Maker DAO's $1bn Bet on Ethena, Aave Strikes Back
Summary
TLDRThe discussion revolves around the recent developments in the crypto space, particularly focusing on Athena and its impact on the DeFi markets. Athena, a structured product that creates a delta neutral position by shorting Ethereum on centralized exchanges, has seen significant growth and is raising concerns due to its rapid expansion and potential systemic risks. The guests, Paper Imperium and Mark Zeller, share their insights on the governance and risk management within MakerDAO, emphasizing the need for a more cautious approach to scaling and the importance of thorough risk assessments and decentralized decision-making in the DeFi ecosystem.
Takeaways
- 📈 Athena, a structured product in the crypto market, has grown rapidly and is approaching billions of dollars in size, causing ripple effects across the wider DeFi markets.
- 🔍 Athena's growth has raised concerns about its potential systemic risks, especially since it hasn't been through a full market cycle yet.
- 💡 Maker, a major player in the DeFi space, has been involved in the rapid onboarding and scaling of Athena, which has led to debates about its governance and risk management.
- 🤔 There are concerns that Maker's governance process has become less decentralized and more concentrated, with a few key players having a significant influence on decisions.
- 🚧 The speed of Athena's growth and the lack of thorough risk assessments have been flagged as red flags by some members of the DeFi community.
- 💰 The pursuit of high yields by Maker through Athena has been seen as a shift from its traditional conservative approach, raising questions about its long-term strategy.
- 📉 The stability of Maker's DAI stablecoin and its supply have been affected by the changes in Maker's governance and asset allocation strategies.
- 🔄 The discussion around Athena and Maker's governance highlights the importance of balancing innovation with risk management in the DeFi space.
- 🗣️ Community participation in governance forums is crucial for addressing concerns and shaping the future of DeFi protocols like Maker and Athena.
- 🌐 The wider implications of Athena's growth and Maker's governance decisions underscore the interconnected nature of the DeFi ecosystem and the need for coordinated risk management.
Q & A
What is Athena and how does it relate to the recent controversies in the crypto market?
-Athena is a structured product that takes in Ethereum and other assets, creating a one-to-one short on centralized exchanges to maintain a delta neutral position. It has been causing controversies due to its rapid growth and the systemic risks it may pose to the wider DeFi markets.
How does Athena's structured product work in terms of profit and loss?
-Athena's structured product works by creating a delta neutral position, meaning that as the price of Ethereum goes up or down, the derivative trades on the back end keep the profit and loss flat. It is used to farm the funding rate, which is then passed back in the form of yield to USDE.
What is the significance of the 100 million DAI credit line that was implemented in the Maker protocol?
-The 100 million DAI credit line was implemented to allow people to borrow DAI against USDE and staked USDE. It represents a significant move in Maker's governance and has been a point of discussion due to its rapid implementation and potential impact on the DeFi ecosystem.
What was the proposal made by Mark Zeller regarding the LTV of DAI?
-Mark Zeller proposed to cut down the LTV (Loan to Value) of DAI to zero. This proposal is part of the ongoing discussions and governance actions within the Maker protocol to manage the risks associated with the rapid growth of Athena.
What are the concerns raised by the guests about the due diligence process for Athena?
-The guests raised concerns that the due diligence process for Athena has been rushed and incomplete. They pointed out that there has not been a technical or legal risk assessment published, and that important questions about the rights of token holders and the potential risks to the system have not been adequately addressed.
How does the speed of the growth of the Athena credit line impact the safety module of Maker?
-The rapid growth of the Athena credit line could potentially overwhelm the safety module of Maker, which currently has around $120 to $130 million in equity buffer capital. If the credit line grows too quickly, it could expose the system to risks that it is not prepared to handle.
What is the proposal to increase the maximum debt ceiling to?
-There was a proposal to increase the maximum debt ceiling to 1 billion DAI, with an intention to ramp up to 600 million and then assess the situation from there.
What is the concern about the over-collateralized lending against DAI?
-The concern is that the over-collateralized lending against DAI is complex and carries smart contract risks. If the value of USD or SSDE goes down faster than the possibility of liquidation, it could result in a debt that the system may not be prepared to handle.
What is the role of the direct deposit module in the Maker protocol?
-The direct deposit module is a second-degree effect collateral where DAI is printed out of thin air and deposited into the vote. It is important to note that DAI cannot be accessed without depositing collateral, which in this case would be SSDE or USDE.
What is the significance of the Maker protocol's decision to hardcode the oracle to $1?
-Hardcoding the oracle to $1 is a risk management decision made by Maker to ensure that the DAI stablecoin does not fall below this value. However, it also means that the protocol needs to underwrite against the issuer, which requires a deeper understanding of legal and financial facts about the issuer.
What are the implications of Maker's shift towards a more aggressive protocol in terms of yield chasing?
-Maker's shift towards chasing yield changes its risk profile, potentially leading to more systemic risks and affecting downstream service providers. It also raises questions about the protocol's governance and decision-making processes.
Outlines
📰 Introduction to the Athena Controversy in Crypto
The discussion begins with an introduction to the ongoing controversy surrounding Athena, a structured product in the crypto space. Athena has been creating a significant impact on the decentralized finance (DeFi) markets, particularly due to its unique mechanism of creating a delta neutral position by taking in Ethereum and other L1s, then creating a one-to-one short on centralized exchanges. The segment also highlights the concerns around the rapid growth of Athena, which has surpassed a billion dollars and is approaching four to five billion dollars in a mature state. The guests, Paper Imperium and Mark Zeller, are introduced as key figures in the conversation, with Paper being a long-time supporter and closely associated with MakerDAO, and Mark providing insights from his perspective.
