MIP40c3-SP17: Sustainable Ecosystem Scaling Core Unit MKR Budget - SES-001

Preamble

MIP40c3-SP#: 17
Author(s): @wouter, @juanjuan
Contributors:
Status: Formal Submission (FS)
Date Applied: 2021-05-12
Date Ratified: <yyyy-mm-dd>

Sentence Summary

MIP40c3-SP17 adds the MKR Incentive Plan budget for Core Unit SES-001: Sustainable Ecosystem Scaling.

Paragraph Summary

MIP40c3-SP17 adds the MKR Incentive Plan budget for Core Unit SES-001: Sustainable Ecosystem Scaling. It contains:

  • Total MKR Expenditure Cap
  • Estimated MKR Expenditure (based on the current team)
  • Escrow Wallet mechanism

MKR incentives have been determined based on the Program discussed here. This is a 3-year vesting plan with 1-year cliff vest.

Total MKR Expenditure Cap

The total MKR Expenditure will not exceed 3,309.85 MKR.

This covers the entire 3 years plan for 10.90 FTEs.

Estimated MKR Expenditure

The Estimated MKR Expenditure is our best guess of how much MKR will be used with the current team configuration.

Reasons why the Actual MKR Expenditure could rise closer to the MKR Expenditure Cap:

  • A raise for a member of the team
  • New hires (2 are covered by the cap)
  • Repricing (and resetting) the program, in the case of bear market

Price floor: -30%. If any Contributor chose to reprice their program, they could do it at a maximum of -30% from the set MKR price.

Permanent Team Forecast

For the permanent team, assuming the team configuration remains the same as today, this would result in the vesting schedule below.

Vesting Date MKR Amount
30 Nov 2021 0 MKR
31 May 2022 556.00 MKR
30 Nov 2022 278.00 MKR
31 May 2023 278.00 MKR
30 Nov 2023 278.00 MKR
31 May 2024 278.00 MKR
Total 1,668.00 MKR

This covers the total vesting schedule of 3 years for the current 8.90 FTEs.

On average, this yields 61.82 MKR per FTE per year.

Any changes to these amounts will be reported in the Monthly Budget Statement and reviewed by our budget auditors.

Parameters

Property Value
MKR/USD lock-in Price (New) Trailing 6 month average
MKR/USD lock-in Price (OG) MKR = $1,956 (11/12/20 - 05/12/21)
MKR Price Floor -30% ($1,369)
Vesting Period 3 years
Cliff Vest 12 months
Vesting Schedule After cliff has expired, the Biannual MKR amount vests every 6 months
Manual Repricing yes
Auto-Renewal yes

Incubation Program

For the Incubation Teams, MKR incentives will be included in the respective budget MIPs as they are published. This may include a back pay amount for the incubation time, but the details are still being discussed.

Grants Program

Grantees will not receive MKR as part of the Grants Program. Moving into the DAO as a full-time Contributor might include a back pay amount for the contribution time, but the details are still being discussed.

Payment Implementation

  • Payment of the MKR tokens will follow the same flow as described in the original SES budget MIP (MIP40c3-SP10).

  • As defined above and in MIP40c3-SP10, the Monthly Budget Statement will contain the MKR vesting schedule. This schedule specifies when in the future MKR is vesting, and how much.

  • To keep the risk acceptable for Maker governance as well as for the team, the MKR is moved from the protocol to the contributors in stages:

    • Following the MKR vesting schedule, any MKR that is vesting in 6 months or less, will be included in the top-up transaction which is added to the executive vote. This will move the MKR from the protocol to the SES Auditors Wallet, which then acts as an escrow wallet.

    • Following the MKR vesting schedule, after review and approval by the auditors, any MKR that is vesting in 3 months or less, will be included in the monthly top-up transaction that moves funds from the SES Auditors Wallet to the SES Permanent Team Operational Wallet.

    • When the MKR has vested, it is paid out to the contributor, either directly or through an intermediate payment processor.

  • Any excess MKR in the SES Auditors Wallet or the SES Permanent Team Operational Wallet will be returned to the protocol, following the monthly payment transactions.

This payment implementation makes no assumptions about the origin of the MKR. It can either be moved from the protocol’s treasury, newly minted, or obtained from another source.

The MKR that’s held by the SES Auditors Wallet and the SES Permanent Team Operational Wallet will not be used for voting, signaling, or any other type of governance participation. It will remain in the wallets untouched until it moves to the next step in the process.

Once DssVest or another payment flow has been adopted by the community, SES may propose to update its payment flow to comply with the standardized flow. That is assuming that the standardized flow is compatible with the vesting schedule, and that the risk is deemed acceptable by the team.

7 Likes

Update

After carefully reading Nik’s Proposal, we have borrowed a couple of tweaks:

  • We have updated our floor to 35% (from 20%). We feel this is fair and creates more equality.
  • We have raised the lock price of MKR, which translates to a lower total MKR compensation for the Core Unit. We think this is fair with other Core Units and will produce more consistency.
  • We have kept our Program length at 3-years. We encourage other Core Units do the same since four years is an eternity in DeFi, and the Program auto-renews (with a fair price).
3 Likes

Ha! 3-months is an eternity in DeFi. Totally support this! It’s more than fair, IMO.

Edit: moved subproposal number to 17.

The proposal has been updated with the details of the payment flow.

Note that the MKR is moved to the SES Auditors Wallet 6 months before vesting, and then to the SES Permanent Team Operational Wallet 3 months before vesting.

Any feedback is appreciated.

2 Likes

I know we all know the answer, but MKR held in the SES wallet for vesting will not be used for voting, correct?

1 Like

Hah. Interesting take.

The only idea of this implementation is to minimize risk transparently (this helps with Contributors).
This was not created with the idea of swinging any vote.

That said, I don’t think that the amount accrued and not vested will ever be enough to have a real impact.

I’m trying to think if there’s any situation where it would be beneficial to use that MKR, for example, to protect the hat. Again, I don’t think it would ever make a real impact.

Hmmm. I would assume this would follow whatever rules the 84k treasury MKR follows. Or maybe not, since a CU is in many ways a contractor of the DAO and its own independent entity.

Anyway, maybe it doesn’t need to be spelled out right this minute.

Hypothetical future use cases aside, I think we can definitely commit to not use the MKR that’s sitting in the multisig wallets for voting. If that ever changes, we can propose a change first. I added a sentence about it.

6 Likes

The opening post was just updated to reflect the final salaries and MKR number based on the new parameters with 35% salary floor and the new lock price:

  • Updated the MKR Estimate from 1,650.58 MKR to 1,668.00 MKR for the entire 3-year plan.
  • Updated the Total MKR Expenditure Cap from 3,263.24 MKR to 3,309.85 MKR.
1 Like

Edit: moving this to Formal Submission (FS).

7 Likes