MIP39c2-SP4: Growth Core Unit, GRO-001
MIP39c2-SP#: 4 Author(s): Nadia Alvarez Contributors: Jennifer Senhaji, Gustav Arentoft, Matt Cooper, Doo Wan Nam, Mariano DiPietrantonio. Status: Formal Submission Date Applied: 2021-02-24 Date Ratified: <yyyy-mm-dd>
While Dai’s implicit utility (stability and interest rates) can be improved via governance, the protocol needs an entity capable of helping it grow in distribution channels, increasing the capacity that can be absorbed by the organic growth of the protocol and leveraging resources to ensure that a lack of integrations does not restrict or stagnate adoption.
Over the past 3,5 years, the mission of growing distribution channels has been taken by the Maker Foundation through the Business Development team, run under Greg Di Prisco’s leadership. With the upcoming Core Units spinning out, we have identified the need for the function to shift gears and move under direct protocol management, and that is why we decided to propose the Growth Core Unit.
As of now, the BD team is divided into five main regions: NA, LATAM, Asia, Europe, and Africa, onboarding over 936 different product lines that now include Dai or Vaults. The BD Function has been operating in regional teams with vertical focuses. Examples of verticals are Blockchain Games, Art, Exchanges, Decentralized Finance Protocols, Payments, and Debit Cards.
Core Unit Name
Name: Growth Core Unit
Core Unit Mandate
The Growth Core Unit aims to grow the available distribution channels for the Maker protocol by intelligently deploying the human and financial capital given by the DAO, increasing the supply and demand of Dai in the global markets. The key channels we wish to expand are the (1) ability of borrowers to generate Dai, (2) the ability of users to buy and sell Dai, and (3) the ability of users to perform a useful activity with Dai.
To do so, each member of the Growth CU will be in charge of a segment, vertical, or geography to:
- Understand the Maker protocol market fit.
- Give support and education to drive Dai adoption and integrations.
- Generate expansion and adoption of Dai.
- Develop an integration strategy and give continuous advice to the newest distribution channels.
- Create a success plan to track integration outcomes.
- Review the status of the oldest integrations to help them to grow in the usage of Dai.
What is our execution strategy?
We follow a demand-driven fast execution strategy, spreading resources across a large variety of partner verticals based (initially) on intuition and hypothesis about Maker’s protocol market fit, see what works, and then continually double down where we’ve gained traction.
Once we have found a new market (it could be a region, a vertical, or product), we follow this process to open it and establish Maker on it: (1) we acquire a foundational bridgehead integration which serves as an icebreaker because it facilitates the expansion beyond our current integration types, (2) we use this bridgehead to gain further foundational integrations which help us to make Dai available in that market, and (3) we use these foundational integrations to develop higher-level partnerships, those are partners who add utility to Dai rather than availability.
Our process in detail
The general outline of a traditional cycle consists of the following phases: Outreach → Initial conversations → Project formalization and commitment → Integrations support → Pre-launch growth → The partner Launch → Maintenance and growth
Outreach is done via various channels, including individual networks, conferences/events, cold calling/emailing, investor networks, and inbound leads.
Initial conversations are taken by the BDA (Business Development Associate). This is where the initial outline and scope of the potential collaboration is laid out. The vertical strategies are often a key driver in the initial conversations, showcasing how other integrations with partners that share similarities are successful.
Project Formalization and Commitment is where contractual and specific terms are laid out between the BD Function and the external partner. Contracts are drawn up if needed, and incentives are discussed. This can include financial or human capital deployed to help the integration on its way. An example of financial capital deployed can be paying an integration fee, or committing to a marketing or educational campaign upon launch. Human capital can be technical resources in the form of the integrations team or introductions to Maker partners for synergies.
Integrations support is where the BD Function needs the help of an external function provided by the Integrations team. The Integration team consists of personnel with specialized skills and a deep understanding of the MakerDAO protocol. They help our partners with any technical doubt about integrating the Maker protocol with their systems. They are the prime source of integration documentation for external partners as well.
In the pre-launch growth phase, we do a product and market assessment to understand the best way to promote any of the Maker Protocol solutions in our partner’s project, understanding the target and the objective of the integration. During this stage, we help not only to structure promotional campaigns but also to go deep into our partners’ needs and develop the right product to ensure success once the integration goes live.
