the community well, it is necessary to "simplify complexity" and divide the complex system into various subsystems, which is exactly what Endgame aims to achieve.

Related reading: "Merging Dai and Mkr users: MakerDAO's brand reshaping after Dai deposit rate rises to 8%".

Avoiding Two Extremes in MakerDAO Governance

BlockBeats: Many venture capitalists, including Vitalik, have different opinions on the vision of Endgame. However, your continuous purchase of MKR in the past few months is showing confidence to the outside world. What is your opinion on Endgame?

Rune: In our ecosystem, there were many large MKR holders who had institutional-level transactions with the Foundation many years ago. I believe their motivation was based on the fundamental way investors work, which is to get a good deal and then exit. But now we have a new group of institutional MKR holders who are trading in the market, and this is a completely different situation. They are true believers in the system.

Generally speaking, they purchase MKR because they have some understanding of the ultimate goal, which makes me very happy because I was initially disappointed with cryptocurrency investors. But I think these new institutional supporters are showing a different side, they are people who have faith in technology and the possibilities of the future. We need to pursue the "dessert" that can produce something meaningful and valuable for the real world, that is, the combination of decentralization and blockchain technology with the real world.

This kind of combination exists in reality, not beyond reality, so it must be shaped and adjusted to fit reality. More and more cryptocurrency holders, enthusiasts, and contributors are realizing this, and it is difficult to succeed if you go to any extreme.

BlockBeats: This is the problem facing Uniswap DAO, as they hold a large amount of Uni positions in a16z or other top venture capital companies, but when it comes to voting, is it the community or the top venture capital companies that are in control? MakerDAO has also experienced this issue. Do you think MakerDAO governance will inevitably fall into these two extremes, either venture capital companies controlling everything or the founding team controlling everything?

Rune: I think both of these scenarios are unlikely to succeed, as most cryptocurrencies have not yet achieved them. In terms of governance, this issue is particularly serious, as almost all governance we see is completely broken. Even projects like MakerDAO, which have relatively less broken governance compared to others, still require profound reforms in the way the entire system operates.

This is the core idea of Endgame, that to solve governance problems, the only way is to simplify. You need to make it simple enough to ensure that decisions are made in the way they should be. Endgame's method is to rebuild the basic process of governance, and then reshape the entire ecosystem on this basis, making them mutually adaptable, so that the governance process is powerful enough, the ecosystem is more extensive, and the decisions are simple enough.

These two can be combined in reality to form a paradigm, namely users, ecosystems, communities, and the actual decision-makers. Although the ideal situation is that they don't need to make decisions at all, if they really want to eliminate disputes, politics is not feasible in a large-scale DAO environment. The key to eliminating disputes in the Endgame is to record everything.

This is a pattern where we can try to make all decisions in advance as long as the system is simple enough because there are fewer variables. You need to make decisions in advance so that you don't encounter problems such as contributors not completing their work. You need to make decisions in advance based on assumptions, not on specific people or issues. Because if it involves specific people, the entire political world will instantly affect the decision, but if you establish rules in advance, you can apply them fairly.

There is another key point, which may be the key factor for the success of Endgame, that is, we simplify the ecosystem through subDAO. We split the current large and complex core system into independent subDAOs, in order to find answers for every possible hypothetical decision. By segmenting complexity, functionality, and specialization into these independent subDAOs, we make the core system simpler. The core system only needs to set boundaries around the subDAOs, without the need to deeply understand and micro-manage them, thus eliminating 90% or even 99% of the complexity.

subDAO More Easily Integrates Regional Culture

BlockBeats: Regarding subDAO, someone has mentioned the following viewpoint: these subDAOs may find it difficult to survive or prosper because they are responsible for both DAI and Maker's core, while also seeking their own market positioning and developing their own applications. Will this be very difficult for subDAOs?

Rune: subDAO is actually competing for something like air, because there is almost no value in the entire industry. Looking back at the last bull market, all the hopes and dreams were almost embarrassing, and few people really made substantial things. Cryptocurrency has great potential, but this potential depends on it being a redefinition of currency, but it has evolved into a problem of money, leading to scammers, and then the entire industry has fallen into a vortex of bubbles, cutting leeks, fraud, and Ponzi schemes, ultimately leading to self-destruction.

The key to subDAO is that they leverage Maker's superpowers, namely patience, practical technical and economic skills, and the ability to get things done. Most importantly, our corporate culture is not about making quick money, but about building a long-term great cause, which has greater potential and value than any dirty quick-cutting token.

So from the beginning, subDAO combined the flexibility of a startup, not limited by the large scale and complexity of Maker Core, so they have a lot of room for innovation. We have the best developers and team who are researching these issues and have also received tremendous financial support from the company.

