Required reading for DeFi: simple reading for MakerDAO risk governance framework

Recently, MakerDAO published risk governance in his official blog MediumFramework for longThe article is divided into three parts to describe the decentralized trust and risk management framework of MakerDAO.

Maker said the launch of multi-mortgage Dai is the focus of "the next step."

Maker believes that for users on the blockchain, a decentralized stable currency is the first choice. Maker's stability coin is called Dai. Anyone can borrow Dai by pledging their cryptographic assets (currently ethereum) on the chain, which also generates a supply of Dai, so Dai's money supply is completely decentralized. Maker developed a series of smart contracts called Collateralized Debt positions, or CDP. CDP creates liquidity for Dai, and because of its over-collateralised nature, collateral risk can always be controlled.

Make focuses on the risks inherent in the Dai supply side of CDP systems. This level of risk is directly related to the dynamic core of the MakerDAO system. Like other risk models, the internal risk team (MRT) creates an economic capital and stability fee model as a template to be open to other teams as well as to Maker holders (MTH). Make also combines real governance cases that use governance votes with execution votes.

In general, the main supply-side risks of Dai are:

Volatility risk:The more volatile the value of the collateral, the harder it is to recover the full value of the loan in the event of default

Qualitative risk:The more volatile the fundamentals of the institution, the more confidence the holders of the currency will lose, resulting in even greater price volatility.

Liquidity risk: & NBSP;The less efficient liquidity there is in the market, the more likely it is that the price of a currency will deviate from its real value.

Exposure risk:The greater the aggregate share of total supply, the greater the risk exposure.

Correlation risk:The higher the correlation, the lower the yield from diversification.

Feeding risk:Low quality feed prices will result in insufficient information on the value of collateral.

Governing a MakerDAO system is similar to governing a large ecosystem. Some inherent features help govern the system, and some require the help of a governing body. In any case, system-related information is fluid and continuous, requiring constant evaluation and governance. MKR token holders must be fully aware of their responsibilities and the benefits of managing the MakerDAO system.

MakerDao made it clear in the third risk governance framework that launching multi-mortgage Dai is the focus of the "next step plan", including:

1. Approval of the internal risk team through governance votes to vote on collateral types and risk parameters. (implemented before the release of the main network)

2. Implementation before the release of the main network: the initial list of collateral types is approved by governance voting for the risk parameter value of voting and deployment. (implemented before the release of the main network)

3. Implementation before the release of the main network: vote on the risk parameter value of the approved collateral type through execution voting. (implemented before the release of the main network)

At present, MakerDao risk data has been deployed and the necessary approval is in place. The complete system deployment will be launched rigorously, which will be a new chapter for the governance system.

Click to view the original article:

MakerDAO risk governance framework (part I)

MakerDAO risk governance framework (part ii)

MakerDAO risk governance framework (part iii)

Part of this paper is from carbon chain value articles:

Understand MakerDAO's risk management framework in 20,000 words

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