💡 Breakdown of Dy and Athena Integration
This segment delves into the specifics of the integration between Dy and Athena. It explains the proposal to put forward 100 million D across a portfolio of morpo vaults, allowing people to borrow die against usde and staked usde. The leverage ratios and current allocations are discussed, along with the quick implementation of this proposal. The conversation then shifts to concerns about the rushed nature of the process and the need for a thorough risk assessment, both technical and legal, before proceeding with such significant financial operations.
🤔 Concerns and Risks with Athena's Growth
The discussion continues with concerns about the rapid growth and potential risks associated with Athena. The speakers express worries about the lack of a safety module, the inexperience of the protocol in handling large-scale operations, and the potential for significant losses if the value of USD or S usde declines rapidly. The conversation also touches on the importance of understanding the rights of token holders in the event of any issues with Athena and the need for more transparency and governance in decision-making processes.
🚨 MakerDAO's Governance Speed and Decision-Making
This part of the conversation focuses on the speed at which MakerDAO has been making governance decisions, particularly in relation to the Athena proposal and the rapid increase in the stability interest rates on MakerDAO vaults. The speakers discuss the implications of these swift changes, the need for a thorough risk assessment, and the potential impact on the DeFi ecosystem. Concerns are raised about the lack of a technical assessment for Athena and the rush to implement changes without proper evaluation.
🌐 Centralization Concerns in MakerDAO's Governance
The conversation addresses concerns about centralization within MakerDAO's governance. The speakers discuss the influence of a single entity representing a large portion of the vote and the potential risks this poses to the decentralized nature of the protocol. The importance of a diverse and independent governance structure is emphasized, as well as the need for a more measured and inclusive approach to decision-making to ensure the long-term health and sustainability of the ecosystem.
📈 Reflections on MakerDAO's Risk Profile and Strategy
The speakers reflect on the changing risk profile of MakerDAO, moving from a conservative stance to a more aggressive pursuit of yield. They discuss the implications of this shift for the stability and predictability of the protocol, as well as the potential systemic risks associated with scaling up lending to billions of dollars. The conversation also touches on the importance of risk management and the need for MakerDAO to consider the long-term implications of its decisions, rather than focusing solely on short-term gains.
💥 Potential Systemic Risks with Athena
The discussion concludes with a focus on the potential systemic risks that could arise from the rapid growth of Athena. The speakers express concerns about the lack of market liquidity to handle large-scale events and the potential for systemic issues if Athena were to face challenges. They emphasize the importance of a measured and cautious approach to growth, particularly in terms of the credit line and the need for MakerDAO to work in alignment with other protocols in the ecosystem to ensure overall stability and safety.
🗣️ Call to Action for MakerDAO Governance
The final segment is a call to action for those involved in MakerDAO governance. It encourages participants to engage in the governance process, share their opinions, and contribute to the discussion on the MakerDAO forum. The importance of a decentralized and autonomous organization is highlighted, and the audience is urged to get active and participate in shaping the future of the protocol.
Mindmap
Keywords
💡Athena
💡DeFi (Decentralized Finance)
💡Yield Farming
💡MakerDAO
💡Risk Management
💡Liquidation
💡Collateral
💡Governance
💡Stablecoin
💡Leverage
Highlights
Discussion on the controversial growth of Athena in the crypto market, a structured product that creates a delta neutral position by taking in Ethereum and other assets.
Athena's rapid growth, surpassing a billion dollars and approaching four to five billion, and its impact on the wider DeFi markets.
The proposal to increase the maximum debt ceiling of Athena to 1 billion dollars, with intentions to ramp up to 600 million.
Concerns about the speed of growth of the credit line and the potential systemic risks involved with Athena's integration.
The importance of risk assessment and due diligence in the governance process of decentralized finance platforms.
Maker's shift from a conservative approach to a more aggressive yield-chasing strategy, changing its risk profile.
The potential impact of Maker's decisions on downstream service providers and the DeFi ecosystem as a whole.
Concerns about the centralization of decision-making in Maker's governance, with a few key players holding significant influence.
The debate over the true meaning of decentralization in the context of Maker's governance and the need for a more distributed decision-making process.
The importance of having multiple risk assessments, including technical, legal, and financial, before onboarding new assets or products.
The potential risks of hardcoding oracle prices to $1 and the need for proper underwriting against the issuer.
The impact of Maker's actions on the broader stablecoin market and the need for responsible growth strategies.
The call for a slowdown in the growth of Athena's credit line to allow for proper risk management and assessment.
The comparison of Maker's current strategy to that of a hedge fund and the potential implications for the DeFi space.
The importance of community engagement and open discussion in the governance process to ensure the health and sustainability of DeFi protocols.
