MakerDAO Community Real World Assets Onboarding, 30 Sep 2020

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From YouTube: RWA Onboarding Community Call #1 - September 30, 2020

Description

Working Group Presentation: @SebVentures

Discussion on the Centrifuge Model
Discussion on the DAI Hedging Issue
Discussion on legal structures

Open discussion and Q&A form.

Agenda and Discussion:
https://forum.makerdao.com/t/agenda-discussion-rwa-onboarding-call-1-wednesday-september-30-17-00-utc/4475

Governance Forum:
https://forum.makerdao.com/

Disclaimer: The videos in this playlist are produced by MakerDAO community members. Content produced by the community may not be representative of the views held by the Maker Foundation.

A

ah One you have launched the recording right. Yes, okay, so hi everyone thanks to joining the first uh reel wall asset onboarding meeting. So we will go through the following agenda. We will review three posts on the forum.

A

First, the centrifuge model pool that was a seventy percent agreed on. Then we will discuss the die, edging issues that we can have with uh assets and discuss that a bit more because the pool wasn't so much what they done.

A

And, lastly, we will discuss the legal structures of maker dao. It's a post on how we can have some legal entities which can be used, probably not for the near term but in the medium long term, for glue.

A

A

Now you can see my screen.

A

So I before to start the first post I want to highlight that there is a lot of mips that will go through the governance session in october, at least four. I think so, please at the end you can, you will be able to vote for for those mips. I will not cover them in this agenda, but if you have questions on them, matu is here, and I assume people from santi cruz are here as well.

A

So the first item is the centrifuge model, so what we have done is to look all the information we have on console flight and the centrifuge model more broadly and do another synthetic view on how it should work and look more in detail and some some some details of the process to see if there is some disagreement or some complexities along the way.

A

So I release the the the posts six days ago with the knife's graphics that did the details. Some uh some inner workings of the model and the pool so far was a quite uh was great. With 70 percent of the people agreeing on this model some have abstain.

A

If some of those people are here, you can maybe explain if there was a reason to have seen I put, and one person was unsure. So if you have more questions to to get a better understanding of the model, now will be the time to to ask.

A

Yeah, maybe we I will not go through the post, but if there is some question on this model, please adjust or just ask.

A

Okay, I can expect there is no question, but we can come back later on this topic.

A

So the second point, uh which is a bit more complex, or at least not that easy, is the issue we can have with the die. So, as we all know, die is not currently at one dollar and it's not that much an issue, but it was an issue when it was at uh 105, 104 dollars or usdc in the crypto world, but in the real world.

A

If you make a loan for one project over the course of let's say you're three months and you are buying your die at one dollar and you should repay them at 1.01.

A

That means you it's more expensive one percent over one year, and so it's if you make a loan at, let's say you're, two percent for three months: if die, is going from one dollar to one dollar or one.

A

It's like not having a two percent interest rate, but a six percent interest rate and that's quite an issue in if we are making loan in the real world, because people are not farming, uh sushi or other tokens in the real world that are making buildings, that's why they have some roi that can expect, but it's not like hill farm.

A

So this is why we have to find a solution for that.

A

Currently, the solution we have proposed in this past was to say, uh for instance, uh to to to see what is the cost to edge uh the dye usd exchange rate at another tc desk.

A

If you have a quote, we can then factor the difference in the lending rate that we will do to the borrower.

A

So at some some some way we can say that we will subsidize the issue of having dies. That is not one dollar and paying it ourselves, which makes sense. As for credible assets, we are with dealing with people that want a loan in usd not in die, and the competitor will make them alone in usd and not in that, so the result was less agreed upon.

A

So it's a bit mixed between the yes and the know. Again, a lot of abstention and one insurer.

A

So this will be an issue if we cannot find a way. So I don't know if some people have any questions on this topic.

B

Yeah hello: do we know how bigger this markets on on hedging the high price which otc desks are providing this offers.

A

uh No, I have no idea, but we were discussing it with centrifuge.

A

C

I I can answer, um please I mean we have in the past, only work with scp, but um we can also get other competing offers. They generally have pretty good diet, prices and they're tight spread.

C

So um that's who we've we've worked with and that's um so those those like percentage ranges like sore somewhere in the range between like 20 to 50 basis points on each transaction sort of doing this, hedge and so doing it both um depending on the volatility but of course like that has like greatly varied in the in the recent months, um and obviously this is like a and the reason we've been sort of proposing that that there is that that maker sort of definitely does undercut the like sort of minimum cost of capital.

