MIP#: 61 Title: Recognized Delegate Compensation Author(s): Joshua Pritikin (@jpritikin) Contributors: Tags: template Type: process Status: RFC Date Proposed: 2021-10-01 Date Ratified: <yyyy-mm-dd> Dependencies: Replaces: <List of MIP it is replacing>
- Delegation and MakerDAO
- Whether to compensate delegates
- Compensating recognized delegates, parameters.
This proposal describes how Recognized Delegates will be compensated.
Governance Facilitators will compute and send the compensation to Recognized Delegates starting from the MIP adoption date with payments sent monthly.
MIP61c1 defines key terms.
MIP61c2: Compensation Formula and Process
MIP61c2 specifies how to calculate the compensation and convey it to Recognized Delegates.
MIP61c3 provides examples of the calculation for a few different situations.
MIP61c4: Modification of Parameters
MIP61c4 is a process component that allows authors to appeal to Maker Governance to change compensation parameters.
Vote outcomes are largely determined by how well voters are informed. As recognized delegates hold a great deal of voting weight, MKR holders are strongly motivated to encourage delegates to be as informed as possible, deliberate on questions of governance in depth, and engage in discussion with all stakeholders to gain the broadest possible perspective on the questions presented before them to decide. Compensation will help free delegates from some of their other responsibilities. For outstanding delegates, a secondary goal of compensation is to retain talent and prevent poaching of delegates by other businesses.
- Delegate compensation should be positively correlated with MKR weight.
- There should be a per-delegate maximum compensation because we do not expect a large difference in performance among outstanding delegates.
- Compensation should be skewed toward delegates with smaller MKR weight to encourage recruitment of new delegates.
- The compensation formula should discourage zero-sum thinking among delegates. One delegate’s compensation should be as independent as possible from another delegate’s compensation.
- Recognized Delegates: Any delegate that has been labelled as a Recognised Delegate by a majority of Governance Facilitators according to a public and consistently applied criteria.
Goal 1 can be addressed with a linear relationship or many different curves. Goal 3 can be addressed by using an exponential with a factor between 0 and 1 (exclusive). A factor of 0.5 results in quadratic funding. The idea is to distribute compensation proportional to the square root of the MKR weight. To achieve goal 2, we cap the maximum per-delegate compensation.
|Parameter||Math Symbol||Initial Value|
|Threshold for a large delegate||T||10k MKR|
|Maximum annual compensation per delegate||C||48k DAI|
The formula is
Rates of payment need recalculation only when the amount of delegated MKR changes. A rough approximation is obtained by recalculating only at regular periods (daily or weekly). Governance Facilitators shall look for changes at least daily and include the DAI transfers as part of an executive vote once per month.
Governance Facilitators track participation and communication metrics for each Recognized Delegate. In order to receive regular compensation, Recognized Delegates must maintain a minimum percentage on each of these two metrics, namely:
- Participation is required to be at least 90%.
- Communication is required to be at least 90%.
These requirements and metrics may be adjusted in the future depending on the number of Recognized Delegates, the resources available to the Governance Facilitators, and feedback from the delegates themselves.
Suppose the parameters are set to their initial values.
With 100 MKR delegated, the compensation is calculated as
C*min(1,100^q/10000^q). This is
C*10/100 = 4800 DAI per year.
With 6772 MKR delegated, the compensation is calculated as
C*min(1,6772^q/10000^q). This is
C*82.29/100 = 39500 DAI per year.
Compensation can be visualized by plotting the amount of MKR delegated against the compensation formula,
The parameters that can be modified are:
- Threshold for a large delegate
- Exponential factor
- Maximum annual compensation per delegate
Recognized Delegates are potentially conflicted in consideration of these proposals. There may be a temptation to approve increases in compensation and vote against decreases. Hence, a Signal Request is required to assess broader community sentiment and spotlight any positions on the MIP61c4 proposal staked out by Recognized Delegates. Sunshine is the best disinfectant. The Signal Request Poll must be posted at the start of the Frozen Period.
MIP61c4 subproposals have the following parameters:
- Requirements: 7-day Signal Request Thread, passing with 51%. If the Signal Request fails, then the proposal does not proceed to the Governance Cycle.
- Default Feedback Period: 1 month
- Frozen Period: 1 week
- Governance Cycle: Monthly