Transcripts
[Music]
hello and welcome to Leviathan news it's
April 2nd hope you guys all had a good
Easter we've been off for a couple of
days but we're back and we're ready to
talk about the most controversial thing
happening in crypto actually it's been
going on for a couple of weeks now but
that's Athena and the like yield black
hole that it's been causing and the
Rippling effects that it's having Across
The Wider defi markets uh for those of
you that don't know Athena is
essentially a structured product that
takes in ethereum and other lsts and
then creates a one toone short on
centralized exchanges thereby creating a
delta neutral position which means that
as the price of eth goes up or down uh
the uh derivative trades on the back end
essentially keep the p&l flat and it is
used to farm the funding rate which is
then passed back in the form of yield to
usde and then also their um Vault called
SSD uh which then has been providing
significant yields across the board at
very large sizes uh Athena has eclipsed
a billion dollars and is well on its way
towards pushing towards four to five
billion dollars in a more mature State
and that's all well and fine but the
Ripple effects that it's been having
across the entire industry have been a
bit broader and that's why we're here
today with our two guests we have paper
Imperium uh longtime at makerd Dow uh
supporter and uh working really closely
with him and then we also have Mark
Zeller as well too from a um so uh
before we get into the a announcement
that came today talking about these
Rippling effects that uh Athena's having
uh paper maybe you can help us break
down what
exactly this this whole integration of
Dy and Athena
is sure um so there's kind of two prongs
to it uh I'll start with the the one
that uh people are most familiar with
which is that uh I guess about two weeks
ago maybe less there was a proposal to
uh put forward 100 million D across a a
portfolio of of morpo vaults to allow
people to borrow die uh against uh usde
and staked
usde uh the the ltvs ran a large range
um at the higher end it was about 20 to1
leverage if you Max it out um but those
have very small allocations currently I
think 5 million uh for each the usde and
state
USD um this was uh already pretty a
pretty quick run from proposal to um
implementation um we can talk more about
that later because I think the
governance is a separate issue youall
are probably more interested in talking
about Athena um so that has been live
for I guess this is the fifth day uh
that that that maker credit line of 100
million die has been operating and
yesterday there was a proposal to
increase the maximum debt ceiling to 1
billion with an intention just to kind
of ramp up to 600 million and then see
from there um I uh I work at gfx labs
and we had some questions on the Forum
we think it's a little rushed but that's
that's kind of where we're at and then
we wake up today and uh you know
chainsaw has got to cut things down
so woke woke up to the news of of uh uh
Mr Zeller over here putting forth a
proposal to to cut down the LTV at die I
think to zero but I haven't checked the
Forum thread in the last few months so
just to be clear on the the die
implementation uh this was for over
collateralized lending against so this
is where it gets complex so yes this is
but there's also working its way through
governance right now a
proposal it's second degree effect
collateral so basically it's called a
direct deposit module because you print
the die out of Tiner and you deposit
that into the vote but what is true and
it's completely true and I want that to
be clear for the audience is that you
cannot access that dat without
depositing collateral which is in this
case the E table code but that's second
degree effect Coral the first degree
effect Coral is intin air in this
case well it would technically be
whatever the deposit token is from the
morova but yeah it's yeah I mean it's
the same as um you know the d3m when it
used to run into a and compound it's
basically accepting the receipt token of
the protocol it deposits into as being
good for
$1 um
I mean so I mean it you know people talk
about how tokens and treasuries that
aren't circulated shouldn't count I mean
it's uncirculated until it's borrowed
it's just the fact that it has kind of a
holding pen before it gets borrowed so I
wouldn't really focus too much on the
thin air with the caveat that there's
always smart contract risk because the
die is in there so that you know they're
there should be a smart contract risk
assessment for Moro my understanding is
it's quite simple but
that probably need needs to be done and
published so the the D is essentially
being it doesn't so the die is being
created and then it goes into these
vaults and it doesn't inter circulation
until somebody posts the collateral
token in this case it would be ssde or
or usde to borrow against it that's
right um I mean in some ways that's not
materially different from from some
other arrangements maker has I mean
there's often a little lag between the
the minting of the Dy and the securing
of the collateral you know like U like
this the same thing with t- bills
because there's tradire settlement like
you have to uh you know move it off to
to to bank deposits but then it's back
once it's there
so I I guess you could make an argument
that it would be unbacked if it was
stolen from the Morpho Vault before it
was loaned out but once it's loaned out
it's no longer back
that is true but the thing is that if
the the value of USD or S usde goes down
faster than the possibility of
liquidation you will end up with that
Dept and it's a fact that Mor blue has
no safety module no experience in
liquidation like the the world protocol
is less than six months old and no
experience of that scale basically the
whole TBL of that protocol was
less than 200 million before you started
doing this on theod so it's
basically testing prod and we seen what
tested prod done last cycle so so I've
got good news and bad news the good news
is the liquidations probably don't
matter
um oh yeah because it's harded at $1 so
there's no yeah so it's hard Cod
yeah orles um what the um so the
only way you would get liquidated as if
your interest rate accured to the point
that you crossed the liquidation
threshold so unless you started right at
the line I would not anticipate that
really happening some cre line 20x
leverage like 94% LTV uh I think they
are smaller but it's still to the tune
of 10 million and more uh for last time
I check and the thing is that you know
it works it's it's all this is a carry
trade on the fing rate so if you have
the market that is flat or going to shet
for a few weeks you will have a rate
that goes down and the thing is that
what everything everyone is watching is
that does the natural e yield still
higher than the DSR yield that's the
important point because if the natural e
yield goes below the natural DSR yield
you basically because you have a
negative premium on 20x Leverage and the
thing is that if you want to deliv a 100
million die position with the PSM that's
easy peasy you can do that overnight and
nobody cares about that but if you want
to Del leverage a 600 million die
position that's where uh things start to
