profile rune christensen makerdao

The growing concerns around climate change are urgent, to say the least and they need real solutions. Rune Christensen, founder of MakerDAO addressed this issue recently. He has been advocating for MakerDAO to solve the problem of climate change.

In the latest edition of the Bankless podcast, Christensen highlighted different aspects of the said issue, but with one target at its core — the need for a purpose-driven DAO rather than a profit one. He shed light on the importance of a “clean money” drive, stating,

“I came up with this concept of centering everything around this clean money vision. And the question of DAO’s, how a DAO should organize and this concept of a purpose-driven DAO, versus a profit-driven DAO. I think that’s a real age old kind of issue…”

At present, the “fundamental game-theoretic problems” with DAOs are things like governance attacks.

This model invites new members when things have been mismanaged so they have an opportunity to take control of the system and purchase shares of MKR. This governance model rewards learning from the mistakes over time.
We think this is crucial to having a decentralized, stable system. Open governance helps to prevent the danger of relying too much on one single point of failure.

Leslie Ankney: Looking at other stablecoin models, we see some that are fiat-backed, like TrueUSD and Tether, as well as on-chain collateralized or crypto-collateralized, and then most recently, non-collateralized crypto models based on Seigniorage Shares, like Basis.
Why did you select your model? What do you see as limitations with these other models?

Rune Christensen: We consider a multi-collateralized, on-chain model the only truly decentralized stablecoin.

There are many new projects building on top of this, such as, creating these easy interfaces.

In general, we see Dai and the CDP credit platform as underlying infrastructures on Ethereum that other projects can build on, similar to the way many projects build on top of Ethereum itself. Any project can use Dai as a safe and stable store of value instead of something volatile.

Leslie Ankney: What about your other currency, Maker, and your governance model – how do they work? Why do you think this governance model is an important feature?

Rune Christensen: Maker is the first Decentralized Autonomous Organization (DAO), predating even The DAO, and our project has been around before Ethereum even launched.

Because of this, we�ve spent a long time thinking of worst-case scenarios and designing a DAO model that works in response.

A governance model is what blockchain is all about. Blockchain was born out of a response to the financial crisis.
When Wall Street and banks thought they were �too big to fail� and weren�t held accountable for their decisions, blockchain and decentralized governance emerged in response in the form of Bitcoin. As a community, we want to do things differently.

MakerDAO and the MKR token use a decentralized governance structure to bring stability to our stablecoin, the Dai.
We believe money and credit systems should be transparent so no one can sneak in their own agenda. An open governance process prevents corruption.

In simple terms, if someone actually controlled the majority of the voting shares, say in DeFi, they can just straight up steal all the assets in the protocol. “Bitcoin itself was driven by the same thing.” he said, adding that “the toxic maximalism was a way for Bitcoiners to work together towards a greater good.”

In addition to this, there was a surge in the environmental economic crisis as well. The crisis plus the existing political instability could very easily result in hyperinflation of the USD.

The current financial system ignores what’s going to happen with climate change. But why? To this, Christensen replied,

“…reality of climate change is that it’s not possible in the physical world.

I think it makes most sense to look at MakerDAO in contrast to something like Tether or TrueUSD, or Circle. These all ultimately rely on a bank, and that really means that this bank ends up holding leverage over an entire system almost like a centralized platform where whatever you build on top of the stablecoin is also built on top of the bank.

For example, TrueUSD is actively managing who can adopt their stablecoin because they have to conform to the demands of their bank.
So on one hand, these stablecoins have real collateral behind them, but in the long run they are vulnerable to the �too big to fail� narrative where banks would be the point of failure.

Leslie Ankney: What about elastic crypto-collateralized models like Carbon, Basis, or Fragments?

Rune Christensen: They are the other extreme from the fiat-based models; Dai is in the middle of these two.

ICO. This collateral is what allowed NuBits to stay afloat for so long.

Many other Seigniorage Shares models are planning to do the same thing, claiming that once there�s no longer enough collateral, there will be enough faith in these coins to keep their value. A true stablecoin needs to go beyond that; it should be designed for the worst possibilities and able to survive them.

This is the approach we take with Maker. We�re prepared for a massive market-wide meltdown of many different asset classes by diversifying our collateral.

Leslie Ankney: I remember you really focus on black swan events in presentations.

Rune Christensen: Stablecoins have an obligation to look at all the ways a system can fail and really analyze and describe them, and then mitigate them in the best possible way.

Supply chain today is a massive industry based on very inefficient systems ready for disruption. Blockchain brings payment tracking, faster transactions, and lower fees.

Stablecoins remove the international currency conversion barrier and lengthy transfer times that make it really hard for cash-strapped small businesses to grow.

Very often, small and mid-sized companies can�t get the kind of loans offered to large companies, and a collateralized credit platform removes this unfair practice by basing loans on collateral, not company size. Solving this imbalance will unlock new efficiency and innovation for healthy economic growth.

Stablecoins can also help the unbanked.

For example, we�ve partnered with Bifrost, a charity solution that brings cash directly to crisis zones. Using Dai, Bifrost is able to cut out banks and make a direct transfer through a charity.

If there�s risky stuff going on, like if a mortgage-backed security is being too lenient with credit ratings, anyone can audit that in real time. MakerDAO has a whole framework for making decisions in these situations.

MakerDAO is an open community where people reach consensus on how to safely govern credit and its stability.

Sometimes, there will be insolvency, and our governance model holds its decision makers accountable. Members earn money when things are going well, and when there�s insolvency, MKR is autonomously sold off to recapitalize the Dai, and the MKR holders who made the decisions in the first place lose money as a result.

Unlike the financial crisis, where bankers were bailed out with taxpayer money, members of MakerDAO profit from good decisions, but also are held accountable for bad decisions.

Dai spiked from $1.00 to $1.11, which could net someone almost $300K in profit.

Rune Christensen: This is actually a sign the system is working. We are just seeing it on an extreme magnification because we�re running our beta version with a very small ecosystem of participants.

In our current beta model, the system buys Dai at a premium as an incentive for people to sell it back, allowing the system to contract its supply. In the short run, if the Dai rises to $1.11, selling it yields an 11% profit as a design incentive. We encourage people to sell their Dai when they see the price go over a dollar, and purchase Dai when they see it go below a dollar, bringing the price up.

Leslie Ankney: Where do you see the mass adoption coming for stablecoins?

Rune Christensen: Both supply chain companies and the unbanked can benefit from blockchain, and especially through stablecoins.

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