C

A bid and sort of provides. This factors it in is not that. We think that this always will have to be the case, but just obviously until we've sort of solved the dye like it's nice ability. um It is it's a significant cost to acid originators to do these loans in die versus usdc, um and so they, if you were to like regardless of maker, start originating that these loans, you would actually use usdc um and that's that's sort of the um the place where this is coming from.

B

Okay, thanks yeah. Basically I was just wondering if you know I I've heard there were some options to catch against it, but um I didn't know what notional values were actually considered like would uh the the company that you mentioned? Would they really be able to? You know catch against 10 million notional or even more.

C

Oh yeah yeah, I think I mean they're like they're, a very large uh otc desk that, um as is able to like for the volumes we're talking about here, um they're able to do that.

B

A

Thanks and so the price is uh 25 business points you said, but uh on what uh time or reason.

C

No, I say I mean it depends like historically, this was like somewhere between 25 to like 60 basis points per transaction. I mean we've been doing, we've been doing this over the last year um with different asset, originators for different maturity, dates and like different lengths, and so it always depends a bit. um But and then it depends on the tie price right like when it's when it's at 105, then the hedge is much more expensive than when it's at 101.

A

Yeah uh yeah, but you can currently set 101 and we can expect that we'll assets, it should go down to one zero, zero.

C

A

Gain for uh for the originator, I.

C

Mean but the so look, the the perspective right you have to think about is. This is like a this. This asset originator is giving a hundred thousand dollars to um a business and sixty days later, they're getting a hundred and hundred and five thousand hundred hundred thousand dollars plus interest. So maybe like five hundred dollars, an interest back.

C

If then, like the die price in that time, like goes up by like half a percent, then that's that's the entire profit, like that's the entire interest rate um it due in the period that will go towards it, meaning like this is actually a loss for everyone involved right so like and and in the last six months, like dai, has had like variability within like two months of easily three to four percent and so like, and you can't pick the time right like when this loan is due you're, like gonna, settle like today or tomorrow, um because otherwise you start acquiring interest you're you're overdue, and then you have to explain that so, like there's, not a lot of flexibility.

D

C

D

Waiting for, like.

C

Less diet to pay back and.

A

C

Like that's, why almost always we've sort of um um decided to to hedge, the etched exchange rate risk.

A

Yeah so from my point of view, it makes sense that maker should be penalized because we are not able to keep the peg, but as we are all here, we know that going forward the peg will be solved.

A

So obviously it's a bit odd to pay for something that we are sure will be service in the future. So I have started to search about. How can we make the edge ourselves?

A

Because we know it's a winning bet, but I haven't found a way for maker to do that. So maybe, if someone is smarter than me, maybe you can find the solution, but that will be the best solution. I think, but I don't know how to do.

A

A

C

It I mean yeah, I think, that's a difference, akiva's proposal of lowering the colonization ratio on stable coins. I don't think that just because I mean it would probably result in that, but there's other problems with that that I think, are not or not work. um I mean yeah we're opening up a whole whole kind of worms here if we start talking about lowering their primarization ratio, um yeah like.

A

Acupuncture, you seem to do it just one day when you repay, I think yeah, but.

C

A

Making 1 billion usdc is probably not safe, yeah.

B

No, no, that that wouldn't work, probably, but I'm thinking you know what what is the difference here with you know, considering maker and other financers, is that maker doesn't really are? Is there a plan to offer like a scheduled repayment?

B

um You know from maker side, or are we approaching this the same way we're doing with other world types right, because the biggest advantage um from borrower's side, if you borrow from maker, is that um the repayment schedule is pretty flexible right um yeah, but I guess we're gonna. Have you know something in place where we say you know this is the duration of this kind of loans, but in case we, you know we're not really strict about it. um The volatility doesn't really.

B

um You know it's not really a problem anymore or by a lesser.

A

B

A

uh Yeah, I understand your point, uh but I think it's a problem for the originator.

A

So it's a it's kind of a no limit loan that we are suggesting here, at least for centrifuge and I think every real asset asset.

A

But the issue is, we are giving the money lending the money to spv vehicles that will lend the money back to in the real world.

A

The issue is if they have no loan, but there is an interest they will lose money.

C

Yeah, so you can have you have this risk right, pretty much that um so the spv gets a hundred thousand died gives it to the borrower in dollars. um A borrower pays interest and therefore the spv is able to pay maker interest. 30 days later, the borrower pays back now. The borrower obviously stops paying interest, but if the die price now is one percent like 100 basis points higher than what it was when you sold it now.