get ugly and if it's one billion it's
even worse and yeah everybody knows that
yeah so I I will agree I made similar
points on the Forum that diligence has
is incomplete for something of this size
um there there's not been a technical or
legal risk assessment published I don't
know if one's been done and hasn't been
published um a lot of this process has
been I will admit rushed and um has you
know it's hard yeah I'm kind of in the
uncomfortable position of having to
defend it here um but yeah I I want to
point out like we probably on the same
boat here with paper Imperium uh not
exactly uh because obviously we
different perspective of things but I
don't want to put you on the bad spot
you know how much I respect you man yeah
I mean I think I think my position is
that Athena I'm still I think the
diligence is incomplete there's some
outstanding questions I think it's
probably what I would consider like a
legitimate Pro uh product with a
legitimate use but that it it you know
much like you wouldn't tell someone to
use like a triple inverse ETF and just
buy and hold it um you know I think
people should like probably be very
aware of of all it it's a very complex
thing right like let's just start at the
bottom right like what what kind of
types of staked eth does it take right
um like the some of these are exotic to
maker like math and and wrapped uh Beth
like these are not things that we're
familiar with have ever looked at but
like these make up a non-negligible
amount of like Athena's you know assets
so you know you know there are lots of
ways that you could imagine that Athena
through no fault of their own could
become impaired um and because of that
it's important to figure out what your
rights would be as a token holder which
you know these are questions that I
think have only begun to be asked and
need to be worked through before yeah
going to like 600 million or a billion
um there's also right now at maker a
proposal it's a few weeks behind uh this
one that would be to directly purchase
usde I don't know at what scale that's
imagined um obviously I'm not really
thrilled about that one partly because
of some fee structuring but um I think I
think everyone just needs to pause
because I think it's hard you know this
need we need to like everyone just needs
a stop look and listen period here I
think it'd be really helpful if maker
would do that here because it would let
everybody do it instead of having to
react to maker um part of the problem
with Athena is that so many people
Athena's so big right and it was so well
organized and how they fundraised like
the trouble is everyone and the brother
has either given Athena money or taken
money from Athena so it's very difficult
to get to know like who we should turn
to for opinions I mean let's let's just
look at your own risk assessors right
you have chaos Labs that's supposed to
in reaction to your proposal do a a risk
assessment chaos Labs was partnered with
them like last like fall to help design
the mechanism like what are they going
to say right I mean like you know you
know you mean will not be critic of it I
don't know but like
they they quite to be to to be
independent on this and even though I
think like this proposal is a perfect
opportunity in on because we have an
empty lock right now for a cir service
provider and three company fighting for
it so my expectation is that they will
use this proposal as a Showcase in their
Cur proposal to to get on board it as a
reservice provider so we will probably
this week end up with four very detailed
uh risk assessments analysis in the
Forum and that's the great thing about a
is that we are still a Dow so
people discuss I do a proposal and
there's literally very few chance that
the proposal will pass as it is because
people discuss F consensus and then we
go to a vote very often we have
conservative and aggressive option and
then it's a snapshot vote and directly
AIP on chain I'm very sad that we reach
a point from an exp perspective at meod
where there's no execution anymore you
have one guy that post something and
then you have a VC pet or whatever
governance pet that say yes to
everything and I think there's added
value in actual governance and decision
I have no interest to be a dictator in
AR I'm very welcoming to uh other kind
of uh uh and opposition and other kinds
of uh governance decision and I think
the it's good to have debate I hope we
will reach that point back into the
meadow governance because uh that's how
it should work it's decentralized
autonomous
organization can we talk about this for
a minute uh paper just the speed at
which maker has been making decisions
lately so the last time we had you on
the show I believe it was 3 to four
weeks ago we were speaking about the uh
rapid change in the uh stability
U stability interest rates on the the
makerd vaults in addition to the uh
increased DSR that was pushed up to 15
at the time it's currently sitting at
133% uh and and that was pushed through
within a couple of days and now we have
this Athena proposal also coming through
which is rapidly pushing the uh the
amount that can go into into Moro from
100 million all the way up to a billion
uh probably going to settle around 600
million at this point and from what I
can tell this is the the fastest that
any product has been on boarded if you
look at other assets like steth uh it
took six months for them to scale up to
a billion dollars so what does it say
about maker in just the the speed at
which they're uh changing uh their their
governance and also the the speed at
which they're onboarding a a brand new
product which is four months old uh into
a a new lending facility which is three
months old uh and uh just what that says
for for governance overall at maker so I
I I want to start by really
distinguishing between like the the like
emergency rate changes a few weeks ago
and then this because that was in
reaction to um like the the peg
stability module was like literally
within 26 minutes of running out um at
at one point um so that that was like an
emergent not it was an urgent situation
that needed to be dealt with and so I
think you can forgive people for
overshooting on rates and St so the
details for that we talked about that
already for this so I think yeah some
some things have broken down I think
part of it is that maker has been in the
business of offboarding collaterals ever
since endgame to push them out to spark
so so this is actually the first time
there's really been one that's own
boarded under the new governance regime
that was installed last you know March
2023 uh with with runes ingame so um it
could be simply that people that used to
do this aren't around but there used to
always be a technical assessment like
the the engineers would do a smart
contract assessment of all the relevant
you know token and and other smart
contracts um so I would would have
expected one for Moro and one for uh you
know Athena and Athena's staking
contract and you know all of those um
usually those don't find serious issues
if they do you hit the pause
button um there's been an analysis
posted by block analytica on like the
kind of like the financial aspects of
Athena but there's not been a legal
analysis yet and with a real world
