 Welcome, everyone. I'm Mbautur. I will talk to you today about the history and future of decentralized operations at MakerDAO. First, a little bit of background. For those that are not familiar, MakerDAO is the foundational DeFi project behind the DICE table coin. In 2014, this started with Runa Christensen, one of the founders, posting an e-money post on Reddit. And then, years after that, we launched several products, such as a single collateral die, which is Maker, but only with Ethereum as collateral. In 2019, there was a launch of multi-clateral die, which also added other collateral types. And then, after 2019, when Maker was still functioning as a classic foundation, we started to decentralize, and that simply means that we dissolved that foundation and we rebuilt everything in the DAO. So, we have had almost two years of experience with that now, and we are wondering what is coming for 2023. Will it be MakerDAO vNEXT? So, very quickly, myself, I have a background in software engineering. I joined MakerDAO in November 2017. At the Maker Foundation, I was the head of engineering. And after that, when I also joined the DAO, I became the co-founders of one of the 20 core units, as we call them, the contributor teams at MakerDAO. My core unit is called MakerDAO SES. This is short for Sustainable Ecosystem Scaling. We remove barriers between decentralized workforce capital and work. Lately, we have been thinking more and more about decentralized operations. And while you may ask, why don't I just use the term governance as any proper DAO member? Well, decentralized operations, I define it very simply. For me, it's the art of getting things done in an open, transparent, and decentralized organization. And by things, we like to have work that produces actual value, not just activity, but actually creating value. So why the term decentralized operations? Well, DAO governance involves mostly discussion and decision making. It is not enough to get things done. Decentralized decision making needs to be supported by effective execution. And decentralized operations includes governance, but it emphasizes the execution part. So we will be talking a lot about voting. We'll be talking a lot about governance stuff. But we say decentralized operations because we realize we need to execute and deliver. So let's return to MakerDAO then. What does operations and governance look like today at MakerDAO? There are a number of well-known concepts that have been implemented. Basically, when the DAO first started for real, so one year and 10 months ago. And of course, the foundation of it all is token voting. So Maker has token voting by MTR holders, and it also works with delegates. So MTR holders, they can improve changes to the Maker protocol. They have to approve these changes because the Maker protocol is permissionless. So without a majority of the vote, you will not be able to make any changes in any way. These changes, they can range from simple parameters such as stability fees, debt ceilings and so on. But also bigger things such as collateral onboarding and off-boarding. Today, about 15% of the total MTR supply is delegated. And this is delegated by 222 addresses. We have to say addresses because we don't know how many people are behind those addresses. There are 24 recognized delegates, 92 shadowed delegates. And these recognized delegates, they do receive compensation proportional to the voting rate, although there is a limit. So for example, the current payout of the delegates is around 120,000 in cost for the protocol per month. If you're interested in voting or delegates, then definitely have a look at our voting portal, voteonmakerdao.com. The second piece of the puzzle today are the Maker improvement proposals, the MIPS. So Maker governance follows a monthly governance cadence. The MIPS, they go through three phases. First, there is the request for comments. This lasts three weeks and one week where the proposal is frozen so that the governance participants can properly form an opinion about what is in there. If the RFC proceeds, then there will be a governance poll. Typically, this is about three weeks and this poll will then be up on the voting portal that you just saw. MTR holders and delegates will then be voting on the individual proposals. Could be that one proposal makes it, another doesn't. All the proposals that make it then are then bundled in the executive vote. So this is one smart contract that bundles all the changes that have been voted in by governance that month. And then, yeah, if MTR holders approve this executive vote, then these changes are applied to the blockchain protocol. The MIPS system is quite advanced. For example, we use templates, which we call sub-proposal MIPS. There are hundreds of proposals that have been voted on since early 2022. If you want to know about all the MIPS that went to Maker Governance, go to MIPSonMakerDio.com. And the last piece of the puzzle are the contributors, the core units. As you may know, Maker is a pretty big DAO, so we have 20 contributor teams, 100 full-time equivalents of contributors around. And these core units, the way that they voted in, it's with three proposal types. So they define or they propose a mandate, they propose a budget, and they propose their facilitator, the person who will be responsible for interfacing between governance and the core unit. So Maker DAO grew quite spectacularly in 2021. And as a result, the total expense has also grown to a total of about 30 million a year. The scalability of the elements that we saw is reached now in 2022 with the bear market that has kicked in. Maker has long been known as one of the few protocols in DeFi that is actually profitable. In the longer run, if you average it out, it's still the case. But if you look at the latest months, that is no longer the case, because the bear market has taken its toll. And you can see that the die expenses remain around 30 million. So what are the challenges that we have faced in Maker governance? And what are some ideas that we're thinking about to improve on the current design? The first challenge that I want to talk about is stakeholder alignment and political deadlock. So in a truly open and decentralized organization, it is very difficult to agree on things, even the smallest things, let alone long-term vision and strategy. Maker has been experiencing that firsthand throughout the last two years. There has been a lot of governance drama at Maker. You've probably read about us, even if you're not following the DAO up close. And at times, core units, the contributors, they really got sucked into this drama and