Not exactly - the USDC is issued by Centre https://www.centre.io/ (founding members Circle/Coinbase), which invests the USDC in short-term money market instruments and holds these investments in custody with various institutions in the US (this is their latest attestation report chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/Ushering in the next chapter for USDC).
Currently, any income on investment by Centre is not distributed to USDC holders. I suspect that the motivation for this proposed deal is customer retention. Instead of converting our USDC into dollars (thereby reducing the total supply of USDC) - it is locked into custody with no impact on the supply of USDC. Instead, Coinbase is sharing some of the investment income received on Centres’ short-term investments - (that indirectly they will probably receive in some form from profits made by Centre - my speculation). Therefore, the level of risk is a function of the custody arrangements.
Generally, as I understand it, Coinbase provides segregated custody and cannot re-hypothecate or use the USDC Maker would custody for any purpose. So they won’t be using the USDC to make any income - it just sits in custody until Maker removes it - so there wouldn’t be any “celsius” type risks.
Assuming MKR token holders want to proceed with onboarding this proposal, I am sure that a complete MakerDao legal assessment of the proposed custody arrangements would be completed to determine to what extent other parties could have claims on Maker’s assets - say, in a bankruptcy situation and the necessary information provided by @Growth-Core-Unit, and @strat-fin-core-unit regarding the nature of the custody arrangements.
What exactly is the point of DAI compared to USDC if a significant % is backed by USDC and now Circle and their affiliates manage 1/3 of MakerDAO’s PSM? People joke that DAI is just USDC with smart contract risks. That’s just a joke though, not something to actually and make into reality.
@adcv “Which is to say, highly underinvested, with knock-on effects that reduce the protocol’s ability to take risk and its attractiveness as a stablecoin.”
Who evaluates a stablecoin as the more risk they take with funds that are supposed to be to secure the peg, the better!? I don’t think that’s a real thing that happens.
Thats not at all what he said. Earning a return on your assets should be a self-explanatory concept. Higher revenue at the same risk = higher DSR which makes DAI more attractive.
This is just frankly stupid, insane, retarded, insanity.
Do you want to move USDC OFF-CHAIN to a 3rd party entity (CEX) just to make ~25 mil USD a year for token holders? We need to get out of USDC. This is basically just asking for the government to call up Brian or Jeremy and freeze things even more effortlessly than onchain. Circle itself is a bit more safer, but this is effectively moving from a bank to a broker who has the highest risk of getting screwed by the government in the next five years.
Having USDC in a PSM is better than having it in some holding account with the U.S. government by proxy. So this is taking us backward and even more centralized. It makes zero sense.
That’s not what I mean. If we onboard billions of dollars but collect no fees we end up with no surplus buffer and no ability to bear risk eg of losses during a liquidation. That’s what I mean.
Honestly haven’t seen much MKR news of import that would actually change sentiment toward the protocol. Sometimes it feels the project is languishing and not really going anywhere. From the perspective of a smaller investor who really does want MKR to succeed, I encourage the community to take this offer. With how slow the RWA efforts are going, Coinbase is giving you a lifeline to strengthen the balance sheet and lessen the time pressures you’re faced with while you figure out how to better decentralize your assets. In one fell swoop you can put all your assets to work without losing that all important liquidity. Yes, Coinbase is still a centralized entity but it’s also tied deeply to this space and I’d like to believe that this proposal is one that partially comes from a desire to help MKR and strengthen the entire defi ecosystem. Use this opportunity to get profitable and stay there while you work.
To Coinbase, I wonder what happens to the institutional rewards POC (what is this?) rates at the end of 2022. We’re pretty close to the end of 2022 so it would be wise to figure out how the terms might change in 2023.
A very interesting proposal that would allow Maker to move part of its (non-yield bearing) PSM into a product with at least some yield.
Three questions come to my mind:
1.) Where does the yield structure come from? Any way to negotiate these numbers upward? Or make it variable to match the market? As Rekt suggested…
2.)
I second that, although we do have exposure to US regulation with USDC as it is. This is the fly in the soup for me. The proposal would generate yield but would not diversify our existential risks. If anything, it increases them. We would then have two US companies controlling large parts of our assets instead of one.
3.)
Given that we do not have an arranger for this MIP yet and that it would probably be wise to ramp up the amount the arranger handles over time, I was wondering what @CB_Institutional’s plans in 2023 and onwards are?
Since the MIP13c3-SP12 - Declaration of intent to invest in short-term bonds, the @strat-fin-core-unit is at work under the “Researching and proposing ways to optimize the balance sheet allocation” mandate.
We are working to provide a full toolbox to MKR holders to optimize their balance sheet.
