Babbitt Column | DeFi Review Special: Maker's Leap of Faith

Written by: Cao Yin

This special DeFi Review will specifically comment on the latest series of decentralized community reform measures proposed by MakerDAO.

After the Maker Foundation proposed to dissolve the Foundation in the future on April 1 and hand over all operations to the community, the Maker Foundation released 13 very important MIPs on the forum yesterday (April 7, 2020) (Maker Improvement Proposal), these 13 MIPs will become the core basic mechanism of future Maker decentralized governance, so they are called "Genesis MIPs" (Genesis MIPs). These MIPs are divided into three categories:

  1. MIP0: Maker Improvement Proposals Framework, or MIP framework, which is the constitutional document of the future Maker decentralized community governance, which clarifies the role of various MIPs, the process and cycle of MIP proposal, implementation and action, and the role of MIP related personnel, etc.
  2. Core Foundation MIP Series (CFMS: Core Foundational MIPs Set)
  3. Collateral increase MIP series (COMS: Collateral Onboarding MIPs Set)

In the most important MIP0 and CFMS, the Foundation proposed three major reform measures for Maker's future self-sustained and decentralized governance:

  1. The community hire contributor (EPC) replaces the Maker Foundation to perform Maker daily operations and association maintenance.
  2. Community governance and protocol updates are proposed through MIPs, and MKR votes to decide whether to implement
  3. MKR holders can authorize "voting agents" to make decisions on various governance votes

Thirteen MIPs will be voted on April 27 by the community to decide whether to continue to vote, or to postpone another month for the community to propose new MIPs to replace the thirteen MIPs proposed by the Foundation.

From the perspective of the comprehensiveness and detail of the MIP content, the Maker Foundation's thorough decentralized design should have been researched and prepared for a considerable period of time, not an emergency move after the 3.12 plunge. However, the 312 incident made the Foundation's complete decentralization plan more urgent. At the same time, the occurrence of the 312 incident and the discussion after it also prepared enough community heat and thought preparation for this decentralization reform.

There are many highlights of this reform that defi community deserves attention:

First, the concept of community employment contributors (EPC) shows that DeFi governance has entered an era of specialization. As DeFi protocols become more complex, DeFi Lego becomes richer, DeFi participants become more diverse, and ordinary community participants have become Not enough financial and blockchain knowledge to manage complex DeFi protocols like Maker, let alone innovation.

In addition, the staff who are actively participating in the governance of Maker in the form of volunteers have the problem of unequal rights and responsibilities. If we only rely on the dedication of community volunteers, it is difficult to ensure that the governance and operation of Maker can continue in the long term. The payment of compensation and even the form of employment will enable the core personnel involved in the governance of Maker to assume corresponding management responsibilities and provide the basis for the future community appeal mechanism (Appeal).

Secondly, the voting proxy system proposed by the Foundation is the first attempt of "stream democracy" in DeFi. The Maker Foundation attempts to solve the problem of inactive voting by MKR through the agent system + voting economic incentives. At present, Maker's voting participation rates are very low, and all voting participation rates are below 10%. The voting rate reflects the representativeness and legitimacy of Maker's governance decisions, and the current low voting rate also brings governance The potential risk of attack is not conducive to the long-term development of MKR.

Finally, the combination of the MIP governance system and the voting agent system will make Maker's governance model one step further to the governance model of the modern country. The voting agent will act as a member of the modern parliamentary democratic system, through its prominent social identity and well-known The reputation of governance, or a clear governance perspective, attracts MKR holders, and passes or rejects MIP proposals on behalf of MKR holders.

Although according to the Foundation ’s MIP regulations, anyone can submit a MIP proposal as long as it conforms to the MIP format. However, from the perspective of professionalism and interest-related enthusiasm, the role that is most willing and suitable to propose MIP is still a voting agent. Therefore, In the future, the voting agent will become the de facto member of Congress and will assume the most important role in the Maker community, soliciting opinions, proposing bills, approving bills, supervising EPC implementation of bills, and submitting impeachment and replacement EPCs.

In addition to the highlights, this Maker reform may also cause very significant governance challenges:

  1. Will the system of hiring contributors and voting agents in the community cause Maker bureaucracy, and can these professional managers really put the interests of MKR holders and users above their own?
  2. The MIP system is already quite complicated. How to lower the threshold for ordinary MKR holders to participate in governance?
  3. There is a binary split in the Maker governance system, and the interests between MKR holders and Vault users are not completely consistent, and sometimes there is even zero sum opposition (such as the 0Dai auction event), should Vault users be given certain governance rights ( Such as the governance practices designed by Compound)?

The Maker Foundation's reform, whether successful or not, has historical significance for Maker and the future development direction of the blockchain. This will be the first in-depth decentralization of a large-scale blockchain community with active applications try. If successful, Maker will prove to all mankind another possibility of finance and governance. Even if it fails, Maker's exploration will leave important experience and lessons for other DeFi.