MIP40c3-SP23: Growth Core Unit MKR Budget - GRO-001

Preamble

MIP40c3-SP#: 23
Author(s): @Nadia
Contributors:
tags: core-unit, gro-001
Status: Formal Submission
Date Applied: 2021-07-07
Date Ratified: N/A

Sentence Summary

MIP40c3-SP23 adds the MKR Incentive Plan budget for Core Unit GRO-001: GROWTH.

Paragraph Summary

This proposal contains:

  • Total MKR Expenditure Cap
  • The evaluation process to define the total team MKR per year.
  • Estimated MKR Expenditure
  • Payment Implementation

Our proposal took elements from the others presented before, and we added an achievement metric that modifies the total team MKR per year. This is a 3-year vesting plan with a 1-year cliff vest.

Total MKR Expenditure Cap

The total MKR Expenditure will not exceed 2409.55 MKR, covering the entire three-year plan for 9.7 FTEs achieving the proposed objective.

Evaluating process and total team MKR definition

We think the MKR bonus has to help us retain talent, set shared goals to coordinate efforts between the DAO and be tied to the situation of the protocol. That’s why we decided to use the model proposed by SES to calculate the amount of MKR, but the distribution will be split in two. Depending on salary, each contributor would receive a Maximum MKR total (MMT). The first half bonus is a fixed number representing 60% of the MMT (MMT*60%), and the second half bonus is a variable number that will depend on the total Dai Supply (ObjectiveDS).

ObjectiveDS (Dai supply) corresponds to the projected total amount of DAI by the end of the year (December 31). We will ask Risk CU for their input to calculate a moderated Dai growth scenario to set this objective. This objective will be set during the first quarter of the year.

This means, all contributors, after the cliff has expired, for H1 will receive MMT*60% that will be distributed during the first week of July. For H2, will receive (MMT*40%)*achievementObjectiveDS, which will be distributed during the first week of January of the following year, this is capped at MMT. This distribution will happen for three years, starting on July 1st of 2022.

Example.

During the first three months of 2022, we will set objectiveDS, and define a base scenario for total Dai by December 31, 2022. Let’s assume that objectiveDS is set to 7B Dai.

Contributor X, with an MMT of 60 MKR will receive 36 MKR on the first week of July 2022 (H1-2022) and:

MMT = 60 MKR
H1-2022 = MMT*60% = 36 MKR
  • If total Dai by December 31, 2022 is 7B or more, Contributor will receive 24 MKR on the first week of January 2023 (H2-2022).

    H2-2022 = (MMT*40%)*achievementObjectiveDS% = 24 MKR

  • If total Dai by December 31, 2022 is 5B, Contributor will receive 17.14 MKR on the first week of January 2023 (H2-2022).

    H2-2022 = (MMT*40%)*achievementObjectiveDS% = 17.14 MKR

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:

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

Current Team Forecast

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

Half Vesting Date max MKR total (if 100%objectiveDS)
H2 2021

January 1 2022

0

H1 2022

July 1 2022

396

H2 2022

January 1 2023

264

H1 2023

July 1 2023

396

H2 2023

January 1 2024

264

H1 2024

July 1 2024

396

H2 2024

December 31 2024

264

Total MKR

1980

This covers the total vesting schedule of 3 years for the current 7.7 FTEs.

Payment Implementation

  • 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 vesting in 6 months or less will be included in the top-up transaction added to the executive vote. This will move the MKR from the protocol to the GROWTH 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 1 month or less, will be included in the monthly top-up transaction that moves funds from the GROWTH Auditors Wallet to the GROWTH Multi-sig.

    • When the MKR has vested, it is paid out to the contributor.

    • After vesting, any excess MKR in the GROWTH Auditors Wallet or the GROWTH Multi-sig will be returned to the protocol, following the monthly payment transactions.

6 Likes

I am a well-known opponent of MKR dilution, but given the consistent overachievement of this CU to date, the relatively low DAI expenditure associated with this CU, and the importance of Growth as an engine to scale and secure MakerDAO, this is the first MKR allocation that I can wholeheartedly support without any significant revisions or caveats.

This CU has been and will likely continue to be a driver of Maker’s growth, stability, and profits. I say yes to this proposal.

6 Likes

:100:

That’s a pretty high goal–I totally like it–and I hope y’all get to 10B++ but I think around 6B DAI is more than fair. Might hit some barriers with regulations, etc. but yea–excited to see the Growth CU grow. Best of luck and bring it home!

4 Likes

Moving the proposal to Formal Submission

7 Likes

My only add here is that the MKR payments for our friends in Growth should be drawn off the treasury (84,001 MKR) rather than by printing MKR. There is a psychological effect to printing that I fear may negatively affect public perception surrounding the project.

Gracias

1 Like

Is this MKR going to be vested as options with strike prices based on some trailing MKR price average or no? I don’t see anything in these MKR rewards that suggests they will be options with strike prices.

While I want to support MKR rewards I really want to see these be options that have strike prices to further align people getting MKR rewards with MKR token holder interests.

I support people getting MKR options as bonuses and a reasonable vesting schedule proposed above, but not with strike prices of 0.

I also like the idea that these rewards are based on some performance metric.

Folks. Everyone knows I have been a long time advocate of paying out MKR as a bonus to people working the protocol. But as I researched what happens in industry I learned while companies are all over the map on this, a great many companies end up doing this via options with strike prices as this completely aligns incentives to grow company market cap and in particular stock or token price. I know there were some discussions regarding this but it looks like no consensus has been achieved.

I support the MKR vesting here but will be voting no to every proposal of a CU that doesn’t do this via reasonably priced options and would encourage all CUs basically seek to adopt a similar model in this regard. I want to see full alignment of worker incentives with MKR price appreciation for Token holders. Then to me here it won’t be a matter of incentive alignment but merely of economics and appropriate level of rewards for performance.

In this regard I would like to see these have some kind of bonus component added (say a 5-10% contingency where the CU units themselves vote in this bonus component based on a internal and possibly a external voting component)

I would be happy to change my vote to support if some kind of MKR vesting option pricing based on a 6 month trailing VWAP price or some such was applied but less happy to just hand out MKR for free here when MKR holders are getting less and less MKR burn via flaps. I think this puts a better balance on incentives and rewards.