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hello everyone I'm here to talk about
maker Dow one of the oldest and most
ambitious projects in all of etherium
that seeks to create a stable coin those
of you who don't know a stable coin is a
cryptocurrency that is stable with
respect to fiat currencies making it a
more useful form of digital money so
what is maker at its core maker is
comprised of two tokens the first is
called die this is the stable coin it is
an asset-backed hard currency this means
that every die coin is backed by some
kind of valuable asset and this is
because die is a permissionless credit
system and all die are issued when users
lock up their valuable assets in this
permissionless credit system an issue
die against them the stability of die is
maintained a system of dynamic
autonomous interest rates that
automatically react to emerging market
conditions and change the fees and
incentives associated with using this
permissionless credit system the second
token is called MKR it is the
administrative token of the system and
its holders comprise a decentralized
regulatory body who use token governance
to decide what type of assets are truly
valuable and can be used as collateral
to back the dice table coin in exchange
for their services
MKR is used as the fuel for the credit
system and when people repay die and
reclaim their collateral from the system
they must include some mkr as a fee
which is consumed by the system so what
have we been up to over the last year in
a word refinement this last year has
been all about removing complexity
adding simplicity paring down the code
making it easier to understand this is
not easy stuff a good day at maker last
year a good day often involved putting
one line of code on trial and
scrutinizing it and thinking about it
and at the end of the day removing it we
have used the UNIX design philosophy to
great effect in the maker Tao system now
I talked about this a lot yesterday so
I'm gonna sum it up simply today and say
the UNIX design philosophy encourages
programmers to write contracts that do
one thing and do it well and to write
contracts that work together what I'm
talking about is a modular approach to
system design focusing on one component
making sure it's right and then
composing these into higher order
systems this is not a new idea this is a
decade's old idea and we have leveraged
it to great effect in the maker Dow code
we have also sponsored the creation of a
ton of interesting developer tools and
repeatable smart contracts all the stuff
I talked about yesterday we pretty much
exclusively built in the pursuit of our
goals for maker Dow and so all of that
cool stuff is just one cool way that
maker has contributed to the broader
development ecosystem and it's something
that we're very proud to do here in
aetherium something else that we're very
proud of
achievement we're very proud of is the
creation of the purple paper the purple
paper is our Haskell reference
implementation of the dice table coin
system and it has been invaluable in the
design of dye the reason it has been
valuable are three
the first is comparison it is well
understood in computer science but
creating multiple freestanding
implementations of a system is a great
way to verify your assumptions and see
what kind of behaviors translate between
one and the other in fact the etherium
community has leveraged this fact to
great effect in the create in the
diverse client ecosystem that we all
enjoy and in the creation of multiple
implementations of the casper algorithm
similar sort of thinking there we did
this in Haskell it was very very
valuable the second reason is for
verification Haskell has a very advanced
type system especially when compared to
solidity we can achieve more
expressiveness and we can specify the
behaviors a lot more rigorously using
Haskell than we were able to achieve
with solidity and it has helped us to
think more clearly about the design of
the dice table coin system and the third
reason is simulation when you have when
you design something like this a
separate programming language you can
actually run it what I'm look what
you're looking at here is code of course
so the purple paper is actually a model
of the dice table coin system and we can
use it on the command line to simulate
the system and test our economic
hypotheses it will help with the
administration of maker over the long
term so all of this stuff so refinement
there's a high standard of quality these
investment in our tooling the purple
paper all of it over the last year it's
been culminating it's been leading up to
something
leading up to me standing on the stage
right now it is my great pleasure to
announce to you
that the first release of dye is coming
in December of this year so long we've
been working towards this for so long
I'm so excited I'm so excited I might
faint I'm so excited I may explode into
10,000 pieces of confetti on this stage
right now now I'd say this is the first
dye release because this is the first
major step on the road to formula
verification and all of the important
dye stability features that we need but
make no mistake this is a major step the
landscape of ethereum
to dab the landscape of dabs is going to
be changed forever when we have consumer
grade stability everybody knows that and
we have been working towards this moment
for years and we're ready
we finished our audit just two weeks ago
we are currently responding to feedback
and we are getting ready to launch this
thing I'm gonna go into some detail
about what is coming in this release
let's dive in and talk about the credit
system mechanics this will be especially
useful if you're not as familiar with
the dice table coin system so I spoke
before about how users lock up
collateral assets and issue die against
them this is done in what's called a
collateralized debt position a CDP and
users issue they create CDP's issue die
and use it for whatever and then later
they repay that die plus a fee and
reclaim their collateral but as you can
see in the diagram it looks like there's
more value in terms of collateral than
there is in terms of die why is that
it's because
the system enforces it and the reason
that it enforces it is because the value
of the asset the collateral fluctuates
and it always needs to be backing the
dye because dye is an asset back to hard
currency
so because the collateral value can
fluctuate the dye system needs to
protect itself
now if the value of the collateral asset
fluctuates up if it appreciates in value
that's fine if our diet doesn't matter
but if it fluctuates down and it loses
value dye needs to take steps to protect
the integrity the entire system and what
it does is it liquidates the CDP it
reclaims the collateral and it sells it
off or die to reclaim the dye that it
