MIP40c3-SP25: Risk Core Unit MKR Compensation (RISK-001)

MIP40C3-SP25: Risk Core Unit MKR Compensation (RISK-001)

Preamble

MIP40c3-SP#: 25
Author(s): Primož Kordež
Contributors:  
Tags: core-unit, cu-risk-001, budget, mkr-budget
Status: Formal Submission
Date Applied: 2021-08-11
Date Ratified: /

Sentence Summary

MIP40c3-SP25 adds the MKR Incentive Plan budget for Core Unit RISK-001: RISK.

Paragraph Summary

This proposal contains:

  • Retroactive MKR Compensation
  • Team MKR Compensation Plan
  • Payment Implementation

Our proposal is based on “Alternative MKR Compensation Guidelines” by @Aes but it also uses elements from “An (Alternative) MKR Compensation Plan” made by SES Core Unit. This proposal differs from other proposals, since it assumes one time retroactive MKR compensation payment for 2 Core Unit members, explained further.

Retroactive MKR Compensation

Myself as Risk Core Unit Governance Facilitator and Marko Štemberger as Risk Core Unit Member have been working full-time for the DAO since April 2019, which covers the 2 year period before Risk Core Unit was established. Large majority of Maker’s risk-related work in this period was done by us. However our compensation was done through the grants programme and we missed out on all the MKR bonus compensation that the vast majority of Maker Foundation employees enjoyed.

As to why we weren’t employed by the Foundation to enjoy these extra benefits, the answer lies in us believing that Maker will eventually and much sooner become restructured to a fully decentralized DAO, losing all the ties with the Foundation. Also the Foundation hasn’t shown any indication or offered us employment, which made sense from both sides in order to pursue the path of total decentralization.

We don’t know any other members such as the two of us that have been passionately and independently executing high quality full-time work for Maker in a period of 2 years prior to Core Unit formation. The only other candidate to our knowledge who fulfils this criteria is @LongForWisdom.

Therefore, we propose a one time MKR compensation of 300 MKR, which on average translates to 75 MKR per person per year of independent work prior to Core Unit establishment. This amount is in line to what “Alternative MKR Compensation Guidelines” proposed to be an average yearly MKR compensation amount for Risk Core Unit members. The payment would be done without any vesting or cliff if this proposal potentially passes.

We bundled retroactive MKR compensation with the team MKR compensation plan, but we are prepared to adjust it during the RFC phase if the community feedback is overwhelmingly unsupportive.

Permanent Team MKR Compensation Plan

We used “Alternative MKR Compensation Guidelines” by @Aes, currently as a MIP in RFC phase and elements of SES “An (Alternative) MKR Compensation Plan” to calculate MKR compensation rewards and distribution schedule for Risk Core Unit members.

The Risk Core Unit is proposing to apply a linear interpolation model to utilize salary to calculate the amount of MKR each individual will vest. This model has been proposed by the SES Core Unit with minor modifications. These modifications include a higher floor for intermediate and junior contributors as well as a shorter vesting period proposed in “Alternative MKR Compensation Guidelines”. On average, payments per contributor are also in line with the “Alternative MKR Compensation Guidelines” proposed MKR averages based on the Risk Core Unit tier.

Vesting Details

Property Value
MKR/USD lock-in Price (New) Trailing 6 month average
MKR/USD lock-in Price (OG) MKR = $1,137 (09/22/20 - 03/22/21)
Quarterly MKR Amount Initial Annual Incentive Value (USD) / MKR/USD lock-in Price
Vesting Period 3 years
Cliff Vest 12 months
Vesting Schedule After the cliff has expired, the Quarterly MKR amount vests every 3 months and is distributed on July/Oct/Jan/Apr 1st, depending on each individual full-time onboarding (CU was established on 22nd March 2021).
Manual Repricing yes
Auto-Renewal yes
Estimated Max Total team MKR After 1 Year (9 FTE)* 700
Estimated Max Total team MKR After 3 Years (9 FTE)* 2,100

*Note that this estimation is based on all 9 FTEs joining the Risk Core Unit on day 1. There are currently only 7 FTEs working for the Risk Core Unit which reduces the actual amount of MKR expended for Risk Core Unit vesting (estimated currently at 580 MKR per year).

