# MIP56: Alternative MKR Compensation Guidelines

## Preamble  

```
MIP#:56
Title: Alternative MKR Compensation Guidelines
Author(s): @Aes
Contributors: @LongForWisdom
Tags: incentives, mkr
Type: General
Status: Obsolete
Date Proposed: 2021-07-07
Date Ratified: TBA
Dependencies: n/a
Replaces: n/a  
Ratification Poll URL:
Forum URL: https://forum.makerdao.com/t/mip56-alternative-mkr-compensation-guidelines/9230
```

## References
[Pre-MIP discussion](https://forum.makerdao.com/t/alternative-mkr-compensation-guidelines/9049)

## Sentence Summary
MIP56 describes how MKR can be used to attract, retain and align interests of all stakeholders in the MakerDAO community.


## Paragraph Summary
MIP56 details the six Core Components of the Alternative MKR Compensation Guidelines: Domain Approach, Social Leveling, Multi-phase Guidelines, Vesting, Limit to Inequity, and Separation of Concerns. MKR amounts listed under the Initial Compensation Guidelines are provided primarily for illustrative purposes and may vary greatly based on a prospective Core Unit team’s experience, expected value, and current market conditions. Estimated financial impact is also included under base, bear, and bull market scenarios with adjustable MKR compensation and other key inputs


## Component Summary
**MIP56c1: MKR Compensation Proposal Requirements**
Outlines the requirements a Special Purpose Fund must meet to be valid for inclusion in the Governance Cycle.

**MIP56c2: Domains and Subdomains**
Lists domains and subdomains and relative MKR amounts


## Motivation
There are three main reasons to implement MKR compensation; providing governance rights to dedicated DAO CU contributors (ownership), allocating MKR equitably across the DAO (decentralization), and retaining talented contributors  (commitment). 

Standardizing MKR compensation guidelines will also allow us to scale more efficiently and reduce administrative burden from having to track and account for multiple unique MKR compensation plans.

**Ownership**
To maximize the potential of MakerDAO, we believe everyone working in a CU should have governance rights. We believe that this will be a net benefit to all MKR Holders over the long-term - even if minted MKR exceeds burnt MKR over the next few years.

**Decentralization**
The quality of decentralization was what drew many to this project, and is a continued value proposition for the Maker Protocol that should be maintained and nurtured into the future. This value can be increased by spreading MKR more widely among the current and future decentralized workforce.

**Commitment**
Our belief is that contributors who believe strongly enough in MakerDAO to be dedicating their working hours to the protocol are more likely to retain the majority of any MKR compensation they earn to use to direct the future of MakerDAO, rather than selling it immediately upon vesting. If this bears out, it means that the majority of MKR compensation is effectively removed from the circulating supply.

This belief has held up with many individuals from the projects history. Many of those whom worked in the Maker Foundation have gone on to continue to work for the DAO, in some part due to the MKR they have retained from their time at the Foundation. Smart, driven and committed individuals like these are a critical asset for the DAO and MKR Compensation is a great way to attract and retain these individuals.


## Specification / Proposal Details
**MIP56c1: MKR Compensation Proposal Requirements**
Details six core components for Core Units to follow when proposing a MKR compensation budget.

**Domain Approach** - prospective Core Units can propose MKR Compensation under either the Engineering, Risk, Growth, or Coordination domains.
**Social Leveling** - flatter and more equitable distribution compared to traditional corporate structures
**Multi-phase Guidelines** - living framework that will be updated with industry trends and modified with community input
**Vesting** - one year cliff with quarterly vesting thereafter, for up a maximum of four years
**Limit to Inequity** - no individual will receive more than 10x the lowest individual’s MKR within a Core Unit
**Separation of Concerns** - these guidelines propose that applications for Core Unit operating budgets be pursued separately from proposals for Core Unit MKR Compensation

**MIP56c2 Domains and Subdomains**
Lists current domains and subdomains for a prospective CU to be listed under.


The below amounts (which assume a base of 80 MKR) are relative, presented for illustrative purposes, and are not intended to be fixed amounts. Ultimately it is up to Governance to decide what amounts are appropriate based on the team’s experience, mandate, market value, and whatever other factors they consider important.

**Primary Domains**
Engineering - Technical development and support of the Maker Protocol.
Risk - Management of risk in multiple areas.
Growth - Encouraging growth of the Maker Protocol and the MakerDAO.
Coordination - Maintaining effectiveness of MakerDAO, its core units, and its governance.

| Domain | Suggested Multiplier | Average MKR / person / year | PE Submission Price | 1y High Value | 1y Low Value |
|-|:-:|:-:|:-:|:-:|:-:|
| Engineering - Protocol | 1.5 | 120 | 270,000 | 720,000 | 50,640 |
| Engineering - Oracles | 1.2 | 96 | 216,000 | 576,000 | 40,500 |
| Engineering - Frontend | 0.75 | 60 | 135,000 | 360,000 | 25,300 |
| Engineering - Integrations | 0.9 | 72 | 162,000 | 432,000 | 30,400 |
| Risk - Protocol | 1 | 80 | 180,000 | 480,000 | 33,800 |
| Risk - Real World Finance | 1 | 80 | 180,000 | 480,000 | 33,800 |
| Risk - Legal | 1 | 80 | 180,000 | 480,000 | 33,800 |
| Growth - Business Development | 1 | 80 | 180,000 | 480,000 | 33,800 |
| Growth - Marketing | 0.75 | 60 | 135,000 | 360,000 | 25,300 |
| Growth - Internal | 0.9 | 72 | 162,000 | 432,000 | 30,400 |
| Coordination - Governance | 1 | 80 | 180,000 | 480,000 | 33,800 |
| Coordination - Communications | 0.5 | 40 | 90,000 | 240,000 | 16,900 |