Dialogue with MakerDAO: Solana is not our only option

Interview: Jack, BlockBeats

Organized by: Sharon, Luccy, BlockBeats

Edited by: Jaleel, BlockBeats

Since the "Escape from Ethereum," discussions about MakerDAO have been incessant.

Maker is the oldest DAO, with MakerDAO's annual revenue exceeding $142 million and project expenditures over $44 million. At this scale, MakerDAO has been struggling with coordination issues for years.

To address governance challenges within the MakerDAO ecosystem, this veteran DeFi project announced the Endgame project, which has drawn dissatisfaction from a number of VCs, including a16z, leading them to sell off all their tokens.

On September 1, MakerDAO founder Rune Christensen posted an article titled "Exploring Branches of the Solana Codebase for NewChain," which instantly sparked controversy. Ethereum founder Vitalik sold approximately $581,000 worth of 500 MKR the next day and exchanged it for 350 ETH, leading to rampant speculation about MakerDAO's "escape from Ethereum" and "offending Vitalik."

Related reading: "Offending Vitalik? Where is MakerDAO headed?"

The crypto community has generated various speculations about the future direction of MakerDAO.

Today, during the TOKEN2049 conference in Singapore, BlockBeats exclusively interviewed MakerDAO founder Rune Christensen about MakerDAO's governance and public chain disputes, from which we can uncover some underlying stories.

Through Endgame, MakerDAO Seems to Have Found the Answer

On August 7, MakerDAO co-founder Rune introduced on Twitter the upgrade of DAI and MKR to a unified brand, temporarily codenamed: NewStable (NST) and NewGovToken (NGT), along with all key elements of Maker Endgame.

Endgame is the practical implementation of Alignment Engineering for the Maker ecosystem, which will develop in four main areas over the short term. Each will be gradually implemented over about a year. Previously, the brands of Dai and Maker were separate, as were their user bases. MakerDAO hopes to change this with a new unified brand, creating more consistency between users and governance.

The most critical point is: DAI and MKR will continue to exist! The upgrade is an option. The new unified brand will focus on making it as easy as possible for people to start using stablecoin products, DAOs, or both.

The temporary codenames are: NewStable (NST) and NewGovToken (NGT). The revaluation of MKR to NGT is 1:12000. NST will be able to mine NGT tokens.

In addition, subDAOs are undoubtedly the biggest feature of Endgame, as community governance is an issue that no cryptocurrency project can escape. MakerDAO clearly has a deep understanding and experience regarding this issue. Rune believes that to govern a community well, one must "simplify," breaking down the large and complex system into various subsystems, and the goal of Endgame is evidently to achieve this.

Related reading: "Merging Dai and MKR Users: After Dai Deposit Rates Rise to 8%, MakerDAO's Brand Restructuring"

Avoiding Two Extremes in MakerDAO Governance

BlockBeats: Many venture capitalists, including Vitalik, hold differing opinions on the vision of Endgame. Has your continuous buying of MKR over the past few months been a way to show confidence to the outside world? What are your thoughts on Endgame?

Rune: There were many large MKR holders in our ecosystem who engaged in some institutional-level transactions with the foundation years ago. I believe their motivations were actually based on how investors typically operate, which is to get a good deal and then exit. But now we have a new batch of institutional MKR holders who are trading entirely in the market; this is a completely different situation, and they are true believers in the system.

Generally speaking, they buy MKR because they understand the ultimate goal to some extent, which makes me very happy, as I was initially disappointed with cryptocurrency investors. But I think these new institutional supporters are showing a different side; they are believers in technology and the possibilities of the future. We need to pursue something that can create a meaningful and valuable "dessert" for the real world, which is the combination of decentralization and blockchain technology with reality.

This combination exists in reality, not beyond it, and therefore must be shaped and adjusted to fit reality. More and more cryptocurrency holders, enthusiasts, and contributors are realizing this, and it is difficult to succeed if you lean toward any extreme.

