# MIP39c2-SP37: Modifying Collateral Engineering Services Core Unit Mandate (CES-001) ## Preamble ``` MIP39c2-SP#: 37 Author(s): @rune Contributors: Tags: collateral-eng, collateral-onboard, collateral-offboard, endgame, endgame-prelaunch-mip-set, ces-001, cob-001, active Status: Obsolete Date Applied: 2022-09-07 Date Ratified: 2022-10-24 Forum URL: https://forum.makerdao.com/t/mip39c2-sp37-modifying-collateral-engineering-services-core-unit-mandate-ces-001/17751 Ratification Poll URL: https://vote.makerdao.com/polling/QmTmS5Nf Extra: This MIP has been rendered obsolete following the voluntary offboarding of CES-001. ``` ## Sentence Summary MIP39c2-SP37 adds Collateral Engineering Services Core Unit, CES-001. For more information on the changes to this MIP, please see: - [Collateral Onboarding Core Unit Update](https://forum.makerdao.com/t/collateral-onboarding-core-cob-unit-update/8657) - [Collateral Onboarding Core Unit Launch Pod Session](https://www.youtube.com/watch?v=Q6xNOLPcw2Y) ## Specification ### Motivation The Collateral Engineering Services Core Unit Mandate is modified as a part of the Endgame Plan Approval MIP Set in order to eliminate any possible risk of the collateral onboarding process becoming disrupted or blocked by the removal of the old MIP6 process. The updated mandate is written with a new approach where the critical element of the mandate that explicitly and directly impacts Facilitator Governance Powers are provided up front. This information is also described as short and succinct as possible in order to make it completely clear what Governance Privileges the Core Unit Facilitator will have with regards to proposing non-standard weekly polls as defined in MIP16. #### Mission >Scale the Dai supply and manage the product collateral lifecycle. #### Vision >Provide product management, engineering, & technical services for onboarding and offboarding collateral. > > The Mission and Vision involves two mandates: > >1. **Productization of collateral** >2. **Building a sustainable Core Unit** ### Core Unit ID CES-001 ### Core Unit Name Collateral Engineering Services Core Unit ### Proposed Core Unit Facilitator @monkey.irish ### Core Unit Mandate ### Mandate as it relates to Facilitator Governance Powers The Collateral Engineering Services Core Unit Mandate makes the Collateral Engineering Services Core Unit Facilitator able to unilaterally, and with no additional process, propose non-standard weekly polls and Executive Votes related to: * Decentralized and RWA Collateral management * Risk parameter changes for Decentralized and RWA Collateral * Other Risk Parameters in the Maker Protocol * Decentralized and RWA collateral onboarding * Decentralized and RWA Collateral offboarding * Other votes and governance actions related to risk, Dai collateral and risk parameters * Any other votes and governance actions related to content described in the Informational Mandate below ### Informational Mandate This section contains additional in depth information about the Collateral Engineering Services Core Unit Mandate The Collateral Engineering Services Core Unit (CES-001) is a crucial service for growing the supply of the MakerDAO ecosystem and central to the protocol's success. What follows is an explanation of the Core Unit mandate. #### Productization of collateral >The mandate of productization contributes to the protocol's success as we follow best practices in software Product Management. If the goal is decentralization, and it is still a goal at this present moment, then Core Unit diversity and parallelization is a key part of that strategy. A one-to-one translation of teams from the Foundation into the DAO is the first logical step. Currently, we are seeing a lot of this happening. So, what is the next step? It’s the product oriented, holistic approach called "productization". The implementation leads to consolidating the collateral product and technical functions into one Core Unit. It’s really simple to say and a little more challenging to implement. Some of you might have worked on teams where cross-functional value was delivered with each software development iteration. I am referring to a Product Team where you take a holistic approach in delivering incremental features. You can think of these features as specific collateral or collateral classes as they collectively roll up into the Product. As more Core Units adopt the Product Team approach, this leads to parallel development efforts on the same code base. CES-001 plans to assist and leverage the work the Sustainable Ecosystem Scaling Core Unit (SES-001) is undertaking to enable a scalable approach to support parallelization. This work will help create more diversity and reduce bottlenecks and dependencies on any one Core Unit. All products have a lifecycle and need to be continuously assessed and managed. Our collateral is no different. The health of a product will also be tracked using metrics and dashboards to read out current statuses. For clarity, some of the best practices of Product Management are: - Collaborative ownership of the product vision - Managing the product roadmap - Scoping and estimation with engineering teams - Managing the product and iteration backlogs - KPIs, OKRs, and reporting - Communication and collaboration with stakeholders I’d also like to make sure I am very clear on one point. This Core Unit is a highly-collaborative effort and it’s a partnership, not competition, with the key stakeholders in the DAO. CES-001 will continuously work with Protocol Engineering, Oracles, Risk, Real World Finance, and other critical stakeholders to: 1. Identify and determine CES-001 technical responsibilities 2. Manage ongoing priorities with the product vision and roadmap 3. Develop processes that work for all stakeholders 4. Build competency, quality, and trust with the MakerDAO ecosystem #### Proposals and Funnel (pipeline) Management CES-001 will evaluate the current off-chain and on-chain (ETH/ETH-derived, D3Ms, PSMs and assets with revenue potential above 1 million