MakerDAO’s plan to bring back ‘DeFi summer’ – Rune Christensen – Cointelegraph Magazine

During the last bull market, after a decade in the crypto space, MakerDAO founder Rune Christensen was disillusioned with Ponzi schemes, djinns and dog tokens. “I thought it was over for the top of the bull market. I was really convinced that crypto had nothing to offer because all I saw were games,” the tall, somewhat handsome Dane told the magazine in an interview in Singapore.

“In Makar, we had something real, but we couldn't organize ourselves. And what happened was essentially a political set-up. Basically I decided to give it one last shot.

He had a good base to work on for the final dice roll. Backed by billions in US Treasurys and on-chain assets, the maker is now targeting a quarter of a billion dollars in annual revenue. However, it has a price-to-earnings ratio of just 16, below the Nasdaq average of 30.

There's a good reason Maker is so underpriced – it's boring and complicated. Christensen intends to change all that by securing the controversial endgame through a decentralized autonomous organization (DAO).

It's okay if the game isn't fun. But it's still extremely complicated, according to a recent podcast in which Backup founder Nevin Freeman spent the first hour summarizing the endgame before introducing his five-hour interview with Christensen.

What is the creator's end game? Explain to me that I am five.

TL;DR: It's a five-step plan that involves hiring an outside marketing firm to turn the whole business into something that looks cool and fun. Six new sub-DAOs are tilting at different windmills, attracting yield farmers and savers to millions of NewGovTokens and NewStables (placeholder names to brand).

And, in an attempt to jumpstart the price, they're naming each Maker (MKR) token to 24,000 NewGovTokens.

Christensen talks about the plan with the sound of gunshots and a renewed sense of purpose.

“At this point we finally realized that we can't allow all the scams and all the pump and dump to get the attention of consumers because that's just as irresponsible as building something that's not safe,” says Christensen.

“We want to bring back DeFi winter, but this time, it won't end and go to zero.”

Maker itself acts as a central bank, setting monetary policy for subDAOs. Expected to be set up this quarter, each sub-DAO will hopefully be filled with highly motivated tokenholders driven by a sense of common purpose and risking the DAO's existence with high delinquent bets.

And if that's not enough, MakerDAO will gradually transform itself into the first truly autonomous DAO using artificial intelligence.

This is another not-so-secret motivation behind Endgame; That's how Christensen left the project. Every time things stop, he pulls back.

Every time I go, ‘I'm going' and then I have to go back, then I think ‘I'll just go back because now I'll solve the problem.' cool.'”

“In the early days, I thought, ‘We're just going to build the software that ends up.' And then I realized, actually, the code isn't even important – it's the people in the creator.

He said the plan was an attempt to figure out “what to do with people” and was based on a decade of trial and error.

“I think it will work this time. And in all cases, once it's done, it can't easily be changed again. So it should work.

We all hate Roo, we think it's funny.

Unfortunately, the folks at Creators didn't like the final game, probably because no one outside of Christensen really understood his grand vision. Former Maker Foundation employee Greg DiPrisco told Wired in late 2022: “I didn't vote, mainly because I found it incomprehensible.

One Redditor called on MKR holders to save for “Rune's egomaniacal plan” and criticized the plan to set up subDAOs, each with their own token, as “turning a creator into a Ponzi-Tokinomics factory.”

Vance Spencer, founder of Framework Ventures, thinks Christensen is a visionary, but remembers the reaction to the final game because it was so brutal: “I mean, most people read it and threw it away,” he says. But I think, ‘What did we learn from the last cycle?'

“There's a lot going on there, and that's that we have to balance incentives. We need to drive smaller groups with a more narrow focus; We need to build a central bank-commercial bank model; We need to declare again; We want it as a rebrand, there's so much useful and fun out there, I think, ‘We all hate Rune, we think it's funny.'