C

Obviously you would have this loss, but you can't wait for the die price to go down either because, like there's still this debt, that's accruing interest in maker, and so you have to you- don't have a lot of flexibility in just saying. Oh, I'm gonna sort of wait on the diet price because then you're paying you're paying that interest that you're, that the spv is not getting paid interest.

B

I I totally get no, no sure I totally get this part, but what's the relationship between maker and spv, because spv actually makes the conversion from die to dollar.

C

I agree like this: this is not a risk to maker, I'm just saying like like these spvs are like, so these ass originators are like obviously working with maker, because they're hoping to get um a a source of capital that is attractive to them, but there's also a cost to doing that right, and this cost is like the the exchange risk today, and um I mean maker could say it's it's a thing for maker to say: okay, we want to actually subsidize real world assets to be settled and traded and die, because that's a good thing for maker right, like you want I'll, be I mean, and I'm I'm super bullish on the I I want everything to be used like the more we use die for all these things, the better right and therefore like I obviously want to like make this like pain for um for asset originators to settle these loans and die um cheaper by saying well actually like look like maker's gonna subsidize this, at least to some to some part by offering a lower stability fee, which is something that maker can totally do as long as it dies above the peg and when it's below, then it's not going to be a problem anymore, and then we've solved sort of both problems right um and so.

C

For me, it's kind of a win-win to say um you as originators should get a lower cost of capital. If they're, if they're doing these loans in um in die, as opposed to um to uscc, for example, or any other sort of like.

B

C

B

I totally get this point. I was just thinking you know what about? If maker is more flexible on the repayment timelines and say um you know, you can return the loan when the die price is more um more in favor of the you know, repairs. So they don't carry this additional cost of volatility or higher die price because from maker side we don't really have you know a cost of capital or something we're not limited by depositors. Who would you know on their moneybags, so maker is the biggest advantage advantage from maker.

B

Is that we can be pretty flexible on repayment schedules right? That's why I thought. Maybe it could be. You know, um you know what I mean.

C

Sorry go ahead.

A

Yeah you mean removing the interest rate.

B

No, no, no, no, not removing it's just when you need to make the actual repayment of die to make a vault. um It doesn't need to be. You know specifically on some date, but it's kind of depends on on that price, when it's more favorable right.

C

But I mean so then we have that problem right. That's like you need to you're, not you're, still paying interest while you're waiting, and so that's um that's, not something that you can afford to do if no one is paying for that interest.

C

B

Thought you could recycle that capital into another loan.

C

I mean, of course, yeah and in the majority of cases you will do that um um you will recycle it and so, like you, won't turn over the entire portfolio. Every every um sort of on loan maturity right. It's only it's only the difference, and so I could have to model out exactly how much it costs but like for everyone else right, like sort of involved in this, like investing in this portfolio for the astro engineers like there's, always a risk when the portfolio grows or shrinks that um there is this um exchange risk.

C

I think I mean it's, it's maybe a bit.

C

This like whole conversation is like, I think, maybe trying to like very tightly link these two things together, which is probably like the not it may be a way to look about it, but I look and look at it, but I think in the end it's like well maybe does maker want to subsidize the cost of capital to use maker because they have a need for for as collateral or does maker say they're going to charge the highest rate they can, which would be the the yield on the drop interest rate. Not.

A

C

Sort of like not giving any discount- and I think, for makers from maker's perspective actually like offering less than what the drop you what the yield is on these assets um is, is very much in their interest, because maker wants to have the most like maker right now.

C

At least right wants to have the most diet generated possible and so, like you actually want to kind of like give a lower rate, because otherwise, if, if the asset originator can get give, this pay the same interest to um to other investors that are willing to do it in uscc and get like this whole exchange risk out of the picture then you're um you're now, like you, haven't achieved some from maker's perspective right. You haven't achieved much from the asset originator side.

C

um They obviously don't care, whether it's usdc or I'm overly generalizing, but of course like for them in the end. If there's this huge risk on on dye, there needs to be, I think, a bit of a a a benefit to doing that, and so that's that's where this is coming from.

E

Have we have we thought about uh on the opposite side if die was below the peg? I know that it's it's history now and it hasn't happened for a while, um because in this case the in effect, actually the uh the asset originator would be on actually making an extra profit right.

A

E

We would be subsidizing potentially something that.

D

I know that it's.

E

Unlikely we haven't been there.

