Internal Power Struggle at MakerDAO: When Coding and Personal Interests Collide
Chaos at the headquarters of MakerDAO: Why have some key members left the company, while others hired a lawyer?
In the crypto industry, there are many examples of how a conflict of interest has led to a company split. Perhaps, the largest ones are the forks of bitcoin (BTC), bitcoin cash (BCH) and the Ethereum (ETH) network. As a rule, the reason lies in disagreements related to the philosophy of the project, its development or financial components.
Various views on how the platform should be managed led to the conflict of interest at the headquarters of MakerDAO. It all started with the fact that Andy Milenius, the company’s chief technology officer, left the project, as reported by Cointelegraph on April 28. Internal conflicts have been aggravated by the recently found vulnerability and trials between the key members. How far can it go and will we witness another fundamental split in the blockchain company?
Chapter 1: Vulnerability
MakerDAO is the preeminent lending platform for the DAI stablecoin — which is dollar-pegged, no less. The MakerDAO project is also a decentralized governance platform. It is through the MakerDAO platform that MKR token holders vote for the execution of changes in the DAI lending protocol. In essence, the platform’s governance system works on the principle of granting several proposals encoded in the form of Ethereum addresses. Users vote for the proposals of their choice by freezing MKR tokens in the voting contract as pledges.
Between April 22 and 26, a critical vulnerability was discovered and analyzed on the MakerDAO platform by the security audit firm Zeppelin. The vulnerability impacted the very functioning of MakerDAO by making user funds irretrievable. By exploiting the system’s vulnerable coding, attackers could gain access to the system and freely move the tokens staked in favor of one MakerDAO governance proposal to another — perhaps even a competing proposal — and lock them in place forever. On May 6, the MakerDAO team released an appeal to its community on Reddit:
“In partnership with Coinbase and Zeppelin, the Maker Foundation has been participating in a second round of audits of the Maker Voting Contract. During this process, we discovered the need to make a critical update. [...] You are advised to move your MKR out of the old contract and back into your personal wallet immediately.”
Chapter 2: Andy Milenius’s departure
What could have seemed as a routine error in code at the inception of MakerDAO turned out to be much more as the plot thickened with the sudden departure of Andy Milenius, the project’s CTO, in early April. His departure was preceded by a voluminous 24 page-long letter published on April 3, which begins with the words, “Currently, the Maker development team is going through its most difficult challenge that I have witnessed during my 3.5 years with the project.”
In his letter Milenius outlined his long-standing conflict with MakerDAO CEO Rune Christensen and the former’s attempts to usurp the platform, which began back to January 2017:
“He [Christensen] told me it was necessary that he have full unilateral control over the Dev Fund from that point forward.”
As stated by Milenius, though later Rune abandoned this idea, the whole situation led to the creation of the opposition, aimed at preventing Rune from ruining the project and at protecting the community’s funds.
Another event that affected the professional relations inside the company, according to Milenius, was the appearance of Matt Richards, who, in the spring of 2017, assumed the responsibility of the chief operating officer. According to Milenius, Richards was not only not familiar with the technical side of the project, but did not support the very idea of DappHub, the separate project led by the MakerDAO developers and initiated by Christensen to better manage the company’s processes. In addition, his invasion of the pro