Assets in the past that we would have
someone come in usually and and offer a
legal assessment because that's you know
these are kind of all different risk
areas and no one's mandate covers all of
them and nobody can be good at
everything so I would have normally
expected anything to do with Athena to
be accompanied by like three risk
assessments a technical one a legal one
and then like the financial one because
it touches defi so um we've only got one
of those is is the problem um I think
also it's hard not to feel like this
wasn't really like I don't actually feel
like this was rushed um I feel like it's
just that everyone was cut out of the
loop and it was decided
unilaterally um I mean there were people
on Twitter that were teasing these
vaults um like back my job is to to
monitor what you you guys are doing and
it literally happen in two weeks and a
half like go to from zero to 600 million
in two weeks
yeah do sense I guess where I'm going
with this is that the governance process
definitely rushed but there were clearly
people who were behind closed doors
making the
decisions in private because like these
Vault defining what AD should be
here uh I mean I think it's hard to call
I mean maker is not at its strongest in
governance right now the process is
clearly broken down like we're missing
assessments I I have you need an my
friend yeah yeah well I mean we need
people to come vote is I mean it's if
only one person shows up to vote then
then there's only one person voting and
you you know at some level you can't
blame like you know Rune has like the
like overwhelming I haven't looked
lately but usually upper 90% of the
maker that's voting um are his delegates
and you know you can't really blame him
for V voting and his bag I often
disagree with him in this case though
it's clear that just everything was
already tied up in a bow deals were made
um I mean there were like I say there
were pictures of of the dashboard of
these Morpho vaults being teased on
Twitter back in like the middle of March
um before they even came to the
governance Forum so it was clear this
was a done deal was going to get rammed
through um you that decision the
decision had already been made um we may
or may not be seeing a similar one with
a a proposal to directly purchase usde
um I think that remains to be seen but
it's again one of these where you can
ask questions on the Forum but there's
you know like only eight delegates and
like six or seven of them maybe all
eight are runes so like what are they
going to do like vote no get D delegated
I don't want to blame someone for I
think that's the what you're pointing
out is uh uh it's actually quite
concerning not because of mead but
because I have the feeling like cave is
the only in this world that uh
managed to grow outside the influence of
the initial team and the initial Thunder
Stan has like zero implication on the
aid for the past two years uh sometime
they they go to the for and say hey we
we don't have A3 do you want to finance
that and usually that's a good idea or
or we done the ghost table kinds do you
want to to on board that but the dayto
day we don't have like this presence
like how can you be decentralized if one
guy represent 90% of your vote and the
guy doesn't doesn't want to let the the
Dow mature and become
independent it's actually like a a big
debate are we doing defi for what's our
vision of Defi and oh we want this thing
to be organized because what's the point
of having a d like a company will be
more efficient just put a rune as a CEO
and he takes the decision then that's
it yeah I mean he wouldn't have to
listen to me I guess um I mean the
problem is not really having a whale
it's have is not the problem is not
whales it's having only one whale right
I mean what you need are diver my point
is not against run I think Rune is like
done a lot for our ecosystem my point is
that if you only have one guy you don't
have the GU race so you don't have this
safeguarding things that you have that
you to rely on the fact that your
dictator is
benevolent because if it's not well you
fact and that's the main point and
that's why we are doing theorized Dow is
that on the a if I do something and
people don't like it people say no to me
and there's nothing I can do about that
because my votes are one less than one3
of the Corum in the AO and you have no
one in all governance that is more than
two-thirds of the a Corum so no one can
unily decide this thing so it's really
important was was the Forum the chat is
saying with asbo delegate should be able
to vote against the interest of their
delegator without the faar of un
delegation and I think that's the main
point like if you don't have
independence why why having like uh
voters delegates at all because at the
end of the day just V by
proy yeah I mean I think I have mixed
feelings about this because I sit at a
lot of different protocols as a delegate
or doing other governance work and I
think you know I think delegates should
they do have a maybe not a duty but I I
think that they should look out for and
monitor the interests of their
delegators if they know to the extent
that they know who those people are you
they're like a
constituency that said I think that
there are some mitigations you can put
in place that preserve or at least
increase Independence some of those
would be like terms right like uh
someone delegates to you they can't
undelegated in the middle of a vote
which we've seen before at maker um or
that someone um like one of the things
we do over an interest protocol is that
it's like a matching program so like the
whales will match you know if you manage
to get like one governance token
delegated to you they'll match you with
like three more so it's
proportionately the same as like
whatever you got organically and I think
there are other creative ideas people
could come up with that kind of go in
between because I I don't think that if
a delegate's just out there like you
know basically vandalizing governance
with your with your um with your votes I
I don't think you have like I don't
think it's bad to pull the votes if
someone's not voting the way you want
but I do think it's in poor taste to
like have it just always be looming over
someone and I I think it's s such a hard
problem the song but I kind of agree
with you I guess so with maker pushing
this I I guess short-termism if you want
to call it it uh in its in its
governance essentially chasing after
high
yields uh you know going where
the the puck is right now rather than
thinking about like what's Athena going
to be in in six months or a year like
once rates normalize a bit more uh you
know rates have been pretty exceptional
for the past three to four months
because of this runup in the addition of
the Bitcoin ETF it's really skewed
things uh towards uh positive Athena
growth because people have been paying a
lot for long leverage but that could
unwind pretty quick you know we could
see renormalization of rates back to the
the 5% range or or lower and so when
you're making these decisions especially
to scale up lending into the billions
you know those those don't get changed
relatively quick and so it affects
Downstream service providers like a uh
who who have to take a a little bit
longer view on
