Governance and Delegation

Introduction

As discussed on recent calls, the governance process has become less consistent and less secure than is ideal for MakerDAO and the Maker Protocol. We considered two solutions to this issue, Governance Rewards, and Delegation. Based on the complexity and danger of Governance Rewards, we have chosen to focus on Delegation as the near-term solution to the recent issues.

What to expect

Over the next few weeks, @hexonaut and @Derek will be coordinating the required smart contracts and front-end work to allow delegated voting in the Maker Protocol. We are pursuing a simple and robust implementation that can be implemented quickly in both the Smart Contracts and UI domains.

Smart Contracts

A delegate voting contract can be created by any address. The creating address becomes the permanent delegate for that contract. Once a delegate voting contract is created, anyone (including the delegate) can add MKR to the contract at any time. Any address that has added MKR to the delegate contract may withdraw the same amount of MKR at any time.

The delegate address only has the ability to vote with the MKR locked in the contract. It does not have the power to move the MKR at all - even to return it to the owners.

Users who lock their MKR into the delegate contract will also be able to take advantage of governance rewards when / if they are implemented.

Each delegate contract will be able to vote in both on-chain polls and executives.

User Interface

The interface will be available on vote.makerdao.com and will display a list of official (constructed via a factory contract, so that voters can trust that the delegation contracts are legitimate) delegation contracts.

MKR Holders may select any address from this list and delegate their MKR to that address. MKR Holders will also be able to withdraw their MKR from their delegate using this interface.

Delegates will be able to vote on polls and executives using existing user interfaces.

Governance

GovAlpha will be working to ensure that there is a solid set of initial delegates for MKR Holders to choose from when delegating their MKR. We will reach out to those that display interest and together arrive at some guidelines and best practices for being a delegate.

In later UI versions, information on each (willing) delegate will be collected by GovAlpha and displayed prominently on the UI. We hope to keep track of and display metrics such as:

  • Incentive Alignment (to the Maker Protocol)
  • Attention (voting frequently, staying engaged)
  • Communication (communicating reasoning effectively)

By doing this, we hope that we can ensure delegate quality and safety for MKR Holders that don’t have a personal or professional connection to their chosen delegate. We imagine that these metrics will become important for any publicly accessible delegate within MakerDAO to maintain.

These metrics (or lack thereof) will never be used to prevent delegates from voting.

GovAlpha will also be producing guidelines for both delegates and MKR Holders communicating both expectations for delegates and what MKR Holders should look for and think about when choosing one or more delegates.

Are you interested in being a delegate?

If you are interested in being a delegate please reach out to me publicly or privately.

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I probably should have mentioned this in the initial post, but any feedback or comments on the above are welcome. This represents the current plan but it isn’t set in stone.

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Excited to see how this rolls out, as someone looking to delegate

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I assume it is possible to be your own delegate if you are planning to go solo?

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The governance rewards (as currently defined) will be accessible to those with MKR locked in the Chief contract. This was just to confirm that they’ll also be accessible to those who delegate using this contract.

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I’m very happy about this. Just more automation to further reduce the number of onchain votes and we are in very good shape.

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Checking in from Pantera Capital here (and x-posting from chat).

This is really exciting news. As MKR holders, we’ve been waiting for Vote Delegation for a while now - as we consider it a pre-requisite to our ability to participate actively in governance. Because of this, we’ve been highly active on Compound and Aave governance (for example), but not on Maker despite our desire to do so.

On the sample metrics laid out in the OP (Alignment, Attention, Communication), I believe we’d rate highly on all 3 once this is implemented. Happy to state here publicly @LongForWisdom that we would be interested in being a delegate, even if only to support ourselves.

Also noting here that custodial requirements for larger / institutional investors may present a challenge for them to participate more actively. Once the initial work of enabling delegated voting is done, there’s another layer of work still required for major custodians / exchanges (ex. Coinbase Custody, BitGo, etc.) to integrate the process. Happy to push on that front as well.

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As a small fish, very excited to be able to actually put my MKR to work without bleeding disproportionate gas fees every week!

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I think this can bring vitality to the community and make more people interested in governance. I hope it can be realized as soon as possible.

I couldn’t agree more.
Happy to see so much engagement in general.

The one thing that would worry me if I did not trust the current Governance Alpha is:

How do you measure Alignment?

Let’s say a group wants to bring Maker to some blockchain. Another group wants to focus on onboarding more collateral types.

Which one is more “aligned to the Protocol”? Or maybe I got it completely wrong?

I just want to avoid groupthink.