BlockBeats: A problem that almost all DAOs face today is that top venture capital firms hold large positions, but when it comes to voting, is it the community or the top venture capital firms that are in control? MakerDAO has also experienced this issue. Do you think MakerDAO governance will inevitably fall into these two extremes, where either venture capital firms control everything or the founding team controls everything?

Rune: I believe both scenarios are unlikely to succeed, as most cryptocurrencies have not achieved this. The governance issue is particularly severe; we see that almost all governance is completely broken. Even projects like MakerDAO, which are relatively less broken compared to others, still require profound reform in the way the entire system operates.

This is the core idea of Endgame: to solve governance issues, the only way is to simplify. You need to make it simple enough to ensure that decisions are made as they should be. The approach of Endgame is to rebuild the fundamental processes of governance and then reshape the entire ecosystem based on that, allowing them to adapt to each other, thus making the governance process strong enough while keeping the broader ecosystem and decision-making simple.

These two can be combined in reality, ultimately becoming a paradigm where users, ecosystems, and communities are the ones making decisions. While ideally, they shouldn't need to make decisions at all, if you really want to eliminate disputes, politics won't work in a large DAO environment. The key to eliminating disputes in Endgame is to document everything.

This is a model; as long as the system is simple enough, we can try to pre-determine all decisions because there are fewer variables. You need to make decisions in advance so that you won't encounter issues like contributors not completing their work. You need to make decisions based on assumptions rather than on specific people or issues. Because if it involves specific people, the entire political world will instantly affect the decision-making, but if you set the rules in advance, you can apply them fairly.

Another key point, which may be a critical factor for the success of Endgame, is that we simplify the ecosystem through subDAOs. We break down the currently large and complex core system to find answers for every possible hypothetical decision. By dividing complexity, functionality, and specialization into these independent subDAOs, we simplify the core system, which only needs to set boundaries around the subDAOs without needing to micromanage them, thus eliminating 90% or even 99% of the complexity.

SubDAOs Are More Easily Integrated with Local Cultures

BlockBeats: Regarding subDAOs, some have pointed out that these subDAOs may struggle to survive or thrive because they need to be accountable to both the core of DAI and Maker while also finding their market positioning and developing their applications. Wouldn't this be very difficult for subDAOs?

Rune: SubDAOs are actually competing for something akin to air, as there is almost no value in the entire industry. Looking back at the last bull market, all the hopes and dreams were almost embarrassing, as very few people actually created something substantial. Cryptocurrency has great potential, but that potential depends on redefining money; instead, it has evolved into a monetary issue, leading to scams, and the entire industry fell into a vortex of bubbles, rug pulls, scams, and Ponzi schemes, ultimately suffering the consequences.

The key for subDAOs is that they leverage Maker's superpowers: patience, practical technical and economic skills, and the ability to get things done. Most importantly, our corporate culture is not about making quick money but about building a long-term enterprise, which has greater potential and value than any dirty, quick profit-seeking token.

So from the beginning, subDAOs combined the flexibility of startups without being constrained by the large scale and complexity of Maker Core, giving them significant room for innovation. We have the best developers and teams working on these issues, and they also receive substantial financial support from the company.

Therefore, even when subDAOs are still in the hypothetical stage, I can clearly see that subDAOs are the trend of the future. I believe any project that wants to succeed in this field and has the opportunity to scale will adopt some version of the subDAO model. Without separating management from the beginning, a DAO can only scale to a certain extent or turn into a company, thereby abandoning the entire decentralization and governance. Now we have further development; we have shaped the DAO based on market and community signals. We find that subDAOs are very good at interacting with communities in various regions, such as Sakura DAO, a subDAO interacting with the Japanese community. It has rapidly risen in the Japanese community, and people see it as a way to interact with Maker and utilize what Maker offers, allowing us to operate in a more familiar environment.

For example, Spark focuses more on innovation and construction. The Korean community finds that they can build and interact here; we discover that people in Singapore and Southeast Asia are not interested in games and innovation but want to deal with real assets. Thus, we established a subDAO focused on physical assets and private credit in Southeast Asia, seeking the best physical asset transactions, which cannot be done without personally conducting on-site investigations.

