MIP40c3-SP24: Modify Dai Foundation Core Unit Budget

MIP40c3-SP24: Modify Dai Foundation Core Unit Budget

Preamble

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

Sentence Summary

MIP40c3-SP24 adds the budget for Core Unit DAIF-001: Dai Foundation Core Unit.

Paragraph Summary

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.

Motivation

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.

Core Unit Name

Dai Foundation Core Unit

Budget Considerations

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 Breakdown

Budget (USD) Year 1 Year 2 Year 3
Revenue
Donations, Maker Protocol 2,554,358 1,463,186 445,301
Donations, Other 0
Revenue Total 2,554,358 1,463,186 445,301
Administration
Maintenance of Intangible Assets 5,000 5,000 5,000
TechOps Assistance 96,000 45,000 45,000
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
Legal Assistance 72,000 72,000 72,000
Insurances 7,500 7,500 7,500
Board Fees 172,800 155,520 139,968
Travel costs 49,000 49,000 49,000
Core Unit Facilitator remuneration 22,750 22,750 22,750
Donation Payments/Charity 15,000 15,000 15,000
Miscellaneous 72,308 60,416 58,083
Administration Total 554,358 463,186 445,301
Reserves Buildup contribution 2,000,000 1,000,000 0

Budget Details

Maintenance of Intangible Assets

Administration and payment of renewal fees for the Assets owned by Dai Foundation.
Estimated at $5k/year.

TechOps Assistance

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.

Details

  • 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.

Budget assumptions

  • 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

Consultancy and IT Development

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.

Guides, Reports and Content creation

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 services

  • Editing guidelines & blog posts from Dai Foundation
  • MIP writer assistance

Assistant

  • 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.

Audit and Accounting Services

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

Legal Assistance

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

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”.

Board Fees

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.

Travel costs

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.

Dai Foundation Core Unit Facilitator

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.

Miscellaneous

There always are unforeseen expenses: a miscellaneous category on 15% of the projected expenses is included to provide some buffer in the budget.

Reserves Buildup

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.

Donation Payments/Charity

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.

How will donations that Dai Foundation receives from third parties be allocated?

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

Payment Implementation

Simple Implementation

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 Main Characteristics:

  • 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.

Dai transfers, monthly breakdown

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

Wallets

Operational Wallet

0x34D8d61050Ef9D2B48Ab00e6dc8A8CA6581c5d63

Reserves Buildup Wallet

0x5F5c328732c9E52DfCb81067b8bA56459b33921f


Related Documents

7 Likes

Maker Foundation did not provide such? I’m surprised.

Any way to get the DUX core unit @SES-Core-Unit to develop and maintain such? Would be nice to save some money.

The $72K estimate seems low. Does this amount cover worldwide legal services or just Denmark?

This is pretty cheap! Good deal :+1:t3:

Good stuff–and congratulations on the success of the Danish Football/Soccer team–they did great! No reason to feel sad about the semifinals loss. They were awesome.

4 Likes

DUX is specialized in building more advanced web apps and they have a lot of Maker domain knowledge that is overkill to build a (relatively simple) marcomms website. In that sense they’re overqualified and it’s honestly a better spending of our resources to use an external agency, and save our DUX hours for other work. (That is assuming that the website wouldn’t have any more interactive features for Maker Governance.)

6 Likes

I want to formally submit MIP40c3-SP24.

Thanks

2 Likes

Updated:

Status > Formal Submission
Added > Payment Implementation

@sorenpeter
@juanjuan