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Don’t want to speak for LFW, but from my perspective I’d want to know who the Delegates are/what role they play in the Maker ecosystem. So, for example, if there are two delegates, one of which represents a Core Unit and the other of which represents (say) Aave, I’d consider the first to be more aligned and would be more inclined to delegate my MKR to them.

Hey @franklin glad to hear from you. I was curious as to why you guys were waiting for delegation specifically, is that something you can speak to? I understand the desire for delegation from the point of view of someone who has less time to participate, and wants to delegate to someone else. I’m not sure I understand the lack of participation pending delegation from the point of view of a potential delegate.

Good to know, thank you.

Good question. This isn’t really around groupthink, but more around alignment to the long-term success of the protocol. This can come in several forms. The table below represents some of our current thinking, though I don’t consider it an exhaustive list.

Alignment Source + Type
Holds MKR Extrinsic - Financial
Holds vested MKR Extrinsic - Financial
Paid percentage of revenue Extrinsic - Financial
Maker Protocol is primary employment Extrinsic - Financial
Being a delegate delivers status + prestige Extrinsic - Reputational
Enjoys delegate work Intrinsic
Maker Protocol benefits society Intrinsic

We have been considering how stable these incentives are over a longer time period as well. For example holding MKR shows alignment at the time a delegate is observed to hold MKR. Owning vested MKR would show a longer term alignment.

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Thanks, @Cassius.

I’m not sure if Core Unit Facilitators would be good Delegates, as there might be conflicts of interest.
We should probably discuss this, as well as Delegate Compensation.


OK, so it’s a bit like badges.
And negative points if you retweet Stani. Gotcha. ; )

My initial thought is that we should have an easy way of showing intentions/ideas, historical voting, and a way for the delegate to justify those votes.
Happy to entertain this list too, but I have my doubts. As an example, someone for which Maker is not the primary source of revenue might make better long-term decisions, as they are less concerned by the immediate results. Probably not the best example, but you know where I’m getting.

Really looking forward to the “Enjoys delegate work” award (i.e.: yes, we believe she was smiling as she downvoted that MIP).

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As someone interested in delegating, I’ll chime in and say it’s not just transaction costs. I also want to throw whatever marginal influence I have behind someone who both prioritizes the long- run health/profitability over the short, and who will also be a bulldog about ongoing governance.

My experience in more centralized companies is that those who get approved to start new programs tend to be high quality and followed by those who increasingly add little value for the cost, but who are then entrenched and able to extract resources from the organization. We have a fresh start here and I want “decentralized” to mean not beholden to non-MKR holder interests, as opposed to a capture by management or employees.

Anyway, I might have higher wishes than will be delivered upon, but a few AMA posts by would-be delegates would definitely attract interaction from me. Delegation isn’t just a tool to save on gas/time. It’s a tool for groups of MKR holders to form voting blocs to push in the direction they feel is best

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Thanks @franklin, awesome to know you are happy to join governance and voting!

I am also interested in:

I think it would be very useful for us (but also other DAOs) if you could explain what difference delegation makes (legally, perhaps?) given what you say:

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As one who owns MKR (yes a small stake), and has significant capital in the protocol I would be interested to see if there are any holders interested in me representing their views in the protocol as a delegate.

I check in on votes/polls weekly, have the capability to vote regularly (for the most part).

As a delegate my intention would be simply to make direction choices, occasionally offer suggestions for change, and to secure the protocol generally for both vault users and DAI holders.

Happy to put up my reasoning and positions on votes before I vote, and discussion positions, etc. Perhaps a format for a Delegate Platform that has Q/A that might be a useful way for Delegates seeking to distinguish themselves to inform the MKR holders seeking to delegate their MKR. I may noodle on this and offer up a forum post on the subject. If someone beats me to it, all the better.

Time and detail involved would probably be directly related to potential compensation or lack there-of.

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Are we incentivizing delegation by considering (but not necessarily committing to) possible retrospective governance rewards for those who delegate now?

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No, at this point we’re not planning any incentivisation for delegates (retroactive or otherwise). If the number / quality of delegates ends up lacking, we may want to consider incentivising delegates explicitly.

I volunteer to be a delegate. On incentive alignment,

  • I hold a small amount of MKR relative to many, but it is the largest investment in my portfolio by far.
  • I am not otherwise working for Maker. I’ve never been employed by Maker or MakerDAO, although I did receive some compensation for the work I did trying to compensate vaults who lost everything during BT.

On attention,

  • I read pretty much all forum posts. I often read Rocket chat.
  • I voted frequently, until gas prices went crazy.
  • I’ve studied finance as a hobby for years. I was an early investor in MKR; I was accumulating MKR before SAI was a thing.

On communication,

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