MIP40c3-SP12: Modify Core Unit Budget, RWF-001

MIP40c3-SP12: Modify Core Unit Budget, RWF-001

Preamble

MIP40c3-SP#: 12
Author(s): Sébastien Derivaux (@SebVentures)
Contributors:
Status:  Accepted
Date Applied: 2021-05-11
Date Ratified: 2021-06-28

Sentence Summary

MIP40c3-SP12 supersedes the budget for the Real-World Finance Core Unit defined in MIP40c3-SP1.

Paragraph Summary

With MIP40c3-SP1 the Real-World Finance team was able to onboard the first Real-World Asset and provide some financials for MakerDAO. Nevertheless, as no Legal Core Unit is expected in the short term, we need to increase the budget for legal expenses. We also need to solidify the data analytics part, which is currently limited, to integrate MakerDAO and RWA data to provide transparency and insights to stakeholders.

Specification

Motivation

  • Scaling the Real-World Finance Core Unit after a few months of documented work (see our forum section as well) to tackle the challenges of MakerDAO in the area of Real-World Assets and Finance. Our current budget is MIP40c2-SP1.

Core Unit Name

  • Real-World Finance

List of Budget Implementations

  • This budget implementation uses the Manual Budget Implementation with payment being ideally done before the 10th of each month. This can be changed if needed to any method achieving similar objectives.
  • This budget will be in place from July 2021 to December 2021 included (this way Governance doesn’t have to take action to get rid of RWF)
  • Dai per month: 155,000
  • The destination wallet is: 0x9e1585d9CA64243CE43D42f7dD7333190F66Ca09 RWF Core Unit Multisig

List of Budget Breakdowns

Type Monthly Total
Contributors (7 FTEs + grants) $105,000
Legal consultations $20,000
Real-world structures $10,000
Data-infrastructure $10,000
Buffer $10,000
Monthly budget $155,000

Contributors

At the time of writing, the team is quite small (~2.3 FTE + grants) and we can’t tackle all tasks. The target is to onboard mainly full-time contributors as the knowledge needed is quite large. All contributors are/will be business and are/will be invoicing MakerDAO (and paid by the RWF CU Multisig). They bear accounting costs, healthcare, and all other expenses. Roles are mainly senior positions.

Facilitator: Ability to manage and take over the work of any member of the team.

RWA Analyst (x3): Dealing with Asset Originators/Manager from the negotiation phase, due diligence phase, up to the monitoring phase. This is kind of a key account manager as well. Competencies in structured finance, risk assessment, modeling, spreadsheets, and basic legal knowledge. Specializations: Law, Solidity, Data, Python

Financial/Data Analyst: Ability to understand and maintain the MakerDAO financials and budgets. Ability to use SQL and on-chain data.

Accountant/Finance Analyst: Ability to understand and maintain the MakerDAO financials and budgets. Following expenses of the DAO and coordinating with other Core Units to work on the forecast.

Data Engineer/Data Analyst: Ability to bridge the gap between the blockchain and a structured data warehouse to study on-chain, and off-chain, information. Knowledge from fold, fold to Snowflake.

The grants are used for community contributors/experts. Examples are @jameskmccall work on Peoples Company proposal, @christiancdpetersen on SolarX/legal, and @Aes on the budgeting/forecasting side. MakerDAO being community-driven, we intend to continue to leverage and involve our amazing community.

Legal consultations

Initially, the legal aspect of RWA was to be outsourced to a Legal Core Unit. While waiting, we have onboarded a law firm to help us audit the RWA structures and guide us through legal solutions/issues.

Real-world structures

Following the trust model for RWA, we are working on legal entities for MakerDAO RWA.

Data-infrastructure

As discussed in our previous reporting we want to solve our data problems and stop being reliant on third parties in order to build a scalable architecture.

Buffer

Extra safety in case we forgot something unexpected and for small stuff like gas, minor SaaS subscriptions, …

We expect legal to be more costly at the beginning for instance.

MKR compensation

We plan to propose MKR vesting for members. We plan to follow a MakerDAO-wide framework if one is adopted by MakerDAO Governance. We will propose something if nothing is adopted. Ideally, vesting schedules would be implemented retroactively from the time members have started.

Resources

Not saying we are following those comparable but we want to provide data to MakerDAO Governance to assess the proposal.

