Ethereum DApp Creators // Issue #09 Maker
In the previous Issue #08 we talked about vDice and their gambling platform running on Ethereum. You can read that and all the previous issues of the series along with our Ethereum Contributors Series at https://blog.status.im
On this issue we’ll be talking with Rune Christensen who is the founder of MakerDAO about stablecoins, decentralized exchanges and different facets of Maker.
This interview series is about the people who work hard to develop decentralized applications on top of Ethereum.
Maker consists of several things: Dai is a project that aims to create the first decentralized stablecoin on Ethereum, MKR is a speculative cryptocurrency that gives price exposure to the success of Dai, and Maker is the organization and infrastructure that makes it all work.
Formerly known as Maker Market and initially developed by the same team, OasisDEX is one of the most successful decentralized exchanges that are currently running on Ethereum, and was one of the first DApps integrated with Status.
With their own token and a decentralized exchange to support it, along with other tokens, Maker is in a unique position to foster the transition away from centralized exchanges, and also to form a piece of infrastructure to provide the ecosystem with a stable crypto-token. They recently announced their intention to incorporate as the Dai Foundation, so we decided to reach out to get more insights into the project.
Hi Rune, glad to have you here for the interview!
Rune Christensen, Founder of MakerDAO
Could you first tell us who you are and what is it that you do at Maker? How did you get started with all this?
I first got into Bitcoin in 2011 because of the obvious ramifications of blockchain technology for personal sovereignty. I then focused on BitShares, which is the first project to successfully create and maintain a functional decentralized stablecoin. Then I discovered Ethereum and the immense potential of permissionless smart contract scripting and decided that what Ethereum needed was to integrate the best of BitShares.
I am an entrepreneur who ran an expat HR agency in China after graduating high school, as well as several smaller crypto projects that failed, and the founder of the Maker community. I am temporarily acting as a so-called “benevolent dictator” ensuring that i can preside over a calm period of early growth that remains fully inclusive of all of the most active community members.
I also want to ensure that the surplus of the project (which is more than 450,000 MKR — 45% of the total supply) goes to charity in the event that we are able to complete the technical milestones of the project on a lower budget.
Now, what is Maker? What is your vision for it?
The goal is to create a new, neutral world currency with equal benefit and access for the whole world, inclusive of both big business and the unbanked. We achieve provable and secure price stability of Dai by using a diversified portfolio of Ethereum tokens as collateral. The Maker community of MKR holders is extremely important for the operation of the system, and we cooperate using both forum and chat software as well as weekly public voice meetings.
Maker exists in the context the Oasis, an abstract term describing the aggregate liquidity that is openly available through decentralized exchanges or autonomous economic agents.
Screenshot of OasisDEX running on Ethereum Mainnet
Speaking of Oasis, you also have OasisDEX running which is a decentralized exchange, what benefits do see decentralized exchanges providing over centralized ones?
Decentralized exchanges have two main benefits over centralized exchanges. The first is security: a centralized exchange that holds “naked” crypto in e.g. a multisig or cold storage will always be susceptible to hacking or social attack vectors. It can also be forced by legal means to forfeit its assets to a government. A decentralized exchange (with formal verification) cannot be hacked, and assets traded on the exchange cannot be frozen or controlled by any third party (unless the assets themselves are centralized IOU’s).
The second benefit is economic efficiency: Centralized exchanges are owned and operated by for-profit companies that needs to take a cut of every trade to stay afloat. A decentralized exchange doesn’t need any sort of fee built into the system, beyond the gas costs of making the Ethereum transactions for using the smart contracts.
Maker’s OasisDEX running on Status alpha version 0.9.6. Click here for HD version.
Why did you originally choose to use Ethereum?
Maker can only perform well if there is high quality assets available as collateral for Dai. As Ethereum is the leading platform for cryptographic tokens — both protocol tokens (ETH, REP), app tokens (GNT) and IOU tokens (Santander USD or DGX) — it is the natural place for the core Maker decentralized infrastructure to be deployed.
While we are committed to use Ethereum, we also plan to ensure that Dai will be seamlessly usable as a stablecoin on every blockchain, and that users will not see any difference in performance from using Dai on another blockchain than Ethereum (so Dai will “feel native” regardless of what blockchain you are using in the long run).
How do you see that stablecoins will benefit the Ethereum ecosystem?
A healthy Ethereum ecosystem needs a stablecoin in order to accomodate mainstream users, who will not accept a user experience involving excess volatility.
As an example, for a decentralized prediction market to see mainstream adoption it will be necessary that users can use a stable unit of account for their bets, or they are in effect making two bets every time they use the platform (because they’re both betting on the prediction, as well as the future price of the volatile asset they use as currency)
What was the reasoning behind forming the the Dai Foundation? Can other Ethereum projects benefit from this?
The primary motivation was to pre-emptively prevent infighting in the community around the question of how the huge amount of undistributed MKR should be handled.
I am personally strongly of the opinion that the surplus of the project must go to charity, doing so will be unprecedented opportunity to improve global equality.
Do you think that the Dai will impact people’s lives? Do you see it disrupting existing systems?
