🎙87 - The Future of MakerDAO | Rune Christensen

welcome to bank list where we explore the frontier of internet money and internet finance this is how to get started how to get better and how to front run the opportunity i'm ryan sean adams i'm here with david hoffman and we're here to help you become more bankless david we've got an og on the podcast og from a founder perspective also an og protocol this is rune christensen from makerdale what did we cover what were some of the highlights for you yeah this is actually i think two podcasts in one uh so the first half of

this show is all about a tweet thread that arun put out that captured both your and mine attention and it was a technical argument about why things will likely collapse down to one single ecosystem and so where previously like maximalist arguments have generally been one of mostly emotion and people speaking their bags roon does a fantastic job of actually articulating a technical rationale for why there will

likely only just be one layer one blockchain that will succeed uh at least with regards to smart contract platforms that have defy on them so he goes through the game theory about why defy apps might actually align themselves with one specific chain in lieu of i'm going to say i'm going to say it dave because he said it it's like an eth maximalist take right sure yeah i mean we also go through the uh go through a section with room about like well we can strip away the names of these things and

just talk about the concept of layer 1a layer 1b layer 1c one has greater levels of adoption one has minority levels of adoption but yeah if you want to add like names onto these things like roon is saying well for maker dao putting maker dow first and putting being a maker down maximalist it actually game theoretically makes sense to commit to one chain and one chain only and so roon takes us through that argument which i find personally i find very compelling um and that's the first half of the show second half of the show we go through roone's recent proposal on

the maker dow governance forums about uh making die quote-unquote clean money and pointing maker dao's abilities of being a capital generation facility a credit facility towards things that combat climate change and having make or dao being climate aligned and branding die as this clean money that when you use die you are actually helping combat climate change down the line and the mechanisms for that are simply allowing uh capital

to be directed and make your doubt to fund things like solar farms or sustainable energy farms or things that help out actually help us fight climate change and this has been one of the big bold cases for crypto at large you know back in 2009 10 11 12. the we had no idea how this would actually get done but we did understand that crypto can help coordinate against problems that are larger than nation states and to this day nation states continually to illustrate their lack of competency with

being able to tackle problems that are bigger than themselves and so it's very very cool that we're seeing and a defy app on ethereum take up the mantle of being the thing the coordinating body that can actually go after climate change because like roon says so many people are just in denial about it or they've given up hope it's like he said in the show it's gone from uh climate change denialism as in just being blind about it to climate change dumerism saying well we know it's going to it's we know it's real but like it's

too late to do anything about it and so it's optimistic it's awesome to see something in the crypto world take the climate change problem head-on or at least that's what roone has proposed and so we go through his proposal and all the details around that yeah absolutely so bankless listeners this is like a two-part meal for you i think the first meal is where we talk about why uh why uh crypto will have a layer one power law winner and why roone actually thinks that might be ethereum is probably going to be ethereum which is an interesting take in the second course i think counteracts a lot of fud

that we've heard uh just in general in the mainstream let's call it you know maybe senators politicians regulators and just like mainstream institutional news that crypto is bad for the environment well brune is proposing that maker become good for the environment every time you you buy die or own die that is actually a plus one for environmental like reducing environmental externalities and helping climate change so super fascinating conversations again if you want to take this in two parts that's probably a

recommended way to digest it these are all tied together though david in one way which is the future of maker what is the future of this og d5 protocol that's been with us since inception and you know one the answer seems to be ethereum and layer twos and the second seems to be this clean money narrative at least that is what roon is proposing but what does he get to control he's just another governor on the governance forums now that the maker foundation is decentralized that's a fascinating

conversation in and of itself you are definitely going to enjoy this one with roone christensen before we get to the conversation we want to thank the sponsors that made this episode possible bankless is proud to be supported by uniswap uniswap is a new paradigm in asset exchange infrastructure instead of a cumbersome order book system where trades are matched with other humans uniswap is an autonomous piece of software on ethereum which is what ryan and i call a money robot no human counterparties or centralized intermediaries just autonomous code on