this yeah I mean I I don't think that
this is a prudent decision at least at
this Speed without collecting more
information first um just because it's
at the scale that could you know one
shot Mak or if it like zeroed out for
some terrible reason um I mean I have a
hard time thinking how it could go to
zero but like you could still Maker's
got about 120 to $130 million in equity
like buffer Capital it's like Maker's
Capital so you know when you start to
hit areas the question is that in what
scenarios would you eat through that
right and then then you start
potentially inflicting losses on die
holders um if things continue to go
poorly um I don't think stable coins
should be really necessarily in the
business of chasing yield um I think you
know spreading around lots of little uh
you know credit lines is fine um not
really thrilled with 100 million but
like again that's smaller than maker
Capital buffer so I I don't see a way
that Athena could go straight to zero um
so you know even 100 million it's hard
to what is concerning is not the the
ability to do a direct deposit modu I
think it's a great idea it's a great way
to maximize uh the the revenue of a
protocol the the only issue we have
we have at a uh is the speed of the the
the growth of this credit line uh it
basically happen overnight and from our
perspective it it create DS about the
predictability of the meod protocol
because the relationship we created with
the cre the meod protocol for the past
four years or even five years if you
look at the history of a and the
ancestor of a which is at L uh we have a
positive some relationship with the Mead
because Mead is the decentralized table
coin and we are that's compatible with
ouros and that's something that we want
to push uh and also we had this
expectation for the past year that Mead
was a conservative protocol in terms of
risk management and basically in the
very short term for the past quarter
that assumption is not quite true
anymore and the thing is that with 100
million uh die credit line into uh etina
that's completely fine that's basically
maximizing the yield they will make 40
million a year for that K does for that
and everybody wins and why not but when
that 100 million becomes overnight 600
million we uh like everybody saying uh
on the Forum we should grow that to 1
billion doar and maybe five billion the
fundamental and the intrisic risk
profile of the asset changing over
that's why we need to react because at
the end of the day like people try to on
social media to create uh to to say it's
a war between me and and AI That's not
very well knowing the history between
and of synergy between me and a and the
fact that a right now is making $15
million net profit from D into as a
collateral and as an asset borrowed into
the other protocol so we have a vested
interest as a protocol and Naz into the
the success of Meer which is a k nav and
die as a stable kind which is one of the
money maker in a the all reaction is
pure risk management because the profile
change overnight and that's important
for me to point out yeah I think paper
that was something that you and I
discussed the last time that you were on
was that for the longest time Maker's
been just boring it's been extremely
conservative extremely just you know uh
just boring at the end of the day like
the the how they've segregated their
their capital and where they've um grown
through it's always been in in providing
their like the lowest risk across defi
right like they they are considered to
be uh the the Bedrock of defi interest
rates and so this the shift into a more
aggressive um uh protocol in chasing
yield does change the risk structure of
of maker as a
whole yeah I mean it if if if maker goes
through with it
um yeah I agree it's a significant
change in the risk profile um I think
again I I think I tend to be more
concerned about the fact that some of
the the parameters and some of the risk
management choices that are being made
again don't make a whole lot of sense to
me like hard coding the oracles to$
one um yeah for those who like context
comp tried to do that uh that was not so
great I think recently uh it's radian
Capital that tried to do that with usdc
uh so it happened at least three or four
times over the the past years and during
the last cycle where uh we had very
clear uh example that AR coding the the
price of a stable going to $1 is not a
great idea
so and that's why it's a bit concerning
to us even if in that context is not
completely Reckless but here so I mean I
think the problem here is that by
choosing so if you use a price Oracle
that's like and and you can underwrite
almost any asset based on the secondary
Market liquidity that you can dump into
for liquidations right so um I think the
problem here was people were very
gung-ho about this collateral and they
saw that you can't safely liquidate more
than you know I don't know $10 million
or something like that making up picking
a number out at TH air but it's not like
on the order of scale to even a 100
million um probably uh for for a credit
line so if you want to go beyond that
like I I understand that that's why they
made the choice to hardcode the Oracle
to $1 because there's no way to safely
liquidate but the trouble is then you
need to underwrite against the issuer
which is much harder right because you
need to you know learn all kinds of
legal facts about them and financial
facts and you know like are these
reserves bankruptcy remote are they
going to be proof of reserves like is
there a legal obligation to redeem usde
if so for what do you get to pick or do
they get to pick because there's lots of
different underlying stuff that can be
repaid in kind um you know there's just
all these extra hundreds of extra
details that could still be perfectly
fine it's just so much more work and
this is the work that has not been done
yeah but that's all work has a
protocol that's that's literally what we
do yeah yeah um yeah I don't I don't
know like I'm Pro maker I still got my
maker tokens I don't really agree with
with the the current governance proposal
but go
ahead I just want to comment that uh
this ped for at least like I don't know
half a year or even like nine months or
so ever since maker got more serious
about
W um I don't really perceive it as very
decentralized uh on many aspects like
like I'm finding it difficult to
understand like what's really
decentralized about the maker when I
really try to think
about I mean I think decentralization is
one of those like suitcase words that
everybody packs whatever meaning they
want into it um do you mean it's
decentralized and that it's technically
decentralized then like you know an AWS
important to point out is that
concentrated decision making doesn't
equal
the centralized protocol I have the
feeling and I think it's backed by the
fact that Mead is a decentralized
protocol and the die is a decentralized
table coin everything up on chain
everything is permissionless and that
does not change what is subject to
debate here to me is that is the
decision making thisiz or not I have the
feeling that for the past quarter to six
months it's less and less decentralized
and more and more concentrated but I
will not say publicly that beod is not a
