The Metaverse

[Clinamenic]

don't do the transition then, just explain it in terms of the crypto stack

What are you asking for an explanation of again? How operations on a blockchain work?

 

[Clinamenic]

Sorry yeah. MakerDAO provides loans on collateral. Usually users use native crypto assets, e.g eth/btc and borrow against that. recently a french company in possession of some tokenized bonds used the tokenized bonds as collateral to borrow from the protocol. The tokenized bonds are collaterized by real estate and are rated triple A

And in the case of MakerDAO, governance token holders vote on what assets can be accepted as collateral.

 

[vimothy]

so what are they issuing some tokens there?

 

[vimothy]

What are you asking for an explanation of again? How operations on a blockchain work?

no, not at all

 

[toko]

don't do the transition then, just explain it in terms of the crypto stack

oh alright then. I detest real estate and mortgages so lets do something like a farm. Here is what we need:

some way to reliably establish cashflows of farm
some way to reliably valuate the assets of a farmer

If we want to do it completely programmatically, an algorithm checks the public db to ensure the farmer actually owns the assets he says he does. if we assume assets are tokenized this should not be too difficult. the farmer uses a zero knowledge proof to prove his cashflows in stablecoins without opening his books. The algo determines the farmer can borrow up to x but only if the farmer deposits its token representing rights to the farm as collateral. Farmer says fine. Farmer gets stablecoin loan. Algo responds to market conditions to adjust interest rates, and also responds to continuous reporting of income by farmer.

assuming that risk and value can be assessed via algorithms, (which zillow showed it can be done) then it can be implemented via a set of smart contracts

 

[Clinamenic]

so what are they issuing some tokens there?

MakerDAO issues its own stablecoin, DAI, using the deposits of users as collateral. And here again I think the Loan to Value ratios differ from asset to asset, presumably at the decision of governance token holder, i.e. members of MakerDAO.

To my understanding, DAI was the first algorithmically backed stablecoin (maybe even the first stablecoin?), backed not by fiat but by other crypto assets that were deemed sufficiently liquid.

 

[vimothy]

so MakerDAO has the asset. they issue what, tokens? which the borrower can redeem everywhere?

 

[vimothy]

can you explain it in terms of balance sheets. who's got what.

 

[toko]

The MakerDAO issues a set amount of stablecoins, (DAI) to the bank each of which is worth a dollar. The DAO has a tokenized bond backed by real estate collateral. The bank has stablecoins which it can spend. Its liabilities are the loan given by the DAO. the asset its bond. vise versa for the DAO. Its confusing cause its actually a refinancing

 

[Clinamenic]

oh alright then. I detest real estate and mortgages so lets do something like a farm. Here is what we need:

some way to reliably establish cashflows of farm
some way to reliably valuate the assets of a farmer

If we want to do it completely programmatically, an algorithm checks the public db to ensure the farmer actually owns the assets he says he does. if we assume assets are tokenized this should not be too difficult. the farmer uses a zero knowledge proof to prove his cashflows in stablecoins without opening his books. The algo determines the farmer can borrow up to x but only if the farmer deposits its token representing rights to the farm as collateral. Farmer says fine. Farmer gets stablecoin loan. Algo responds to market conditions to adjust interest rates, and also responds to continuous reporting of income by farmer.

And when it comes to grounding on-chain assets to off-chain assets, and if we want to do it programmatically, it seems we have to depend on sensors to carry off-chain data on-chain. So things like soil mineral levels, temperature, computer vision to roughly gauge crop health, weather sensors, etc. are the sorts of things that can do this.

Then you need a way of verifying the legitimacy of the data being relayed on-chain by these sensors, and that is what oracles do. Personally I don't see blockchain realizing its systematic potential without a robust oracle infrastructure.

 

[Clinamenic]

so MakerDAO has the asset. they issue what, tokens? which the borrower can redeem everywhere?

The borrower would have to return the DAI to reclaim the collateral, I believe. I haven't directly interacted with the protocol, but I've converted to and from DAI several times, via centralized exchanges.

 

[toko]

And when it comes to grounding on-chain assets to off-chain assets, and if we want to do it programmatically, it seems we have to depend on sensors to carry off-chain data on-chain. So things like soil mineral levels, temperature, computer vision to roughly gauge crop health, weather sensors, etc. are the sorts of things that can do this.

Then you need a way of verifying the legitimacy of the data being relayed on-chain by these sensors, and that is what oracles do. Personally I don't see blockchain realizing its systematic potential without a robust oracle infrastructure.

yes this is where IoT fits in.

 

[Clinamenic]

Exactly. Another trend I don't see slowing down any time soon.

 

[vimothy]

MakerDAO issues its own stablecoin, DAI, using the deposits of users as collateral. And here again I think the Loan to Value ratios differ from asset to asset, presumably at the decision of governance token holder, i.e. members of MakerDAO.

To my understanding, DAI was the first algorithmically backed stablecoin (maybe even the first stablecoin?), backed not by fiat but by other crypto assets that were deemed sufficiently liquid.

so essentially you are a fund who takes in dollars, makes investments and issues liabilities ...​

 

[toko]

this is really an exception. normally they only accept native crypto as collateral because then risk assessment can be done progmatically but yeah. See:

Maker DAO - MCD

Blockchain ecosystem analytics by and for the community. Explore and share data from Ethereum, Polygon, BNB Chain, Solana, Arbitrum, Avalanche, Optimism, Fantom and Gnosis Chain for free.

dune.xyz

 

[Clinamenic]

so essentially you are a fund who takes in dollars, makes investments and issues liabilities ...​

Well they take in crypto assets like ETH and other prominent Ethereum-based assets (pretty sure MakerDAO is limited to Ethereum, but I could be wrong), and they issue different crypto assets, stablecoins, which are pegged to the value of a dollar but are not collateralized by dollars. Hence why they are overcollateralized, to help protect against the volatility of the assets that are backing the stablecoins.

 

[vimothy]

The borrower would have to return the DAI to reclaim the collateral, I believe. I haven't directly interacted with the protocol, but I've converted to and from DAI several times, via centralized exchanges.

but they must be able to do something with these token

 

[Clinamenic]

so essentially you are a fund who takes in dollars, makes investments and issues liabilities ...​

But yeah DAI could be considered a liability if somehow the collateral is drained, or if the assets serving as collateral depreciate significantly, as I understand it.

 

[toko]

yes, stablecoins are incredibly liquid and can be redeemed for "real" dollars or spent directly on the network.

 

[vimothy]

Well they take in crypto assets like ETH and other prominent Ethereum-based assets (pretty sure MakerDAO is limited to Ethereum, but I could be wrong), and they issue different crypto assets, stablecoins, which are pegged to the value of a dollar but are not collateralized by dollars. Hence why they are overcollateralized, to help protect against the volatility of the assets that are backing the stablecoins.

yes but at some point they must interface with "the real world"