they broke down entirely in certain cases. So there is an incredible noise factor. There is a lot of distraction. And this culminated a while ago when there was a standoff between two factions over a set of MIPS that were about real-world finance. So there was a new core unit that was up for vote to be voted in. This was the landing oversight core unit. And then there was a Maker Hathaway fund that was up for vote. I won't go into the details of what these proposals were about, but they came to an ultimate standoff between the two factions. And as you can see in the screenshot, there was a wreckage to MTR voter turnout. And yeah, this attracted quite a bit of attention. And it caused a lot of distraction in the DAO. At that time, definitely political rhetoric reigned supreme over the rational debate. And one of the reasons is that Maker DAO has very few consensus-building tools other than just the forum to have a discussion and then majority voting, which really isn't a consensus-building tool. You do that when you can't reach a consensus. So what might be an idea to improve on this? Recently there has been a lot of talk about the idea of decentralized voter committees. In fact, this is a main element of the proposal that was put forward called the Endgame Plan by one of the original founders, Rune Christensen. Voter committees, they recognize on the one hand the political nature of decentralized organizations, but at the same time they try to apply some structure. They try to offer some mechanisms to form consensus and to reduce the conflicts that are going on all the time. What it does is a voter committee is quite simple. It is just a group of MTR holders and delegates. And the important thing is they are self-selecting. So you have people in a group that are of the same mind. They think the same thing about what Maker should do next, what the long-term strategy should be, etc. And of course not everyone might agree with that group. So there might be multiple voter committees. The idea is that these voter committees will put forward strategies and that the MTR holders can then vote in a liquid election system on the combination of a strategy and the delegate that they believe in. If you think that this is quite similar to political parties or elections, then you are quite right. I don't think it's a coincidence that we are rediscovering the same mechanisms that have been tried and tested. Another part of the voter committee setup is that we want to restrict the flexibility and the possibilities that these voter committees have because if you leave all possibilities open there is a lot larger space for a disagreement. So another part of the design would be a number of fixed scopes, a number of business activities that Maker should focus on and not go outside of that. Maker is not an ice cream factory, for example. The scopes that have been proposed are so far protocol engineering, real world, collateral, permissionless, collateral and growth. This will probably not surprise. The strength of these is that they define the scope and make it closed. As a last element, these voter committees, MTR holders and delegates, they need to deal with something else that is challenging about Maker, which is a very multidisciplinary organization. You can't be at the same time an expert in engineering and finance and all the other areas of expertise that are needed in Maker. So when these voter committees, they put forward their strategy, they will define for each one of those scopes how they see the future for Maker. But by doing so, they will be supported by a number of expert councils that have been put forward by the workforce, by the core units. And this is one idea to deal with the difficulties within Maker to reach agreement about the long-term vision and strategy. What is the next challenge? The next challenge is broken transparency and a breakdown of trust. Maker is one of the most radically transparent organizations, not just within the crypto space, but I think globally. An important lesson that we've learned is that transparency in itself is not enough. The right information really needs to be served to the right audiences at the right abstraction level. People don't have time, everyone has the time to read through long documents and just distill the information that they may need. So standard size structured data needs to be made available via APIs if it is to be analyzed, summarized and leveraged successfully. Today, this is the case for some types of data in Maker but not all. So the clearest example of this was the core units and their budgets. All information was always available, it was on the forums, but it was very difficult to find. Our user research has shown that stakeholders were unable to find even the simplest relevant information. Which core units exist? What are they doing? What is their budget and what are they spending their money on? A result was a breakdown of trust between MTR holders and core units and even MTR holders and delegates because people had this impression that despite all the so-called transparency there was a lot of obfuscation going on. So what is an idea of how to deal with this? There's the idea of decentralized operations platform. We want to leverage the power of software to serve the right information to the right audiences and automate processes and embed best practices. This isn't exactly a very original idea but it is one that we think will work properly for Maker. In fact, we have already been doing this for the core units and the budgets. This piece of information that was so difficult to understand for stakeholders. We created a limited prototype that focuses specifically on that information. So if you go to expenses.makeadout.network you will see a clear overview of the core units. Right now this platform is being used for core units to submit their budgets and core units can use it to verify that they've properly reported on their budget. This information is available on the forum but if you would want to collect the same information that you have in five minutes here you would probably need five days or longer. So what is the next challenge? Coordination failure between core units. There is a construction error at the heart of Maker. That we were not really aware of when we put forward the first proposals for the DAO. The mechanism goes like this. So core units are voted in individually by MTR holders and delegates. For example, you may have the growth core unit that is voted in separately then from the smart contracts or at the protocol engineering core unit is voted in separately from the oracles core unit for example. So