MIP101: Maker Atlas Immutable Alignment Artifact

0: Definitions

Organizational Alignment

Organizational alignment is a traditional business concept and can be described as the process of implementing strategies and philosophies to ensure that each member of an organization, from entry-level positions to executive managers, shares a common goal and vision for the success of an organization.

Ecosystem Intelligence

Ecosystem Intelligence is a way to look at a decentralized ecosystem as a single entity that acts with a greater or lesser amount of intelligence. Ecosystem Intelligence isn’t just determined by the sum of the intelligence of each of its constituent parts, but also of the alignment of them. Counterintuitively, very intelligent, but spiritually misaligned participants in a decentralized ecosystem will actually lower its Ecosystem Intelligence.

Aligned structure

An aligned structure is a network, ecosystem, entity, organization that actively employs alignment engineering.

Universal Alignment

Universal Alignment means an actor holistically understands their connection to their external context, and can extrapolate how their actions impact everything else, and the second order effects that reflect back on the actor, in the context of human morality and values and the natural world. Being universally aligned allows an actor to understand the intention of universally aligned rules, and discover discrepancies between the technical incentives of rules and their universal intention. Lacking universal alignment, or acting in a way that is against universal alignment, is being misaligned. Preventing misalignment is the fundamental objective of Alignment Engineering and Alignment Artifacts.

Universal Alignment Assumption

Universal Alignment is a spectrum, and actors are more or less Universally Aligned.

In theory Universal Alignment is absolute, but in practice it cannot be measured deterministically and thus practically will always be subject to debate and changes over time. Alignment Engineering aims to minimize the degree that actors experience their own, and others, Universal Alignment changing over time.

Alignment Artifact Strength

The Strength of an Alignment Artifact determines the minimum level of universal alignment required for an actor to, upon interaction with the Alignment Artifact, take universally aligned actions.

Alignment Artifact Strength occurs by making sure the Ecosystem Intelligence evolves such that each actor’s self-interested incentives correspond as precisely as possible with requirements of Universal Alignment, so that misalignment can be overcome with minimal Inner Incentive.

Inner Incentive

Inner incentive is the second-order incentive that a universally aligned actor uses to counteract the first-order (or self-interested) incentives that are present pre-Alignment Engineering and/or caused by a misaligned structure.

Alignment Engineering

Alignment Engineering is a philosophy of organizational design introduced through this Alignment Artifact. It aims to anchor internally sustainable Ecosystem Intelligence within Alignment Artifacts that embody recursive trends towards increased Alignment Artifact Strength over time.

Letter of the rule vs spirit of the rule

The distinction between the letter of the rule and the spirit of the rule refers to whether an individual interprets and follows a rule strictly based on its precise wording, or instead also considers its underlying intent or larger purpose. Based on the Universal Alignment Assumption the underlying intent of rules always aims to serve human values and promote public benefit within a given context.

A “letter of the rule” interpretation adheres strictly to the rule’s language, often exploiting ambiguities or loopholes to achieve a specific outcome. This approach allows the rule’s exact wording, even if flawed or misaligned with its goals, to dictate the result, particularly if it benefits the interpreter.

A “spirit of the rule” interpretation seeks to comprehend the rule’s true purpose and how it contributes to universal alignment, while remaining bound by the letter of the rule. When faced with inconsistencies or errors in the rule’s language, this approach appeals to a pre-established method for disabling, disregarding or substituting the rule as needed to prevent outcomes that contradict its intended objective and the greater purpose it serves.

Example:

Imagine a large corporation discovers a loophole in the environmental regulation of its jurisdiction that allows them to generate profits by using a specific type of pollutant that isn’t regulated as a greenhouse gas, but when emitted is as harmful as regulated greenhouse gasses.

By exploiting the “letter of the rule,” the corporation complies with the regulations on paper but continues to harm the environment and public health in practice.

A universally aligned actor in this situation, such as an environmentally conscious competitor, would interpret the regulations based on their “spirit” or underlying purpose – protecting the environment and public health. Recognizing that exploiting the loophole contradicts the regulations’ intent, the universally aligned actor would voluntarily choose not to emit the harmful pollutant, even though doing so might be profitable and technically legal. A universally aligned actor would also actively work with the government and other stakeholders to close the loophole and strengthen the regulations to ensure that they effectively serve their intended purpose, and to protect themselves from misaligned competitors.