Manual repricing allows any contributor of the Risk Core Unit to calculate a new MKR/USD lock-in price using the trailing 6 month average. This ensures that contributors who join during a bull market aren’t penalized relative to new contributors who join later during a bear market. In order to prevent abuse, manual repricing will reset the 12 month cliff vest period.

MKR Vesting Schedule

MKR Total
October 2021* 300
April 2022 700
July 2022 175
October 2022 175
January 2023 175
April 2023 175
July 2023 175
October 2023 175
January 2024 175
April 2024 175

*Retroactive MKR Compensation for 2 Risk Core Unit members.

This covers the total vesting schedule of 3 years for the planned 9 FTEs.

On average and excluding retroactive MKR payment, the team MKR vesting schedule yields 77.78 MKR per FTE per year, or 700 MKR in total per year.

Payment Implementation

MKR compensation is based on Manual Budget Implementations, the Simple one and same as used for regular budget, or any other method achieving the same result at the discretion of the Governance Facilitators. Risk Core Unit may consider alternative payment flows compliant with DssVest if the standardized flow is compatible with the vesting schedule. MKR payment is allocated from the 84,000.1 MKR treasury controlled by MakerDAO.

  • Payment: based on predetermined MKR compensation schedule
  • Asset type: MKR
  • Address: 0x5d67d5B1fC7EF4bfF31967bE2D2d7b9323c1521c
5 Likes

Hi @Primoz,

my comment concerns the retroactive part of this proposal only:

As a community member I had or have no insight whatsoever into the workings at the Foundation. Neither me or I guess most other community members have any real idea about the ongoings, agreements or work delivered that were made during the Foundation era.

Accordingly, agreeing to retroactively award someone for something they feel they should have received from the Foundation is a very suboptimal idea from a Community standpoint.

Your colleague and yourself might deserve 100% or more of what you are asking, but it is still a bad idea as retroactive rewards opens up a complete Pandora’s box of stuff from the Foundation era that present day Community members are in very poor position to ever have any constructive opinion about.

3 Likes

I totally support this! I can’t believe you guys have been around this long and were not compensated w/MKR for your loyalty and dedication to MakerDAO. Most would have left for another DeFi project. Thank you for sticking around. You deserve to be compensated, in my honest opinion.

While I agree with @Planet_X point of view—I believe the community is well aware of the hard work and dedication that has been given by these Risk Team members over the last 2 years.

I still remember the day Cyrus resigned and he announced that Primoz was taking over. Cyrus stated that the community should not worry, because most of the Risk Team success was all credited to Primoz and team. Therefore, I believe what Primoz is asking for is well deserved.

2 Likes

Thanks for this, @Primoz. We were looking forward to it.

Just to add on @Planet_X point: it seems that the whole team is getting retroactive MKR. Most of the team is getting it since April (I’m assuming Risk Core Unit’s ratification) and the rest since before that. Is that the case?

I’m interested in seeing how the Community will feel about the pre-Core Unit part. It will set an interesting precedent.


Also:

Also, I’m not sure if we should reference MIPs that have not yet been approved? (Worried about setting a confusing precedent, where an actor can propose a never-to-be-approved MIP, and then use it as a backup for a subproposal).
Maybe replace MIP56 with LongForWisdom and Aes?

1 Like

Thanks for feedback everyone.

I agree with you, but we personally feel that we have more than good arguments for asking this. To be clear, we knew from the start this won’t be an easy topic, but this is our honest situation we wanted to share and address.

Most of the team is getting retroactive MKR since they got onboarded full time and this was after April 2021. I believe this is the case with majority of other approved CU MKR compensation proposals - works retroactively since CU was established or members joined full time. Or at least this was my interpretation.

It is quoted as “Our proposal is based on MIP56, currently in RFC phase” but I’ll change it, thanks.

3 Likes

I don’t yet have an informed opinion, but would you be willing to find some compromise like accelerated MKR vesting or overweighting the first tranche of vesting to avoid setting a precedent for retroactive awards?