The Partner launch is the final step in the integration process, but not by any means when the partners are handed off. Ensuring a mutually beneficial relationship for the future can enhance the distribution channels’ performance, with Dai demand and supply.
Post integration marks the beginning of the next phase of the BD partner relationship management, aiming to support and expand Dai’s usage within the partners’ environment. During the Maintenance and Growth phase, we work very closely with our partners to understand the impact of the integration and how the market receives the use case we co-created with them. That is how we track the interplay between foundational and higher-level integrations within specific markets, verticals, and products and monitor the volumes and utilization of these integrations (e.g., trading volume on an exchange/Dai locked into an application). These metrics generally do not materialize for 9-18 months after focusing on a market, vertical, or product line and are therefore not useful in short-term decision making. During the maintenance and growth phase, our main objective is to find a way to develop higher-level integrations that will add genuine utility to Dai. To achieve them, we must provide real utility to our partners, which requires a solid base of foundational integrations.
A clear example of the whole process is the development of the Argentinian market. While Dai is a global currency, the markets we seek to penetrate are often very local. In each of these markets, we need to understand where local demand is coming from and know that we can fulfill it in the short term. For instance, before the Dai Savings Rate, the only reasons someone would save in Dai were: (1) they had a philosophy of decentralization, (2) they lived in a country where it was undesirable to hold the local currency, and they could not trust the banks to custody USD for them. Using this simple heuristic, we identified Argentina as a key potential market about one year before any of our competitors found it compelling.
After almost three years working in the region under the process previously explained, Argentina has become one of the biggest DAI markets in the world. We started acquiring a foundational bridgehead integration, a partner who set precedence and helped us to create a custom-made message for Argentinians, establishing Dai as a new paradigm on how people save their money. After a couple of months, we integrated further foundational integrations, which helped us make Dai available in the Argentinian market. Different exchanges started to list DAI against ARS and USD, opening new on-off ramps in the country. We help those foundational partners understand what they could offer around Dai, without forgetting local regulations, users’ manners, wording, mechanics, etc. And then, we partnered with Buenbit, our first higher-level partner in the region. We supported Buenbit to create an exclusive Dai product, regulated by the local government, allowing people to keep saving in a dollar-linked asset (Dai).
How do we measure success?
Closing a deal means the partner completed the integration, and the execution of the “maintenance and growth program” has started. The best short-term metric of our success is the rate of growth in “tier-weighted closed deals’’. This is the number of deals closed weighted by the tier that they fall into.
The Growth CU breaks down its relationships into tiers. The average quarter is intended to be 80% tier 3s, 16% tier 2s, and 4% tier 1s. This is reflective of the Pareto distribution that historically governs economic relationships. Adoption from these deals is intended to follow the same distribution in aggregate, i.e., the collective tier 3s should represent 80% of ROI to the protocol.
The benchmarks for what qualifies as a tier 1, 2, or 3 do not have to be very precise but represent the difficulty of acquisition and the opportunity of expansion it will give to the protocol. In the long run, this difficulty (or tier) will match the value of these deals.
Besides the monthly salary, the Growth CU will be compensated proportionally to this distribution curve, to incentivize growth. If the aggregate achievement is skewing away from these ratios, what qualifies for each tier can be adjusted by the Maker Governance to bring it back in line. The ideal scenario keeps these ratios in place while increasing the overall number of deals. In practice, some leeway needs to be given to changes in the ratio given the relatively small sample size, but the tier qualifications would likely be changed if we saw a sustained deviation from the ideals.
Every month (or more often), the Growth CU will share with the community what we are doing on the different segments, verticals, and geographies. At the end of each quarter, the Growth CU will prepare a summary of the quarter to:
- Describe each segment
- Review all the close deals and the integrations under the maintenance and growth phase
- Review of the integration acquisition cost and the churn rate
- Give an overview of the plan for next quarter
Depending on the results, the Maker Governance can opt to adjust the tiers that help us calculate the growth rate in the “tier-weighted closed deals’’.