Incentivized Alignment

Incentivized Alignment is the outcome of an actor’s myopic and self-interested following of the letter of the rule with the first order incentives of an Aligned Structure, but is not likely to be inherently Universally Aligned and lacks Inner Incentive.

Misalignment

Misalignment is when it is possible to prove that an actor does not possess Universal Alignment or acts in a way that goes against Universal Alignment.

Slippery Slope Misalignment

Slippery Slope Misalignment is the shortest path to misalignment where tiny misaligned acts are justified through various means, which could include ignoring the potential significance and larger impact of acts due to their small scale, the trivial way the misalignment occurs, the good intentions of the actor, or that the ends justifies the means.

Understanding Slippery Slope Misalignment means understanding that any misalignment at all is always very serious and if not dealt with results in increased risk of disequilibrium and alignment failure. In the context of a DAO this could mean a governance attack or financial collapse.

Scope

Scope is a particular focus area of Maker or a SubDAO. There are 5 scopes: Stability focusing on financial stability and the core Dai stablecoin product

Accessibility focusing on frontends and distribution

Protocol focusing on technical development, maintenance and security

Support focusing on ecosystem support, tools and activities

Governance focusing on Alignment Artifact interpretation and balance of powers.

Alignment Artifact

Alignment Artifacts are outputs of alignment engineering, and can be used by universally aligned actors to coordinate to achieve a positive sum outcome.

Scope Bounded Mutable Alignment Artifact (Scope Artifact)

The Scope Artifact is an Alignment Artifact that is designed to align the actions and incentives of participants within a specific scope defined by the Atlas. It provides a framework for decision-making, resource allocation, and governance within the defined scope.

Each scope has its own unique set of challenges and objectives that require a tailored approach to alignment.

The strength of a Scope Alignment Artifact depends on how well it aligns with Universal Alignment principles, as well as how effectively it is communicated and understood by participants within the defined scope. A strong Scope Artifact can help prevent misalignment and ensure that all participants are working towards a common goal for the benefit of the entire organization or ecosystem.

Scope Artifact must not be changed beyond their Scope Boundaries defined by the Atlas, as this constitutes Slippery Slope Misalignment.

Atlas Immutable Alignment Artifact (The Atlas)

The Atlas is the foundational set of rules that underpins the Scope Artifacts. It is immutable from the moment the Maker Ecosystem enters the Endgame State. Its immutability mitigates the potential and actual damage caused by Slippery Slope Misalignment that could result in erosion of its potency in favorably impacting Alignment Engineering over time.

Alignment Conserver

Alignment Conservers are external entities that play a fundamental role in facilitating and protecting the Maker Governance process by ensuring it occurs according to the processes defined in the Atlas. As such, they enable MKR holders to participate in Maker Governance in a manner where it is easy for MKR holders to make the decisions that best benefit their long term interests as MKR holders, even if the MKR holders as a single group have relatively little alignment.

Aligned Voter Committee (AVC)

Voter Committees are groups of MKR holders that publicly coordinate to analyze the best voting behavior based on a particular strategy, and publicly coordinate political positioning with other Voter Committees and voting blocs to reach compromises and middle grounds that minimize bad decisions. The base form of Voter Committees are the Permissionless Voter Committees which is a very simple designation for any kind of organized voting group.

AVCs are standardized Voter Committees made up of Alignment Conservers that hold MKR, and publicly coordinate to analyze the best voting behavior based on a particular strategy, and publicly coordinate political positioning with other Voter Committees and voting blocs to reach compromises and middle grounds that minimize bad decisions. They are subject to specific requirements enforced by the Governance Scope, and receive various benefits, resources and support from the Support Scope.

AVCs are stewards of the spirit of the rules, and prioritize responding proactively to any evidence or allegation that letter of rules are being introduced or used in ways misaligned with the spirit.

Bullet point highlights:

AVCs are groups of MKR holders that:

• Publicly coordinate for best voting behavior

• Analyze strategies

• Develop Unique, Universally Aligned Strategic Perspective

• Coordinate political positioning

• Work with other AVCs and voting blocs

• Aim for compromises and middle grounds

• Minimize bad decisions

• Are subject to Governance Scope requirements

• Receive benefits, resources, and support from the Support Scope

• Ensure day-to-day rules align with the spirit of rules

Aligned Governance Strategy

The Aligned Governance Strategy is a document that describes the instructions from the AVCs for how ADs should vote with their Governance Strategy Link for the AVC. Aligned Governance Strategies must be Universally Aligned, and both AVCs and ADs are responsible and can be penalized in case of their involvement with a misaligned Aligned Governance Strategy.