Just to see if it’s the timing or the amount that’s most important before going too far into the weeds.

2 Likes

Why not just bake the allotment originally intended for retroactive payment evenly over the remainder of the payment schedule? @Planet_X @Primoz I agree that we should not try and compensate people for Foundation-related efforts, though I question how much “Foundation”-specific work this team did…they’ve always been, as far I know, public facing in the pronouncements.

That said, no need to revisit past relationships about the Foundation (which is a sore point for some community members). I suggest just baking the 300 into the remainder of your comp schedule and we go from there.

Last point – presumably, this MKR comp will be allocated from the 84,001. treasury, no?

Hey guys, just wanted to chime in here since Primoz and Marko worked primarily under my supervision starting from April 2019 (I believe) up until Sept 2020 when I left. To start off, it should go without saying that their contributions to Maker risk were invaluable.

With regards to compensation, and I’m trying to be very diplomatic here, I can only characterize their situation as having gotten the short end of the stick. They got caught up in a very stupid regulatory quagmire that led to them getting severely undercompensated. To make a long story short: Primoz and Marko were onboarded through Rich’s grants program because it was the easiest method of getting me help on the risk team. It also served as a good work trial for them. After they had proved themselves by late that summer, I started floating internally the prospect of them becoming full time employees at the Maker Foundation. I knew the type of compensation employees were getting, and I found it extremely unfair that they were not given the same upside. I sincerely wanted them to come aboard as fulltime employees

The Foundation was initially amenable to them being brought on, and for several months they were intended to be. I spoke about it many, many times with HR and the legal department. Sometime in 2020 the whole thing was suddenly nixed due to “regulatory concerns” from counsel. I won’t get into the details here, but suffice to say Primoz and Marko were rugged. I felt it was a bit disloyal to our two hard-working contributors who had time and time again proven to be upstanding and competent risk analysts.

Anyways, I don’t know if this story or my perspective matters, but I feel out of loyalty to Primoz and Marko that I at least provide my side of the story. The reality is that they worked extremely hard, were under-compensated, and potentially slightly misled about the nature of their employment (that last part is obviously a matter of perspective and I’m sure people at the Foundation would vehemently deny that point. but whatever). Anyways, I hope that the community finds it in their power to do right by Primoz and Marko, without whom MakerDAO simply wouldn’t be where it is today.

Happy to answer any followup questions for clarification.

14 Likes

@cyrus great to see you around here! It’s been awhile

I guess I would fulfill to a great extent the criteria put forward here, on a pro-rata basis between July 2020 and the dissolution from the foundation and grants program. It’s always a pleasure to see your ex-colleagues appreciate your effort. :wink:

Perhaps we just couch the 300 as a performance bonus “for efforts made to-date” as opposed to saying it’s retroactive comp for services rendered to the Foundation? That seems to resolve Planet X’s concerns, while getting Primoz and Marko the MKR they deserve (FWIW, I’ll vote in favor of them getting these funds – last thing we want as a DAO is for important contributors like Primoz and Marko to feel underappreciated).

Well, the MakerDAO biography should have some juicy tidbits on internal Foundation fighting. I’ll buy it, if anything for the gossip, haha.

2 Likes

@Primoz

Can you explain the lock-in Price?
Is this MKR going to be options based on a trailing price.?

Thanks!

I think I have to agree with comments regarding an accelerated vesting schedule. Probably want to stick with normal vesting schedule on the back dated compensation and just extend it forward - but use the appropriate trailing average cost.

I find it ironic being paid under a MKR grant for first work done on BT report, and then waiting quite a bit of time for the second compensation (that I had slated to buy MKR when it was $600 vs. $3000) the idea a lot of people paid under grants might now come forward seeking MKR too.

Really don’t want to bring this as an issue going forward as I support appropriate compensation for work rendered and fairness but I think we should separate compensation on a going forward basis from a backward basis when it comes to compensation.

