MIP40c3-SP#: 24 Author(s): @sorenpeter Contributors: @juanjuan Tags: dai-foundation, core-unit, daif-001, budget Status: Formal Submission (FS) Date Applied: 2021-07-07 Date Ratified: YYYY-MM-DD
MIP40c3-SP24 adds the budget for Core Unit DAIF-001: Dai Foundation Core Unit.
This proposal contains a three year budget for the DAIF CU with requested funding and payment implementation.
- The first year the requested funding is 2,554,358 DAI which includes 2 Million DAI for reserves buildup
- The second year it is 1,463,186 DAI including 1 Million DAI for reserves buildup meaning the operational expenses are reduced by 16% compared to year 1.
- The third year the requested funding is 463,186 DAI solely for operational expenses and that is a reduction of 20% compared to the budgeted operational expenses in year 1.
The Dai Foundation safeguards the intangible assets, related to the Maker DAO and Dai System, that cannot be decentralized. To ensure the proper functioning of the foundation, a working budget and a safety buffer are required.
Dai Foundation Core Unit
The Dai Foundation base capital consists of intellectual property rights (including copyright) and trademarks to open-source software, technology, and other assets related to the Maker DAO and Dai System, granted by the founder in connection with the incorporation of the Foundation.
During its existence, the Dai Foundation has covered its operating expenses with loans from the Maker Foundation, where the Maker Foundation has subsequently donated each year an amount equal to the prior year’s operating expenses.
The Dai Foundation holds no free capital. With the Maker Foundation dissolving, the Dai Foundation is proposing the Dai Foundation Core Unit in order to request the necessary budget from Maker DAO’s Governance. This is to sustain its operations and properly mitigate the legal risks related to its role.
|Budget (USD)||Year 1||Year 2||Year 3|
|Donations, Maker Protocol||2,554,358||1,463,186||445,301|
|Maintenance of Intangible Assets||5,000||5,000||5,000|
|Consultants and IT development||10,000||5,000||5,000|
|Guides, Reports and Content creation||24,000||18,000||18,000|
|Audit and Accounting Services||8,000||8,000||8,000|
|Core Unit Facilitator remuneration||22,750||22,750||22,750|
|Reserves Buildup contribution||2,000,000||1,000,000||0|
Administration and payment of renewal fees for the Assets owned by Dai Foundation.
Estimated at $5k/year.
Technical management of internal systems like Google Workspace and external systems like a website, the Dai Foundation Github account and a solution for accepting asset contributions and making assets available for use by the Maker community.
- Creating and managing solutions for providing access to Maker’s intellectual property
- Sub-domains that websites and apps are hosted in
- Issuing makerdao.com emails accounts to users approved by Maker Governance
- Software contribution process - integration into Dai Foundation Github
- Accepting Governance approved software
- Accepting other software
- Managing software subscriptions
- Technical Asset maintenance
- Domain and ENS names renewals
- Assisting with Multisig operation, updating docker images etc
There is a relatively high TechOps cost forecasted for the first year as various solutions to support the Dai Foundation are on the roadmap.
- 1 TechOps FTE with a yearly cost of $200k (monthly $16.7k).
- In the first year, 0.5 FTE TechOps FTE is forecasted to fulfill the requirements: ~$8k/month
- After the initial setup of the above-mentioned mechanisms, operations support is estimated to require 5 days/ month ~$45k/year
Website development and maintenance will be done by an external service provider. The cost for this is estimated to be $10k the first year, and then $5k the following years.
Dai Foundation needs to create Guides about how to utilize its assets, how to contribute assets, its policies and principles plus quarterly and yearly status reports to the community and the donors - as well as applications for donations.
- Editing guidelines & blog posts from Dai Foundation
- MIP writer assistance
- Collecting data and providing quarterly updates for the Community
- Writing draft blog posts
This is estimated to cost $24k the first year, and $18k the following years.
Handling invoices and payments, keeping the books, creating the Financials Yearly Report
Dai Foundation will use a financial services provider and a Danish Auditor for this. The estimated yearly expense is $8k
Day to day legal advice and work on topics like:
- Creating Terms of Services for Asset Usage
- Consulting on potential Trademark violations; Sending Cease & Desist letters where required
- Reviewing documents regarding accepting Assets
- Liaising with external counsel in case suits against DF are brought forward
This expense probably will vary a lot and thus the estimate is not very precise. The estimate is a $72k per year.
This section does not cover any costs related to regulatory enforcement actions or lawsuits. Refer to “Reserves Buildup”
Insurances like General Liability Insurance. A cost of $7.5k per year is estimated.
For Directors and Officers Insurance please refer to the section “Reserves Buildup”.
The Current board fees are $1800 per month per member with the chair getting double the amount. Planning a 7-member board, the yearly cost rises to $172,800. Assuming Dai Foundation operations are set up for smooth, day-to-day operations after the first year, these fees are estimated to be reduced by 10% each of the following years.
