Recent Core Unit budget proposals have included MKR to be able to recruit and retain personnel. This prompted a forum discussion which quickly distilled into a choice for the protocol as a whole. Either the core units make separate proposals involving MKR, or there would be an overall guideline for the whole community.
As a response members of the community initiated a working group with two core unit facilitators, Derek and LongForWisdom, as well as two representatives for the MKR holders Aes and Planet_X. The group initiated discussions to produce a guideline for MKR compensation for the Core Units.
The advantage of guidelines
The time and effort of Core Units are highly valuable to the community and while budget proposals involving MKR could be customized for each Core Unit, such an approach has the downside of consuming considerable time. There is also the aspect of avoiding creating diverging incentives as these could lessen the cohesion of the community. Additionally, the discrete yes/no nature of voting meant that some units might get everything they ask for while others end up with nothing. Given these considerations, the MKR Compensation Group believes a common guideline for MKR compensation to be highly preferable.
The necessity of a system
The simplest compensation system would be to give the same amount of MKR to everyone. However, the amounts necessary would make MKR an inflationary asset. Additionally, this structure would not aid retention or recruitment in critical core units while likely creating a tsunami of applications and proposals for most other units. The expectations for future MKR distribution as the organization grows would be enormous. Last but not least, such a distribution proposal would likely be impossible to sell to MKR holders.
With uniform distribution scrapped, we needed a way to evaluate the Core Units; ultimately deciding on the parameters of maintenance, growth, security, and market demand for personnel.
Maintenance. Peg stability, continued operation, evaluation, engagement
Growth. Awareness, education, promotion, presentation, content, integrations, scaling, collateral onboarding
Security. Assessment of risks, audits, regulation
Staffing. Difficulty to attract, retain, or replace team members
The group researched the bonus structures of world-leading technology companies. The results showed that there were huge differences in the bonuses offered to different groups of employees with software engineers offered compensation packages more substantial than even senior managers of other categories. This meant that any compensation plan taking staffing issues into account is bound to be heavily skewed in favour of the leading software developers. This is a basic fact of life which the Maker community will need to take into account. Proposed compensation for other Core Units were taken from ballpark corresponding positions at world leading tech companies or investment banks. Rounding was upwards.
Additional research revealed that positions could be grouped roughly into four tiers, which matched fairly well with the discussed evaluation made of the Core Units.
The net result was a compensation guideline that both fulfills the requirement of offering globally competitive compensation for critical Core Units, but also seeks to reward all contributors with a share of the Maker protocol.
How it would work
Different structures of compensation were discussed. The group converged on that MKR would be used for the guideline, not DAI or the dollar value of MKR. This was both due to the high degree of alignment with protocol as well as the low governance overhead involved.
The guideline proposes that MKR is transferred to the Core Unit Facilitator based on the number of full-time equivalent contributors in the unit. The Facilitator will then distribute the compensation to their team based on the situation that is most applicable to that specific unit. A small team with limited plans for growth could choose to divide the compensation equally, while a team with plans to recruit substantially with high demand for training and uncertain individual performance could choose a tiered system. This method was chosen to allow for simplicity for the Community as well as flexibility for the Core Units.
Any funds not spent should be returned to the community.
The MKR will be transferred to the Core Unit a full year after ratification of the guideline and once per year after that until the last transfer in 2025.
NB: Some listed Core Units have yet to be approved. Others have yet to formally apply for approval. Unit sizes uncertain in some cases.
Recommended best practice for Core Units
Based on internal discussions the MKR Compensation Group has the following list of best practices for Core Units seeking to apply for MKR compensation.
- Core Units receiving MKR are advised to adhere to this guideline when possible.
- The MKR compensation proposal should be placed in a separate proposal, not combined with the initial budget request. This allows a new team to start working for Maker and pay salaries to the team members.
- There should be a minimum 3-month gap between core unit approval and the application for MKR compensation. This will allow the community a chance to evaluate the core unit before compensating the unit with MKR.
The MKR Compensation Guideline towards 2025
It is the intention to inspect and if necessary revise the guideline annually towards 2025 while maintaining the core principles of the document to provide a firm foundation for recruitment and retention.
Periodic revisions will also enable the community to include lessons learned both from inside and outside the Maker community. Do note that as the protocol progresses, working for the various Core Units will most likely increasingly resemble a normal job with proportionally less risk and also less compensation.
For the purpose of establishing a DAI value to the MKR used for compensation, the price is set to DAI 2250 per MKR, which was the price of MKR on 3 March 2021 when the Protocol Engineering group submitted their budget proposal.
All participants have been critical for the creation of this guidelines. With internal discussions largely concluded and recommendations made, Planet_X will promote the guideline towards the community, due to concerns around neutrality and conflict of interest for LFW and Derek. The presented proposal, including all argumentation, ranking, and figures, is therefore considered the work of Planet_X. Questions, comments, praise, or criticism should be directed there.
Team composition for future revisions of the guideline will be up to the community.
Based on this Pre-MIP and community feedback, a MIP will be formalized for RFC on 12 May 2021, intended for the June governance cycle.