D

For a while guaranteed to happen again, I mean if, if an at a end, lender has a bunch of capital sitting outside the minute. It goes below one they're, a natural liquidity provider and they'll want to repay their loan. The real issue, though, is if it, if off chain lenders, continue to pull down more and more die when the price is below one maker, as almost like a defensive mechanism should either a increase, their cost of capital which well I would dispute that.

D

But really the next mechanism is just to constrain the amount of lending by lowering debt ceilings to inhibit lenders from flooding the market with more dye when it's below one.

D

The real solution is to have enough off-chain lenders such that whenever one party looks at it as being too low. Somebody else looks at it as a mechanism to repay their loan when you look at it in a mac in a micro perspective of just one individual lend code this this structure that issue becomes prevalent. When you have a portfolio of off chain lenders, they'll, ultimately feed off of each other, and that's you know where we're trying to get.

F

D

F

You matthew at the end of the day. I think that it's uh it's a similar situation when you're using fx or a different currency from yours.

F

But in this case the difference in volatility is much less, so you either hedge it and someone has to take the risk and that hedge will have a cost or you you kind of not hope, but you don't hedge it, and then the difference will will have an impact, and I think it was will that uh that mentioned the pack being on the 0.99 instead of the 101, and in this case you would kind of lose money when doing the initial conversion. um But yes, so basically there will be a delta.

F

If, if, when you have to repay the rate, is different from when you, when you withdrew the money. So I think that's the real risk. It's about the movement and not about being over or or or under.

A

Yeah, exactly if the height is the same at the beginning, at the end, it's not important. It's not relevant, but it's a variation of the rates that can be either a benefit or an expense.

F

Yeah and also there's, I think that we should consider the I'm not entirely sure what the maybe matthew or or lucas can help us a little bit more, but I'm not sure what the what the margins are right, because eventually someone could take the the bite and say yeah: we either we are more competitive uh and there's this risk or you can guarantee the lender. Hey the risk, there's no risk fluctuation risk, we'll we'll take the bite if that happens, but we're going to be less competitive.

F

So you kind of offload the the price on them.

A

Yeah but either you pay for the production or you take the risk or someone need to take the risk. Yes, and you can expect it is almost the same as paying for protection.

F

Yeah I mean when you, when you buy it, even when you buy eq like any product online on e-commerce, um and if you, if you do the calculations with the fx you're, probably better off, buying on usually us dollars compared to euros, for example. um So what they're doing is when they price in euros, they tell you hey, we can you can pay in your own currency? This is the feature for you, but we'll charge you two percent more. How much do you care about that two percent?

F

uh I guess that in this case it will matter yeah when you're buying, because I imagine that the margins are not huge um but again. This is this is something that uh that we can consider. Yes,.

E

Yeah um look, there's, maybe a question for you more: um how is actually usually the contract with those old dc desks in terms of like the hedging is it like for the for the whole maturity of the law or how? How is usually actually structured, actually the contract. The legal agreement with them.

C

um Like I mean this is like sometimes sometimes the asset engineers I've bought forwards.

C

um Sometimes one of the other things we look at is what we're looking at is if an otc desk would sort of just um give like a fixed price in and out um and and then um just factor in factor that in on their end, um I I mean like like it's it's a bit of a.

C

I think my opinion we're getting like a bit too hung up on like okay. How much does this is this like? Is this cost and like? Should we subsidize like the use of die in these assets by that amount?

C

um I I think the question I would be asking is like: is it worth it for maker to to outbid what, for example, retail investors would be willing to expect as yield, because, obviously the maker has today zero cost of capital, there's no dsr and there's a huge pressure on on maker actually to produ to mint more die.

C

So I think, like the the question I'm asking is like like, for example, right like these: are additional costs like there's, there's sort of stuff involved in getting these asset originators to actually start working with maker, and so um just doing doing being able to like offer being able to offer an interest rate or a stability fee that is lower than the yield of these assets actually makes sense from maker's perspective.

C

And that's that's setting the question to the community.

A

C

A

You come to the community with a proposition for the drop and the community can accept, or not I mean if you can have a better price in uh with another kind of drop in uscc.

A

While that's the market.

A

So, for instance, you can you can ask for a hop in a die with a six percent, and maybe you can offer seven percent in usdc yeah and after that, it's up to the community to decide. One thing is true: we cannot provide the usdc exactly. We will have either to take the six percent or say.

C

No right, there's no reason why maker, just wouldn't say: yeah we're like willing to pay five percent and the asset originator can take the one percent spread yeah.

A

C

The that depends on.

A

The risk assessment I mean if the exact.

C

A

Is lower than the five percent exactly.