Scope Advisory Councils

Scope Advisory Councils are groups of Ecosystem Actors approved by Maker Governance to perform Scope Artifact Advisory Projects that aim to produce objective, fact-, data- and expertise driven upgrades to the Scope Artifacts they specialize in. Their Advisory output is used as the starting point for Aligned Scope Proposals.

Aligned Scope Proposal

The Aligned Scope Proposals are documents that describe the desired updated state of each of the Scope Alignment Artifacts from the perspective of the AVC that makes them. The Aligned Scope Proposals may be created based on a starting point developed by Scope Advisory Councils, where the AVCs then take steps to ensure it is Universally Aligned, and apply their unique strategic perspective, to for instance make it more or less dovish or hawkish.

Aligned Delegate (AD)

Aligned Delegates are Anonymous Alignment Conservers that use the Protocol Delegation System to enable regular MKR holders to easily and safely delegate their MKR voting power towards implementing the Aligned Governance Strategy of an AVC, while earning Governance Participation Rewards in the process.

Because they directly control large amounts of incentivized MKR voting power, ADs are the most powerful and potentially dangerous type of Alignment Conserver and the primary way the Alignment Artifacts need to work is by providing tools for ADs and all other actors in the ecosystem to keep ADs in check and acting Universally Aligned.

The most important task of ADs is to use their power to protect the spirit of the Atlas and maintain Universal Alignment of the Maker Ecosystem.

ADs are subject to strict requirements enforced by the Governance Scope, and receive various benefits, resources and support from the Support Scope.

Governance Strategy Link (GSL)

A Governance Strategy Link is a vote delegation module controlled by an AD. Each GSL is paired with a specific AVC, and the AD is required to faithfully follow the spirit of the AVCs Strategic Perspective when voting, while safeguarding against misalignment by the AVC.

Facilitator

Facilitators are anonymous Alignment Conservers that can be engaged by FacilitatorDAOs to directly access governance processes and smart contracts that the FacilitatorDAOs control, to help ensure the FacilitatorDAOs fulfill their responsibility under the Alignment Artifacts.

SubDAO

SubDAOs are semi-independent DAOs that are linked to Maker Governance and whose core design enables a derisked, second layer of the ecosystem to foster fast-moving, risk-adjusted innovation, growth and experimentation. SubDAOs also enable delegation of responsibility and risk within specific, highly complex areas. In general, complexity, responsibility, decision-making authority and risk is off-loaded from Maker Core and pushed to the SubDAOs, except if the Maker Core Alignment Artifact specifies otherwise.

FacilitatorDAO

FacilitatorDAOs are the administrative SubDAOs that are tasked with organizing the internal mechanisms of MakerDAO, AllocatorDAOs and MiniDAOs, based on the processes specified in their Scope Frameworks. They ensure that all internal processes have a collateralized actor responsible, who is providing insurance for the task and processes running as it is specified, and they also ensure that neither MakerDAO or the SubDAOs need to have a notion of an “internal team” or similar that could be a centralization risk.

AllocatorDAO

AllocatorDAOs are the most prominent SubDAOs. They can generate Dai Directly from MakerDAO and allocate it to the most valuable opportunities in the DeFi ecosystem from the Allocator Vaults. They also operate decentralized frontends that act as the entry point to the Maker Ecosystem. They can also incubate and create MiniDAOs.

MiniDAO

MiniDAOs are created by AllocatorDAOs through a simple Governance decision. MiniDAOs enable AllocatorDAOs to innovate many new products and ideas they can then diversify and decentralize by spinning them off as MiniDAOs. MiniDAOs can be very diverse and in some cases very short lived as they try out a new idea that may or may not hit product market fit. Because of their extremely low barrier to entry and ease of creation they can be highly experimental and creative, allowing some of them to hit surprising home runs.