Therefore, even when subDAO was still in the hypothetical stage, I could clearly see that subDAO is the future trend. I believe that any project that wants to succeed and have the opportunity to expand in this field will adopt some version of the subDAO model. If separation management is not carried out from the beginning, as a DAO, it can only expand to a certain extent or become a company, thereby giving up the entire decentralization and governance. Now we have further development, and we have shaped DAO based on market and community signals. We found that subDAO is very good at interacting with communities in various regions, such as Sakura DAO, a subDAO that interacts with the Japanese community. It has risen rapidly in the Japanese community, and people see it as a way to interact with Maker and use what Maker provides. We can also play a role in a more familiar environment.

For example, Spark is more focused on innovation and construction. The Korean community found that they can build and interact here; we found that people in Singapore and Southeast Asia are not interested in games and innovation, but want to make real assets, so we set up a subDAO that focuses on physical assets and private credit in Southeast Asia, seeking the best physical asset transactions. Without conducting on-site investigations, it is impossible to achieve this.

In fact, not everyone wants to complete all tasks, most people are only interested in a specific field. Previously, in Maker, one had to deal with a whole set of tasks in their desired field; with subDAO, people can focus on their interested field, those who like deep technology and innovation do not need to deal with physical assets, and vice versa. People interested in finance do not like ambiguity, and everyone is more satisfied, which will bring higher productivity, more innovation, further reducing struggles in governance, and focusing more on construction, leading things towards the market.

BlockBeats: Many people believe that creating subDAOs or metaDAOs may incur more costs as more people are needed to manage these subDAOs, and you have also introduced AI governance tools. Have you considered that this may also bring more costs in terms of human resources or create more tension in governance?

Rune: All of this is based on a principle called "alignment engineering," which requires every aspect of the system to contribute to simplification, conflict reduction, and information loss reduction. The reason subDAOs can make things much simpler is because they can fail. So if a subDAO wants to create some dramatic, foolish things or generate a lot of conflicts, they can indeed do so, and it is acceptable for the entire ecosystem because their failure will not affect the stability of DAI or other issues.

BlockBeats: But they did increase costs, right?

Rune: Yes, the key is that if you assume a single interconnected system and you find that a certain part of the system is malfunctioning or has structural risks that you cannot easily control, it is possible that the entire system will collapse. In the case of subDAO, we are able to limit this problem to a single subDAO. From this perspective, you cannot imagine how much cost this kind of failure would cause if it were placed in a whole system.

But if it is a subDAO, we can know how much subsidy we have provided and how much value we have invested. When making this decision, we have decided in advance the acceptable cost of failure, and we are actively conducting risk management, knowing that we are taking the risk of losing this money. It doesn't matter if we fail, after all, even failure can create value, because understanding how things can go wrong is very valuable data.

In a complex interlinked DAO, you cannot reasonably perform such calculations and say, "We are taking some risks that may cause the entire system to crash, but we will get some good data." You don't have that kind of confidence; you can only say, "We cannot let the core fail." Because the core is the stable pivot of the DAO, which is very different from subDAO. When you are building on a stable point and constructing a dynamic DAO based on it, you need to ensure that the guarantee of non-failure is completely different.

"Escape from Ethereum": Solana is just one of the choices

"Escape from Ethereum" has been the core of controversy surrounding MakerDAO recently. In the blog post, Rune specifically expressed MakerDAO's long-term plan to re-implement the project and proposed creating a new chain using Solana's codebase. Rune also listed three reasons why he believes Solana's codebase is the "most promising" for NewChain to explore, including the technical quality and optimization of Solana's codebase, the resilience of Solana's ecosystem after the "FTX explosion," and successful forking examples in the past, such as Solana's, just like the Pyth network.

Rune proposed a possible future where MakerDAO's NewChain will serve as a secure bridge between Ethereum and Solana, "providing beneficial impetus for the network effect of the entire multi-chain economy."

During this exclusive interview, Rune expressed that MakerDAO is planning to make more effective attempts to find the highest performing public chain to help the various systems in the MakerDAO ecosystem better interact with each other. Solana may not necessarily be MakerDAO's optimal and final choice.

What underlying technology does MakerDAO need?

BlockBeats: Regarding NewChain, why did you choose Solana instead of Ethereum? You mentioned that Maker has a special front-end code stack that is more suitable for Solana. Why not use other tools such as Aptos or Sway? What specific back-end does Maker need? Why is forking necessary?