I think Dai will both disrupt and complement the existing financial system, both at small scale with individual companies and startups getting more direct access to credit, and also at large scale by creating a new tool that global economic stakeholders can use to coordinate global monetary policy with the global economic outlook.
The Dai could help save a lot of cryptocurrency traders from falling victim to another Mt. Gox as Dai will allow them to easily speculate on cryptocurrency using decentralized exchanges without having to deal with neither currency volatility risk or counterparty risk. I also think that Dai and stablecoin is a missing link in the stack of the majority of other Ethereum DApps (such as Augur and gambling DApps, as mentioned before).
The Internet of Things is another market where Dai may provide a lot of value, because Dai as a currency and a credit platform is optimized to service machine users.
Finally there is the unbanked — currently something like 25% of the worlds population do not have any access to financial services and suffer significantly as a result, which is made even worse by the fact that these people are already the poorest people of the world. Dai will allow every single person on the planet to access the same level of banking services that is currently available only to residents of the developed countries, but with the added benefit of having cheaper fees, being faster and easier to use, with strong security and focus on user sovereignty and empowerment.
Do you think that Maker would benefit from a mobile user interface?
For Dai to succeed it will need to have a pristine brand that users are comfortable and familiar with on every platform. Having an innovative and high quality mobile interface like Status will be crucial for us as mobile is an especially important platform for the unbanked, which is an important demographic that we plan to target both as users and also as the target of our charity efforts.
Which other DApps in the Ethereum space do you think Maker could benefit the most from?
Maker benefits immensely from almost every single DApp on Ethereum. Any DApp that has a token of any kind contributes to Dai stability because it can be used as collateral, and platforms that provide services where Dai can be used as a currency also are a big benefit to Dai adoption — such as Augur, Melon or gambling DApps or derivatives platforms.
I’m also especially excited about the VariabL and StabL platform, because it will be possible to use this style of platform to create Dai-backed stablecoins pegged to other national currencies, such as USD or EUR, creating a class of decentralized stablecoins that are more relatable for mainstream users.
And which of these projects are you personally most excited about?
Augur because it is a high profile decentralized platform and arguably the flagship of the Ethereum ecosystem in terms of public exposure. Digix because it plays an important role as collateral for Dai.
Taking a glimpse into the future, what do you think is the biggest advantages for Maker when moving forward? What do you see as the biggest risks?
Code security is both our biggest advtage and risk. Because Maker is decentralized, the biggest short term risk we have to protect against is a vulnerability in the infrastructure allowing an attacker to steal the Dai collateral. To mitigate this we have invested heavily in code security and best practices in smart contract design. We have been working tirelessly for almost two years to do everything we possibly can to make the safest possible codebase.
A second and also significant risk is legal issues, especially issues around KYC and AML of the core system. Our positions remains that as Dai runs on a fully decentralized platform it is infeasible to enforce hardcoded KYC at the system backend, and instead this kind of legal compliance is the responsibility of user-facing applications or advanced users that interact directly with the system.
The biggest advantage of Dai is the total transparency of the system, which allows all users unrestricted access to audit that the stablecoins are fully collateralized and solvent, in real time, down to the last Dai.
ZK-snarks as a native service would be huge for Ethereum, as it would immensely benefit Dai and make it the best currency for anonymous use.
In your opinion, what’s the most exciting feature of Maker?
The CDPs [Collateralized Debt Positions] and the decentralized margin trading platform that the CDP system creates. Enabling free and open access by everyone to borrow money “directly from the central bank” could bring about a dramatic shift in global finance and significantly improve liquidity worldwide.
What is required of the end-user to be able to use the Dai, and when do you think it will be available to a wider audience?
There is no barrier to entry of any kind for mainstream users to use Dai as a stablecoin. It will be like using Bitcoin, but with better features and of course price stability. Our main hurdle will be to have a strong and trustworthy brand presence. It’s also likely that many users will end up using Dai without even knowing it, as a sort of “back-end asset” backing other financial products (as an example, a Dai-backed stablecoin pegged 1:1 with the U.S. Dollar).
We originally estimated Q2 2017 for the alpha version, but now that we are also taking care of the legal issues and will be spending extra time to diligently implement changes to our rollout that have been suggested by our lawyers. As a result I currently expect it to be delayed to at least Q4, however I am generally not a big fan of giving deadlines and I have no qualms changing or delaying a rollout if I think it’s necessary for security or usability.
What can people in the Ethereum community do to help Maker?
The most important thing will be to use dai for trade and on dapps. But as it is not yet available, in the short term it is to buy MKR and become an active community member by joining chat.makerdao.com and reddit.com/r/makerdao.
Active MKR holders are very important because they are the ones who are responsible for researching and discussing the theories governing the risk parameters of the Dai collateral portfolio. How successful Dai ends up becoming will entirely depend on how smart and proactive the MKR holders are, and how good they are at working together and maintaining a coherent and reactive hivemind that is able to prioritize long term stability and fundamentals over short term greed and irrationality.
And what are you looking forward to from the year 2017?
We will be launching our prototype stablecoin called Sai (Simple-Dai) very soon for public testing.
Thank you Rune, we will be eagerly waiting for the release of Dai, and will keep an eye out for the other things to come out from Maker.
A Mobile OS, built for Ethereum.