Aligned Voter Committee (AVC) Subcommittee Meeting

The AVC Subcommittee Meetings are events where AVC Members gather, together with other key stakeholders such as ADs, Facilitators, and Advisory Council Members, and other stakeholders like MKR holders and Ecosystem Actors invited by the AVC. The Subcommittee Meetings always cover one of the 5 Scopes in a weekly rotation, covering each Scope twice every quarter. The AVC Subcommittee Meetings are used to discover the pathway for the AVC to align on an Aligned Scope Proposal for each Scope for the quarter.

Communication Channel

Communication Channels are a critical consideration of the Maker Alignment Artifacts as they have a significant impact on incentivized alignment.

Governance Scope (GOV)

The Governance Scope Alignment Artifact codifies rules that regulate the critical balance of power processes defined in the Maker Atlas, and adjudicate on appeals processes related to misalignment in the ecosystem.

Support Scope (SUP)

The Support Scope Alignment Artifact codifies rules that regulate various tasks of ecosystem support, including governance process infrastructure and management, SubDAO ecosystem support, Public Good Purpose System.

Protocol Scope (PRO)

The Protocol Scope Alignment Artifact codifies rules related to the core technical MakerDAO protocol, the NewChain, and the Two-Stage Gravity Bridge.

Stability Scope (STA)

The Stability Scope Bounded Mutable Alignment Artifact codifies the rules related to managing the core stablecoin product, Dai, and supporting factors related to financial stability, such as surplus buffer and decentralized asset reserve.

Accessibility Scope (ACC)

The Accessibility Scope Bounded Mutable Alignment Artifact codifies rules related to accessibility and distribution efforts, and regulates user-facing frontends of MakerDAO Core and SubDAOs.

SubDAO Scope Bounded Mutable Alignment Artifacts

SubDAO Scope Bounded Mutable Alignment Artifacts are internal Scope Alignment Artifacts for SubDAOs. All SubDAOs begin with a standard genesis Scope Artifact that they can modify. They can also create additional Scope Artifacts with new Scopes. Unlike MakerDAO, SubDAO Scope Artifacts have much fewer restrictions on how they can be modified and what strategic opportunities they can cover.

Governance Equilibrium

A Governance Equilibrium is a state in a Decentralized Governance dynamic where the governance process is able to remain decentralized over time with a very high degree of confidence. It requires redundant feedback loops that can counteract the natural incentives that push the governance process towards disequilibrium and centralization.

Endgame State

The final technical and Alignment Engineering state of MakerDAO where all aspects of the Ecosystem that can be made immutable, have been made immutable. It is triggered with the deployment of NewChain. The aim of the Endgame State is to create a highly resilient Governance Equilibrium.

Easy Governance Frontend

The Easy Governance Frontend is a standardized decentralized frontend for participating in MakerDAO governance that all SubDAOs must make available for MKR holders to access. It is the standard way to access the Governance Participation Incentives defined in the Maker Atlas.

Governance Participation Incentives

The Governance Participation Incentives are a set of rewards available to users who participate in Maker Governance and Lockstake their MKR into the Sagittarius Engine. The Governance Participation rewards include choosing either Dai and SubDAO token farming. For the Maker Sagittarius Engine, it also includes the ability to generate Dai.

Lockstaking

Lockstaking is a form of governance participation used by the governance tokens in the Maker Ecosystem. When a user Lockstakes, they immediately begin to earn significant rewards, but must pay an exit fee to access their governance tokens again. This makes it a lot more beneficial to lockstake if the user expects to remain in the system for a long term. Because there’s a penalty for exiting, Lockstaking helps generate additional skin in the game and makes incentivized alignment more long term aligned.

Farming

Farming means using a token to receive a different token. Often, the token received is a volatile token, such as a governance token.

Neural Tokenomics

An advanced tokenomics system that involves feedback loops, value distribution and value recapture with the aim of improving Ecosystem Intelligence.

Explicit Incentives

The first order incentives that are coded into rules in Alignment Artifacts.

Implicit Incentives

The incentives that an actor can estimate through the letter of the rules interpretation of an Alignment Artifact and the probability of enforcement.

Incentive Slack

Incentive Slack means that there’s a gap between the explicit incentives and the implicit incentives in an Aligned Structure. Incentive Slack can occur if coded rules aren’t enforced, or if they are made to be overly restrictive or unworkable, and thus necessarily setting precedence of bypassing the rules. High Incentive Slack creates a perception that rules are likely to be ignored generally, without regards for the spirit of the rules. Incentive Slack means significant risk of widespread misalignment because it cannot occur if the aligned structure contains universally aligned actors enforcing the rules.

