News. We met in Argentina one of the architects of the MakerDAO protocol and its stablecoin dollar DAI.
Background. The collapse of UST has highlighted the virtues of its decentralized system.
Why it matters. MakerDAO provides IAD loans to address the inefficiency of the banking sector.
The Big Whale: You are one of the figures of the crypto in Argentina. When did you get started in the industry?
Mariano Di Pietrantonio: It all started with bitcoin in 2011. At that time a friend told me "you should buy some". Since I'm a bit curious, I looked into it, but at the time I didn't understand what it was, so I passed. I studied "classical" economics at university, so I thought it was irrelevant, that Bitcoin was just what you hear all the time, i.e. machines that consume a lot of electricity. In 2011, almost nobody was talking about Bitcoin, it was a fairly confidential subject. There weren't thousands of videos on YouTube to understand how it works, the big magazines didn't talk about it. You could only find information on obscure forums.
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When did itall start to happen?
It took a while. I saw bitcoin go past $5, then $10, then $20, then $100, and I thought to myself, "You still have to understand what this is. The famous click came in 2014. I remember it was one morning, I was making coffee, I was on my computer and it was like a huge blow to the head. Everything I had read about Bitcoin suddenly came together, like magic. I realized that Bitcoin and cryptos were going to change everything. I quit my developer job and started going to all the crypto events to meet other enthusiasts. That's when I discovered MakerDAO which had just been created. A few weeks later, I met Mariano Conti (co-founder of MakerDAO) who was surprised that I knew about his embryonic project! That's how I joined the organization.
And you haven't left it since. But why MakerDAO? Why stablecoins?
For me, there are only three cryptos that really matter and will exceed $1 trillion in capitalization: Bitcoin because it is the first crypto and digital gold, Ethereum because it is the new financial infrastructure, and stablecoins. I could have worked on other projects, but I decided to focus on stablecoins because they have so much potential. They are too often reduced to "stable" crypto-currencies, but they are much more than that. You can do a lot of things with them, they are all very different, even if today many of them are badly designed and explode in flight...
Are you thinking about the UST of the Terra project?
Yes, of course. Right after the UST crash, we saw authorities around the world step up to the plate. Even the U.S. Treasury Secretary, Janet Yellen, spoke out and said that we had to react. But we've been saying for months that there's a problem with UST and Terra. So go ahead and do it, regulate. But don't lump the whole industry together.
Are you afraid of this regulation?
Things are quite simple: there are centralized stablecoins based and localized, especially in the United States. These are stablecoins like Circle's USDC and Tether's USDT (Read our big feature on stablecoins). These are sensitive to regulation. And then there are decentralized, non-localized stablecoins like MakerDAO's DAI. We do not meet the same standards.
And Europe in all this?
There are euro stablecoins, but look at the market... All the big centralized projects are already indexed to the dollar, except for the ones like DAI which are totally decentralized products.
Are you working on a DAI in euro?
This is one of the topics on the table. Some people in MakerDAO are pushing for it. We'll see.
Whatmakes the ICD so special?
I often see people on social media comparing DAI to USDC or USDT, which makes no sense. Circle and Tether are not technology companies, they are financial companies. They are like banks on Wall Street. They issue an ERC20 token and they have a reserve in front of it, that's it. Anyone on Wall Street could do what they do. That's why they're backed by the banks, whereas if you look at MakerDAO, it's totally different. We are a decentralized organization that allows anyone to create a stablecoin by contributing their crypto-assets.
In March 2020, the market crash almost took you away. Since then, much of the DAI's reserve is still based on USDC, which is a centralized stablecoin. Isn't that ironic?
There are also a lot of ethers. It's not a problem that there's UDSC. What we need is for it to be more than that, for the reserve to be very diversified and easily scalable.
What would happen if the USDC was banned?
We will find an alternative. We are capable of adapting to any situation, as we have already shown.
How is MakerDAO managed?
We are a DAO so we don't have a manager like in traditional companies. We run the project collectively with just over 200 people around the world. Everyone gets paid from MakerDAO revenues. We make money. In the last six months, we've generated $100 million in revenue, which is pretty good. All our decisions are made by vote.
And there is a constant consensus in the community?