Don’t get me wrong. I am for elements of backward compensation, as well as forward compensation. Let just not mix things up in these compensation proposals. (just a suggestion)

Personally, I support this compensation package along with the 300MKR for Primoz and Marko without a cliff vest. Foundation members already have their vested MKR, I think these individuals should too.

I don’t think this sets too strong of a precedent regarding retroactive grantee MKR compensation. Mainly because the work Risk did was directly servicing the DAO, and in full time capacity. Most grants from the foundation were for projects building around Dai, dashboards, and other indirect ecosystem investments.

The only comparable case really is LongForWisdom and maybe the work Vishesh did(also for Risk/Data.) But I know that was not on a full-time basis.

2 Likes

It’s definitely the timing that matters a lot to us because of all the reasons stated above.

Yes I think this is probably the best method, will update the proposal in formal submission so it is clear.

It is the same method that SES and Oracle Core Unit used in their proposal and follows guidelines from Pre-MIP Discussion MKR Compensation Plan, posted by SES.

3 Likes

Yeah I am looking at that now. I really am against having compensation on a forward basis budget being lumped in with compensation for past work. I am for compensating you guys based on prior work, but I think we should line everyone up who might submit for this compensation for past work to be fairer to all. Just a suggestion imho.

I have another issue and this is in relation to the actual value here. On reading the document you linked regarding MKR compensation SES - MKR Incentive Plan Details - v0.1 - Google Docs and the following MIP40c3-SP13: Modify Core Unit Budget, RISK-001 I was wondering how to justify the forward compensation.

I have DAI compensation at 130K DAI/FTE yr but the above MKR compensation proposal if I use current 3K price and 175/9 over 3 month periods (quarters) 19.44/3 is 6.48*3000 = 19.448K extra compensation/month or about 234K/yr on top of the 130K/yr. This is a pretty hefty salary when MKR bonuses are included at 3K to total 330K/yr per FTE

@Primoz can you help me understand the $$ valuation of the going forward MKR compensation against salary budgets. I thought the SES suggested like a 35% MKR reward based on DAI salary not 200%.

I think the previous 2 years with a rough average of 1.137K/MKR and 1000MKR for 3 FTE I understand as this works out to roughly 180K/yr for back dated work and with a vesting MKR price of around 1137/MKR is not unreasonable since this work was done with Maker without decent compensation.

My concern here is that with 250K/yr MKR rewards it isn’t going to take very long (particularly true if MKR price triples from here) to have enough MKR rewards to just retire. I don’t have an issue with decent compensation but just wondering whether the amount at 200% MKR compensation above salary isn’t just a bit high here.? I mean even if I look at this from 200K/yr DAI salary for these positions the MKR compensation at current prices is still a 100% bonus. I am really just trying to justify these numbers as they seem pretty high to me for anyone but senior risk analysts in major firms with at least 3-5 years previous experience. I guess I am seeing either the DAI salaries are too low or the MKR rewards are too high and I am trying to understand this.

Thank you again for pointing me to the compensation doc. I am still trying to catch up on all I missed due to my much needed time away from Maker.

I will say if you guys get this kind of compensation - I might be willing to take on a 1/2 time position at risk… hehe (half serious and half kidding).

2 Likes

@MakerMan I am not going to go into details of MKR comp calculation here right now and I suggest you address this at Pre MIP SES and MIP56 RFC proposal threads. There were many other CUs using this framework for past few months.

Also please don’t make an impression right now that we are one of the best paid people. Risk Core Unit has always been one of top few important domains at Maker (top 3?) and our budget (both for regular salaries and MKR comp) is very low compared to others. See comparison here.

5 Likes

There is nothing new here. MIP56 currently under RFC is proposing on average 80MKR/year. As you can see in the RWF forecast most teams that have MKR accepted are around that (those in color). PE is an exception with 250MKR/year.

So is @primoz asking for 1/3 of the last SC dev hired in PE team too much?

Moreover, if we use the price of MKR of those years, it’s more $40k/year.

1 Like

Well I looked at the SES and the 35% on top of salary didn’t look unreasonable.