Whole weeks

The Alignment Artifacts defines quarterly and yearly cycles that determine fixed points in time by counting whole weeks from the beginning of a quarter. The first whole week of a quarter is defined as the first week that contains all of its days, starting with Monday, inside the quarter. Another definition would be “the week starting with the first Monday of the quarter”.

Strategic Perspective

The Strategic Perspective of an AVC is its internal bias around what modifications and improvements are most needed for Maker. It can also be referred to as the bias. Every AVC must have a Strategic Perspective, because it is impossible to define a truly objective Universally Aligned interpretation of the Atlas. All AVCs and all other actors must collaborate to find something that is as close as possible to true Universal Alignment, each using their Strategic Perspective to pull in the direction they think is most strategically sound.

Major and Minor SubDAOs

FacilitatorDAOs and AllocatorDAOs are Major SubDAOs because they are incubated directly by MakerDAO, while MiniDAOs are Minor SubDAOs because they are incubated by AllocatorDAOs (another SubDAO).

1: The Atlas

Will be populated with the Atlas Preamble in a future edit.

2: The Governance Scope - GOV

The Governance Scope covers rules that regulate the critical balance of power, and adjudicate on appeals processes related to misalignment in the ecosystem.

2.1: Scope Improvement - GOV1

The Governance Scope must have a specialized Advisory Council that is able to propose improvements to the language of the Mutable Alignment Artifact that increase Alignment Artifact Strength and increase efficiency and security of the Maker Ecosystem.

2.1.1: The Governance Scope must have a customized strategy towards its display and interaction through the DAO Toolkit.

2.2: Atlas Immutable Alignment Artifact - GOV2

The information contained in the Atlas is the most important for determining the rules and incentives of the Maker Ecosystem, and supersedes and overrides all other competing rules or decisions. The Atlas is interpreted and used as the source of truth for determining what is Universally Aligned and what is misaligned. However, in practice it is not possible to always interpret all aspects of the Atlas directly, as the Maker Ecosystem may encounter situations that the Atlas didn’t predict. In such scenarios, it is crucial that the Atlas is interpreted in a way that is maximally Universally Aligned and prevents misalignment or slippery slope risks.

GOV2 contains the structure for Maker Governance to scrutinize and disambiguate the elements and other contents of the Atlas Immutable Alignment Artifact and define the effects and consequences in practical situations.

2.2.1: The principles for when Atlas interpretation is necessary, and how it is initiated.

2.2.1.1: This must cover the delineation between when Atlas interpretation can be used to cover shortfalls or gaps in the Atlas that are congruent with the spirit of the Atlas, and when interpretations are reaching too far and are going against the spirit of the Atlas and as a result, are misaligned.

2.2.2: Principles and processes that must be followed when deliberating and deciding on Atlas interpretations.

2.2.3: List of all settled Atlas interpretations with all necessary context.

2.3: Scope Bounded Mutable Alignment Artifacts - GOV3

Scope Mutable Alignment Artifacts (Scope Artifacts) are important tools in enabling Maker Governance to evolve over time while staying aligned with, and protected by, the Atlas. They specify in maximal practical and required detail how Maker Governance operates, within the constraints and boundaries set by the Atlas.

2.3.1: Scope Artifacts are continuously updated on a quarterly basis through the AVC process, based on the Aligned Scope Proposals produced by the AVCs. Their updates must always be aligned with the specifications of the Atlas.

2.3.2: GOV3 must cover a ruleset for ossification of mutable elements, ensuring that significant changes to the Scopes take a long time and provide a lot of time for input.

2.3.3: There are multiple types of Scope elements:

2.3.3.1: Strengthening Elements are regular elements that ossify over time and are meant to eventually never change as they reach a sufficient strength that the Letter of the Rules remain Universally Aligned. Every update to a Strengthening Element must make it stronger, more future proof and long term focused, and less likely to be changed in the future.

2.3.3.2: Active Elements are mutable elements that need to change as a part of the normal operations of Governance. An example are lists of active state or parameters. The rules for changing an Active Element are codified in adjacent Strengthening Elements.