Compensantion scales in the FP&A space

Compensation in investment banking in UK and US (another source)

13 Likes

In big support of this. This Core Unit needs higher prioritization. Having worked with them on the Business Development side I found them highly capable and in need of more dedicated resources.

Maybe a bit of clarity on how the different levels of FTE will be splitting the Monthly Total could be useful.

11 Likes

I totally support this modification. The previous Budget IMO was too low.

6 Likes

@SebVentures the only part of budgeting I would recommend reviewing is the legal consultation one. Some debt structures in both structured finance and project finance might get quite complicated with a zillion contracts to go through. I think it might be warranted to maybe 2x that figure. We’ve already got some projects down the pipe where that will be the case 100% sure. If they get complex, you may have to get an opinion from an specialist legal counsel. Specialist = expensive

5 Likes

I think this is a good next milestone. RWF is a unit that should have a more prominent role in Maker, and should be scaling as fast as is prudently possible. That includes on boarding legal representation. I suspect it would also be helpful if an Accounting CU would magically appear, so they can focus on the RWF core mission.

3 Likes

The is a great example of using the onboarding process to your advantage. If you are an unproven team to the DAO, start small/cheap and show your work. Once you have proven yourself you can ask for more and get more easily approved. Well done!

2 Likes

I increase the legal budget from 10k to 20k monthly. I’m still waiting to get the law firm back to me, but I agree that spending more to get more safety is good.

@Gustav_Arentoft The contributors split is more a map than a reality. I’m not disclosing more, mainly to keep flexibility and to keep a bit of privacy. I’m all for full transparency, but this is not the path taken by the DAO.

@Aaron_Bartsch that’s the idea. RWF remains quite young and on the edge of MakerDAO.

5 Likes

I’m formally submitting this proposal for the June cycle.

4 Likes

@SebVentures Did you hire a law firm to review the Centrifuge arrangements from the DAO’s perspective? If so, can you please disclose the relevant information (firm, lead partner(s) and specialty) along with what their expected work product will be?

1 Like

Still in the process. As said during the G&R call, it’s not easy to get them working for a DAO. It was also discussed in the RWF last reporting. There are also issues regarding the lawyer-client privilege as the customer will be my company and not MakerDAO.

Meanwhile, the RWA Committee had a meeting with the law firm that designed the Centrifuge documents. We will also add the Independent Director to all SPV to go higher than 5M DC (as defined a long time ago, then wanted to get the audit, then we can’t wait for ages).

2 Likes

That is highly needed and I am all for it. We as originator know what is the amount of due diligence required and if we want to see MKR scaling RWA relatively quickly we need to scale the team. One way to save from legal fees is to build a legal framework that all originators are gonna use. However, the loan originator’s documents need to be reviewed for every newcomer, so that is requiring more gun power.
I think that the RWA team is doing a great job so far!

Hmm, interesting. If anything, I believe a law firm with a strong structured finance practice would be the best fit to critically evaluate the Centrifuge structure and other structures that should come down the pipe if either Centrifuge or 6S is successful.

Centrifuge used Manatt, no? Keep in mind that they were advising Centrifuge, and the advice they proffered could have been (and perhaps likely was) adverse to the DAO and/or MKR holders. Also, that firm’s blockchain practice took a hit with the recent departure of the two lead lawyers (now the GCs at Aave and dYdX respectively).

On the more sensitive issue of establishing relationships with a firm, I think this situation emphasizes the need for an independent CU. The Legal CU (or perhaps lawyer members of other CUs) can hire firms and then filter advice down to the DAO. But a vital component of that, in my opinion, is that (i) we have a legal professional or professionals managing that relationship, and (ii) any conflicts with the Legal CU/lawyers working with a CU and the DAO are divulged and regularly updated.

I can imagine scenarios where a Legal CU may evaluate a new collateral type, say, while individual members hold positions in said asset or where they review an RWA company in which they have invested. I think that robust disclosures in these situations are the least Legal CU members can do to ameliorate concerns about acting in their self-interest.

Of course, my concern over self-interested acting applies to current actors as well.

2 Likes

Just to give you a view on the legal cost the CU will have to bear, the rates we are getting are $500-$2,000 per hour (depending on the seniority).

It is more than likely that for the firsts month the budget breakdown will be geared more towards legal costs as we have quite a large ground to cover.

1 Like