Our Journey during these years
During the three years of existence of the BD unit under the Maker foundation, we achieved the closing and the growth of foundational integrations in the largest countries of the regions we covered, allowing us to identify different verticals where the Maker Protocol could integrate with high-level partners to create utility.
To measure our progress, we assigned a weight to each tear: Tier 1 → 25 points, Tier 2 → 6.25, Tier 3 → 1.25. In that way, a closed integration that could bring to the protocol more than 1M users/wallets holding Dai weights the same as twenty closed integrations of niche-oriented solutions. The demand of Dai or the volume that a partner can bring to the Protocol is proportional to the investment in resources and time we put on closing that particular deal.
During the last three years of the BD team, this has been the rate of growth in “tier-weighted closed deals.”
As the data shows, we experienced strong growth across the board. The tier distribution remained mainly compliant throughout the three years. The growth of closed deals during the time reflects our strategy, where the foundational partners have helped us convince high-level partners to integrate with the Maker Protocol.
Our team has been distributed mainly by geography, giving us a deep understanding of each region and developing closer connections with our partners. This is a brief overview of what we have done in each geography:
Latin America region is where organic growth is. We have seen two types of users of the Maker Protocol: crypto-native and the ones who are looking for options outside their local currency and the traditional financial system. In LatAm there are not that many DeFi projects as you may find in other geographies, but, as we have seen, there is a substantial user base who is willing to enter the crypto world to escape from their local financial constraints.
During the last years, we made an effort to integrate with as many on-off ramps to provide access to Dai with the different local currencies in the region. Exchanges like Bitso, Bitcointrade, Buenbit, Ripio, Panda, among others, helped us to create a localized use case, while we helped them to adopt Dai and DSR to support them with their business goals.
We also have been helping other crypto projects (like Argent, Binance P2P, Oasis.app, Status) to land in the region, explaining to them the situation of each country, making intros, and working with them on the best strategy to launch in Latam.
The North American market has experienced strong growth with a dedicated business development effort. To date, Dai is listed on leading US exchanges and platforms like Coinbase, Binance US, Kraken, and Uphold Finance, among others, with two more very notable platforms listing Dai this quarter. We recently added BitPay as a partner, currently with Dai available on their app, and their payment processing service later this month, making Dai available to merchants like Twitch, Microsoft and Newegg.
We’re also carving out the digital art/NFT vertical by cultivating relationships with nft platforms and artists and educating them on the values of Dai as a currency. One particular example of Dai involvement in the arts is with an upcoming integration with professional artist Micah Johsnon and his incredible piece “Bitcoin Birthday” (developed with Async Art), which illustrates the inequity of the traditional financial system for people of color in the US. We’re working with Micah Johnshon and Async Art to add Dai as a currency that people can donate to in this interactive artwork that has a fund for two children that are depicted in his work and who will receive funds donated on their 18th birthday. Bitcoin and Dai will be the only assets available to donate in. The statement is about sovereignty and open access to finance.
Asia is home to various Dai use cases ranging from DeFi dApps like Kyber Network and InstaDApp to dApp games like League of Kingdoms to major exchanges such as Binance, OKEx, and Upbit. Many of them integrated DSR, which allows users easy access to use DSR with their Dai. We are also working with multinational Korean corporation Kakao’s blockchain Klaytn. There are already 6.6 million Dai wrapped on Klaytn and they are used in its dApps such as KLAYswap.
The European market has been one of the most active regions for the business development team, with over 250 closed integrations. Close relationships with large companies like Wirex, Opera, Nexo and AAVE have helped fuel the growth of Dai in the European region. They represent millions of users on their platforms. The Gaming initiative was sprung out of a collaboration between regions, and enabled the team to work closely with brands such as Animoca Brands, Axie infinity and Decentraland.
In Africa the prime focus has been to build initial relationships and liquidity up. This is still a work in progress, but a detailed action plan is being made, with local resources expected to come into play over the next couple of months. This will enable the Growth team to help Dai liquidity being sourced from the global markets into the African continent. Enabling liquidity to push integrations with local partners. The team has showcased the success of the internal strategies by propelling Dai to be one of the top crypto currencies in LATAM. This approach will be replicated, tweaked to fit Africa, and then put into place to ensure Dai to be a top currency in the years to come. Opening up for DeFi and financial inclusion for Africa.