Risk Management in MakerDAO

A core function of the financial system is to transfer risk to the parties most willing to bear it. It should therefore be no surprise that two of the most successful products in DeFi, stablecoins and DEXs, address the key risks of using and holding cryptoassets. But these systems face uncertainties of their own. While limited counter-party risk and full transaction auditability have been rallying cries for DeFi, history reminds us that risk isn’t eliminated, but transposed. In fact, increasing complexity of products and complacency of market participants can magnify rather than reduce systemic risks.

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3Box Investment Thesis

In the technology market, a shift in the development paradigm has always shuffled the deck and created opportunity for new entrants and new tools. We are thrilled to announce today that Placeholder led a $2.5mm investment in 3Box, a company based in New York and Berlin dedicated to the proposition that users should have an interest in their data.

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The Full Circle Hypothesis

One thing more difficult than critical analysis is predicting the future. But here’s one possible scenario. While blockchain networks will continue to reinvent organizations that administer information and facilitate transactions connected to that information, on a societal level, the end result will look disturbingly familiar. I call this the full circle hypothesis.

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Blockchains are Bureaucracies par Excellence

In an earlier post, I likened decentralized networks to fields - social arenas of symbolic and material production within which interested actors compete and cooperate over network-specific resources.

The promise of blockchain and related technologies is that these arenas can be set up in ways that minimize trust requirements, reduce concentration of control over data, and enable free, censorship-resistant transactions in an increasingly global and automated setting.

In this post, I propose this development represents an important step in the evolution of bureaucracy. That may sound counterintuitive given this term’s common association with inefficiency and excessive paper-shuffling. But once we understand the essence of bureaucratic organization, it will become clear that blockchain networks are actually bureaucracies par excellence.

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Value Capture and Quantification: Cryptocapital vs Cryptocommodities

The majority of cryptoassets are shaping up to be capital assets in nature, whereas many early examples like bitcoin are better characterized as commodities, with a subset poised to become commodity monies. Within the burgeoning capital asset field of crypto, some closely resemble equity, others more closely resemble debt, and others have a bizarre enough mix of capabilities and value streams to be unrecognizable from prior renditions of capital assets. As part of explaining why governance assets have value, Joel has done an excellent job of laying out foundational principles behind capital, which is a piece that should be read before continuing here.

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