As it has become apparent that the Maker/Dai project is entering a new phase of growth, the core community of active governance meeting participants have been debating the need for a high level restructuring of the Maker project and organization to solve some immediate risk factors, the most significant of which are the fragility of the governance meeting and the unclear legal status of the undistributed MKR (aka the Maker Fund). The core community of active governance meeting participants appointed me, Rune Christensen, to address these issues, as I founded the project, have been present from its start, and have already been de facto assuming legal responsibility for the project.
After much debate and legal counsel, we came to the conclusion that the only viable solution to these issues is to transfer legal ownership of the undistributed MKR to a nonprofit legal entity (AKA a foundation). This entity will then take over management of the fund, and assume the core responsibility of overseeing the development of dai to its full potential while preventing any sort of negative external interference. It will also market and drive global adoption of dai as a world currency while ensuring that any leftover undistributed MKR is distributed in an egalitarian manner.
The legal process by which this will happen, is that I will first assert legal ownership of the undistributed MKR. The total 1,000,000 MKR currently in existence were originally created, owned and distributed by me directly, and as it never saw a transfer to a decentralized governance mechanism, nor saw a legal transfer of ownership, the consequence is that I still legally own everything that hasn’t yet been distributed. After assuming legal ownership of the assets, I will oversee their disbursement to a Swiss nonprofit foundation (Stiftung) that is currently in the process of being legally incorporated. The organization will be modelled after the Ethereum Foundation, and I am using the same law firm for legal services as they originally used (MME global).
The Dai Foundation, as it will be called, is going to be located in the small Swiss town of Zug, next to Ethereum HQ, Dfinity stiftung, Akasha Foundation, Shapeshift, Xapo, and many other of the world leading blockchain and Ethereum projects. These projects all chose Zug because of its globally superior regulatory framework, and to reap the benefits of the colocation synergies that are created by the crypto valley - the “silicon valley of crypto” that has emerged in Zug over the past years, which will eventually come to dominate the global blockchain industry. Because dai is both a project that has legal indecisions and thus requires a clear and safe legal environment and a project that benefits exponentially from network effects and synergy, it means that Zug and the crypto valley is a perfect fit for the Dai Foundation - getting established there will be a massive step forward for the project as whole.
To ensure appropriate governance of the foundation, a traditional board structure will be used to guarantee executive oversight. This board will initially consist of core community members, but will be expanded or reformed later as the community deems it necessary. Currently I’m the only person who represents the Dai Foundation legally, but as soon as the foundation has been legally established, I will nominate and select the board members in consultation with the community.
Now here’s a list of the top reasons why the Dai Foundation is going to be great for maker and dai:
Eliminate the legal uncertainty and risk surrounding the undistributed MKR - this will preemptively prevent any sort of political infighting regarding how the assets are managed by inserting a well-known, proven, and regulated model for governance of public goods.
The Dai Foundation solves the issue of unavoidable early centralization of dai with the best solution available: a regulated and financially licensed entity having administrative access and guaranteeing security of the alpha dynasty (which will be transitioned into a foundation multisig).
Organizational overhaul of the project that will learn from traditional management structure as well as similar organizations (such as the Ethereum Foundation) to better manage our development and financial resources.
Fix and reuse the mechanism of the governance meeting, which will be renamed the Community Consensus Call. By turning it into a non-binding advisory tool for the foundation to clearly understand the “official” community consensus, we both eliminate potential legal risk surrounding its participants, and end its potential as an attack surface against the community. At the same time we will preserve and improve the voice and influence the meeting can give to individual community members, and will continue using it as a tool for the community to directly micromanage some aspects of the project.
Having an official, legal entity will make it significantly easier to guarantee the important core characteristics of dai: 1) limiting the scope of maker to only ever be the dai stability mechanism (prevent DAO maximalism) 2) guaranteeing the neutrality and decentralization of the core infrastructure in the long run 3) guaranteeing that all income from the stability fees get funneled to MKR holders only, with no sort of rent seeking or special case mechanisms to funnel cash elsewhere.
The Dai Foundation will be able to take legal control of the trademarks and brands related to maker and dai, ensuring that we can protect them from fraudulent usage in the future, and will be better able to develop them and promote a unified brand identity. I will also transfer ownership of the makerdao.com domain to the Dai Foundation, which will then oversee its continued use as a hub for accessing reliable information about the maker system.
With a consolidated executive team I will be able to close deals and partnerships with other key projects in the ethereum ecosystem as well as institutional users/investors. We are in the perfect spot to engage the establishment with Polychain Capital backing and advising us, while acting as our bridgehead to the institutions.
Full deployment of the capital of the fund, using professional methodology to ensure the fund is well managed as it slowly diversifies out of MKR over time. A diversified portfolio of liquid assets in the Dai Foundation can act as a strategic reserve which can help dai survive total crashes or exploits in the short term. Whatever trading strategy the Dai Foundation ends up adopting, it will be subject to full transparency, scrutiny and input from the community - we will work together to make it the best and safest it can possibly be.