C

A

Really care yeah if the risk premium is seven percent, probably it's not safe to make a five percent.

C

Investment at all right and then then it should be liquidated yeah. So what we're talking about is like- and that's I think, the the cr right, if these, even if these assets are yielding, say, seven percent. This is the example used then like. As long as the risk assessment is that actually it's safe to um charge a five percent stability fee should makers say we want seven percent just because the ma, that's the maximum we can get out or we'll make her say as long as die.

C

Supply is fine, we'll actually, as long as the dice supply is an issue we'll like sort of offer, the lowest cost possible.

D

um I think, on this whole topic of like maker charging, the most it can before people leave, or should they just charge like. But the important thing is that you can't charge um the most possible when dsr is at zero, because then the second dsr starts moving up, people are going to get pushed out. You also have to factor in the cost of hedging dsi.

D

So when maker is charging the highest cost possible that the borrowers will will tolerate, that that should be the cost of the risk premium and the cost of dsr and the cost of hedging gsa.

A

Yeah correct it's true that currently the dsr is at zero percent, but that can change and then it will be a risk for maker.

A

There can be a a world where we are paying more for the sr dsr then, for uh that the interest we get from a real asset and then we are making a loss.

A

But that's an issue we already have with with stable coins, so we will have to solve it anyway. I would say it's an issue, but we don't have a solution currently, okay, if no one has a question on uh die exchange. Maybe we can move to the next topic.

F

Just just one last comment: I won't say that maybe this is a problem akin to to getting a loan on on a fixed interest rate versus variable interest rate. So when it's variable it's cheaper, but it might go one way or the other and when it's fixed you fix it for for a price and of course it's it's more expensive.

F

So I think that's that's slightly equivalent. I don't know how it would work from the commercial point of view, so maybe matthew or lucas can weigh in there but yeah. That's that's my view.

A

So for matrix, it's a variable interest rate, but the viability is from the real world.

D

A

So it's not the viable interest rate that we can have in the crypto world.

A

And this is an important point and that's why I asked for the ability for the governance to be able to liquidate, maybe even if it takes a year or six months, because if interest rates are rising, obviously you don't want to still have a loan at seven percent. For for ten years,.

F

You know I meant I mean that having the floating rate is similar to having an interest rate, even if interest rate is fixed. So even if the dsr or the or the rate in the vault is fixed, this would be the equivalent. So you you either take it variable and it's cheaper and it might fluctuate to 0.99 or 101 or you might fix it and pay more and someone will bear the risk for you.

A

Yeah, but in both case as those are real-world assets, we are competing with real-world banks, so yeah the rates are coming from them and not yeah, and not from a compound to other platforms.

A

So is that, okay, for this another discussion about the maturity and the fixed versus viable interest rate.

C

Yeah, I think that's a good idea. I mean also like I guess it would be interesting here from to have like a first.

C

I mean I, I think for now right, like sort of doing this, with like sub 50 million die worth of debt like even even raising the dsr on, like the million die outstanding to like to like like quite a bit it won't. You won't run into an immediate issue of having huge losses in the protocol, so I would say, like this- is a problem we'll have to solve, like going from like 50 to 500 million and die from real world assets so like but yeah.

C

It would be super interesting to at that point and sort of leading up to that right, get like. Maybe I guess from the risk team. Mostly. I don't know how governance will think of that in the future, but start a bit of a a framework for managing liquidity, not just by adjusting interest rates sort of live every week, but having plan planning in like some some some part of the die being more stable in some part, obviously being less stable and then like seeing what makes sense.

C

So I guess yeah, that's really the the question that will come up.

A

Yeah, that will be a discussion for next year. I think.

D

Yeah, I think, if there's going to be different parts of the portfolio or some parts are more stable and other parts less stable like so you know there might there might be a fraction applied to the dsrs? Maybe some would be like 0.25 dsr another like 2dsr, but I think it's important that we use linear combinations rather than rather than non-linear, because once you start getting into non-linear combinations of dsr, it becomes very complicated to hedge.

E

Yeah, that's right.

A

Okay, let's move to the legacy, so it's not 100 percent for assets. I think it's more broad, but uh it's still relevant for assets, because if we had legal entities we could have this really well entity to borrow die from maker, make make the conversion in usd and then land the usd to reward the lender above.

A

But the issue is: is it possible to have a legal entity, so I started the thread which has already some some great feedbacks.

A

Oh I I haven't seen the last one, but during the same meeting perfect.