2.3.3.3: Budget Elements are elements that contain budgets and that can trigger valid executive votes for deploying smart contracts that can perform payments controlled by FacilitatorDAOs.

2.3.3.4: Template Elements are elements that specify templates used for other elements. Template Elements don’t have to follow the regular Alignment Artifact formatting standards for its subelements.

2.3.4: The Article must contain a process for ecosystem participants to petition for an appeal where they believe a Scope is misaligned, and the process for the Governance Scope to accept and process appeals, including fees and conditions.

2.3.5: The Article must contain processes for how the outcome of appeals are recorded in Scope Artifacts

2.3.6: The Article must cover specific rules related to Ecosystem Agreement appeals.

2.4: Alignment Conservers - GOV4

Alignment Conservers are external entities that play a fundamental role in facilitating and protecting the Maker Governance process by ensuring it occurs according to the processes defined in the Maker Core Alignment Artifact and with Universal Alignment. They enable MKR holders to have Universally Aligned participation in Maker Governance with minimal Inner Incentive, by ensuring it is very easy for MKR holders to make aligned decisions, and that there are strong protections against misalignment.

2.4.1: Roles of the Alignment Conservers

Alignment Conservers can have 4 critical roles: Aligned Voter Committee Members, Aligned Delegate, Facilitator and Budget Allocator.

2.4.1.1 Alignment Conservers may only be operationally active in a single Alignment Conserver role. They may not simultaneously assume multiple Alignment Conserver roles, or other ecosystem roles such as Ecosystem Actors.

2.4.1.2: When assuming the special roles available to Alignment Conservers, they also become subject to additional requirements specific to their role. These role-specific requirements are described in the relevant Atlas Articles and in the Governance Scope Artifact. Breaking these requirements also means breaking the Alignment Conserver requirements.

2.4.2: Alignment Conservers Eligibility Requirements

Alignment Conservers must always act to preserve the spirit of the Atlas Immutable Alignment Artifact and to fight against, and make public, all forms of corruption, organizational drift and other misalignment threats that they discover from their embedded position near the inner workings of MakerDAO. They must be held to a high standard in terms of acting with Universal Alignment.

2.4.3: Alignment Conservers may never collude or secretly organize to change the Alignment Artifacts or the governance dynamic of MakerDAO in general, except within the clearly delineated processes and frameworks of the Maker Core Alignment Artifact.

2.4.4: If an Alignment Conserver is discovered to act against the requirements outlined in 2.4.2 and its subelements their Alignment Conserver status must immediately be derecognized by the FacilitatorDAOs. GOV4 must specify the processes for derecognition so that they are fair and minimize risk for the Maker Ecosystem.

2.4.4.1: In cases of mild “slippery slope” breaches, a warning may be given and recorded in the Governance Artifact with no further consequence for the first breach.

2.4.4.2: In severe cases that can be described as Governance Attacks, in addition to being derecognized, the Alignment Conserver is also stripped of all reputation recognized in reputation systems of the Scopes.

2.4.5: Alignment Conserver Anonymity and Privacy

Alignment Conservers are encouraged to be anonymous. Some Alignment Conserver roles are required to be anonymous, and their identities must be derecognized from acting as Alignment Conservers in general, in case their privacy is breached.

2.5: Aligned Voter Committees - GOV5

AVCs are standardized Voter Committees made up of Alignment Conservers that hold MKR and participate in the Maker Governance process as actors that are deeply aligned with MKR holders. They are subject to specific requirements, and receive various benefits, resources, and support from the Support Scope. They have significant formal powers, but no direct physical power, making them well-suited to be in control and making key decisions during normal conditions.

AVCs focus on making sure that the day-to-day Letter of the Rules of the scopes are aligned with the spirit of rules and Universal Alignment. The AVCs impact on Maker Governance is to make marginal improvements to the Alignment Artifacts that strengthen them. As AVCs make detailed Universal Alignment interpretations, they must all follow a particular Strategic Perspective that informs their subjective definition of Universal Alignment.

2.5.1: Aligned Voter Committee (AVC) Role in the Governance process

AVCs are the actors in the broader aligned structure that have the most direct alignment with MKR holders, and thus Dai holders and the broader key stakeholders of the ecosystem. This makes AVCs able to act as an important check on the governance process by monitoring the Spiritual Alignment of the Aligned Structure, and identify and act to deal with inner alignment deviations between Universal Alignment and Incentivized Alignment.

