MakerDAO specializes in decentralized loans issued on an Ethereum powered stablecoin, Dai. However, the fine print tells us a different story: one where users can be cut off without notice.
Nobody ever reads the fine print. The good news is that decentralized systems generally don’t have fine print, due to the fact that a decentralized entity has no power to kick or remove you—or at least we thought. It turns out that MakerDAO has some fine print which may concern some of its users.
Reading MakerDAO’s Fine Print
As pointed out by grubles (@notgrubles) on Twitter, the fine print in MakerDAO’s terms and conditions should cause us to pause. Under section 9, the terms read that MakerDAO is able to “terminate or suspend all or part of the Service and your Dai System and Software access immediately, without prior notice or liability.” This can only happen if a user is suspecting of breaching any of the other terms or conditions of use for the MakerDAO.
— grubles (@notgrubles) November 18, 2019
Is this what decentralized finance is all about? Some Ethereum critics have been quick to point this out as a flaw, but the story is, in truth, a bit more complicated.
Not a Cause for Alarm
Of course, fine print like this is to be expected. After all, there has been no known case of MakerDAO users being removed without notice. It can be argued that the stipulation was just included out of regular legal habit and will likely never be used.
Moreover, no central entity is able to shut down MakerDAO. Existing as a decentralized autonomous organization, the supermajority of MKR tokens holders would have to vote to suspend particular activities. Such a move would not only be extremely unlikely but would be counter to holders’ interests.
Decentralized finance will undoubtedly be one of the leading areas for Ethereum in the coming years—and, indeed, for the entire cryptocurrency space. However, just like regular finance, that will have to come with some legal lingo. There will be fine print to ensure protections for all parties involved just like in traditional finance. These legal hoops are unavoidable and it would be unfair to use them against MakerDAO. Bitcoin may not have any ‘fine print,’ but it’s also not trying to break into decentralized finance.
So, yes MakerDAO has some fine print. Depending on your perspective, it may be a concern. However, the chances of the project ever getting the supermajority to employ such punitive actions are slim to none.
Images are courtesy of Shutterstock, Twitter.
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