per year) ecosystem to propose to onboard or offboard assets into or out of the Maker Ecosystem, based on the current and sought risk for Maker as a whole. CES-001 will have discretion in managing the pipeline in terms of prioritization and resources dedicated to the aforementioned process. **Key Takeaway** >Productization is the way we scale the Dai supply. #### Building a sustainable Core Unit >The mandate of sustainability is to ensure CES-001 is a profitable entity for business continuity. Managing our supply and collateral is the foundational activity that makes ***everything*** about the protocol work. It is important not to lose sight of this and to be grounded in the realities of what is required to create a sustainable, systematic, and repeatable practice. This is a top priority for the Core Unit. One of the key aspects of every Core Unit is that of business continuity. As we know, some Core Units carry a high degree of risk if they do not operate properly. The question is, how do we architect a level of Core Unit stability as volatility continues to hit our industry and markets? The solution is to look at Core Units as a regular business. Something to point out before we move forward. Functions within every business, entity, or organization, regardless of structure, have two general categories: 1) cost centers and 2) revenue generators. CES-001 is specifically focused on supporting **revenue generation** for MakerDAO. This is an important point since future compensation, incentive, profitability, and sustainability models will be explored based upon performance. As a business, the top operational aspects are: - [Product-market fit](https://a16z.com/2017/02/18/12-things-about-product-market-fit/) - Attract and retain the team - Expense management - Profitability **Product-Market Fit** Since CES is a revenue generating function within MakerDAO, it is critical we have product-market fit for our collateral. Citing the article above, the top four reasons a new company fails are: 1. No market need 2. Ran out of cash 3. Not the right team 4. Got outcompeted The first and fourth bullets are addressed with the productization mandate. The second and third are addressed by building a sustainable Core Unit. **Attract and Retain the Team** With a decentralized workforce, the challenge is to attract team members while organizing around a common mission and vision relating to the mandates of the Core Unit. I will also mention aligning with generally accepted [MakerDAO objectives](https://forum.makerdao.com/t/optimizing-for-the-ultimate-objective-please-hold-your-application-is-important-to-us/6051) is also helpful. The cohesion of the team and support of the mission and vision are critical elements in retaining the best people. The challenge CES-001 faces is hiring permanent team members with a background in software architecture and/or software engineering with a comprehensive understanding of blockchain fundamentals, security architecture, consensus algorithms, formal modeling and verification, and smart contract Solidity/Ethereum development experience. We seek to balance the needs of the community, collateral objectives/outcomes, and the Core Unit to attract, hire, and retain top talent as it relates to compensation and incentive structures. While individual incentives are important, incentivizing someone to achieve something, especially as a team, is much more sticky and can lead to better retention. As we establish CES-001, incentive models based upon contribution and performance will be presented to the community. **Expense Management** Runway is a critical aspect with a new business venture since it gives a team time to execute on the vision and strategy. Controlling expenses while building the right product-market fit is a delicate balance. CES-001 will operate on a funding model where the DAO allocates funds for periods of time. For example, an initial funding allocation for the first six months of operation then quarterly, semi-annual, or yearly after. The first tranche of funds will go into business formation, establishing the CES-001 team, and productizing the collateral. See [MIP40](https://forum.makerdao.com/t/mip40c3-sp14-modify-collateral-engineering-services-core-unit-budget/8038/3) for additional detail. Generally speaking, month-to-month employee relationships are more costly and can introduce volatility. The goal is to move away from the transactional nature of a group of contractors to a model where the Core Unit has a shared vision and common goals along with incentive systems that support teamwork. Funding and runway are also incentives to retain the team. Due to the shortage of qualified engineers in DeFi, we will be looking to attract product people and senior developers from outside of crypto and blockchain. Many people from other industries will find it challenging to commit to a month-to-month relationship with CES-001. Therefore the CES-001 runway will introduce more stability and help as a recruiting and retention tool. **Profitability** As the CES-001 team and business model is established, the Core Unit will focus on profitability. Only when a business entity is profitable and has the necessary reserves does it have a chance to survive a prolonged downturn in the market or industry. Given the importance of CES-001 and having the necessary reserves, in the way of profit, leads to business continuity and sustainability. See [MIP40](https://forum.makerdao.com/t/mip40c3-sp14-modify-collateral-engineering-services-core-unit-budget/8038/3) for additional detail. **Key Takeaway** >CES-001 is a business venture that becomes a profitable entity. ## Related Documents [MIP40c3-SP14 Collateral Engineering Services Core Unit Budget Proposal](https://forum.makerdao.com/t/mip40c3-sp14-modify-collateral-engineering-services-core-unit-budget/8038/3) [MIP41c4-SP14: Facilitator Onboarding, Collateral Engineering Services Core Unit](https://forum.makerdao.com/t/mip41c4-sp14-facilitator-onboarding-collateral-engineering-services-core-unit/8039)