# MIP40c3-SP31: Modify Core Unit Budget - Sustainable Ecosystem Scaling (SES-001)

MIP40c3-SP31: Modify Core Unit Budget - Sustainable Ecosystem Scaling (SES-001)

Preamble

MIP40c3-SP#: 31
Author(s): @wouter, @juanjuan
Contributors:
Tags: core-unit, cu-ses-001, budget, dai-budget, 
Status: Formal Submission
Date Applied: 2021-08-11
Date Ratified: yyyy-mm-dd

Sentence Summary

MIP40c3-SP31 modifies the Dai budget for Core Unit SES-001: Sustainable Ecosystem Scaling, replacing MIP40c3-SP10.

Paragraph Summary

MIP40c3-SP31 modifies the Dai budget for Core Unit SES-001: Sustainable Ecosystem Scaling. It contains:

  • Changes against the previous version
  • Increase in the Total Budget Cap: the hard limit voted by Governance
  • Breakdown of budget increase
    • Permanent Team
    • Incubation Program
    • Grants Program
  • The MKR Compensation Expectation

Changes (compared to MIP40c3-SP10)

Total budget cap: $1,153,480 → $1,461,111

Permanent Team: $154,493 → $177,037

  • Reviewed Dai compensation for some contributors
  • Some contributors increased their FTE commitment
  • Travel budget added
  • Cost estimation improved: overhead → payment costs

Incubation Program: $200,000 → $250,000

While we are limited by our capacity to help and assist teams successfully, we are helping more teams than anticipated. The budget increase includes compensation and software costs.

Grants Program: $30,000 → $60,000

As we advance in conversations with potential grantees, we discover prices to get things done in promising areas.

Transfers

A slight modification in the text to make the ongoing process clearer.

Specification

Motivation

Going by the critical nature of the work done by the Sustainable Ecosystem Scaling Core Unit, sufficient funds need to be provisioned to guarantee the success of the Maker ecosystem in the long run.

The proposed budget comprises three parts:

Permanent Team Budget

The Permanent Team Budget covers Dai compensation and operational costs for the permanent team members of the Sustainable Ecosystem Scaling Core Unit. This is a standard budget based on the breakdown of actual costs. It will evolve in a relatively slow and predictable way.

Incubator Program Budget

The Incubator Program Budget is not based on a breakdown of actual costs but rather acts as a spending limit for a financial buffer used for funding incubation projects at the discretion of the SES Facilitator and multisig co-signers.

A big part of the Incubator Program’s value lies in this ability to allocate budgets without waiting for governance approval quickly. This is to avoid a situation where promising teams have to wait in great uncertainty, typically 3 months or longer, before potentially receiving the first DAO payment for their Core Unit. This is seen as a requirement that is an unreasonable barrier to entry for new teams joining the ecosystem.

Grants Program Budget

The Grants Program Budget is a similar budget based on prior experience with the Governance Communications’ grants program that has now been sunset.

Core Unit ID

SES-01

Budget Breakdown

Dai Expenditure

Total Budget Cap

We’re asking for a Total Budget Cap of $1,461,111, spanning a 3-month runway.

Group Monthly Total 3 Months
Permanent Team $177,037 $531,111
Incubation $250,000 $750,000
Grants $60,000 $180,000
Grand Total $487,037 $1,461,111

Permanent Team

Type Monthly Total
Dai Compensation (9.5 FTEs) $127,210
New hires’ Compensation (2 FTEs) $19,708
Travel Costs $3,333
Buffer $8,333
Software Development $4,167
Software $1,785
Payment Fees (gas & payment processor) $12,500
Grand Total $177,037

See our Team Spreadsheet for more details about the included FTEs.

Incubation Program

The limit for the Incubation Program was estimated based on some team configuration scenarios that we want to support, as outlined in the table below. The requested limit is the (rounded) maximum amount needed for any of these scenarios.

Teams Avg Team Size People Total Avg Dai Compensation Annual Cost Monthly Cost
Sr. Engineers 3 4 12 $155,000 $1,860,000 $155,000
Non-technical 5 4 20 $120,000 $2,400,000 $200,000
Mix 3 6 18 $137,500 $2,475,000 $206,250

Estimations of different incubation costs at industry standards.

Grants Program

The details for the Grants Program are still being worked out. To avoid updating the budget MIP soon, a budget is included that will be sufficient to get the program up and running. Once the program is active, more detailed estimates will be included in the Monthly Budget Statement.

MKR Expenditure

Permanent Team

For the Permanent Team, a budget proposal amendment will be submitted for the Permanent Team that proposes a detailed MKR incentive model.

While this leaves the details undefined for now, the expectation of the team is threefold:

  1. That the MKR incentive structure is reasonably defined by the time the team starts working for the SES Core Unit.
  2. That the vesting schedule starts no later than this starting date.
  3. That the commitment and, therefore risk that the team is taking will be reflected in this structure, for example, by taking the MKR price into account at the moment of the formal submission of this MIP40c3-SP10.

Incubation Program

For the Incubation Teams, MKR incentives will be included in the respective budget MIPs as they are published. This may include a back pay amount for the incubation time, but these details, too, are still being discussed.

Budget Implementation

Goals

The budget implementation is based on a monthly reporting and top-up cycle described in the sections below. Our goals with this implementation are the following:

  • Continuously fund the SES core unit. Ensuring that SES has enough money available for business continuity and minimal job security.
  • Provide full transparency and be kept in check by a group of governance-appointed auditors.
  • Fully separate cashflows on the Core Unit and budget category level for transparency.
  • Reduce governance overhead to a minimum.

Total Budget Cap

The Total Budget Cap, specified in the Budget Breakdown, will be transferred to the Auditors Wallet, who will keep the funds and transfer them as needed. This amount aims to maintain a 3-month runway for the Core Unit.

