MakerDAO, an automated lending dApp, has become the most successful project yet in Ethereum’s rising decentralized finance sector. That’s largely thanks to the Maker Foundation, a non-profit organization that’s served as an early and apt steward of the dApp and its stablecoin, the Dai.
However, Maker Foundation’s leadership knows they will eventually have to step back for Maker and Dai to achieve real decentralization and fully actualize. The training wheels eventually have to come off, as it were, and Maker’s community must then step forward to take command of the steering.
Notably for DeFi, that time is now on the horizon. MakerDAO founder Rune Christensen used the project’s April 2nd governance meeting to chart a path to the Maker Foundation being formally dissolved in the years ahead and to having its responsibilities transitioned to a “self-sustaining,” community-run decentralized autonomous organization (DAO).
The 3 Pillars of Change
During that meeting, Christensen argued that a transition away from the Maker Foundation to a self-sustaining DAO would depend on three main pillars.
The 3 pillars of a self sustaining MakerDAO:
Elected Paid Contributors: experts hired directly by the protocol
Maker Improvement Proposals: formalized processes for decisions and operations
Vote Delegates: an ecosystem of "protocol politicians" that makes MKR voting easier
— Rune Christensen (@RuneKek) April 2, 2020
The first of those elements was “Elected Paid Contributors,” which would be specialists employed by MakerDAO’s community to carry out the key duties the Maker Foundation has been responsible for to date. Some of these EPCs will be organized on “domain teams,” e.g. a risk team or a marketing team, that will have unique authorities.
How these EPCs will work and operate still needs to be formalized, Christensen said, and beyond that the Maker Foundation will also need to effectively off-board its knowledge base to contributors to come.
The second of Christensen’s pillars dealt with Maker Improvement Proposals, or MIPs, which will be used to formalize governance decisions. The first 13 of these MIPs will be published next week and will get discussions going as to how the Maker community should proceed.
Lastly, the MakerDAO founder said vote delegation would also be huge for the DAO going forward. Voters already use the MKR governance token to make key decisions, but vote delegation hasn’t yet been possible.
Soon such delegation will be, though, and that dynamic will undoubtedly give rise to so-called protocol politicians: figures who vote on behalf of a faction based on a given political platform. For example, a person who wants many new collateral types approved in the Maker ecosystem could delegate their votes to a like-minded, more involved protocol politician.
Accordingly, vote delegation will probably lead to a few things, like larger amounts of MKR being used in votes and the development of a multipolar political arena wherein differing factions can keep each other in check and actualize truly decentralized governance. As Christensen explained on April 2nd:
“If Maker becomes a global actor, it is unavoidable that there will be a lot of political proxy wars of public figures fighting against each other for influence. That dynamic is always gonna happen. We just need a system that is resilient enough to deal with these non-optimal behaviors.”
MKR Auctions Successful
Christensen said the events of March 12th, or Black Thursday, has hastened the need for the Maker Foundation to work toward dissolution and prepping the wider Maker community for that major development.
Black Thursday was indeed Maker’s most challenging day yet, as ugly markets and acute liquidation anomalies left the lending system with some $5 million worth of protocol debt.
The good news for Maker is that debt was finally completely covered this week, albeit by emergency MKR auctions that inflated the MKR supply.
Accordingly, the episode provides an early and prime example for the kinds of crises that a fully decentralized MakerDAO ecosystem must be prepared to weather in the future.