In fact, not everyone wants to do everything; most people are only interested in a specific area. Previously, if you wanted to work in your desired field within Maker, you had to handle a whole set of tasks; but with subDAOs, people can focus on areas they are interested in. Those who enjoy deep technology and deep innovation do not need to deal with physical assets, and vice versa. Those interested in finance do not like ambiguous attitudes, and everyone is more satisfied, leading to higher productivity, more innovation, further reducing struggles in governance, and focusing more on building and bringing things to market.

BlockBeats: Many people believe that creating subDAOs may bring more costs because more people are needed to manage these subDAOs, and you have also introduced AI governance tools. Have you considered that this might bring more costs in terms of human resources or create more tensions in governance?

Rune: Everything is based on a principle called "alignment engineering," which means that every aspect of the system needs to contribute to simplification, reducing conflicts and complexity, and lowering information loss. SubDAOs make things much simpler because they can fail. So if a subDAO wants to create some dramatic, foolish things or generate a lot of conflicts, they can indeed do so, and it is acceptable for the entire ecosystem because their failure does not affect the stability of DAI or other issues.

BlockBeats: But they do increase costs, right?

Rune: Yes, the key is to assume a single interconnected system. If you find that a part of the system is malfunctioning or has structural risks, you cannot easily control it, and the entire system may collapse. In the case of subDAOs, we can contain this problem within a subDAO. From this perspective, you cannot imagine how much cost such a failure would incur if it were in an entire system.

But if it is a subDAO, we can know how much we subsidized and how much value we invested. When making this decision, we pre-determine the acceptable cost of failure, actively managing risks, knowing we are taking the risk of losing that money. If it fails, it's okay because even failure can generate value, as understanding how things might go wrong is very valuable data.

In a complex interconnected DAO, you cannot reasonably make such calculations and then say, "We are taking some risks that might lead to the collapse of the entire system, but we will get some good data." You don't have that confidence; you can only say, "We cannot let the core fail." Because the core is very different from subDAOs; the core is the stable fulcrum of the DAO. When you are building on a stable fulcrum and a dynamic DAO based on that fulcrum, you need to ensure that the guarantee against failure is entirely different.

"Escape from Ethereum": Solana Is Just One Option

The phrase "Escape from Ethereum" is at the core of the recent controversies surrounding MakerDAO. In a blog post, Rune specifically expressed that MakerDAO will re-implement the long-term plan for the project, proposing to create a new chain using the Solana codebase. Rune also listed three reasons he believes the Solana codebase is the "most promising" exploration for NewChain, including the technical quality and optimization of the Solana codebase, the resilience of the Solana ecosystem after the "FTX explosion," and past successful forks of Solana.

Rune proposed a possible future where MakerDAO's NewChain would serve as a secure bridge between Ethereum and Solana, "providing a beneficial push for the network effects of the entire multi-chain economy."

In this exclusive interview, Rune expressed that MakerDAO is planning to make more effective attempts to find the highest-performing public chain to help the various systems within the MakerDAO ecosystem interact better. Solana is not necessarily MakerDAO's optimal and final choice.

What Underlying Technology Does MakerDAO Need?

BlockBeats: Regarding NewChain, why did you choose Solana instead of Ethereum? You mentioned that Maker has a special front end that is more suitable for Solana's code stack; why not choose a chain like Aptos or a programming language like Sway? What does Maker's specific back end require? Why is a fork necessary?

Rune: First and foremost, Maker is highly focused on Ethereum. In the ecosystem, we have five development companies focused on Ethereum, and Maker will increase funding, trading, and incubation for developers focused on Ethereum and EVM, and it will only increase because Ethereum, EVM, and Layer2 will be where all users choose to go.

So this is where we build user-facing products. However, to make subsystems truly work, develop them to new heights, and showcase the true potential of blockchain, the key is that they have very advanced token economics, inspired by much of the content during the DeFi boom, which not only won't collapse but can also be sustainable.

