The Defense Fund will soon be created following the approval that has come directly from the Marker Governance. The Defense Fund is expected to play a considerable role in reimbursing active MakerDAO participants for all their legal expenses. This development has been shared by Maker through its official Twitter handle.
The Maker has further said that the special fund will have a contingency of 5 million DAI acting as a self-insurance tool, a risk management technique that enables it to cover the costs in the future when risk cannot be transferred via traditional technique.
Termed Special Purpose Fund, the Defense Fund will come in handy during a situation when legal or regulatory action has to be taken against specific participants of MakerDAO.
Coverage under the Special Purpose Fund will be prioritized in the following manner:
- Recognized Delegates
- Core Unit Facilitators
- Core Unit Permanent Contributors
- MKR Holders
Claims and payouts will be settled after they have been reviewed in two different steps. First, an external technical committee will issue a recommendation about the approval or rejection of the payout. This will be based on the claim that has been submitted to the insurance and risk management experts, members who ultimately comprise the external technical committee.
Following the recommendation drawn by the external technical committee, it will move on to Comptrollers, who will review the recommendation for the final call. Comptrollers have the right to approve the recommendation or reject it with an explanation. This entire process can be viewed in the Claim Procedure Manual.
The Special Purpose Fund is only meant to cover legal defense expenses. They will be paid out in lump sum once the claim has been approved by the external technical committee and Comptrollers.
As of now, Maker has made the Special Purpose Fund proposal available in the Maker Forum.
It is important to note that the funds will not cover operational costs, and the claim approval will be thoroughly based on the rules drafted in the Claim Procedure Manual.
A maker is a group of builders who are working towards establishing DAI, a digital currency that has unrestricted utilities, no matter the holder. Leveraging the token has no time set since it is available throughout the day and night. Known to be an unbiased currency, Maker claims to have developed something that provides stability in a decentralized manner.
According to the details shared by Maker, more than 400 applications and services have proceeded to integrate Dai with their infrastructure. This includes DeFi platforms, wallets, and games, among many others services.
The creation of the Special Purpose Fund follows the announcement related to the integration of the Dai Saving Rate with an increase of 1%. The Defense Fund will work as a self-insurance tool only for the MakerDAO participants.