A

So if you have any input on that, please feel free to to add your pasta. I will read them and or if you disagree, that the dio shouldn't have any legal entity in the real world.

A

That's a position as well, so so we can either explore the solution when, for when the real-world asset will go bigger inside, let's find the other solutions. It's not an issue currently because for both.

A

Low-Skilled world assets either from the centrifuge or success we have other ways so for success. We use the trust model, so we don't have a need for a legal entity and for centrifuge we will be using some co-investors that will be that will enforce or at least guarantee, that the contract is safe between the centrifuge and the acetogenator and the lenders, but even if it works at a small scale, small small scale being still quite big.

A

I think that in the future we will need something more more strong to do that. So I don't know if someone has some input or question on those topics.

G

Hi everyone, this is priyanka from open law. um I was just asked to join the call- and I guess this is probably best where I.

A

G

um So I guess just to back up, I mean like we don't I I don't want to provide legal just to copy. I don't like provide legal advice or whether or not you should structure. I know that open law. We can definitely help you with the tooling to do that um and tie these smart contracts in some sort of like real world legal agreements. So whatever you end up whatever endpoint, if you do decide to do a legal structure, we can help.

G

You tie them to the smart contracts, um and I mean I would just flag which I just quickly scan skimmed. I would be weary, not. I would be wary if you guys decide not to do any sort of legal entity just because it would be classified as like a general partnership, and that means people would be personally liable potentially- and I just don't know if you'd want to open yourself up to that risk as a side there and as far as just the you know, sucking in real world assets via maker.

G

We have spoken to centrifuge in the past, about you know, putting the spv legal documentation on open law and kind of wrapping the smart contracts. I know you guys were talking about interest rates and the like, um so like with open law.

G

We can really take any third party data, feed or oracle and, um depending on whatever timing you want to trigger, you can actually feed that in to the agree like this living agreement effectively, um and so I just wanted to add that we can kind of help out um at least provide the tools on that piece. We really just need the legal documents um and.

D

G

I talked we talked to centrifuge back early summer, so I'm happy. I actually followed up with them this morning. So I'm happy to pick those conversations up again, but um I just wanted to share that and I don't know if that would be interesting um again. Sorry, if this is repetitive, I'm new here so yeah no.

A

No, no problem.

G

Okay, but that's basically the spiel here, so I don't know on the legal structuring side what you guys are thinking, but we're happy to uh help.

A

So if I'm correct, you are saying that you can uh take the smart contracts and make them kill world contract right.

G

Yes, so let me just kind of for those of you who don't know what open law is, give a brief background. um So with open law, you can really take any real world legal contract um and turn that into a dynamic data object. So you take the contract, use our domain specific markup language.

G

That markup language then turns the agreement into a json object. In that object, you can actually embed a smart contract. um You know that could be in this case, like a die transfer or something whatever the terms of the contract are, can also be memorialized in the smart contract. The legal agreement um and the markup language is tied to the smart contract itself. Both parties will, then you know they can actually read the contract, so they can read the real uh natural contract. Natural language contract agree the term sign it.

G

The signature gets memorialized on ethereum or whatever blockchain, and then the smart contract gets called. So whatever the transfer is can happen based on the parameters that were set forth in the smart contract and the agreement itself. um You know our smart contracts actually live in a secure scala environment off chain. um Like it's, that's how I like to think about it. It's like tethered on chain! So let's say both parties want to amend the agreement or the smart contract.

G

uh Stop it from running. You can actually sever the connection between the smart contract and and blockchain itself, so um that that's that's um kind of a high level of what we do. We have some other like bells and whistles when it comes to contract management and collecting data, but it's probably less relevant to the crowd here. Right now,.

A

Yeah but in this case uh it's a contract with a maker dio as an entity. Yes, so because, let's bring the issue that uh makadao is, is maybe a general partnership.

G

Yeah so so I mean you know we can yes that would that is separate from what I'm suggesting here I I guess I was speaking more in the context of the spv itself, but as far as like the legal structuring yeah I mean I didn't mean to take away from the what you guys are thinking about, structuring it legally but um yeah. If you have no legal, the default is general partnership.

A

Yeah, I know it's interesting that we can yes, that you can provide the the legal structure for smart contract.

A

But if we goes in this direction, that's all half of the problem, but the other half is who will sign the the contract and make a side. Currently we avoid everything by not having any contract at all.

A

So we can have the smart contract contract, let's say, but then we have to sign it and we don't want to sign it most likely, I think, uh as make a dab, because there could be legal implications.

A

So do you provide some services as well to make.