There is a kind of interaction between sub-agents similar to Curve and Vaults, which can compete and collaborate. The issue is that this involves exchanging and distributing a large number of tokens, and if not operated on an efficient back end, it will pose certain attacks on the system and negatively impact what we build and provide to users on Ethereum. So we want to find a high-performance stack to build this back end.

We want to experiment with Solana because it has proven its high performance in real life. But obviously, what we need is the best technology, and we need to take the time to choose; we cannot just choose Ethereum or Solana because we were very aligned with Ethereum in the past or because Solana is the latest trend. We need to genuinely try, research, and learn, which takes many years.

For Ethereum and EVM, we will conduct experiments and research to understand the actual situation; perhaps the results will show that EVM is the most efficient way to build things. Currently, my impression is that EVM is like JavaScript; it is standardized, and everyone knows how to use it. So if you understand how the internet works, those are the things you use to handle all the front end.

But you cannot use JavaScript to build a high-performance back end; otherwise, the front end will perform worse. So you won't see extreme advocates of JavaScript saying, "You must build the back end with JavaScript." In fact, EVM and Ethereum and their ecosystems and Layer2 will be better; if EVM-based products have these specialized high-performance back ends, it will benefit users and help develop the ecosystem.

We will show everyone: look, there is real value here. We just need to build, not fight, and I hope the launch of sub-tokens can truly open this situation. We will return to the DeFi summer, but this time it won't end; it will continue to develop with sub-tokens and won't be a bunch of Ponzi schemes, hype, and sell-offs. It will be tokens with real value, real use cases, and genuine specialized business models, and they will have this community adaptability from the very beginning.

BlockBeats: Is the same true for your ideas regarding T-Bills and the entire RWA?

Rune: Those will be run by subDAOs.

BlockBeats: So Solana is not the final choice, and it may be replaced by another chain?

Rune: Of course, this is just an experiment, so we can learn. We also need to examine other aspects, see how performance is, and look at the developer ecosystem around it to truly improve the efficiency of the ecosystem in three years, benefiting the entire industry and promoting the development of the entire ecosystem. Including Ethereum, of course, are areas we are focusing on, as well as where our users are and the directions our developers are interested in.

Rune's New Company: Seeking Interfaces and Balance with the Real World

BlockBeats: You mentioned that MakerDAO's front end might not include U.S. users; doesn't this hinder Maker's mass adoption?

Rune: If you want mass adoption, you need to deal with real people in the real world. The existence of cryptocurrency does not mean you can be outside the law and regulation. This has always been one of our key principles over the past eight years: we need to work with regulators to ensure we do not engage in activities that could ultimately lead to more problems and uncertainties for users. This is our entire philosophy; we try to find a balance between DeFi and the real world and apply it in a truly effective way.

BlockBeats: Many people choose to collaborate with large institutions; why did you choose to establish another company?

Rune: Yes, we have currently created two companies and refer to them as arrangers. The reason we collaborate with more crypto-native companies is that we value their crypto-native nature, as it is not difficult to find lawyers who can do the job, but it is very challenging to find people who understand both the crypto space and the legal and business aspects.

We can basically be considered pioneers, showing the outside world how to do this correctly. Because most projects related to on-chain assets and RWA do not understand what projects like Maker are actually looking for, what kinds of risks and legal certainties are involved. Most products and projects that tokenize assets and RWA are engineer-driven, where one person proposes a good idea and then thinks about how to implement it, but they do not focus on what users actually need.

The real cool thing about the subDAO model is that it allows subDAOs to be more flexible in figuring this out, rather than having to figure everything out from the top down like MakerDAO; it just sets the general boundaries of what we care about. Then, subDAOs solve complex legal and regulatory issues through token holders from specialized communities, as they are particularly interested in governing these issues.

Many people in the crypto space do not want to deal with these matters because they are very complex; they actually want to handle things like the metaverse. Therefore, the subDAO model is very suitable for bringing the right people together, making the entire system very flexible, and using tools, skills, and mindsets to maintain our absolute leading position in real assets is a significant advantage for us.