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 ever to need it, an additional subproposal MIP will be submitted to adjust it.

Multi-sig Wallets

The budget is split into three separate categories: Permanent Team, Grants Program, and Incubation Program. The following multi-sigs are involved:

  1. The Auditors Wallet – A 3-out-of-4 multi-sig, controlled by trusted Maker DAO members that are not a member of SES. This multi-sig will hold the Total Budget Cap in DAI. All funds pass through this wallet before any are sent to the operational wallets. One of the signers is the Self-Accountability Auditor of the SES Core Unit.

    The signers of the Auditors Wallet are still being confirmed and will be added to the MIP40c3-SP10 forum thread. No funds will be sent to this wallet before the signers’ addresses have been set in the wallet.

  2. The Operational Wallets – One wallet for each budget category. These are 2-out-of-3 multi-sigs controlled by SES. Signers include the facilitator, the team lead, and one other SES member from the permanent team, responsible for the associated budget category.

    • The Permanent Team Wallet
    • The Grants Program Wallet
    • The Incubation Program Wallet

Monthly Budget Statement

Within the first 5 days of each month, SES will submit a Monthly Budget Statement to the signers of the Auditors Wallet with the following sections:

  1. The Budget Forecast, based on the latest available information, of the budget (in DAI) required to maintain a 3-month runway for the team.
  2. The Last Month Actuals, i.e. the actual expenses (DAI and MKR) of the month that just ended.
  3. The MKR Vesting Overview – this schedule has the expected MKR vesting amounts for the current team configuration, grouped by the pay-out month.
  4. The Transaction Amounts
    • The required DAI amount for each Operational Wallet to replenish the 3-month runway
    • Any excess DAI amount that will be returned to the Auditors Wallet

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

Monthly Top-up Cycle

Seeding the Auditors Wallet

As preparation for the Monthly Top-up Cycle, the Auditors Wallet first needs to be seeded with the Total Budget Cap from the surplus buffer. This seeding transaction will be included in the executive vote on the initial SES Core Unit MIPs.

Monthly Cycle
  1. Monthly Budget Statement Submission – Within the first 5 days of the month, SES submits the Monthly Budget Statement to the Auditors Wallet signers. This report is also available for the rest of the community to review.

  2. Transaction Requests Submission – In parallel, SES submits the necessary transaction requests for the Auditor Wallet signers to sign:

    • DAI Top-up Transactions – One DAI transaction for each Operational Wallet that has a balance below the 3-month runway forecast. The top-up transaction adds enough funds to the operational wallet to replenish this runway.
  3. Returning Excess Funds – SES creates and signs any transactions for excess funds that should be returned to governance:

    • Excess DAI Transactions – DAI transactions for Operational Wallets that have a balance above the 3-month runway forecast.
  4. Auditors’ Review – The Auditors Wallet signers review the Monthly Budget Statement. They check that the transaction request amounts are the ones mentioned in the report and that they make sense. If there are any irregularities or other questions or comments, they discuss this with SES and allow for resubmission if any corrections are required.

  5. Transaction Approvals – Three Auditors Wallet signers sign the submitted transactions, sending the DAI top-up amounts to the Operational Wallets. SES can now use the funds for expenses.

  6. Auditors Wallet Top-up – SES submits a PR to top up the Auditors Wallet to the Total Budget Cap in the next executive vote. The cycle can now start again from step 1.


Transfers

Top-ups

  • What: Transfers of the total budget cap for the 3-month runway minus the available amount in the auditors’ wallet.
  • When: Automatically, upon executive vote approval (spell cast).
  • Amount: 1,461,111 DAI - amount available in wallet
  • Sender: Maker Protocol Surplus Buffer
  • Recipient: Auditors Wallet: 0x87AcDD9208f73bFc9207e1f6F0fDE906bcA95cc6

Internal Transfers

  • What: Operational wallets monthly top-ups for expenditures.
  • When: Manually, upon Monthly Budget Statement review.
  • Amount: Determined by the Monthly Budget Statements
  • Sender: Auditors Wallet: 0x87AcDD9208f73bFc9207e1f6F0fDE906bcA95cc6
  • Recipients:
    • Permanent Team Wallet: 0xb5eB779cE300024EDB3dF9b6C007E312584f6F4f
    • Incubation Program Wallet: 0x7c09Ff9b59BAAebfd721cbDA3676826aA6d7BaE8
    • Grants Program Wallet: 0xf95eB8eC63D6059bA62b0A8A7F843c7D92f41de2
4 Likes

Sir, Nine and a-half humans (9.5) ? :laughing:

Buffer is needed incase you do more than $3,333 worth of travel and/or unexpected expenses?

It wouldn’t be easier to keep the excess funds for the following quarter, and include in the next SES CU budget?

All in all, is it fair to say that your CU budget is increasing because of both the incubation and grants program are expanding–did I understand it correctly?

Otherwise TY for this write-up, very informative & open.

9 full-time, 1 part-time.
Or 8 full-time, 3 part-time.
Or… you get the point. : )
Full-time equivalent.

We’re getting better at estimating and forecasting costs, but we still have a way to go. The buffer is to make sure that we have some manoeuvering space.

Yes. That’s what we’re currently doing. We’re forecasting 3 months and requesting the difference between that and whatever is left from previous months.
If for any reason, the three-month forecast went down and we had more money than forecast, we would return those funds.

Yes! We have included a TL;DR section called Changes (compared to MIP40c3-SP10) where we outline the changes so that people don’t need to go through the whole thing again (which is quite similar to the previous one).

Thanks for reading it.

1 Like

Any thoughts on going to a 6-month forecast/budget reporting versus three (3)? Looks like GovAlpha is headed in that direction.

1 Like

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