MakerDAO is transferring control of MKR from the Maker Foundation to Maker Governance. Holders of MKR can vote on changes to the agreement, following the principle of one coin and one vote. MKR can also exchange for the platform's stablecoin Dai; this helps its stablecoin and lending products run smoothly.
Beginning on December 20, control of MKR is handed over to the Maker Governance smart contract, which is distributed to the governance community. The company wrote in the announcement that this would further advance its goal of network decentralization.
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The Foundation will still retain control of the tokens for approximately one month to ensure a successful transfer. Afterwards, "MKR holders will be given full control, which means that decentralized governance will be the only way to change the MKR authorization."
The following is the full text of the announcement:
In the Maker agreement, MKR plays two roles. First, as a system's governance token, MKR allows holders to vote on amendments to the agreement. Each MKR locked in the contract is equal to one vote. Secondly, through the system's automated auction mechanism, MKR supply will float. During the debt auction, MKR was created by the agreement and sold in exchange for Dai to cover outstanding debt, thereby increasing MKR supply. In contrast, in the case of excessive supply, the agreement will sell excess Dai in exchange for MKR and destroy it, thereby reducing MKR supply.
Considering that MKR is very important for the health and normal operation of the Maker protocol, protecting the security of MKR contracts has always been the responsibility of the Maker Foundation. The transfer of MKR control to Maker Governance shortly after the release of Multi-Collateral Dai (MCD) was planned from the beginning. With the release of the MCD, the agreement worked as expected, and the transfer of control has now been arranged.
Beginning on December 20, control of MKR will be transferred to the contract, and thus to the governing community, and we will continue on the road to decentralization. The foundation will share token control with the contract within one month to ensure a successful transfer. After that, MKR holders will gain full control, which means that decentralized governance will be the only way to change the MKR authorization.
To understand the transfer process, you need to have a deep understanding of the structure of the MKR token contract.
There are two addresses in the MKR token contract, which determine which functions can be called, and who can call them: Owner and Authority. The owner address (currently set as the multi-signature wallet of the Foundation) can call any function of the MKR token with full permission. However, the authorizer address can authorize calls to specific, restricted-level functions (for deeper control).
The foundation created a custom authorizer contract for MKR tokens: the MkrAuthority contract. This custom contract has undergone extensive design review, testing and formal verification, providing a specific permission set for MKR tokens to enable key features of the following contracts:
1. Debt Auction smart contract, creating MKR at the end of the debt auction.
2. Surplus Auction smart contract to destroy MKR at the end of the remaining auction.
3. Burner Contract, used to pay the SCD stabilization fee when MKR is destroyed.
4. Governance Contract, used to control future permission changes of MKR contracts.
In addition to transferring control to the community through decentralized governance, the successful operation of the MCD system also requires MkrAuthority. It authorizes a debt auction to sell MKR tokens. Similarly, it is also responsible for authorizing the remaining auction contracts, destruction contracts, and any MKR-containing addresses to destroy the tokens they hold.
Once the destruction contract is triggered, the MKR therein will be destroyed, thereby reducing the total supply of MKR to less than 1 million. It is important that no one can destroy another person's MKR without approval-even the owner or authorizer of the token cannot do so.
Regarding the transfer of control, two steps will be taken first:
1. Deploy MkrAuthority contract on the Ethereum mainnet.
2. The deployer sets the DSPauseProxy of the governance layer as the root of MkrAuthority, so that the decentralized governance has complete control over MkrAuthority. This is because DSChief, as the main governance contract, ultimately owns and controls DSPauseProxy.
This step was taken on December 20:
The Maker Foundation multi-signature sets the token's authority address to the address of MkrAuthority.
Finally, after waiting a month to ensure that the new configuration is okay, this multi-signature will eventually be used to set the owner of the MKR to a zero address.
A strong, highly engaged and proactive governance community is essential for the growth of the Maker ecosystem and the expansion of DeFi. The transfer of MKR control from the foundation to Maker Governance is the latest important step towards a decentralized system.