MIP40c3-SP30: Modify Core Unit Budget - Collateral Engineering Services (CES-001)

MIP40c3-SP30: Modify Core Unit Budget - Collateral Engineering Services (CES-001)

Preamble

MIP40c3-SP#: 30
Author(s): Robert Jordan @monkey.irish
Contributors:
Tags: core-unit, cu-ces-001, budget, mkr-budget, dai-budget
Status: Formal Submission
Date Applied: 2021-08-11
Date Ratified: <yyyy-mm-dd>

Sentence Summary

MIP40c3-SP30 adds the budget for Core Unit CES-001: Collateral Engineering Services.

Specification

Motivation

Building upon the theme of sustainability of the Collateral Engineering Services Core Unit (CES), the budget reflects support of the Mandates and business continuity in MIP39.

Any elements of this budget reflecting a likeness to other Core Units is a principle of building on the shoulders of giants. Much appreciation is given to all the trailblazers.

Core Unit ID

CES-001.

Budget Implementation

The CES budget is designed with the following in mind:

  • Paying for the operational costs to run the Core Unit
  • Building a reserve for sustainability

Therefore, a vote to ratify this MIP means MKR holders make a commitment to:

  • An initial six month budget for CES
  • A continuous funding model that operates on a semi-annual basis based upon achieving CES milestones
  • A MKR vesting schedule for CES based upon the SES MKR Incentive Plan

Budget Responsibilities

  • Auditor’s multi-sig Wallet to honor and uphold MKR holders preference for the CES Budget Breakdowns
  • Operational multi-sig Wallet to run the operations of CES
  • CES commitment to the transparency and accounting of funds during all budget cycles

List of Budget Breakdowns

Team Structure

The team will consist of seven full and part time Core Unit contributors.

Team Summary for 2021-2022

Team Members
Full Time
Core Unit Facilitator 1
Technical Product Owner 1
Smart Contract Engineers 3
Part Time
Advisors 2
Team Total 7

Total Budget Cap for the Cycle

The Total Budget Cap is $1,223,552, spanning a six month Cycle. The annual budget is projected at $2,375,469.

6 Months 12 Months
Budget $1,223,552 $2,375,469

Budget Detail

Summary Q4 Q1 Q2 Q3 12 Months
Salary $250,000 $343,750 $343,750 $343,750 $1,281,250
Benefits + Taxes $75,000 $103,125 $103,125 $103,125 $384,375
Travel $15,000 $15,000 $15,000 $15,000 $60,000
Hardware $17,500 $0 $0 $0 $17,500
IT & Subscriptions $25,000 $8,333 $8,333 $8,333 $50,000
Referral & Sign-on Expense $100,000 $0 $0 $0 $100,000
Audits $0 $0 $0 $0 $0
Bug Bounty $0 $0 $0 $0 $0
Gas Costs $5,625 $5,625 $5,625 $5,625 $22,500
SC Verification & QA $0 $0 $0 $0 $0
Professional Services $75,000 $25,000 $25,000 $25,000 $150,000
Contingency Buffer $84,469 $75,125 $75,125 $75,125 $309,844
Total $647,594 $575,958 $575,958 $575,958 $2,375,469

A few notes about the Budget Detail:

  • The Budget Detail in the first Formal Submission of this MIP was $3,133,211. This has been lowered to $2,375,469. The decrease is primarily due to removing three headcounts. Also note this budget includes a Benefits + Tax provision of $384,375.

  • Any business functions (HR, Legal, Operations, DevOps, etc.) not listed here will be contracted on an hourly basis as Professional Services.

  • The budget represents a fully populated team based upon a hiring schedule. The actual amount might be lower due to the availability of smart contract engineers.

Illustrating these details as a percentage of the total budget request for overall comparison (12 months):

Budget Details:

Providing additional detail with regards to the above line items:

Salary: The initial team has three full-time Smart Contract Engineers, one full-time Technical Product Owner, one Facilitator/Team Leader, and two part-time Advisors (for a total of seven permanent members).

Benefits + Taxes: The overhead cost of an employee/contractor such as benefits (including healthcare), and taxes. This has been calculated by scaling salaries by 30%. This premium is likely an overestimation, and the realized cost is expected to be lower. That being said, paying salaries to a global remote team in a multitude of jurisdictions can be quite expensive.

Travel: The team may travel to present at industry events or participate in a team offsite. The budgeted amount is $1000 per person per month. The goal would be to meet twice a year around an ETH event and Devcon. We get to attend the conferences and take a few days to meet/plan as a team. Consideration is given a geographic distribution of 5-7 people and the higher than normal costs for travel and expenses.

Hardware: An allocation of up to $3,500 per new team member.

IT & Subscriptions: We anticipate a variety of costs relating to software subscriptions, cloud services, and contract service providers.

Referral & Sign-on Expenses: Provided at the discretion of the Facilitator to attract top talent to the team.