However, this estimation will be corrected after reviewing the actual workload of the board, including an increase if necessary. Any changes will be communicated and be submitted to Governance for approval.
The Board is planning to have one physical meeting per year. In addition, each board member is expected to travel to one appropriate event per year (like makerCon, DevCon, etc.) to meet and engage with the Maker Community. The assumption is that the average travel cost per trip is $3.5k, and there will be 2x7 trips per year.
The person being appointed as the Facilitator for the proposed Dai Foundation Core Unit will need to spend time participating in various Community/Governance coordination meetings and activities as well report to the community about deliverables. This will require some effort and therefore the budget contains a facilitator remuneration of a little less than $1900 per month.
There always are unforeseen expenses: a miscellaneous category on 15% of the projected expenses is included to provide some buffer in the budget.
Dai Foundation is set up to operate in perpetuity. To ensure this isn’t endangered by any individual event, it is important for the Dai Foundation to have a “war chest” to cover extraordinary expenses or temporary issues with funding of day-to-day operations.
Examples of events for which Dai Foundation may need access to reserves to continue operation:
- Regulatory or other action which means the contributions from the Protocol to cover daily operations are cut off for a period that may last up to three years
- A lawsuit like the one that was seen after the “Black Thursday” event in 2020 where Dai Foundation will be the main or rather the only centralized entity to target. Defending against lawsuits can be very expensive - an estimate of legal cost of $1M in connection with a big US lawsuit is not unrealistic.
- Events where Directors and Officer Insurance is required - e.g. a lawsuit where board members are sued individually. It is very expensive for Dai Foundation to acquire a Directors and Officers insurance, so as a backup there should be sufficient reserves for Dai Foundation to provide the same cover for its board members as is available to board members in similar foundations, e.g. a coverage up to $2M.
Based on the above, Dai Foundation should aim to build up reserves of at least $3M where it is proposed that the protocol donates $2M to reserves the first year and $1M the following year.
A Danish foundation has favourable tax conditions while being legally required to provide charitable donations out of its surplus. It is estimated that the Dai Foundation will support projects that work to create a better world with unbiased decentralized solutions with at least $15k/year.
To the degree the Dai Foundation receives donations (e.g. in the form of crypto sent to the Dai Foundation wallet) they will be allocated to one or more of the following three categories:
- Funding more charitable donations from Dai Foundation
- Further building up of the reserves
- Reducing the amount needed from the Protocol for covering operational expenses
The DAIF Core Unit has opted for a simple implementation aiming to keep governance’s overhead to a minimum. It does not require any particular implementation to work properly and the team is quite flexible to upgrade this simple implementation into a better suited method, as as suggested by Governance.
- The Reserves Buildup transfers are done in time to support any potential litigation costs.
- The first payment for the first month also includes the payment for the second and third.
- The second payment corresponds to the 4th month, and so on.
|Yearly||Month||Operations||Reserves Buildup||Total to Transfer|
|554,358 DAI||1||138,591 DAI||2,000,000 DAI||2,138,591 DAI|
|2||46,197 DAI||46,197 DAI|
|3||46,197 DAI||46,197 DAI|
|4||46,197 DAI||46,197 DAI|
|5||46,197 DAI||46,197 DAI|
|6||46,197 DAI||46,197 DAI|
|7||46,197 DAI||46,197 DAI|
|8||46,197 DAI||46,197 DAI|
|9||46,197 DAI||46,197 DAI|
|10||46,197 DAI||46,197 DAI|
|11||38,599 DAI||38,599 DAI|
|12||38,599 DAI||38,599 DAI|
|463,186 DAI||13||38,599 DAI||1,000,000 DAI||1,038,599 DAI|
|14||38,599 DAI||38,599 DAI|
|15||38,599 DAI||38,599 DAI|
|16||38,599 DAI||38,599 DAI|
|17||38,599 DAI||38,599 DAI|
|18||38,599 DAI||38,599 DAI|
|19||38,599 DAI||38,599 DAI|
|20||38,599 DAI||38,599 DAI|
|21||38,599 DAI||38,599 DAI|
|22||38,599 DAI||38,599 DAI|
|23||37,108 DAI||37,108 DAI|
|24||37,108 DAI||37,108 DAI|
|445,301 DAI||25||37,108 DAI||37,108 DAI|
|26||37,108 DAI||37,108 DAI|
|27||37,108 DAI||37,108 DAI|
|28||37,108 DAI||37,108 DAI|
|29||37,108 DAI||37,108 DAI|
|30||37,108 DAI||37,108 DAI|
|31||37,108 DAI||37,108 DAI|
|32||37,108 DAI||37,108 DAI|
|33||37,108 DAI||37,108 DAI|
|34||37,108 DAI||37,108 DAI|
|35||0 DAI||0 DAI|
|36||0 DAI||0 DAI|