A

Limited liability subsidiaries, for instance,.

G

We don't actually provide the legal services themselves, um although, like you know it's, it wouldn't be difficult for us to like put together an llc like we have that you know that basic um framework ready, um but that's something that I I'd have to think a little bit more about.

A

Okay, no problem.

A

So is there someone in the audience that uh think having some legal entities and having contracts with your clients is a bad thing, because some can say that a maker is a protocol and should be a permission. S and a trust class and everything.

C

I'm I I am, I am of that opinion, and not not talking about centrifuge interest, but just in general um maker is not one legal entity operating in one legal jurisdiction.

C

uh It is operating many different ones with possibly conflicting business practices laws, and I think that it's gonna be very hard to try to tie it to one legal entity and so like the trust, like the sort of the representative structure that we have or the trust structure that matt's working on, I think ultimately solve this in a much much better way that doesn't try to turn maker into into a a general partnership but um but yeah. So that's that's just my opinion here.

A

Yeah, but it still is, I mean possibly, you can uh one asset originator can sue maker dao, for I guess many reasons.

A

Yeah, so that would be a student issue. Is it.

C

Is it, though, yeah? I guess it remains to be seen what the case law in the u.s around this is going to be for americans, but I don't think we've seen, we've seen token holders being considered as general partners in like sort of decentralized um networks um but yeah, but I'm not a lawyer and I'm definitely just speculating here. So I don't I'm just I guess yeah my expertise is there, but.

A

Yeah, we will see what happened with the lawsuit against the foundation, because it's the best example we have because.

E

B

Was there was a.

E

A

Because there were the major uh character, conductor and the originator of maker or maker of the protocol.

G

I mean the original dao was seen as a general partnership. I mean, obviously nothing ever really came of that, but um there's there's some writings about that.

A

Yeah I haven't found any illegal president. There was obviously as a dao yeah but as it's screwed up quickly never came out something.

G

A

They didn't have the time to have issues, I would say so and then I even found something else, but even the dao made a llc in switzerland for all the contracts.

G

E

G

um You know at the open law side we created the lao, which is a limited liability, autonomous organization, and I mean that that's more of an investment for investment purposes, but um I feel like something like and it's a delaware based entity like something like that could be sort of repurposed. um You know I would have to dive in to see exactly I'm not like a expert when it comes to like these spvs and what structure is best well suited for that.

G

So I don't want to speak out of term, but I think something like that could also work here.

G

A

But maybe I can start with making a pool just to uh to assess what the community want if we should pursue something in this direction or just say uh as lucas uh told us that maker is a protocol, so we shouldn't bother with uh the having legality in the real world, but I find that uh that we want to stay remote from the real world and still have loans in the re for real world assets.

A

For me, it's uh you. Can you can't have both? You can't be just the crypto world and still make loan in the real world, but yeah. I will try to to relax some pool to get the opinion of other communities.

A

We have a five minute left. So if someone has a question or uh want to bring the topic on the friday sets.

E

Yeah, maybe maybe one one thing to potentially cover that with priyanka as well. um It would be how how does actually the flow of risk actually goes for existing actors um should any actually class class action actually happen or any any legal action actually happen in the case of the real world. Assets um who would be actually kind of like the implicated part is. I think that would be also interesting to cover. I think uh sebastian you have.

E

um You have kind of like briefly mentioned, that on one of the posts, but but um I guess it's for the moment, it's more like um an assumption of how things would flow right, um so it probably would be good as well to to clarify um to clarify that like who would be the legal. I guess legal entities actually implicated should anything actually happen.

A

Yeah, that's a real question.

A

I'm not sure that, because we will be dealing more in the real world, we will have more lawsuits.

A

That's an assumption, I think so, but even without going the real world you can have lawsuit lawsuit. So when the foundation will be out of the picture in the future, someone else will take the role.

A

Maybe it will be a long for wisdom, but we will do to to clarify what will happen in this case, but I I'm not sure we can have the solution as it's quite new to have to have now in.

A

There is not a lot of legal history on the.

A

Subject but you are white, it's uh it's a concern.

H

Hey so I'm a little confused here, um so we are we talking about a legal structure for the entire dow maker now or are we talking about a legal structure here of just the spvs, um and how does this correlate to like entities that are maybe based offshore?

H

um You know if they're doing business outside the us, I mean I don't understand how there needs to be a legal structure that correlates to u.s laws. So I'm a little confused so because, because if you ask the whole community, do you want a legal structure for the dow they're going to say? No, I'm like 99.9, sure they're gonna say no.