While we are earning less than the risk-free rate here, it should be noticed that, so far, it is the only solution that should be able to respond “quickly” to a liquidity need.
It is also showing the acceleration of the RWA deployment where each time we can go further based on the previous work.
Given recent discussion of censorship resistance and the future of DAI I would have thought this is a regressive step because it exposes an existential level of Maker’s treasury to yet another highly exposed, US-centric, public company’s regulatory positioning.
Of course this is perfectly reasonable if MKR holders feel that Maker & DAI have decided they want to head towards full US regulatory compliance - with whatever OFAC and other censorship burdens that brings - but I was not aware that was the decided direction of travel for Maker & DAI…
I will of course be supporting it fully and help to vote it through, alongside the other major yield proposals in the works, as they are fully aligned with the Endgame Plan and the strategy of Pigeon Stance - first we need to double down on RWA and focus on generating as much short term income as possible, that we can use to accumulate Staked ETH to give us the option to later switch to a more defensive stance if/when the risk of RWAs become too high.
The estimates I’ve seen is that we should expect 70-80 million in yearly revenues with just this first wave of yield generation activities. That doesn’t mean we should keep splurging on the current badly structured version of the Decentralized Workforce, rather we need to reduce the recurring budget as much as possible so we maximize the surplus that can be used to accumulate decentralized collateral with the Protocol Owned Vault.
If we can get revenue to 80 million per year, and reduce costs to 25 million per year, that gives us a yearly surplus of 55 million. The current version of the Protocol Owned Vault Emulation MIP specifies a leverage of 1.8x, which means we would be able to use this cashflow to accumulate almost 100 million USD worth of Staked ETH per year.
Add to that that there is still more Dai demand available to allocate into higher yielding opportunities, and that with the Endgame Plan we would begin driving Dai demand through MetaDAO yield farming, our changes of accumulating a decently sized protocol owned vault over the next 3 years are looking good.
One important thing to note that seems to be hard for people to grasp - from a regulatory/legal/seizure risk perspective, this proposal changes nothing - it’s no different than holding USDC. And from the Endgame Plan perspective, there is no realistic way to wean off RWAs in the short run, hence Pigeon Stance doubles down on RWAs and instead maximizes income to build up the capital necessary to make it realistic to limit RWA exposure in the medium term.
This is a powerful proposal indeed. It’s aligned with the metadaos structure, as it could be managed by one of the protector metadaos (as the arranger), it’s an efficient way to get revenue from the PSM, and as all MIPs, it can be discussed by the Maker community and MKR holders will decide what to do with it. I hope everyone here and in CT understands that because of the impact of this proposal, it has to have a legal and risk assessment that will help MKR holders and delegates to make an informed decision.
Good points, however, would like to see a few detailed solution from you on how else can Maker earn revenue.
This is a bit of knee-jerk reaction wouldn’t you say? Maker also incentivises delegates, should we look to reduce delegate incentives based on how much opportunity they create?
True, cutting expense is one way, but we also need to generate more rev. What would you say the roadmap and items within look like?
Let’s face it, IT IS about money. Show me one person who is willing to put in the work for zero monetary return. All the drama that has unfolded inside is the DAO has been to grab cash, from upset aspiring facilitators who would happily badmouth Maker to anyone who doesn’t agree with losing their valuable position that’s making them a sweet bit of living.
This is all to be proven - we have no information regarding strategy nor custody. So this assertion is not based on facts. Looking forward to hear more from @CB_Institutional
Leaving aside any comments about the proposal contents, some changes will be required before we can put this into a governance vote. Currently, this MIP does not meet the correct formatting for a MIP as listed in MIP0c7 - here is a direct link to the template that should be used for MIPs. One of the @MIP-Editors can help with formatting if you need assistance.
Hi, I invite you then to create another proposal to get same revenue or close, cuz at the moment Maker SB is getting drained. Or just a proposal to reduce the exposure to USDC. Thnx!
This needs a careful structural and bankruptcy analysis - if Coinbase enters bankruptcy, how quickly can Maker get its collateral back (and what is the collateral?)?
If the collateral may be tied up in a bankruptcy court for months, this would be a notable risk. If the collateral isnt short term treasuries, this would be another notable risk.
Until you understands these risks, you dont really know if the yield is enough for the given risks
It is good to understand these details but it’s also helpful that Coinbase is a public company and you should be able to keep tabs on its financial health. They have over 6 billion in cash right now though they did lose over a billion just last quarter. I wouldn’t worry too much about bankruptcy risks in the near future but it is something to keep an eye on. Let’s hope it doesn’t come to that though because a Coinbase bankruptcy would have huge negative impacts on all of crypto.