ethereum input the token you want to sell and receive the token you want to buy something brand new in the uni-swap ecosystem is the uniswap grants program is now accepting applications for grants we have been saying this for a while and we'll say it again dows have money and they are in need of labor if you think that you have something to contribute to the uniswap dow apply for a grant to uniswap just look at the size of the uniswap treasury it's almost three billion dollars this mountain of capital is looking for labor do you have

something of value to contribute to the uniswap dow no matter how big or small your idea is you can apply for a uni grant at unigrants.org and help steer uniswap in the direction that you think it should go that's exactly what we did to get uniswop to be a sponsor for bankless and you can do the same for your project thank you uniswap for sponsoring bankless the era of proof of stake is upon us proof-of-stake systems like ethereum terra and solana allow the industry to move away from the hot loud and wasteful proof-of-work systems and

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we are super excited to introduce you to our next guest this is roone christensen's he is the founder of maker dow he's he was building crypto before ethereum was even a thing and he started maker dow before d5 was even a thing maker dow has pioneered some of the most fundamental components of this industry really the foundations of d5 when you think about a decentralized stablecoin when you think about decentralized governance when you think about daos all of this started with maker dao back in 2016. it was actually my first love and

my first fall down the d5 rabbit hole as well um so we're going to unpack a lot of these topics with uh roon we're going to talk about some of his threads about layer one we're also going to talk about the future of maker dow how he sees it evolve into a green money type platform a clean money type platform there's so much to discuss on this episode first i just want to say roon welcome to bankless you are an og sir it's fantastic to have you really glad to be here yeah i think it's

going to be exciting okay so i want to start with this question because you know you've been in crypto for a long time i've been crypto for a little bit um some years in crypto feel exhausting right some feel exhilarating there are times in crypto i feel like super optimistic about the future in the direction we're headed there's other times where i just feel like jaded like i'm done with it like this short-term thinking and you know chasing after scams is too much for me um i want to ask you

is that how you feel as well like do you do ebb and flow between these things and how are you feeling about crypto and d5 right now i think rather than sort of ebb and flow between it i more like have both feelings simultaneously at all times i guess it's the best way to describe it you know it's like i mean it's like that bell curve meme right you really got all the extremes you got so much of the the most sort of inspiring and amazing stuff you'll you'll ever see in your entire life right you'll you'll just re scroll through that on twitter

coming from some weird uh avatars and then at the same time yeah there's like the dark side of crypto as well right it's like the good all the good comes with also an incredible amount of of bad and and frustration and scams and you know what you can call it incentivize stupidity and all of these things that really you know it's frustrating that that's how it is but but you know i've over my many years in crypto and you know my my origin as a bitcoin

maximalist back in the really early days i've just come to accept that that's just what it's like basically that's what this space is like and you just have to sort of accept and live with that and then i guess try to focus on the positives so you you've come uh to peace with things then it sounds like you've you've kind of reached this this state of zen where you can live with both of these realities simultaneously and you you don't let one get you down or the other gets you like too excited you're just like you know focused on the future

yeah absolutely and i think you absolutely need to be able to do that too i mean work in a space and i guess especially to to um you know build a project and and try to really make something new right i mean that's something that it's sort of the uh i mean yeah i remember just uh some advice some some wisdom on that topic right it's from i think it's from kane from synthetics that had this quote of something like if you haven't been called a scam yet in crypto

you know keep working hard one day you'll make it right because that's a part of it right that there's a you know that that's the thing about where the negativity the sort of the the bad side of crypto follows the the good side of crypto and they're both fundamental and interconnected and uh you have to be able to to deal with it or you'll just it's just not for you right you shouldn't be shouldn't uh give away your life force to to something uh if you can't really handle it we we absolutely close every single

bankless episode with this line it's not for everyone right but thanks for joining us on the bankless journey and i totally echo that crypto is not for everyone it's a it's an emotional rollercoaster out there and uh and things get uh absolutely crazy but but let's talk about something crazy that happened in a good way for maker recently uh you guys have been up to a lot of things this year but um something that more recently hit the headlines was a society general sg we'll call them which is a massive frank