H

The idea is to be decentralized 99.99.

H

um So I'm a little confused. What legal structure we're looking for.

A

Yeah, so there is many possibilities: one was to be to have a lao and have a legal structure from eckerdale in general. I'm not sure, that's very important and that will not be possible, probably because it's decentralized and we want it that way.

A

But uh my my feeling was more on having a legal entity just to do the real-world asset loans, for instance, with with mature.

A

So there is a contract between entities it's signed and there is no, and even if it if there is an issue, it stays within this legal entity and it doesn't go up to make her dab.

H

Got it? What about um what matthew has proposed, uh setting up a trust.

A

Yeah, so we we had a call with uh with matu, so I'm still working on on the details, but I think it's a it's a nice restriction, I'm just it's. She left to yeah with you, maybe mature. You have more to comment if it can work at a scale.

H

Yeah, I guess we need some some legal advice. I guess.

G

A

Because even for matu we need some maker representative, so they most likely will be exposed.

D

A

Yeah and you have to to trust, make a need to trust the maker representative.

A

So is that, okay with the community, one thing is true: it's not trustless.

A

It's you need to trust those make a representative, but you can have many, so it will be not that bad, but it's still an open question.

A

That's why I want to explore other alternatives, so we can submit to the community all the alternatives and the community can decide which one is the best.

A

But yes, currently we have more questions than.

A

A

So if there is, is there any.

E

Questions yeah, I think, sounds just like um yeah um a chat with um someone like priyanka or some some people that may have either themselves experienced with that or um or that actually can't have access to resources that actually have experience with those kinds of questions. So I don't know some examples like the guys that are doing like I don't know, tokenized properties and things like this. They might actually have already come through some of those same um issues.

E

I can try to chase up as well some people that I know that might be related to them, um and then we could actually have a bit of a session on on this, rather than us kind of just working out of a lack of jurisprudence on these things, yeah and then um and then um and then moving forward from there yeah.

D

Yeah hi um this is phil and I'm sorry that I joined late.

D

um I agree with that statement and um there's a number of things that that I can contribute and add to this discussion- um maybe not right at this moment but um happy to participate in in any further um discussions or meetings.

D

F

Sev, I don't know if it's possible, but I think it would be good to to document even if it's an overview of the different possibilities. Maybe it's already done um and then once we have that we could get like a panel of experts.

F

I don't know I don't have a better name or maybe, if we leave priyanka uh matthew avenue could join. I think we could also ask amy if the the legal slash compliance team from the foundation might be able to throw a hand, even if it's not in a in a binding way, but maybe they know things uh and again we could. We could have like a more productive call if we know the different possibilities and- and we present them in hey guys- we've done our research, we're blocked here, because we're not legal experts.

F

So, what's what's the thing to to move things forward,.

A

Yeah, but currently uh we are still exploring all the possibilities. So if some people have a id that wasn't that warrant explorer, maybe it can be fine as well to just send me a message or make a blog post on the forum. So we can have every solution and try to explore them.

F

Is saying that they can't? I know that they can't provide a binding legal advice, but we can say, like hey guys, has this been explored in the like? Is this something that you guys have seen and they can say like? Maybe you should try it or forget about it, I'm not saying that they should say like yeah. This is good to go. We take responsibility, but yeah. I don't know.

E

Yeah and here's martin there's uh the centrifuge also bieber is our asset originators.

E

Of course you know try to get as much of an illegal opinion from our lawyers and feedback back to you guys- and I think the plan for us really going forward is um to not have the make a dao community entering into any agreement but still make it for you. Mkr holders enforceable, um and I think the risk of- and you mentioned it, except of an asset originator suing you is- is comparably small because hey the value being represented by you know, these tokenized nfts in a maker vault is not comparable to a crypto asset.

E

That is exactly you concerned as a as a community uh that you have as real world assets because they are centered in the real world. They are basically centralized assets and not decentralized assets on the blockchain. So uh there is rather, I think, the bigger question for you guys is: how can we actually make this investment of maker the make a dao community into those assets make that enforceable? If you know this is the defaults, how actually we can assume that the spv issuing uh the tokens uh being as a collateral and a makerbot?

E

uh Can? How can we, actually, you know, get access to the to those assets and and force them to sell the invoices or to sell a property or whatever and then get some money back.

A

Yeah, that's another solution, right right.

F

Should we call it a day.

A

Yes, let's create a day, thank you very much for coming and the video will be posted very soon on the forum somewhere. Thank you. Bye, bye,.

D

Thank you, bye.