decentralized protocol anymore because
that would not be factual to
be yeah I would agree with that uh one
thing I do want to pull up is just the
the the sizing of the pools I mean if we
take a look at the the curve pools right
now uh there's probably hundred million
do worth of USD liquidity uh across the
board if we're looking specifically at
us or at the state USD
liquidity uh there's only about 37
million uh right now and so it's just
it's surprising to me that with the
current um liquidity that you can find
on curve and other places that the scale
of of this growth in maker would be
allowed to to to grow so much un
feathered and I think that's that's kind
of what ties in because if there needs
to be liquidations if there needs to be
other things that that that come as a
result of um having uh USD or SSD
onboarded into maker um it's it's really
questionable whether the the market
dynamics in the in the dexes would be
able to to handle any sort of major
event well well Maker's betting that if
it gets stuck with collateral it can
redeem
it just directly through
Athena
um so I I maybe um arrangers are also
available to be I'm not sure if you need
to be listed to redeem at a certain size
so I because I think for retail and
someone can correct me if I'm wrong but
I think like if you're just a retail
schlub on the UI um I think you're
actually going through the curve pool um
but I might be wrong on that don't quote
me but you know there is like an actual
Redemption process where you show up
like as a kyc company and say here's our
tokens give us the whatever um so I
suspect maker would probably go that
route yeah just like it does with usdc
or other things when it needs money
right yeah Mark like I I hope that that
a is able to exert some sort of
influence here um especially with you
know it's a it's a
clear showing of
sentiment uh for third
party protocols that are that are using
die uh in in showing that that the these
moves that they've been making have been
aggressive and that may not be warranted
or or wanted by by Downstream providers
uh who are then using those assets
specifically die and and the risks that
are being on board in um is there
anything that could be like learned from
this on on moving forward that you know
we have these segregations of these Dows
uh but sometimes the the these these
Dows don't really U act in alignment
with each other um you know what be done
here I think what is important to point
out this situation is that even if what
we did today seems aggressive uh to me
it's was important to draw a line in the
sand and say okay guys this is not okay
we think that's reckless and it will be
better for everyone involved to back
turn a little bit uh slow down and maybe
find a pathware where everybody wins
again and that's pretty important
because if we want it to go nuclear on
this we will have a discuss with the
guardian and just freeze die overnight
and make a a governance decision with uh
the D asset Frozen on every Market that
will have been like quite TR stronger
but the thing is that I do believe that
the risk for die of a deeg right now is
not uh big enough to to to put that what
I'm concerned is the speed of growth of
this credit line and what
if we do nothing could have pick on in
the next few weeks or in the next few
months because the thing is that if uh
the people in charge and uh the people
that has the decision making in make are
saying okay with 100 million die we are
making four $60 million net profit so we
just do $600 million because we going to
make like hundreds of million dollars
make profit so why not just mean 10
billion dies and just do it because it's
the bull market we probably going to get
away with it for a few weeks or a few
months and let's see what happened next
and the thing is that our safety module
is not big enough to to under a dial
failure like there's half a billion
dollar in the a safety module it's not s
for the die risk because it was sized
for the die risk of three months ago or
three weeks ago when uh the the credit
line was 100 million and that's why it's
quite important to send the signal to
the our governance saying well if you
want to go down that path that's going
to be without us uh we work together for
the past four years but if you go reass
uh we're not going to work together
anymore and that's how it's going to be
obviously in our opinion or at least at
the ACI opinion no burn uh no Bridge has
been burned at all so we be more than
happy to roll back or even consel the
proposal if the speed of growth of the
credit line is lower not even uh a
question of SL of size to me the most
important is how predictable this credit
line are and how we can assess the die
risk and as long as it stay in
reasonable uh frame and range it's
completely fine we are not anti
competition we are not anti maker uh we
uh work with meod for the past year and
we hope we can work with uh make dou for
the next few years so I wanted to bring
up your uh proposal you know in The
Proposal you talked about angle and
their agus or AG Euro which is now euroa
which was Meed into uler a week before
their hack uh and also the J Euro
menting and demidas uh leading into the
uh asset long-term dpeg um can you can
you talk about those two events and yeah
so basically uh H is quite a funny one
so so they had like the equivalent of
the DM obviously the scale was much
smaller we are talking like few million
dollars here not uh I think like the
size of angle was $30 million which is
not zero but something that is
manageable by the uh safety module and
at the end of the day we did not have
enough liquidation to Warrant like P dep
like Liquidation in a work for that site
uh but still uh it's quite funny because
their credit line was automated and at
some point like for as long as the
credit line existed a was the largest
source of yeld so their money where
deposited in Na and for some kind of
Market reason one week before the ACT uh
the EUR EUR Le yield uh increase of 1%
there's been like 1% premium uh in oer
then in a and they lost everything that
way uh it it's a story that ended in a
good way because at the end of the day
Oiler found uh recoup the The Bunny and
the haer send the bunny back but Ang
could have died just because they wanted
to make like 1% more than what they used
to make in a that's so it's quite
important to to monitor this kind of
action uh because uh Jarvis was not so
lucky and when they deposited 30% of
their so basically what maker is doing
right now like 20 to 30% of their supply
uh into a protocol call me Midas and
when Midas got got wrecked well the the
asset is not permanently dep I think
it's still 10% not 15% below Peg as we
are speaking today so it's not nothing
in terms of
risk let me ask you mark what would it
take to get you to pull this like what
would like what would be the remedy if
you could wave like ask something from
maker like what would be the specific
terms to like like pull the proposal
slow it down do XY Z slow down yeah do
that on six months do that on six months
so we can adapt and uh adapt the risk
parameter on a and make sure the a user
stay safe instead of doing that in six
weeks do it in six months I don't think
that's right uh just don't be Reckless
at the end of the day we are nothing