Rune Christensen Why the DAO doesn't work… yet

Although there are about 100,000 addresses that have a creator and can theoretically vote on governance, in reality, all it took to push the game over the line was Christensen, a16z, and two other proxy addresses. Between them, they had enough votes to force the plan through October 2022. Interestingly, the Tokinomics of the new sub-DAOs are designed to prevent core team members and VCs from having such a vociferous voice in sub-DAOs in the future.

In fact, much of Endgame Maker is a response to the most obvious problems with governance over the years, the same issues that hold back many other DAOs: greed, politics, and nobody bothering to vote.

“We've managed everything, including these real problems,” he says, explaining that when a project is small, everyone knows and trusts it.

“You can't trust anyone anymore. Then suddenly I thought, ‘I don't know if those people over there are robbing me. They may be ripping off the DAO; In fact, they probably… so, I'll make sure I'm tearing up the DAO, too.'”

“Therefore, everyone rationalizes the idea that ‘because others do politics, I must do politics.' And you start working and cooperating not with people who give value, but it becomes a question of loyalty and political loyalty.

Enter SubDAOs: “The simple solution is to cut it into smaller pieces. So always make sure that every type of organization is small enough to maintain its positive dynamic and not turn into that negative dynamic.

There are two governing SubDAOs, Zero and One: Sakura (startup-friendly DeFi and product), Spark (tech-focused), Quantitative and Qualitative (real-world assets, finance and institutions).

A long time ago on the island of Denmark

Born on a small island in Denmark, Christensen grew up in Copenhagen as a “very brave” kid who was really into World of Warcraft. After a stint teaching English in China during the global financial crisis, he studied international relations at Copenhagen Business School between 2011 and 2013 and moved on to biochemistry at the University of Copenhagen the following year.

During his first year of study, a Bitcoin donation address on a random website caught his eye, and he fell down the rabbit hole and bought as much as he could for $2 BTC.

“Bitcoin has made me a complete fanatic,” he says. “I mean, everybody wants some kind of meaning or purpose. And it hit at the right time after the financial crisis when everyone was completely disillusioned with the old system.

I got into that Bitcoin, culture and sentiment: we can use technology to fix the world.

His first inkling that there was more to blockchain than untraceable hard money came when he became involved in Bitshares, a proto-maker-style project developing a decentralized currency and stablecoin. However, they failed to deliver on their promises, so Christensen and a few others – including co-founder Nikolai Mushegia – founded Maker in 2014 to use smart contracts on the upcoming Ethereum network.

Unfortunately, Mousheghian in 2010 He drowned in 2022, hours after he sent a paranoid tweet saying the intelligence service was going to kill him. Some believe his death was a conspiracy; Others believe that he may have committed suicide, but the official cause of death is an accident. Regardless, he died very young.

Christensen says Mushegian's focus on technical safety is a key reason Maker has outperformed all of its competitors. He recalls that when smart contracts were first released, many believed they were as immutable as blockchain.

“We were very lucky because my co-founder Nikolai was someone who realized that smart contracts can be hacked.”

Maker delayed any products to become bombproof, like The DAO, which jumped in early and got hacked for $60 million. Playing it safe, however, is counter to the fast pace of crypto and you'll make a lot of money.

“The problem with that approach is that you're not going to, you know, attract a lot of buzz and get a lot of people in quickly, but you're going to be better than everybody else. So that's why we finally made it to the top.”

The creator of crypto has attracted ideologues

In the early days, crypto people were a collective of naive ideologues bound together by the feeling that “they were naturally advanced people… if you add crypto to any system, they will overcome the flaws.”

Early management was rudimentary at best. Every Sunday, there will be a management call that anyone can join, even if they don't own a token. Because the project was small, this slippery slope worked, until Christensen decided he could run himself.

A power gap opened up; People started objecting to every idea and the project stalled. “Nothing happened, and nothing can be done,” he recalls. Although the creator said he was “playing the DAO,” Christensen realized “in hindsight I was the leader.”

“Ideology is not enough, and being too naive just breaks down, when we get into something like this, we set the foundation. At least we understand that we need a real organization to build and launch the thing.

In the year Established in 2017 and modeled after the Ethereum Foundation, the Maker Foundation has finally become the guiding light of coordination that has made real progress.