Then I just started doing math using current price on the forward looking MKR going out as per above post. Looking at MKR Budget Simulator - Dashboard v2.xlsx - Google Sheets I was kinda like - oh my god. This MKR isn’t going out in the future at 35% of salary but more like 200%. I didn’t understand this from the context of the SES. Also I just happened to land on this polling vote. My comments would have been the same. I am not picking on you @Primoz

I mean I was getting push back from asking 100/hr to start on doing part time work. Salaries here including MKR compensation at current 3K (really it’s 3.5K) are 300K are 160/hr and that is basically starting salary. I think the above document would do well to break out CU operational costs from manpower costs in CUs btw. Even so at 3K MKR the 80 MKR/yr bonuses are basically expanding salaries by at least 250K/yr on top of DAI paid. At 1K this is 80K which is not unreasonable. This kind of stuff is a prime reason to have vesting options.

Sure add up all the MKR and it isn’t much of the 84K MKR left. Simulator says 8.5K MKR/yr which eventually will have to be covered with surplus cash. The DAI at almost 30M/yr in the simulator can be paid with 3B DAI paying 1% SF on average (doable). If this was MKR that vested with option prices I pretty much have no issue because MKR price would have to increase by 3K to 6K from here to make 80MKR options vesting at 3K to be worth 250K. 3k-4K gives a 80K/yr increase per 80 MKR.

I look at something and wonder how is this going to be sustainable not just in a financial sense, but from a experienced and talented manpower one. A smart contracts person by selling their MKR after 3 or 4 years and investing for even a 3-5% return basically can retire within 3-4 years in about 90% of the places in the world without having to work one more hour. There is a real concern the structure of this compensation is such that people will be peeling out of the protocol in a few years or less depending on what Maker price does and how much MKR is in the vested(ing) hopper(s) at any given time.

When considering this from the perspective of what is already approved and overall fairness perspective, ok not as bad as the rest, but when considering this from the context of the entire package and MKR price mostly likely going up from here. I think this level of compensation will the bar so high that at some point if the protocol comes under hard financial times that we simply will not be able to pay CUs these lofty salaries and again we will lose people.

I am caught in a quandry. Vote yes for these things just because everyone else already got them and why be unfair, or basically stand against them because I think the implementation is flawed, excessive, and unsustainable. I mean what happens here if MKR price 3x’s in the next year does the MKR alloted basically go out at a reduced rate. My whole problem with MIP56 is that there is this MKR value compensation MIP that says the multiplier and amount of MKR being compensated and lists a high, mid, low valuation of this but no-where does this MIP56 suggest that MKR compensation at some trailing price average will only be vested at a DAI value no greater than 50% or some multiplied value of the contractors DAI compensation?

Did I miss something here regarding the maximum DAI value of MKR vesting relative to contractor paid salary is to be paid out. My point here. MKR goes to 100K/MKR (unlikely yes). Does this mean that CU contractors are going to still earn 60-80-125 or more MKR/yr ?

Thank you guys for being patient with me. I have been away and missed a lot of this and am catching up. Perhaps this is all accounted for and makes sense. If so great I will change my vote and support these. If not - sighs - I am going to have to carefully consider my positions on these. Everyone knows I have been a strong advocate of people working on the platform to earn a voting and investment stake - for many, many reasons. I think being fair to parties is important, but also having some consideration of the sustainability of the platform is also ‘just as important’.

https://forum.makerdao.com/t/makerman-delegate-platform

Because things have been tough the past year or two I tend to be more accommodative of people. I have a significant concern there is a precedent being set here that is so high that any changes to reign this in, in any way will be met with some fierce and potentially disastrous contractor consequences.

Give a mouse a cookie, and he’s gonna want a glass of milk… .:wink:

Again if I have missed something that puts this in perspective (not just from a fairness perspective) but how in the heck this works if the price of MKR rises by 3-5x in the next twelve months to give me some idea of how it makes sense I am happy to change view/vote here. Until then I am still digesting implications of what this is going to mean not just for MKR holders, but contractor turnover (and brain drain), as well as how this is sustainable is the SB is drained and revenues are not sufficient to cover expenditures.

1 Like

Formally submitting for the September cycle.

2 Likes