As a part of the plan to deploy the capital of the fund, the Dai Foundation will act as a keeper in the early dai economy. This means during the critical early phase of the project, the Dai Foundation can help guarantee vast amounts of liquidity to dai trading pairs and ensure all CDPs are cleanly liquidated. This role will also help ensure that open source keeper software gets developed and released to the wider community, helping to foster a diverse ecosystem of keepers. This relationship will naturally also go the other way, with the keeper community at large helping the foundation with responsibly managing its keeper activities.
Over time the return on investment into the technical infrastructure backing the dai (aka maker) will diminish, and we will only need a modest independent fund to ensure long term maintenance. If there is a significant surplus of capital leftover from the undistributed MKR, the Dai Foundation’s bylaws will ensure that the value of this capital is spread in an egalitarian manner as charity with the aim of benefitting the unbanked and financially disadvantaged of the world. A parallel mandate will be to continuously spread the adoption of dai and teach its benefits to the same demographic group. The increased adoption of dai by the unbanked combined with targeted charitable campaigns will be a significant gain to the dai ecosystem - the people that dai can help lift out of poverty over the next decades will form an important and loyal backbone of the future dai user base.
As I am already acting as a de facto benevolent dictator of the Maker/Dai project, and will only be increasing my involvement and management over the project going forward, I am of course extremely concerned with ensuring adequate checks and balances on my influence and decision making. Over time I will develop a comprehensive framework of this in dialogue with the community, but in the very short term I am going to promote using messages signed by MKR holding Ethereum accounts as an ad hoc mechanism for posting anonymous votes of no confidence. If a small amount of MKR holders have critical input they feel isn’t being heard, signaling with MKR will ensure I will take the issue very seriously. If a large portion of the MKR supply signals against my continued involvement in the Dai Foundation, I will terminate my position and let the board of directors find a replacement.
While we're at it, I also want to take this opportunity to announce some interesting releases the project has on the horizon:
OasisDEX rebrand and improvements to prepare for MKR getting listed on CoinMarketCap. The OasisDEX rebrand has been pretty lame so far (we haven’t even replaced the maker market logo yet on oasisdex.com), but this will all change once we have a dedicated front end developer working on it (which we're currently in the process of hiring). Once enough bugs and UX issues are fixed we will move to get MKR listed on CMC. If we’re really lucky we will have implemented order matching on Oasis by then, but it’s something that can’t yet be guaranteed.
First simplecoin release in a controlled environment. Simplecoin is a project that was developed with the goal of creating a framework for simplified stable coins that could be used for testing core stable coin assumptions and the process of administering and “keeping” a live stablecoin. One of the crucial parts of the restricted simplecoin is a prototype decentralized oracle system that will need to be significantly expanded and developed further to make it acceptable as the solution used to secure the price feeds of dai in the future.
Several explanatory videos coming out within 1-2 months. Proof Of Work is an animation company that specializes in blockchain explanatory video productions. They are in the final stages of production on a 3 part animated explainer video series on Maker/Dai that gives a general introduction of dai to the more casual audience. Meanwhile, a two part technical video using the whiteboard format will explain the lifecycle of a CDP to help shed light on the most essential building block of the maker system. This is only the beginning and we plan to release much more educational and promotional material in the short term.
Maker development team spotlight. Although they have been working on the smart contracts for almost 2 years, the developers behind the maker infrastructure are still relatively unknown. I will be doing a developer spotlight series compiling information about some of the brilliant people we have working in the trenches, to give the community a better idea of how it’s all being made, and to inspire confidence in the technical competence and reliability of the project.
More flexible MKR selling strategy. I have begun altering the selling pattern of the Foundation Fund (formerly Maker Fund) to increase the efficiency of our fundraising. As the fund currently holds almost 1 million USD of liquid funds (held as ETH), the daily sale amount has been reduced to 150 MKR, or 1050 MKR per week. Instead of purely selling into open buy orders at a continuous rate, the fund will try to sell MKR at the highest possible price (while still meeting its weekly target volume) in order to raise more funds overall. In the event of a sharp MKR price increase, the fund will increase sell pressure in an attempt to counteract a bubble from forming.
This post is also a one week notice of a formal proposal to the governance meeting: At the next governance meeting, one week from now, I will begin the preparations of the process to transfer the assets of the fund into the legal custody of the Dai Foundation (to be established). First step will be to propose at the governance meeting that the Alpha Dynasty is renamed to the Dai Foundation Multisig, that my legal custody of the undistributed MKR is publicly acknowledged, that the community consents to me temporarily administering the fund (in cooperation with the foundation multisig members, but with me assuming all legal responsibility), and that the Maker Governance Meeting cedes any notion of holding formal power (or acting on behalf of “maker”), and is reformed into the non-binding Community Consensus Call.