Robinland achieved a very important milestone on Jan 24, passing the Greenlight Poll on MakerDAO’s governance forum for its MIP6 collateral onboarding application. After lots of revisions and hard work, the team was able to overcome the concerns Maker delegates had brought forward. This article will give readers an inside look into the MakerDAO process and the steps we took to achieve a “yes”.
The Maker Application ProcessMakerDAO is a decentralized autonomous organization that can receive applications from any entity around the world to access its DeFi liquidity pool contingent on approval based on a pre-defined governance procedure.
Typically, the application process involves:
- The applicant submitting applications to the governance forum according to Maker’s pre-specified format for the application.
- The community engages with it during a cooling off period (usually 2–4 weeks) by posting questions
- Community Greenlight Poll to determine which applications to prioritize
- Maker’s ‘Core Units’ to conduct assessment/verification of the application along 3 dimensions: commercial, legal and technology
- Onboarding call where the applicants present to the community, the community asks questions, and finalizes with an onboarding poll to decide whether funds will be dispersed
It was not the easiest time to navigate the Maker process, for various reasons Robinland still decided to apply.
Despite our confidence, Robinland has been preparing for Maker’s MIP6 application since Q4 2021. Even though we know of cases where the applicant failed the first time but went back, revised and succeeded the second or third time, we wanted to make sure that the first version of our application is top quality.
As a result, we
- Studied all of the applications on Maker’s forum that are relevant to our case
- Talked to 10+ security/real estate/financial lawyers about our legal structure and any/all regulations related to the process
- Talked to Matthew Rabinowitz, the architect behind the 6s capital structure to understand its rationale and what Maker is mainly looking for
After a long period of preparation & revision, we finally submitted our proposal to Maker’s forum on Nov 21. What’s next was a 2-week cool down period in which the community engages with the proposal and asks questions. Over the next few days, we indeed received a few questions from the community, and have addressed their concerns about liquidity of security tokens, Maker’s position as ‘Senior Secured’, reserve fund, the use of Polymath jurisdiction accordingly.
Usually, the greenlight poll happens on each 1st and 3rd Monday of the month, so ours should be scheduled for 12/20. However, due to the holiday season, ours was pushed to 1/10 instead.
After an anxious holiday season, our team got back and fully prepared for the greenlight. To our surprise, during the first 3 days, the ‘leading option’ was actually a ‘No’ on our proposal. Among the voters, 2 delegates voted no, and the other 4 voted abstain.
Seeing that, we quickly responded by messaging MakerDAO asking for feedback, as we’re sure that (1) we’ve drafted it with all the knowledge collected from other approved proposals (2) meaning there must have been some misunderstanding going on about key elements of our proposal (3) or there are certain reason out of our control that’s leading delegates to vote no, such as long backlog or being in the transition period to a new collateral onboarding model.
At the same time, we received an extremely valuable piece of feedback from @MakerMan, a major delegate, on his own delegate forum. It provided clarity over what the concerns are, and a chance for us to address them openly to the entire community. Upon receiving it, the entire team paused all other engagements and jumped onto the case and quickly came up with a very detailed rebuttal, addressing all of the concerns, with the key points being:
- RBL represents fractions of a *portfolio* of loans. This brings 2 benefits (1) mutual insurance among the loans minimizes risk of default of the overall portfolio (2) rather than issuing heterogeneous tokens mapping to each underlying projects which suffer from poor liquidity, we’re issuing a form of homogeneous tokens that represent the senior lien commercial real estate asset class, which brings about much better liquidity.
- The underlying collaterals are full-recourse right senior lien debt, which is more secure than any asset we’ve seen in other real estate MIP6 applications. The senior lien debt itself is equivalent to the ‘senior tranche’ in a capital stack MakerMan suggested. (See illustration for details) The full-recourse right (again not present in other real estate MIP6 proposals) is the highest level of protection for real estate debt projects, as it means the entirety of the value of the loan can be traced back in the case of default. If we were to adopt the tranching method MakerMan suggested, defaults on the ‘first loss’ tranche can still affect the senior lien.
We provide 3 layers of protection for Maker:
(1) A put option for the RBL tokens. (We will keep trying to execute until Maker’s needs are fully satisfied)
(2) Full-recourse right provided by the underlying asset.
(3) Robinland’s industry connections with a robust secondary market for senior lien commercial real estate debt buyers, meaning we can easily sell a loan in our portfolio in 1–2 weeks.
- We are taking on most of the labor-intensive steps in the process because we have the right skillset, experience, and industry connections in our team to do so. We are alleviating Maker from touching the dirty work and we are achieving our mission of serving as a bridge between Trad-Fi and DeFi — as the financial service provider. We let all the transformation happen within, such that our partners — real estate developer & DeFi lenders can stay within their comfort zone.
- There isn’t a concern over ‘conflict of interest’ as (1) all the valuation and audit of the loan portfolio is conducted by industry-standard third party consultancies such as CBRE, BakerTilly, JLL, and Cushman & Wakefield (2) Role of the liquidator is purely to execute steps according to judicial process and state laws and all documentations and data involved in the process is out in the public (3) which we are more than happy to let Maker appoint a third party to take on and/or let Maker appoint a third party to supervise such process.
- In fact, Robinland’s role is similar to an Arranger: we’ve set up a structure that is robust enough to include a large number of commercial real estate debt assets, mitigating Maker’s risk as outlined above, and also saving Maker from labor-intensive work by taking on that in-house. This means we are a financial service provider that can serve as the bridge between Trad-Fi and DeFi specialized in the real estate industry for the benefit of both parties. (Project suppliers and liquidity suppliers)
The rebuttal was a turning point in the Greenlight voting process, as it:
- Clarified to the community that what Robinland is proposing is much in line with what Maker is looking for, both under the current framework and where it’s headed.
- Showcased Robinland’s professionalism & flexibility in adapting to major partners’ needs such as Maker, which is the key in a healthy long-term partnership in a changing environment such as RWA X DeFi
From then onwards, we received positive feedback from many delegates, and received public support from the forum. A few days later, we noticed that our voting result had turned to a ‘Yes’ for its leading option, with 55k MKR yes, 18k MKR abstain, and 17k MKR no according to the vote breakdown. This is the best result among all other applications who are going through the greenlight poll in the same batch.
We’re really proud to have passed Maker’s greenlight poll especially during such a turbulent time. This really gave us confidence that we’re a team who not only possess the right expertise to produce a top-level framework that satisfies specifications of the industry leader (i.e. Maker), but also the flexibility and resilience to adapt to challenges and resolve point by point, the latter of which being the key to success in such a changing environment.
We also know that this is not the end, not even the beginning to the end, but just the end of the beginning. After the greenlight poll, we’ll be coordinating with Maker’s Core Units under the RWF division to conduct all necessary due diligence and assessments. In that process, if there is anything that does not satisfy Maker’s needs, we’ll again change and adapt. Even so and after passing of the onboarding poll, we’ll also keep engaging with Maker to adapt to its needs and the overall regulatory environment.