Before diving into frequent discussion topics, it’s worth highlighting the incentives operating on MKR token holders. The first and only reliable economic incentive for MKR token holders is to safeguard and increase the value of the MKR token. While this does mean that the driving motive for MKR token holders is that of profit, this self-interest is directed by the Maker Protocol into positive outcomes for all economic participants.
It’s important to remember however, that this economic incentive is rarely the only incentive acting upon MKR token holders. While some tokens are held institutionally, others are held by individuals and not all individuals are driven primarily by a profit motive. In addition, it is possible for MKR token holders to act maliciously, with outside incentives to see the Maker Protocol fail. This is an unavoidable risk but it is guarded against to the fullest extent possible by the principle of scientific governance and the mechanisms of the Maker Protocol.
Despite the individual variations in personal incentives and the risk of malicious MKR, the unifying incentive is that of protecting and increasing the value of the MKR token. All governance discussions should be viewed through this lense and with this objective in mind.
Maintaining the stability of the Dai stablecoin is one of the primary reasons for MKR governance to exist. As such, it is hardly a surprise to learn that this is one of the most commonly discussed topics among the governance community. The primary product of the Maker Protocol is the stablecoin Dai. If Dai is not kept stable, it is not an effective stablecoin and it will not be used by the market at large.
Market usage of Dai is critical to MKR token holders because more Dai usage equates to more incoming Vault Fees. Vault Fees are the largest source of income for the Maker Protocol, directly causing MKR to be burned so long as the protocol has a net-positive income.
Stability of the Dai stablecoin is controlled through two mechanisms, the Stability Fee, and the Dai Savings Rate. The specific value for each of these parameters is voted on regularly and the outcomes of these votes are often a source of discussion within the governance community.
Without a functioning Maker Protocol, the MKR token has no value. The security of the Maker Protocol, and by extension, security of the value of the MKR token itself, is of paramount importance.
Any potential risks to the correct and secure functioning of the Maker Protocol are issues of urgency for MKR token holders. This is true whether they are technical issues with smart contract implementation, issues with oracles, or even crypto-economic governance attacks from malicious MKR token holders.
It is also important for the governance community to consider the risks to the Maker Protocol that are inherited from the Ethereum blockchain itself. As Ethereum develops and evolves, MKR token holders will need to discuss and manage this inherited risk.
Due to the nature of the Maker Protocol, some risks cannot be eliminated and must instead be managed. Traditional risk analysis paradigms have been adapted and used to aid with measuring and pricing of the credit risk inherent in the Maker Protocol, but their effectiveness is still untested in the area of cryptocurrencies.
The primary operational risk to the Maker Protocol comes from rapid decreases in collateral token price, which can lead to under-collateralization of the Maker Protocol and a collapse in the value of Dai. This risk is balanced by the collection of the Vault Fees from borrowers using the Maker Protocol.
Developments in risk management are ongoing, and as such this is an area of discussion in which MKR token holders should take a keen interest in order to safeguard the value of their tokens.
With the launch of MCD, the Maker Protocol reached its mature form, however, the maturity of the protocol and the maturity of the ‘MakerDAO’ built around it are two different subjects.
Effective governance and risk management of the Maker Protocol is essential to its continued operation. However, as of current technology, governance and risk management duties are not able to be performed directly by smart contracts and must rely on human input.
With this in mind, it’s no surprise that MKR token holders spend much of their time and energy attempting to build out structures and processes that will allow this governance and management to occur in the most efficient, decentralized, and secure way. The structure of MakerDAO is dynamic and has not yet been fully defined. Indeed it may never be fully defined. This structure is an on-going subject of discussion.
While the shared goal of all MKR token holders is to increase the value of the MKR token, the timescale associated with this goal is more nebulous. If MKR token holders wished to maximise the value of the MKR token in the next week then they could raise stability fees to insane levels and use the income to burn MKR. This has yet to happen, and this is largely because MKR token holders anticipate increased profits at some point in the future.
While the timescale for the increase in value of MKR is nebulous, in aggregate MKR token holders appear to be long term thinkers, putting off short-term profits in favour of long-term profits. This means that the growth of the Maker Protocol is a major topic of discussion.
Those short term profits aren’t sacrificed without cause, they are sacrificed to gain value in the future, but what is the best way to ensure future value? What is the best way to ensure the growth of the Maker Protocol? These are questions that often arise in conversations around governance.
While the launch of MCD moved the Maker Protocol forward in many important ways, there are still many areas for improvements, and countless opportunities for pitfalls. The development of the protocol is currently on-going, largely directed by the Maker Foundation. Unlike many other protocols, the responsibility to approve upgrades falls directly to MKR token holders.
This means that it is incredibly important for MKR token holders to adequately discuss and critique any future protocol upgrades: they must ensure that they will result in further value accruing to MKR, rather than putting what value the token already holds at risk.
For this reason, protocol upgrades will always be a central topic to MKR Governance.
While less directly related to the Maker Protocol itself, effective tooling is essential for the efficiency and accuracy of MakerDAO in making management and governance decisions. Because the Maker Protocol (and blockchain in general) are still new, tooling is currently lacking in several areas.
There are already several good examples of tooling created for (and in many cases by members of) MakerDAO. https://daipeg.com/ shows the recent prices at which Dai has traded, aiding in decisions made about stability. https://mkrgov.science/ calculates metrics around voting and governance itself, helping MakerDAO understand areas that work well, and others that work badly.
These examples and many others aside, there are still many areas in which tooling can be improved. The aim is for MKR token holders to have access to as much information as possible when making decisions about the Maker Protocol and the importance of access to accurate information can’t be underestimated. For this reason, MKR Governance often discusses the utility of available tooling, potential improvements, and proposes new tooling.
With the development of MCD, it became possible for the Maker Protocol to run with a net-negative income during normal operations (without liquidations). This is due to the implementation of the DSR, which is the first out-going expense accrued by the Maker Protocol.
This means that MKR token holders now need to be aware of the income and expenditures accrued by the Maker Protocol. As MakerDAO matures, these expenses seem likely to increase as the DAO takes over payment of Oracles and starts funding DAO domain teams to fill the various roles that the Maker Foundation has been funding until now.
The balance of income versus expenditures directly leads to MKR either being burned or minted. However, the desire to burn MKR will need to be weighed against the desire for growth and organisational and management expenses accrued by MakerDAO. This balance is already starting to feature prominently in governance discussions and this will only continue in the future.
The slow expansion of MakerDAO and the eventual shutdown of the Maker Foundation will almost certainly result in MakerDAO directly employing personnel to fulfil roles that cannot be automated using smart contracts. With employees come questions regarding fair and equitable remuneration, employment policies and the associated bureaucracy. No matter the role - whether full domain teams, or individuals or groups currently paid through the Maker Foundation’s grants program - entities contributing time and resources towards MakerDAO should be incentivised to continue their activities.
However, how this remuneration is handled, and how far the remuneration should extend are open questions to be resolved. There are many models to choose from, and there are many ways in which such a subject can backfire. Discussions of this have already started to take place among the governance community, and look set to continue in the future.
Even once this system for remuneration is built and ratified, discussion will no doubt continue as the system is maintained. Employees come and go, new roles must be filled, old roles eliminated and the system may need to evolve to meet future requirements. For these reasons, the subject of payroll will always be a focus for MKR token holders.