one coordination is needed between these core units and if you want to be successful and if you want to deliver value a lot of coordination is needed. These core units I can only propose work to other core units but they can't enforce a collaboration. So there is a constant negotiation that goes on between the core units how things should be done, what are the priorities and if core units don't agree there is no one stepping in and saying we're doing it this way or that way. In fact the core units then just walk away and say okay you do you I'll do me and we'll each just do our job. The result is because these core units they have a defined mandate they have a long-term work stream but there are no end-to-end deliverables that are defined. So as a result core units don't feel responsible if coordination fails. So you might have a core unit that say builds a front-end and does a tremendous job and then you might have a core unit who needs to promote the front-end but they haven't been aware that it was built or that where it is available and the marketing might fail. Or you might have disagreements between for example technical core units which architectures to use and if they don't agree on that well the end result will simply not work. So a lot of work is done. Notice that sometimes not a lot of value is created because the pieces aren't integrated or working together well. So which idea can help with that? We have been talking a lot about project-based budgeting at MakerDAW and I believe that this will be a much better structure to deal with this. So real value is really only produced when delivering an integrated solution. Delegates and MTR holders they should approve these integrated solutions projects more so than mandates. So they wouldn't be paying for work like for coming to work every day but they would be paying for the actual results. Now the party proposing the solution, so proposing the project, they should be responsible and this is critical for the end-to-end delivery not just the technical part, not just the marketing, not just the front-end, not just the back-end, the integrated solution because that's how you create value. And then responsibility comes with authority over the full project budget. So if core units disagree how to implement a certain piece of work, then the party proposing the project should have the authority to say well we'll go with your solution and not yours. The current system that we have with MIB 40, which defines the budget of core units and the MIB 39 with their mandate, it will probably not go away but we will gradually try and transition it towards a system that is more balanced. As you can see in the diagram, you can think of today's budgets as 100% retention budgets, we're just paying you to do work for the DAO. Instead we would be transitioning to a budget that is split up between still a partially retention budget but separate from that clear project budgets where the cost items are directly related to the integrated and valuable work that is delivered. Then for the last challenge, talent acquisition, onboarding and the compensation question. Maker has been struggling a lot consistently with hiring, onboarding and comp challenges. Maker DAO SES, my core unit, we have run an incubation program for some time but now we are winding that down. Why? Well it's very difficult and time-intensive to coach teams throughout the long and costly onboarding period. I already mentioned when you make a governance proposal, it takes you all in all two months to go from the RFC to the final vote but if you really want to propose a core unit, you need a lot more work than that. At least two months of preparation adds up to total of four. It's difficult for people to just do their own effort without compensation. However for a core unit it's also very difficult to make these calls. So we have been doing that for a while but we felt that the model really wasn't suited for the new situation that we're in. And of course a large element of that is simply the bear market. This has ended the onboarding of new startup teams and it also has created a lot more discussion about where the money should go. It's easy to get a budget approved if there is enough budget to do everything. Comp questions in general are extremely difficult in a global open and decentralized organization with such diverse areas of expertise. Even if you know how much an engineer is worth or how much a web designer is worth, you may not know how much you should be paying for a risk analyst or someone working in banking for example. So we have attempted to ameliorate that by hiring or incubating rather a people core unit but this proves to be extremely difficult and has not succeeded so far. So what is the idea here? The idea is to make a Maker Academy instead of an incubation program. A Maker Academy would be a platform that is open to everyone and that is also permissionless. Meaning that it is out there in the open in the DAO and if you want to create a core unit or you have an idea for a project that you want to see funded, you need to know how do I fulfill the role of being a good core unit facilitator? What are my responsibilities? How do I need to interact with governance? And all these things that can be made available in open platforms, open education platforms with specific courses but also general topics. Especially today when Maker is going through a lot of transition there is a lot of complexity on the technical side, there is a lot of complexity on the real world finance side, there is a lot of complexity on the organizational side and there is a lot of complexity in the new proposals that are up for vote. So an open and available platform for education and training may help people to acquire the skills they need. And then if you combine it with the possibility of grants then you get a funding mechanism that doesn't need to be inside a single core unit but that can be done out in the open. And so Maker can continue to onboard the talent that it needs. So these were my four challenges. So what does the future of decentralized operations that Maker look like? No one knows, there are a lot of ideas that are floating around. We do believe that the solutions we're thinking about, the solutions we're building, they're all open source software and they could be interesting for other projects as well. So yeah, thank you for coming to my talk and let's continue the discussion. Thank you so much, Walter Kammann from MakerDAO. We don't have time for questions, so feel free to reach out to Walter outside and we're having a launch stop, so join again at 1.30. Thank you.