“At that time we were able to ship the most advanced state-of-the-art contracting system ever built,” he said proudly.

Dai, a stablecoin that uses ETH as collateral, was launched in December 2017, just in time for winter, when the price of ETH fell by 80%. The decentralized stablecoin's ability to weather the storm without collapsing highlighted its value, and the multi-guaranteed die launched two years later in December 2019.

It must be said that Die is not perfect. The S&P Global report found that between June 2021 and June 2023, it spent more than 2,750 minutes above the $1 peg and fell below $0.90 per point for 20 minutes.

There have been many missteps and controversies along the way, such as the decision to add the centralized stablecoin USD Coin as collateral, although this was largely held by the US Treasury.

Christensen sparked controversy by suggesting that Maker's new blockchain, called NewChain, be cut as part of the fifth and final phase of Solana's (rather than Ethereum) endgame.

Although the launch of the savings and loan platform Spark Protocol in May last year (which offers a 5 percent yield for die deposits) led to rapid growth, the decision to cut off US and VPN users due to regulation has sparked outrage among crypto purists.

Spencer said Christensen showed a knack for rolling with the punches.

“I think Rune is lucky to learn from his mistakes – most mistakes and crypto just kill you; you're not given the benefit of learning from them.”

The third version of the die is coming soon

A third version of Die (Newstable) is listed in Endgame, when MakerDAO acts as the central bank to license subDAOs to create money.

“Instead of being a single mechanism for lending, it is spread across these sub-DOs. Therefore, each of them can know their own approach of how they want to allocate and how they want to give loans. Therefore, it is infinitely variable and programmable.

Maker has the authority to create and sell new governance tokens for subDAOs. Therefore, if a DAO runs into financial trouble, a developer can raise funds with the new tokens or get a hint from the market that a subDAO may mature. At that point, it can take over and sell the assets of the subDAO.

The advantage of this setup, he explains, is that the smaller teams risk their own management signals on their own projects.

Let's be willing to take some crazy risks and fail because sometimes it can produce amazing results.

“They've got each other's backs … if it goes wrong, they're all pulled together. Therefore, they will not be about loyalty and politics. They say ‘we need to do something that unlocks the potential of blockchain'.

“And you have this evolutionary ecosystem where you let things do some crazy experiments.”

Let the AI ​​overlords take over

The long-term idea is for the DAO to be self-sustaining and AI-driven, and according to his carefully curated Atlas of the Rule book, Christensen says it could stretch to 13,000 pages.

The team is putting its knowledge of the project, along with its rules and procedures, into a format that can be easily digested by AI, so DAO members can consult it to find out what the hell is going on.

Currently, few people outside of the core team have an understanding of all the moving parts.

“The key tool is the central mechanism for storing and validating all the data – all the rules, all the relationships – we call it the Atlas. So the Atlas is the single source of truth for the DAO.

“Having such a central data repository makes it possible for hundreds of thousands of people from different backgrounds and backgrounds to meaningfully collaborate and communicate.”

At the heart of Atlas is a permanent constitution of “immutable documents” designed solely to protect AI governance from bad actors or deviating from its mission.

As the technology becomes more reliable, it will be given more responsibilities until it does everything, and Christensen Maker can retire happy knowing he's a perpetual motion machine.

“Those four will be the only subDAOS for the first two years,” he says. “Then, when we reach the final stage of the system, an algorithm kicks in – fully automatically without human intervention – generating new sub-DAOs.”

“Once you get to the maturity level of AI-assisted governance, you can have more DAOs than your people, basically, because of the cost of creating tokens and wrapping the token management function around anything. Especially since the economic interaction or business model is so low that if it works, there's no reason why it shouldn't.

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Andrew Fenton

Based in Melbourne, Andrew Fenton is a journalist and editor covering cryptocurrency and blockchain. He has worked as a film journalist for News Corp Australia, SA Wind and national entertainment writer for Melbourne Weekly.

Follow the author @andrewfenton