[seibelj]

The crypto hate on HN is enormous, and someone who evaluates MakerDAO for 15 minutes will speak authoritatively over its inevitable failure.

The core thing to realize about Maker is that all Maker does is loan Dai against an asset! It's collateralized. Ethereum may be risky to use as collateral, but something like Digix, where tokens are issued one-to-one with gold stored in a vault, means that you are now issuing Dai against a real asset (gold). If you think Maker will fail, you are arguing that the value of the asset backing Maker will fall.

[JumpCrisscross]

> Digix, where tokens are issued one-to-one with gold stored in a vault, means that you are now issuing Dai against a real asset (gold)

Marketable collateral is an old idea, and suffers certain intrinsic difficulties. One is counterparty risk. Here we have at least three trust points: the place(s) the gold is physically held, Maker and the mechanism by which one holds Digix.

The classic case: Maker lies about the amount of gold in the vault (or steals the gold). Less classic case: the person holding the gold does the same. More realistic case: someone in this chain runs into financial difficulties, or messes up their AML or sanctions compliance program, and has their assets frozen and/or seized by some authority somewhere in the world.

[seibelj]

Once you have possession of a gold token, no one can stop you from trading it, because of the blockchain. Converting your gold token into gold and having it shipped to you may be problematic, but once you have the gold token, it's transferrable.

Maker is decentralized, the problem there would be a bug in the smart contract.

And Digix being a failure / scam, that is indeed a failure point.

But what MakerDAO and Dai represents is not some "magic blockchain thinking", it is based on rational economic incentives.

[JumpCrisscross]

> Converting your gold token into gold and having it shipped to you may be problematic, but once you have the gold token, it's transferrable

"I want to sell you this gold token. You can't convert it to gold, because the gold was all stolen."

[seibelj]

As with any asset you don't physically own, you are trusting that it exists. Digix is insured, and any token backed by a physical asset you would need to trust the organization that issued it. But this is not rocket science - these types of businesses and the industry surrounding them have existed for a long time. The innovation, if you believe it's innovative, is that the representation of the asset exists as an ERC20 token.

[JumpCrisscross]

> these types of businesses and the industry surrounding them have existed for a long time

And they've failed, via common mechanisms, for as long. Hence why issuers of marketable collateral are tightly regulated. This "innovation" updates an administrative aspect that always worked fine while leaving the dicier back-end not only untouched, but less regulated than before. It's analogous to rolling back to an un-patched OS, changing the color scheme and calling it progress.

[cornholio]

> If you think Maker will fail, you are arguing that the value of the asset backing Maker will fall.

Or the entity having the key to the gold vaults decides to buy themselves a nice tropical island. The real world, it seems, does not expose a blockchain API.

[seibelj]

Digix is incorporated in Singapore and goes through the same audits as any other gold storage facility, has their gold insured, etc. If you own paper gold that is backed by gold in a similar facility, then this is no different. If you own gold futures then it is ultimately backed by physical gold in facilities (although perhaps warped through various contracts and leveraged 5x).

It just happens that Digix gold is issued as an ERC20 token rather than registered with a physical gold exchange.