a bank based in france in france they just posted on maker dow's governance form and apparently they want to uh inject 20 million dollars in collateral and their bonds as you know as part of the the maker um you know collateral platform and this is so interesting to me i want to hear the details from you about kind of the specifics of what they're trying to do and why but what's super interesting to me is we've actually reached the point where the banks are

coming to defy how crazy is that uh but but tell us about this what are they doing here why is this meaningful what is what is kind of the bond that they're proposing injecting as collateral to back die yeah i fully agree that the most the most sort of uh shocking part of it is this like what now the banks are coming to d5 it just seems like it seems a little too early almost a little surreal um but actually for me the thing that really was crazy about this is i had

just no idea it was in the works at all you know so that's really the sort of showcasing um you know decentralized organization right so i was like just super surprised to see it and just like what i'd have to like google it and be like we're talk is it a real bank this thing it's the third largest bank of france that was like you know that was uh that was pretty mind-blowing um and but yeah so so what's going on is that it's ceceta generales hard to pronounce but it's their um

the blockchain subsidiary sort of experimental subsidiary that's doing this kind of d5 blockchain fintech you know cutting-edge innovation and experiments and trials with that kind of stuff and so apparently last year they created a tokenized bond so there's been this bond living in ethereum for quite a long time already that's basically yeah like a some kind of a real bond in a token format that's been done i guess under

french law um as an experiment ultimately and so now they've reached a point where they've i guess they're starting to look at okay we've created this thing you know can we actually go and use it in d5 um and so so so i guess then they uh they've been in and they've been working together with some of the the contributors the decentralized contributors and maker that are being paid by the protocol to to support it they've basically been working together with

this uh society generalist blockchain subsidiary to um yeah like prepare this proposal to make um and and yeah and one of the things that's also sort of another mind-blowing thing that also just really showcases the you know the incredible potential of d5 and really this fundamental power of money legos right is that so this token they made a year ago as an experiment it's it's an erc20 token and it just out of the box it fits right into the

standard maker collateral um you know like like um interface essentially right so like there's not even any technical work in all of this there's like the work the the sort of the barriers that were necessary to overcome for this were i guess basically the legal work on on the bank's side in order to to figure out whether they could do this legally and then the work of like writing the proposal and that's actually that's it basically which is kind of

crazy i think um and then of course when it comes to the actual like the actual sort of the uh the qualities of the collateral and and and how it's useful to make her i mean then i think one thing a lot of people immediately noticed is that this bond they have so it's a euro denominated bond with a 0 interest rate basically so it's basically like a like a bond that's not that's not um it's like a five-year bond right so it's not super liquid but it doesn't actually pay an interest rate and that's of course because in europe we've got some pretty serious

negative interest rates going right now so people will actually like they're very happy to just get euro at zero percent but of course that means that it's it's going to be hard to charge a high stability fee um from you know buy maker on on this use when this bond is using collateral and i really think the role that that this kind of asset can play and also just generally this kind of collaboration between maker and these very very large institutions that are sort of sitting in in um

you know squarely in traditional finance with all of the scale and and sort of interconnectedness that entails is really that they can provide liquidity to maker right so so it's a way to basically have some of the maker and some of the dye collateral um in in a form that is is somewhat similar to the role that usdc is playing right now and and packs a stable car as well where i see is like liquidity reserves that are sitting there ready to to protect the pig

and basically make dye very liquid and very useful um but then this would be a way to sort of take some of that exposure and move it over to you know just like a completely different type of exposure right instead of being to a stable home provider it's with a huge bank and it's a different jurisdiction right it's it's french french law and i think that's quite desirable because i mean that's one of the biggest topics in maker governance for well very long time at this point is like how do we diversify out of

all of the usdc that's sitting there right so i think that's that's great and and there i mean there's a very clear sort of way that this is spent at a beneficial relationship that that can be developed further and but i think the final thing that you know that's really the what really matters of all this is the president that it sets right i mean one thing is the fact that you now have one of the world's largest banks and the third largest bank in france they've gone through sort of the legal work of figuring out whether they can use their