Audits: Initially, this work will be coordinated with the Protocol Engineering Core Unit. Budget modifications will be submitted when appropriate.

Bug Bounty: Initially, this work will be coordinated with the Protocol Engineering Core Unit. Budget modifications will be submitted when appropriate.

Gas Costs: Initially, this work will be coordinated with the Protocol Engineering Core Unit. A nominal amount has been allocated for administration. Budget modifications will be submitted when appropriate.

SC Verification & QA: Initially, this work will be coordinated with the Protocol Engineering Core Unit. Budget modifications will be submitted when appropriate.

Professional Services: Coverage for managing general operational overhead and services, legal costs including entity creation, legal officer/company insurance, as well as monthly and annual financial reporting.

Contingency Buffer: Approximately 15% of budgeted costs to be held in reserves for business continuity. The CES entity will mostly likely be a business in the United States and corporate tax rates may apply to these reserves.

MKR Vesting and Incentive Structure

The MKR vesting schedule for CES based upon the SES MKR Incentive Plan.

MKR Vesting Details

Property Value
MKR/USD lock-in Price (Post Ratification) Trailing 6 month average
MKR/USD lock-in Price (OG) MKR = $1,956 (11/12/20 - 05/12/21)
MKR Price Floor (Post Ratification) -30% (Trailing 6 month average hire price)
MKR Price Floor (OG) -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

MKR Forecast

The below forecast is based upon a fully populated team today.

Vesting Date Vesting Transfer Date MKR Amount
30 Sep 2022 01 Oct 2022 966.49 MKR
31 Mar 2022 01 Apr 2023 483.24 MKR
30 Sep 2022 01 Oct 2023 483.24 MKR
31 Mar 2022 01 Apr 2024 483.24 MKR
30 Sep 2022 01 Oct 2024 483.24 MKR
Total 2,899.46 MKR

At the current (2021-08-11) MKR price and if CES was onboarding a full team, the MKR Incentive Total would be 2,292.46. An additional 607 MKR are allocated for Manual Repricing or if the trailing six month average drops below today’s MKR price. The actual MKR issued will fall in a range between 2,292.46 and 2,899.46 MKR.

The Vesting Transfer Date is one day after that period’s Vesting Date. For example, a Sep 30 Vesting Date would have a Vesting Transfer Date of Oct 1.

Budget Implementation

Goals

The CES budget implementation is architected to build and sustain a stable Core Unit in relation to the volatility in our industry.

  • Funding for the initial six months of the Core Unit with a contingency reserve
  • Thereafter, a continuous funding model operating on a semi-annual basis
  • MKR incentives with a Vesting Period of three years, a 12 month cliff, and six month vesting after the cliff
  • Provide full transparency and accounting of funds during all budget periods

CES Cycle Alignment

Total Budget Cap for the Cycle

The Total Six Month Budget Cap, as specified in the Budget Breakdown, will be transferred to the Auditor’s Wallet after ratification. This wallet will keep the funds and transfer them as requested by CES, per the below.

The Auditors Wallet balance will never exceed the upper limit voted by Governance. If this limit needs to be raised, or we’re no longer expecting to ever need it, an additional subproposal MIP will be submitted to adjust it.

CES Budgeting Cycle

Core Unit Ratification

When the CES Core Unit is ratified:

  1. Core Unit begins
  2. Six month budget is transferred to Auditor’s multi-sig Wallet
  3. Initial requested budget is transferred into the CES Operational multi-sig Wallet

Core Unit Monthly Budgeting Cycle

Within the first 5 days of each month, CES will submit a Monthly Budget Statement to the signers of the Auditor’s Wallet with the following sections:

  1. For each month, provide an accounting of funds spent in the prior month
  2. Provide an updated budget for the remaining cycle
  3. Provide a MKR vesting overview, by month
  4. Auditor verification of accounting
  5. Requested additional budget allocation & MKR incentives transferred into the CES Auditor & Operational multi-sig Wallet

The Monthly Budget Statements will be added to the MakerDAO forum. The originals can be found in this git repository on Github.

Core Unit Summary Cycle

  1. Reconciliation of budget, actual vs. spent
  2. Review results & achievements
  3. Present new budget, MKR vesting, & goals
  4. Entire committed budget transferred to Auditor’s multi-sig Wallet
  5. Initial budget transferred into the CES Operational multi-sig Wallet

MKR Incentive Vesting Implementation

MKR will be transferred from the Auditor’s multi-sig Wallet into the CES Operational multi-sig Wallet no later than Core Unit Monthly Budgeting Cycle before the month the MKR actually vests. For example, if a Vesting Transfer Date is 01 Oct 2022, the MKR will be transferred into the Operational Wallet no later than the August 2022 Core Unit Monthly Budgeting Cycle. Once DssVest is ratified and implemented, CES will investigate the use of automated MKR incentive vesting.