needs to get and make sure that all the
books are balanced you can think about
it you can analogize it to a margin call
where the CDP owner made a bet here they
were wrong and they pay the price so
what type of collateral is going to be
used in this first release of dye it's
called pooled eath and it allows us to
pack the system with ease and protect
the system in the event of extreme
market volatility in the next release of
dye and in future releases we will use
the MKR token to protect the system in
the event of extreme market volatility
downward volatility but in this system
because it's simpler to do so and
because we are still working on that
aspect of the system we use pooled eath
so let's go into a little bit how it
works we call this a bailout mechanism
let's go into how this work mechanism
works at the high level peth is very
very simple you just put your ease into
a contract and you get pass out and path
can be used to reclaim your eat
so if there's 100 eath and 100 paths and
you put any eath into the system you
will get one path maintaining the ratio
between path and ease but that ratio is
not static it is dynamic and the reason
it is dynamic is because paths have text
the system with this bailout mechanism
in exchange for that service half of the
fee from the CDP is used to bypass and
burn it destroy it so if you think about
it if we're buying path and destroying
it
taking that CDP fee CDP fee and
destroying it that means that the
remaining path has greater claim power
on the east here you can see it can
claim 1.5 years where before I was
saying it claimed 1/8 that ratio is
increasing and it's causing paths to
appreciate in value this is what happens
when the system is experiencing normal
levels of eath volatility but what if
the blacks want the dreaded Black Swan
event happens a Black Swan event the
price of ease rapidly loses value faster
than the dice table coin system can
liquidate positions and will we wind up
with is an insolvent GDP an underwater
CDP this means that the totality of the
collateral that has been issued against
this die is lower than the value of the
die itself something needs to be done we
need to collect this die somehow and the
way that it's done is by minting paths
so here this red area on the diagram
would be minted path and it's minted and
sold for die in order to keep the system
solvent so we're accessing the value of
the pool of ease in order to keep the
entire system solvent and balance the
books but as you can imagine
minting paths means that the claim power
is diminished
here we can see now one past claims 0.66
is causing the value to depreciate this
is why in times in times of normal
volatility should appreciate and only
falls in value in the event of these
snap moments extreme volatility the next
feature is the governance fee as I said
half of the fee is given to path holders
the other half is given to MKR as a
payment for their service administering
the system and choosing the important
security parameters that keep the system
safe this is paid in MKR as I said it's
denominated and die and here we will
have the first main use case for this
vision that we've all kind of thing been
thinking about when it comes to token is
this vision of decentralized exchange
whenever we think about tokens we often
think about the user buying them and not
even realizing that they're buying them
buying them behind the scenes
automatically without thinking about it
without even knowing about it
we have developed this technology for
this use case so users aren't gonna have
to think about em care but they're gonna
automatically buy it in a decentralized
exchange like Oasis or ether Delta or 0x
automatically and use it to close their
CDP's this M care will be burnt consumed
by the system the last feature is called
global settlement this is how we wind
down the system gracefully and it will
allow us to upgrade like I said be
graceful
this is an orderly process when the
system is globally settled by the MKR
holders a few things happen in order the
first is that Dai becomes a claim on
eath on the eath collateral at a fixed
price so it is as if
your dye which is an actively managed
stable coin suddenly became easy just
like that the fixed price next CDP
holders will be able to free their
excess path so if I put 100 paths $100
worth of path into a CDP and I issued
$80 worth of dye against it and then the
system was globally settled I would get
my $20 worth of pets back and whoever I
gave that $80 worth have died to would
get the other $80 worth of eath simple
orderly and then last the path holders
can exit to eath and whatever rate
exists for path at that time have a
claim power it has there are only three
conditions upon which the system will be
globally settled the first is in cases
of bugs this is a safety precaution you
can never be too sure until the system
has been formally proven the second is
extreme events of market irrationality
we're all used to this encrypted
currencies it's something that we are
quite certain won't be happening and die
both of these things bugs and market of
rationality but it's something that
we're prepared to handle nonetheless and
by market of rationality I mean
something like an unstoppable amount of
demand for die that threatens its very
stability and in the third case is in
terms of upgrade or in cases of upgrade
this is definitely going to happen
because as I said we have another
release of die coming which is going to
have more important stability features
and this will be an orderly way to go
from the old system to the next system
so what's coming next a lot of exciting
things we're gonna be working a lot on
exchange integrations this means that
you're gonna get by trading pairs is
gonna be a great base pair to trade
against and we hope to get our CDP
system integrated into exchanges so that
you get safer borrowing with much lower
rates margin trading at 1% sounds
awesome the last feature is of course
the last aspect there going up we're
going to be working on is of course the
importance ties stability features I
mentioned a few here there's a few more
that I can't get into but we're gonna be
heads down over the next quarter working
really really hard to get the next
release of dye out there which is gonna
be even better and even closer to ready
to the to the final formally verified
product we are so excited that we've
been working for so long on dye
we're so excited to deliver a working
DAP to you this is something that we're
really really proud to put out there and
I think that it's going to like I said
completely change the landscape of
ethereum getting consumer-grade
stability if you're interested in
learning more please visit maker.com
there's a lot of information there you
can join our chat chat maker.com thank
you very much
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