tokenized assets as collateral and maker and basically they're saying it can be done right i mean that's why they've gone so far and so to stake their reputation on making this proposal right and that's really a huge deal i mean that's it actually sets not you know obviously it's not a strong sort of legal precedent or anything like that it says right it's not anything like there's been courts or you know law firms making legal opinions and publicly stating that this is legal or anything like that but

what the thing is is i mean the way that the the world works is when you have something like a huge institution like a bank they're you know they're part of the system right like they're and and it really matters when a part of the system starts to sort of reorient itself it's gonna it's you know that's gonna impact how easy it is for other parts of the system to do the same thing and uh yeah this is i mean i think this is this is really it really changes the landscape of um which jurisdictions are friendly to d5 i

mean in particular it it makes france a lot more like a a much safer place basically but i actually also think it impacts the entire eu um so yeah so i think that's a huge deal and it means that it could be a lot easier for future interactions like this to happen and maybe also not only would it have to be these kind of liquidity type of of uh collateral assets but you could also have financial institutions offering other other kind of stuff for maker to to use as collateral maybe stuff that

actually provides um you know has the potential to provide real stability fees as well rooney may this isn't just some like lucky happenstance outcome because some bank chose to do some defy stuff the maker dao as an organization has had its sights on real world collateral for a long time now and can you perhaps um elaborate on the point as to why sg bank chose maker dow instead of something like compound or ave or any of the other

credit facilities in defy what about maker dao the organization there may was such a um compelling place to submit a governance proposal for something like sg bank why why maker so i mean i don't know because i wasn't a part of the process really so i can only guess but i would i mean i think the obviously the one thing to really notice just like the sort of the um the age the brand the sort of the the history of makers being

this sort of old conservative um d5 project right and and then there's the fact that we've had this focus we've had this sort of um you know we've had a lot of communications and and spend a lot of effort trying to educate and talk about um you know the potential of defy interacting with the real world um so i guess on the on that sort of front sort of the when it comes to like who would you know who would a huge conservative bank choose as their

partner when taking their first steps into d5 i think it makes sense that that they would go for maker because that's kind of that's exactly the kind of role that we've been setting ourselves up for for many many years at this point um but i think an even more sort of practical reason is because maker is a really the only place where you can go with something at pace uh you know zero percent interest and still get the you know people that are perfectly happy to accept that right because we're sitting with so much usdc where we're makers sort of the one place where

risk really matters so much more than than the return essentially right so so that's where a bank can really provide something that's that's useful right like if they went to compound and up it just it wouldn't fit into the systems because you just there's just no place where people will park money to get zero percent in return right that that doesn't really work with their systems um and uh yeah i think that you know

it's also that that in because of dye's interconnectedness and sort of existence across d5 it's also just a way for them ultimately to tap into sort of the whole ecosystem right because by tapping into die they kind of actually end up tapping into to activity across the whole the whole space i think this is a massive step for d5 it may be one of the biggest markers of uh i guess institutional adoption of a d5 protocol that i've seen like i mean it's a uh it's a real world bank one of the

largest in the world posting on maker governance forms and submitting their collateral like how crazy is that how bizarre is that hard to imagine back in 2016 2017 when you guys were first firing this whole thing up so super cool step and really excited about it um roon want to hit on this this next topic which is uh super interesting to me i came across a thread that you published i guess a couple weeks ago i felt like this thread hit really hard this was a twitter thread and i'm just going to maybe summarize a

few points and we'll get into them one by one but um it was kind of a criticism of the multi-chain future and also criticism of the multi-sig future that a multi-chain future inevitably brings with its bridges we're going to explain that a little bit more but just some colorful languages you called multi-sigs a dumpster fire right they're used as bridges at least not in general but they're used as bridges from chain to chain you also said and this was very provocative on a very long time scale only one layer

one can survive only one layer one can survive on a very long time scale you just didn't you didn't just tweet that you had actually a justification like backing up why you think that might be the case and then you also said game theoretically um d5 protocols that are on ethereum they probably won't support other chains it's almost like this version of let's call it ethe maximalism light i know we're not talking about toxic maximalism but d5 protocols on ethereum will want to have their home chain be the winner