No, not everyone agrees and that's normal. There are more and more divergences within the project with "chapels", which does not prevent us from advancing.
What is your mission within the DAO?
I'm in charge of partnerships and marketing for MakerDAO, and there's a lot of work to do because we don't communicate enough about what we do. Obviously the ecosystem knows us, but our goal is to be used far beyond the circle of connoisseurs. If we stop at this circle, we won't reach the critical size.
What is most important for MakerDAO?
Our compass is security. When I say safety, I mean safety in the broadest sense, including financial safety. It's critical, and the Terra crash made that clear. For months, Do Kwon and others said they were going to kill DAI. We can see today how that turned out...
Do you think the UST crash dooms algorithmic stablecoins?
We need to stop talking about algorithmic stablecoins. It doesn't work. Some project holders think they're the only ones who thought of it, but there's a reason why there's an over-collateral in the IAD system (to create $100 of IAD, you have to put in $150 of cryptocurrency). Do Kwon and others think they can do without, but it's like in physics-chemistry, you test formulas, and there the one of algorithmic stablecoins is not stable, so you just have to stop because otherwise there will be other disasters. Algorithmic stablecoins are a time bomb.
There has been a lot of talk about you since the UST crash. Did you benefit from it?
If we talk more about us? Yes, of course. And at the same time it's normal, some projects like Terra kept saying they were going to "kill" us, so of course... After that nobody can be happy about the situation. Hundreds of thousands of people have lost a lot of money. Now we have to move on. The most important thing now is to continue to develop MakerDAO and explain to people why they should use DAI and all our other services.
What is the ultimate goal of MakerDAO?
We simply want to become the world's leading credit provider. It sounds crazy, but decentralized finance is going to grow tremendously. More than 2 billion people don't have access to a bank account and financial services. They can't borrow money. This is the case in Asia, Africa and South America. DeFi and stablecoins have developed in Argentina for these reasons. As long as you have a smartphone, you can buy cryptos, put them in DeFi and borrow in DAI. You can then spend them on buying a coffee, or a house. It's as simple as that.
Do you think this will happen in the United States and Europe?
In the US and Europe you have banks, people have access to credit, so for now it's not too much of a priority. But decentralized finance is still in its infancy. It has the advantage of being much cheaper than its traditional counterpart, so I think it will develop for this reason in advanced economies.
Of all the services that MakerDAO develops, which one are you most advanced on?
Clearly these are the loans. You can deposit your cryptos and get IADs. Then we're working on collateralization with physical assets, which means you can get IADs by depositing real tokenized assets, like real estate. The other product we're working on that's very cool is a smart contract system that can be implemented in other DeFi protocols like Aave or Compound and that allows you to maintain fixed rates. This is very useful when there is a lack of liquidity in a pool and there are big variations in rates. How does it work? The contract is linked to the pool and when there is a lack of liquidity, you can create IADs to avoid sudden variations. When liquidity is low, rates go up. And the opposite is true when liquidity is too high. This is quite revolutionary in my opinion!
For the past six months, Société Générale, through its subsidiary Forge, has been testing DAI loans. What are the results of these tests?
The tests are still ongoing, but it's working well. The fact that a European bank such as Société Générale is using DeFi is a strong signal. These experiments will multiply. Other banks will soon follow suit. No financial institution will be able to miss out on its financing channels tomorrow.
How do you explain that Argentina is "so far ahead" on the subject of cryptos?
We've been living with one of the worst currencies in the world for decades and a financial system that is completely out of whack. At the same time, Argentines are very well educated, so it creates a very favorable context for the development of cryptos. Argentines live with several currencies, official and unofficial rates. It's such a complicated environment that we have to adapt. For decades, Argentines have been unknowingly preparing for the arrival of crypto-currencies.
How do you see the future of currencies? What place for stablecoins?
It's very complicated to say. Things are evolving fast and we don't really know in which direction. But I think that several currencies will co-exist and that they can be used at the same time almost everywhere. This is already happening in Argentina. And it's going to happen in every country. There will be digital currencies from central banks, stablecoins, cryptocurrencies. We will use them according to our needs.
But neither the Fed nor the ECB will let that happen. You know that in the United States and in Europe, there is only one currency available...
Yes, but they won't have a choice. It will be imposed on them.