outline

• we'll discuss the question: what is money?
  
• after that, understanding dai should be intuitive
  
• I'll try to leave 10 minutes at the end for questions
  

money is abstract

• many competing narratives for money
  
• medium of exchange
  
  • heard from gold bugs, Austrian economists, bitcoin
    
  • can be a commodity or a memecoin (or both)
    
• formal/legal mechanism used by governments
  
  • chartalists, MMT
    
• money is credit
  
  • money is endogenous
    
  • money is about cooperation in the future
    
  • we will explore this one
    

money is future time

• anthropologically this seems plausible (Graeber, etc.)
  

  

• seems to be how businesses think of it (time value of money, investment theory, etc.)
  
• is exactly how (most) money is created in the modern economy
  

money in the modern economy

• base money (also called narrow money, M0, etc.)
  
  • notes and coins
    
  • deposits with the central bank
    
• broad money (also called M1-4, commercial bank money, etc.)
  
  • deposits at commercial banks held by people and firms
    
• recommended papers by the Bank of England
  
  • Money in the Modern Economy
    
  • Money Creation in the Modern Economy
    

money in the modern economy

the dai credit system

• (contrary to popular misconception) dai is a very simple mechanism
  
• money and debt: two sides of the same coin
  
• any user can pledge a valuable asset as collateral and generate dai, which must be paid back later
  
  • this record is called a CDP (collateralised debt position)
    
• governance of the system (Maker community) has to decide:
  
  • which asset
    
  • how much dai to lend
    
  • what to do if the asset loses value
    
  • monetary policy: how much should 1 dai be worth?
    
• governance incentivised to act wisely
  

immediate questions arise

• dai is overcollateralised: isn't this "capital inefficient"?
  
  • open your mind to what can go in a CDP, and look at the origin of money today
    
• how will dai governance carry out its monetary policy?
  
  • all users of the system want price stability
    
  • supply of dai (credit) and demand for dai (exchange) may change
    
  • the goal of monetary policy is to set a target ($1.00) and use policy levers to attain it
    
• what about bank runs?
  
  • global settlement is a very powerful backstop
    

major research areas

• monetary policy
  
  • credible algorithmic approaches
    
• tokenisation
  
  • real efficiency gains from using CDPs in existing models
    
  • new economic activity
    
• high-assurance software engineering
  
  • when building the new core financial backbone of the internet, we need the greatest assurances
    
  • Maker community has been leading in smart contract formal verification:
    
    • see http://stablecoin.technology and https://github.com/dapphub/klab/
      
• decentralised financial technology
  
  • decentralised exchange, auction theory, etc.
    
    • e.g. https://oasisdex.com/ and https://github.com/makerdao/auction-keeper
      
  • theory, implementation, and practice of futuristic financial infrastructure on the blockchain