My takedown of Maker Dai
The incorrect ideas of Maker would be acceptable for a new project, but the team is 2 and half years in. The Maker team seem naive, in their knowledge of money.
For instance they are basing a “stable” currency on the SDR. The SDR is not stable.
They are creating a peg to the SDR, but incorrectly state that: “It is a misconception that dai is pegged to the SDR — dai is a free floating currency and thus is not pegged to any other asset.” The dai is pegged to 0.75 SDR, it may float around that value, but it is obfuscation to say that it is not a peg.
The dai collateral are ethereum based digital assets. Wall Street had hundreds of years of property information and managed to blunder. But yet Maker will have a “stable” currency being back by “assets” younger than a mayfly. Nobody will build on top of the Maker Rube Goldberg machine.
The following is from Maker documentation and highlights the lack of understanding:
However I believe that once the dai ecosystem has stabilized it is likely that it will be deflationary in the long run, or at least have less inflation than any existing fiat currency. I’m basing this mainly on two factors: 1) the dai system is more efficient than traditional central banks and can pass on the efficiency gains to dai users in the form of higher deflation, 2) traditional central banks use their monetary policy tools specifically to target inflation, while the dai will have no such bias
dai will be deflationary in the long run
So the maker team is creating a stable currency that is likely to be deflationary, due to a one-off supply shock that doesn’t exist.
the dai system is more efficient than traditional central banks
It’s hard to grasp what is meant by this sentence. The daily operations are all automated these days. ‘Outside money’ changes accounts by data from the central bank’s customers. All done online. Where is the inefficiency?
dai will have no such [inflation] bias
A quick perusal of Wikipedia shows that the SDR assets include USD, Renminbi, Yen, Euro, Pound. Let’s picture a scenario where the Germans allow Mario Draghi to implement a sensible monetary policy. Inflation rises in the Eurozone. Would not the dai be affected?
Anyway enough fun for now. I strongly recommend people in the blockchain community take this MOOC banking and monetary policy course by Perry G Mehrling.
I learnt so much from it and think many people developing new finance technologies would benefit. You might actually know what you are talking about & at minimum, never say “go to the moon”.
For anyone interested in a robust medium of exchange and unit of account drop me an email at: firstname.lastname@example.org