Parameter Proposal Group - MakerDAO Open Market Committee

Hello everybody,

The current Rates Working Group wants to form themselves as a Parameter Proposal Group as outlined in MIP46.

Objectives

Sustainably growing the DAI supply while minimizing risk and keeping peg stability.

Scope

We want to cover the following parameters

Identity

PPG-OMC-001
Informal name: MakerDAO Open Market Committee

Members and Conflicts of Interest

Conflicts of Interests as stated by each individual by their own judgement. In case something is changing it will be updated in this thread.

  • @Primoz - Dai user
  • @LongForWisdom - Dai user, occasional vault user.
  • @Monet-supply - Dai user, vote delegate for UNI, COMP, and AAVE governance, reviewer for Uniswap and Compound grants committees, employee for Tally
  • @SebVentures - Dai user, vault user (different ones over time)
  • @hexonaut - Dai user, occasional sometimes vault user, has GEL tokens (added 2021-10-13T22:00:00Z)
  • @Akiva - Dai user, Vault user (different ones over time). Has a startup selling DSR hedging products to Vault and Dai users.
  • @ultraschuppi - Dai user, vault user (different ones over time)

Consistency and Reactive

We are going to meet at least once a month and publish a proposal on changes on the covered parameters. In case urgent changes are necessary, we will do that as well.

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I can confirm that this meets the requirements to be recognised as a Parameter Proposal Group. Though I would like to see more detail in the objectives.

Curious as to what others in the community would like to see in posts like this that are aiming to fulfil the requirements under MIP46.

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Perhaps this would just be a formality, but would it be appropriate to periodically ensure anyone on this committee has and maintains a higher stake in MKR than in DAI vaults? Just from a governance perspective, I would like to avoid any situation where a good person has to resist bad incentives.

My apologies if this has already been addressed, but it seems like there’s probably a way to address this that’s not onerous, and I do feel it’s important.

I’m not sure I really want to be enforcing this, and in practice it’s probably impossible to verify given that people can sell MKR at any point. Realistically governance needs to approve any proposal that comes out of this group, and rationales are presented alongside each proposal.

The conflicts of interest section is more of a heads-up and background info than it is a replacement for due diligence on proposals put forward by this (or any other PPG.) Especially given that this disclosure is voluntary and there is no guarantee of its accuracy.

MKR Holdings were excluded from ‘Conflicts of Interest’ as it’s pretty much the opposite of a conflict.

I also don’t want to require people to disclose their holdings in specifics as I think that will disincentivise involvement in groups such as these.

I get that rationale (and agree with it). But I also have to push back at least a little, because I think it’s something that should still be considered, and perhaps there’s a creative way to address it.

Realistically, if someone is heavily indebted to Maker to the point it affects their finances more than their ownership of MKR ,and also sits on the committee that makes the official recommendations to the community about stability fees and debt ceilings and the line, that’s just not a recipe for good governance. Correct me if I’m wrong, but if the MakerDAO version of the FOMC comes out with a recommendation, wouldn’t you think most MKR holders will agree with what they propose, if only because those folks have been in the weeds and likely have more knowledge about the matter in real time. Catastrophic mistakes may present themselves immediately, but you still leave yourself open to corruption – which I think we’d at least like to avoid the appearance of.

Perhaps verifying stakes in vaults and MKR isn’t the answer. But I think we need to have something in place to account for the fact that it can be really easy to put someone in a position where they have to choose between their own financial wellbeing in a very direct way and that of Maker. Even if these folks are 110% trustworthy, there will always be someone new in the future who can hop onto this committee – particularly if a history of agreeing with its recommendations develops.

I just think we’re setting ourselves up for some bad news bears down the road as soon as there’s any turnover in this committee if this isn’t thought about right now.

So the way this works in practice is that the Primoz and his core unit (and in the future maybe other core units with the necessary skillset) do their research and then first run their conclusions by the parameter proposal group, who acts as a a sanity check before putting it on the forum and into the weekly cycle?

Tbf mkr holders have the final say via executive and if there is some glaring issue it’s all transparent in the first place so there is room for 3rd party review. Also the forum proposal gives time to question their choices before it goes on-chain.

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Essentially yes, in practice what happens is @Primoz provides risk premiums for everything, @monet-supply provides competitive analysis for everything, then we go through each asset and discuss changes we think we should make.

In the future I’m hoping that we’ll have more of these groups appear, at which point we’ll share the risk and competitive input but potentially end up with differing proposals based on the individual PPG’s goals. One might focus on risk mitigation exclusively and push for reductions to lower stablecoin exposure for example. Another might favour maximizing protocol income and subsidizing risk.

The goal there would be to have competing proposals be voted on based on the same data such that governance can choose based on their desired direction.

Any turnover would need to be clearly communicated, and part of MIP46 says the following:

It’s more or less impossible to account for all the different ways a person could end up with diverging incentives. In my opinion the best we can do is:

  • Make sure that rationale is expressed and related back to PPG objectives, so that holes in logic can be addressed.
  • Make sure there is time for debate so that proposals can be questioned.
  • Make sure membership is public and there is a reputational component.
  • Make sure members have at least considered their conflicts of interest by requiring them to list them.
  • Make sure that MKR Holders sign-off on all proposals.

In principle I understand your point and the risks. But we have this risk everywhere, and the best we can do is mitigate it. Core Units could be bribed in the future to pursue outside agendas, MKR Holders could also be bribed to vote in certain directions, and PPG’s could pursue their own interests in their proposals.

The surest way to ensure alignment in a PPG or Core Unit is to force them to stake MKR in order to do the job. At this stage this doesn’t seem feasible to me, it’s too much of a downside / capital requirement. How much MKR is enough to ensure alignment for something like this? 1, 10, 100? Even just 1 MKR is ~$2000, that’s a big capital requirement to provide input into a joint proposal once a month.

This series from @Planet_X talks about how we could move to staking, and it’s a very neat idea, and would allow a lot more throughput, but it’s probably not feasible at this stage of growth / scale.

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Hi everybody,

quick update:

We just unanimously decided to cover PSM-parameters in future proposals as well - especially since PSMs are a substantial part of DAI creation.

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They seem to me to be by far the most fundamental part of coining DAI when entering sideways or bear markets. Good call guys!

@ultraschuppi Is this group open for members or observers?

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Following up, because I’d like to see more diverse membership, and @williamr is someone I’d support adding to this committee.

Since it has the power to get a proposal to cut our revenue by tens of millions into an on-chain poll in less than 24 hours, I think there needs to be more people on the committee to provide feedback beforehand.

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The MOMC meetings are not public so we currently do not have observers. Regarding adding new members to the PPG, we are still undecided if and how to move forward.

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Is there a particular reason why observers are disallowed?

It’s hard to have an honest conversion when things are going on the public record.

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@hexonaut That’s 100% true. But having an observer from within the DAO is not the same as putting a video or transcript of the meeting out in the public view.

Sure, I guess I thought you meant opening up to any number of observers which is similar. I don’t really see the use in having an observer in the meeting if they aren’t participating. Are you worried we are acting in bad faith?

No. But allowing an observer or two like @williamr would help disseminate information a bit faster. One of my chief complaints is the lack of discussion with the community.

Observers would go a long way to dispelling the image of a “smoke filled room.” Remember: with only one PPG for rates, this closed meeting of a few individuals is deciding what the only candidate on a ballot will be. I think allowing known DAO members to sit in and listen is entirely appropriate. If nothing else, the actual information this PPG is working from is (I believe) required to be shared, even if the discussions amongst individual members are not.