We were here: Maker/Sky launches Stars. Stars need to hold capital to serve as first loss. Stars have no capital. Sky lends them the capital. So Stars can take risks, collect fees on Sky’s money despite not putting their own money at risk. Now we are here: Sky wants to launch more Stars (who also will need to be loaned money to hold as a capital buffer); will authorize negative Surplus Buffer to lend capital it doesn’t have to new Stars You can see why this is perhaps a problem. Imagine Sky sends $25m to two new Stars. As of today, Sky has $28.5m, so the Surplus Buffer would lose $50m and go to -$21.5m, and each new Star would go from $0 to $25m. Sky considered Stars to be direct subsidiaries that it fully controls. It does this to net out the money sent to new Stars. If you add up Sky’s and every Star’s Surplus Buffers, any movement between the two officially nets out to $0 in change. When Sky’s Surplus Buffer cannot go negative, then this is a legitimate (if contradictory to the whole point of Stars) accounting characterization. Once it can go negative, you are now printing unbacked USDS, which is then being used as a backstop for that Star’s investments. We’re now in strange intercompany accounting choices. Stars are ostensibly semi-independent (that’s why they are required to emit governance tokens). But Sky consolidates the Surplus Buffers in the official reporting. This is very aggressive accounting to record a loan of USDS to a Star if Sky doesn’t actually have that USDS on hand. It’s a kind of fiction if you launch 17 new Stars, each with, say, $2m and Sky sitting on -$5.5m. Even Sky isn’t supposed to just mint USDS out of thin air. I suppose if you go by the choice of consolidated accounting it wouldn’t really mean Sky + all Stars is insolvent but it does materially misrepresent the amount of capital backstopping the $1 value of DAI/USDS by using this negative funding strategy to capitalize all these new subsidiaries. Much less important, it also calls into question what the Star-level gov tokens are for and why Sky lets Stars siphon off fees if they are, as claimed, a consolidated balance sheet.