against the concept of the DM we think
it's a smart way to do money but I think
we can make money responsibly and make
money in a way that don't put the Wall E
system and Industry at risk just do it
in six months instead of six weeks I
don't think that's a crazy ask well I
mean I think six weeks would probably be
the thing you could ask for because
we're at six days
um yeah
yeah crazy yeah the money is on the
table and everyone everyone wants it now
no like
a I really think the whole thing with
Athena got everyone kind of
crazy it has yeah yeah but the thing is
that you cannot mean something that is
larger than the PSM like come on it's
basic so if you manage to grow both at
the same time over the the span of the
few weeks that's completely fine and you
end up with the same Revenue but
overnight is crazy just crazy I don't
know in which language to say that I can
say it in
French uh so one last question that I
want to pose to you uh paper before we
wrap is uh there's been some calls now
saying that maker is is no longer just a
a stable coin issuer it's it's now a
hedge fund with its decision to grow to
the size of of a billion into Athena how
would you answer that ah it's such a
joke there's no hedging involved so I
mean so first hedge fund is one of those
suitcase words where people have
different ideas of what it means um if
you want to think about it in terms of
an active actively managed asset
allocation you know I would say this is
not new at all um you know you can
approve or disapprove of the the asset
uh or structure um or terms but like
this is not like a new thing maker has
been doing you know did some small
experiments with real world assets back
in like 21 22 um and then in you know 22
23 you ramped up these very large scale
exposures to t- bills through various
entities
um I yeah I would say maker doesn't have
like a real great track record at
picking winners
um there's a couple tiny ones that have
defaulted you know not Material at all
um I would say there's also quite a few
examples of like where the opportunity
cost is is like I think palpable right
where if you're lending at say you know
below t- bill rates on things that have
credit risk um that's not a situation
you really I think like I can say like
more bluntly the new paper is like the
the management was terrible like at some
point it was 85% of all D collateral
that was of Shane and all of that making
3.5 to 5% while right before uh a bull
market so it like the timing was bad the
uh sizing was bad and the risk
management was bad and I think what we
are leaving right now on Meadow is a
overr reaction on the other side of the
pulum so it been bols deep into real
world assets and then massively
underperforming the the current market
and now we are going Bal deep into risk
in order to overperform the current
market that's not risk management
friends that's not how it
works yeah I mean I think the motivation
is probably similar to what you either
what you said or close cousin of it um I
think I think Maker's bigger problem is
that it's been very hard to grow die
Supply but I think that's like kind of a
like a much bigger question because I
think a lot of these problems kind of
work themselves out if you get your
stable coin Supply growing
again yeah and so like looking at the
diet total Supply uh if we're looking
past or over the past uh two years just
going to pull it maker bur here uh
there's been pretty significant outflows
so back in 2022 in April around this
time the die Supply was at about close
to10 billion was it9 a half billion doar
uh it's now contracted down to uh lows
of uh $4 billion and it's currently
sitting at $4.9 billion so uh there's
been a clear shift away from from d uh
the supplies dropped in in half over a
two-year period and it really hasn't
been able to uh to to capture uh market
share uh over these two years even as as
tether has maintained its its market
share and uh usdc has started to see U
growth within its Supply as well
too
and so if if if die Supply was going up
if we were looking at
a die being 30% off the lows we probably
wouldn't be having this discussion but
uh you know I think people are looking
for ways to to jump start this to get
this back up into the five to seven
billion dollar range again and maybe
that's done through this this Athena
proposal uh as as people use maker to
chase yields and get leverage um but
we'll see I think the I think is clear
that you guys both agree on on the speed
paper you did say this um yeah yeah I I
I don't think it's it's not the way I
would do governance but there are people
I respect on the other side that would
disagree with
me well we'll leave it at that um I want
to thank you both for being here today h
it was really enjoyable to to hear more
about this governance proposal that's
going through both maker and a at the
moment um you know I I hope that we do
see a bit of a Slowdown in this because
it it has drastic effects across the
industry and with maker being one of the
largest defi
incumbents um you know it's it's hard to
say what the Ripple effects might be if
there's any issues with Athena we we we
haven't seen it go through a cycle yet
we don't know what sort of systemic
risks there are um you know maker was
able to navigate 2022 all the blowups
svb shut down and and and make it out
alive
but uh with the sizing of Athena into a
billion dollars and potentially more
it's unclear what sort of systemic risks
there might be in the future that we
just haven't seen
yet completely agree with that I think
it's important to like the Slowdown is
by Design on the a so we have framework
that impose minimum discussion time
because uh there's a lot of emotion but
when you are a d and you do risk
management emotions should not be uh the
main concern so uh at the minimum this
discussion will take two weeks because
uh the current sizing of the position is
not a threat to the a protocol and the
safety module can absolve that so unless
they they decide tomorrow because it can
go fast as we as we discuss uh to
increase the the position side to one
billion or two billion overnight there's
no reason to uh use the AVU guardian and
make thing faster and uh everybody can
discuss the a forum is open to everybody
as long as the Rules of Engagement are
respected and people are respectful to
each other uh you you your opinion will
be valued so feel free to participate
it's a decentralized autonomous
organization a DA and that's how it
should work feel free to share your
opinion in the a
for well thank you Mark thank you paper
and defi adviser for being here today um
really enjoy this uh I hope people get
out and get active on the governance
boards uh I I see that uh there's not
been a ton of comments yet on the maker
stuff and uh I see about 10 comments on
the the a discussion so far so hopefully
we get a lot more input here going
forward and uh we see a a good
resolution of this um thank you
everybody for listening at home uh make
sure to come to Leviathan newws on
Telegram and sign up with your address
you can start to receive squid points
for submitting news to
and you can come join the squid cave so
thanks for being here and we will see
you
tomorrow thanks
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