Rune: First and foremost, it is important to note that Maker is highly focused on Ethereum. Within the ecosystem, we have five development companies that are focused on Ethereum. Maker will continue to fund, trade, and incubate developers who are focused on Ethereum and EVM. The number of developers focused on Ethereum and EVM will only increase because Ethereum, EVM, and Layer2 will be the place where all users choose to be.

So this is where we build user-oriented products. However, to truly make subsystems work, take them to new heights, and showcase the true potential of blockchain, the key is that they have very advanced token economies, which are inspired by many aspects during the DeFi boom, and not only will they not collapse, but they can also be sustainable.

There is a token economy similar to Curve and Vaults between sub-agents, which can compete and cooperate with each other. The problem is that this involves exchanging and distributing a large number of tokens. If the operation is not carried out on an efficient backend, it will pose a certain attack on the system and have a negative impact on the content we build and provide to users on Ethereum. Therefore, we want to find a high-performance stack to build this backend.

We want to conduct some experiments with Solana because it has already proven its high performance in real life. However, obviously, we need the best technology, but we need to take the time to choose. We cannot simply choose Ethereum or Solana just because we have been very consistent with Ethereum in the past or because Solana is the latest trend. We need to truly try, research, and learn, which takes many years.

For Ethereum and EVM, we will conduct experiments and research to understand the actual situation, and perhaps the results will show that EVM is the most efficient way to build something. Currently, my impression is that EVM is like Javascript, it is a standardized thing that everyone knows how to use. So if you understand how the internet works, those are the things you use to handle all the front-end stuff.

But you can't use JavaScript to build high-performance backends, otherwise the frontend will become worse. So you won't see extreme JavaScript extremists saying, "You must build backends with JavaScript." In fact, EVM and Ethereum and its ecosystem and Layer2 will be better, and if EVM-based products have these specialized high-performance backends, it will benefit users and also develop the ecosystem.

We will show everyone: look, there is real value here. We only need to build, not fight. I hope the launch of the sub-tokens can truly open this situation. We will return to the DeFi summer, but this time it will not end, but will continue to develop with sub-tokens, and it will not be a bunch of Ponzi schemes, hype, and sell-offs. It will be a token with real value, with real use cases, real specialized business models, and they will have this community adaptability from the beginning.

BlockBeats: Is this also true for the ideas you are building in T-Bills and the entire RWA?

Rune: Those will all be run by subDAO.

BlockBeats: So Solana is not the final choice, it may be replaced by another chain?

Rune: Of course, this is just an experiment so that we can learn. We also need to examine other aspects, see how the performance is, and the developer ecosystem around it, in order to truly improve the efficiency of the ecosystem in three years, benefiting the entire industry and promoting the development of the entire ecosystem. Including Ethereum, which is obviously an area of ​​focus for us, where our users are located, and the direction our developers are concerned about.

Rune's new company: seeking interface and balance point with the real world

BlockBeats: You mentioned that the MakerDAO front-end may not include US users, is this disadvantageous for Maker's widespread popularity?

Rune: If you want to achieve mass adoption, you need to interact with real people in the real world. The existence of cryptocurrency does not mean that you can operate outside of the law and regulations. This has been one of our key principles over the past eight years: we need to work with regulatory bodies to ensure that we do not do things that may ultimately lead to more problems and uncertainty for users. This is our entire philosophy, and we are trying to find a balance between DeFi and the real world, and apply it in a truly effective way.

BlockBeats: Many people choose to cooperate with large institutions, why did you choose to establish another company?

Rune: Yes, we have created our own company, and currently have two expanding "arrangers". The reason we collaborate with more native cryptocurrency companies is because we value their cryptocurrency nature. It is not difficult to find lawyers who are competent in their work, but it is very, very difficult to find someone who understands both the cryptocurrency field and the legal and business aspects.

We can basically be regarded as pioneers, showing the world how to complete this work in the right way. Because most projects related to on-chain assets and RWA do not understand what projects like Maker are really looking for, what risks and legal certainty are involved. Most products and projects that tokenize assets and RWA are driven by engineers, with one person coming up with a good idea and then thinking about how to implement it, but without paying attention to what users actually need.

And the real cool thing about the subDAO model is that it makes subDAO more flexible in figuring this out, rather than figuring out everything from top to bottom like MakerDAO does. It simply sets the rough boundaries of what we care about. Then, subDAO solves complex legal and regulatory issues by having token holders from a professional community who are particularly interested in governing these issues.

Many practitioners in the encryption industry do not want to deal with these things because they are very complex. In fact, they want to deal with things like the metaverse. Therefore, the subDAO model is very suitable for gathering the right people together, making the whole system very flexible. Our advantage is to use tools, skills, and mindset to maintain our absolute leading position in real assets.

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