so i want to dig into these topics and maybe let's start with the first let's talk about multi-sex dumpster fire duct tape what what is a multi-sig bridge can you define that for our listeners and then why do you hate them so much yeah i mean it certainly is a complicated topic but actually i think the most important thing to really define first and and that wasn't actually completely clear in in you know because of how these terms are used

right but there's there's a multi-chain and then i guess there's what i'm what i'm really talking about which is multi-l1 um and uh because because the distinction between like a chain and an l1 that's very significant right because and that's kind of the what i'm really talking about is l1s and and what happens when you have multiple other ones and the base it comes from this the fundamental um perspective that an l1 is essentially a blockchain that sort of goes out of its

way to be independent and be and actually sort of not interconnect elsewhere right so so um if you look at all the different l1's that you know in practice they're called eath killers right and that's basically because they're positioning themselves you know as alternatives to ethereum rather than as something that's fundamentally built to to synergize and to tap into ethereum's network because i mean and and i really would argue that in practice like if you're just trying to make if you just think

coming from the perspective of you know i'm making i'm going to make a blockchain i'm going to make enable dfi i'm going to make sort of a you know block you know blockchain business blockchain economic ecosystem and all these things right like the number one thing you're always thinking about is like if you're trying to optimize for a good blockchain a good environment for people to build the main thing people care about which is why they're using d5 and why they're using blockchain is is um you know interconnectedness essentially right like this this um

interoperability right the synergy uh permissionless innovation monitor goes this is kind of the entire value proposition right so the the um you know so there has to be like a really compelling reason to sort of deliberately exclude that which is then which then becomes this sort of this l1 narrative essentially right which is this idea that you can be a self-sovereign you know dominant blockchain essentially that can have its own ecosystem so it's already

like basically you already from the beginning you're sort of defining these things as being separate and being distinct and being in some form of competition um and it's then from that perspective that you can then draw this you know draw this um conclusion of like the multi-six and the the multisig bridges because i mean the basic idea is that um when like the reason why someone uses blockchain well it's because they want interoperability but it's also because they want security right i mean that's

why they're not just going on some you know centralized whatever right like some centralized service right they're actually going and and finding you know using a blockchain so they have control over their funds and they have you know um they have sort of an an understanding of of what kind of risks they're exposed to and even if a user isn't doing that explicitly then instead what's happening is they're using a platform which is actually even more sort of obsessed about what what kind of risks is this platform this

you know this may be this custodial solution what kind of risks is it exposing its users to right so security always like it it plays this fundamental role um and in particular this like this sort of the task of like figuring out you know what kind of security are you expecting and what are the risks that you're willing to take and and all of this stuff right and and that's kind of where the problem comes in because every single l1 they sort of offers their own perspective on this right so ethereum it's like you know you want

you have this this uh you know you want the the users to run the nodes and you have all these like sort of this more against more pure approach uh towards decentralization where instead on the other hand you have something like solana which is like actually you don't need all that you can have an l1 that just does x y and c and it's to some extent it's like users that use either that that's adopt either of those perspectives they have they have very different expectations of what security means like what is security

basically and what is decentralization um and so that's why basically all bridges in my opinion ends up being multi-six actually no matter how you construct them you can pretty much think of them as multi-six no matter what because you're not gonna handle real quick when you're talking about a bridge you're talking about like if i want to get my tokens my dye let's say from ethereum to solana or from um ethereum to avalanche or from

you know polygon back to ethereum that's the that's the bridge that you're talking about it's it's trans transmitting from one l1 to another l1 through some sort of bridge right yeah and actually it's a little confusing because the terminology back in the day used to be that this is called a gateway and then a bridge is when you do the kind of the swap so you do an atomic swap cross gene but i guess now it's sort of yeah like a lot of other terms it's

become a lot more sort of abstract and you just kind of yeah what i'm talking about is are these transporting assets from one so go so go into that some more why why do these bridges suck so much and why do why do they become multi-sigs and why do multi-sigs like create kind of a a centralization vector that's duct tape as you said yeah so i mean so it's basically that i mean i guess the best example is ethereum and solana