Wallets

The following wallets are involved:

  1. The Auditor’s Wallet – A 3-out-of-4 multi-sig, controlled by trusted Maker DAO members. This multi-sig will hold the Total Budget Cap in DAI. All funds pass through this wallet before any are sent to the CES operational wallet. One of the signers is the Facilitator of the CES Core Unit.

The signers of the Auditors Wallet are still being confirmed and will be added to the MIP40c3-SPXX forum thread. No funds will be sent to this wallet before the signers’ addresses have been set in the wallet.

  1. The Operational Wallet – A 2-out-of-3 multi-sig, controlled by CES. This multi-sig will be used for Core Unit expenses. One of the signers is the Team Leader of the CES Core Unit.

Transfers

Core Unit Budget Cycle Transfer

  • What: Initial transfer of the Total Budget for the 6-month Budget Cap Cycle.
  • When: Manually, upon executive vote approval.
  • Amount: 1,223,552 DAI
  • Sender: Maker Protocol Surplus Buffer
  • Recipient: Auditors Wallet: 0x25307aB59Cd5d8b4E2C01218262Ddf6a89Ff86da

October 2021 Budget Transfer

  • What: Operational Wallet for the requested budget.
  • When: Manually, upon executive vote approval.
  • Amount: Determined by the October 2021 Budget Statement
  • Sender: Auditors Wallet: 0x25307aB59Cd5d8b4E2C01218262Ddf6a89Ff86da
  • Recipients: Operational Wallet: 0xD740882B8616B50d0B317fDFf17Ec3f4f853F44f

Related Documents

Collateral Engineering Services Product Plan
MIP39c2-SP20 Collateral Engineering Services Core Unit MIP
MIP41c4-SP21: Facilitator Onboarding, Collateral Engineering Services Core Unit

2 Likes

@blimpa Please add MIP40 for RFC.

Good to see you back on the grind Rojo! #resilient

Not sure I understand the “taxes” is that State & Federal tax on benefits, or taxes on the CU entity? Sorry about that.

Very cool–Now that a lot of teams are working remotely–I’m hearing that a lot of companies are doing offsite building/scrumming. Most CU travel budget are averaging $3K-$4K per Quarter–I see your Travel budget is almost the same as IT&Subs/Hardware–are you optimistic that there will be that many travel opportunities?

If I understand this breakdown correctly–this yields approx. 414 MKR per FTE per every 6-months? Also, can you please provide why the first allotments is for 966 MKR? Not sure I understood it correctly.

Thank you in advanced!

1 Like

I’ve got a strong affinity for this community and project…back at it again! :wink:

The Benefit + Taxes are a straight 30% on the base salaries for the employees/contractors. That only gets spent if needed since it includes healthcare and other taxes or obligations depending upon the geography. I highly doubt we’ll use all of it but want to allocate it just in case.

Regarding Travel, my plan would be to meet twice a year around and ETH event and Devcon. That way, we get to attend the conference and we can take a few days to meet/plan as a team. I’m not exactly sure where people will work so it was a ballpark to cover 5-7 people with T&E. Everything is more expensive these days. It’s on the high side. For IT & Subs, we shouldn’t need too much infrastructure initially but that will probably grow as we hire the team and take on more work.

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@ElProgreso It was challenging to represent the MKR vesting when I’m not exactly sure when people are going to be hired. So I decided to present the maximum scenario with a full team at time of ratification and work backwards from that. The comment below the vesting table is important to read since I believe the actual will be lower.

I am using the spreadsheet that SES created for MKR Incentive Plan details, SES - MKR Incentive Plan Details - v0.1 - Google Docs. There are five full time and two part time employees/contractors/advisors at various salary ranges (no salary for the advisors, MKR only) and it’s right from the spreadsheet. The first allotment of MKR is 966…the total MKR amount divided by three since it would be the first cliff vest. Again, I can only accurately model what this would look like IF I was onboarding a full team at ratification time. That is not the case at this moment.

The 483.24 MKR per six months is across 7 headcount and various amounts going to people due to the range of salaries.

The net of all this is that the MKR incentives are going to be more spread out and lower than what I have budgeted.

If I haven’t answered your question, please let me know. I’m trying to be as clear as possible given so many unknown variables.

@ElProgreso One key point I left out. I decided to submit the MKR incentives now and not do it as a separate MIP as some others have done. The challenge is that I need a defined incentive package at ratification or it will be incredibly difficult to attract and hire smart contract engineers. All the good engineers are gainfully employed and it’s going to be a matter of poaching them so I need all the ammo I can carry. It’s not just me since every CU at Maker has the same challenge.

I do have some ideas that I have used in the past on attracting, training, and retaining engineers but that is for another forum post.

This topic was automatically closed 90 days after the last reply. New replies are no longer allowed.

As part of our broader effort to bring more transparency to the CU budget structure, we have documented the wallet setup of this CU and others;


Read more about it here: Introducing the CU Budget Transparency Map

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