Dai can be backed by a properly risk managed diversified basket of crypto and uncorrelated regulated assets, and remain trustless, because the protocol is trustless. Just like BTC & ETH can derive their value from tether and centralized exchanges and remain trustless.
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Replying to @RuneKek
if the regulated assets get seized or compromised due to international regulations, warfare, natural disaster etc, what happens to Dai? there is no recourse. the peg will fail potentially catastrophically when no one wants to bail out the insurance company/or involved govt.
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Replying to @DoctorTringale
Same risks apply to the ETH price, and the effect on Dai and Maker would be the same. That's why diversification is superior as it spreads out the risk so that it can actually be absorbed by MKR, rather than concentrating it in one asset so the blow will be fatal.
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Replying to @RuneKek @DoctorTringale
Can you explain a more concrete example of how you think the protocol will be able to absorb a regulated asset getting sized?
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Replying to @night_ivy @DoctorTringale
Collateral included based on best practice legally "getting seized" is an anarchist meme, not something real. A scenario where collateral is actually "getting seized" by the military or whatever, is a scenario where all crypto exchanges are also having all their crypto seized.
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A good example of what a crackdown on a centralized asset looks like, and what happens to innocent holders in that scenario is e-gold: https://en.wikipedia.org/wiki/E-gold
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But the simple example is: Collateral Asset A Backing 1% of total Dai turns out to be worthless. Total Dai supply is 1 billion. Maker then holds an auction where Dai holders bid on MKR to recover 10 million Dai to cover the shortfall.
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I think as long as MKR holders make sound policy decisions (interest rates, LTVs, ceilings) centralized assets would work fine. Debt ceilings would be especially key for security tokens..
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Could cap $ value of exposure as you say by issuer, custodian, and jurisdiction. E.g. test drive a Coinbase-custodied, US-based real estate asset with a $1mm Dai borrow ceiling. If that black swans, the system lives on. Scale slowly from there.
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Yeah, it’ll actually be a good milestone when the Dai system demonstrates that it can survive the failure of a collateral type
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