2.5.1.1: AVCs act through proposing modifications to the Scope Artifacts.

This gives them the most impactful input on how to correct alignment gap or incentive slack issues in the Alignment Artifacts, by modifying the Scope elements to ensure incentivized alignment maps as closely as possible to Universal Alignment.

2.5.1.1.1: It is important that AVCs always act with proper importance towards safeguarding and optimizing long term alignment artifact strength, as it is their most critical duty. Deprioritizing this duty for the benefit of other aims is severe misalignment.

2.5.1.2: As a general rule, AVCs are restricted from being prescriptive and self-justifying in their approach to Alignment Artifact strengthening. This is to prevent them from micromanaging and using the guise of Alignment Artifact strengthening to cause misalignment. GOV5 must specify principles and processes for FacilitatorDAOs to review and act if AVCs are at risk of micromanagement and misalignment.

2.5.1.2.1: There must always be clear justification for all Alignment Artifact strengthening proposed by AVCs, ensuring that the processes and mechanisms they put in place are Universally Aligned, open, neutral, fair and long term beneficial to MakerDAO.

2.5.1.2.2: The Alignment Artifact strengthening work of AVCs must properly take into account and justify its impact on Future Alignment Risk of the AVC.

2.5.2: Aligned Governance Strategies and Aligned Scope Proposals

The core task of AVCs is the quarterly creation of an up to date ratified Aligned Aligned Governance Strategy and up to date ratified Aligned Scope Proposals for each of the 5 Scopes.

2.5.2.1: The Aligned Governance Strategy is a document that instructs ADs in how to vote with the votes of their Governance Strategy Link to the specific AVC.

2.5.2.1.1: The first paragraph of the Aligned Governance Strategy is the AVC Profile, which can be up to 280 characters long. The AVC Profile is displayed in the EGF and other important Maker Governance interfaces when describing the AVC. AVCs must have easy to understand Profiles, and their governance actions must be congruent with their AVC Profile. The AVC Profile must, as its first sentence, describe where the AVC aims to be on the Hawk, Dove, Balanced spectrum.

2.5.2.1.1.1: Hawkish AVCs tend to prefer higher spreads and lower budgets, focusing more on short term income and asset accumulation. Dovish AVCs tend to prefer lower spreads and higher budgets, focusing more on long term growth and innovation. Balanced AVCs try to find a middle ground between the two. The Hawk, Dove, Balanced spectrum is a continuous spectrum, so many different hawkish or dovish AVCs can exist that are more or less Balanced.

2.5.2.2: The Aligned Scope Proposals are documents that describe the desired updated state of each of the Scope Artifacts. The Aligned Scope Proposals are often created based on a starting point developed by Scope Advisory Councils, where the AVCs then apply and communicate their unique strategic perspective.

2.5.2.3: For Aligned Governance Strategy and Aligned Scope Proposals to be valid, they must be posted on the AVCs communication channels, and have a hash of its contents ratified through a successful AVC Decision.

2.5.2.4: AVCs must always be able to articulate their Strategic Perspective in their AVC Profile in a simple enough way that EGF users can reasonably understand what delegating their votes to the strategy of the AVC means. This is in terms of the Aligned Governance Strategy and the Aligned Scope Proposals that the AVC will create.

2.5.3: Aligned Voter Committee Recognition Process

New AVCs can become recognized as Active AVCs by the Governance Scope if they fulfill the AVC eligibility requirements for participation and internal governance for at least one full quarterly governance cycle. If at any time after becoming recognized as an Active AVC, the AVC no longer completely fulfills all of the eligibility requirements, it immediately loses its recognition as an active AVC and all associated benefits.

2.5.3.1: Before creating an AVC, an Alignment Conserver must verify as an unaffiliated Alignment Voter Committee Member through a process specified in GOV5.

2.5.4: To remain Active, an AVC must follow a standardized internal governance process for determining membership, creation of Aligned Governance Strategy, Aligned Scope Proposals and other decisions.

2.5.4.1: AVC Members vote on AVC decisions based on their relative ownership of verified MKR. A vote takes one week and resolves with acceptance or rejection based on the amount of verified MKR that votes for each option, unless a simple majority is reached in which case the decision is accepted or rejected instantly.

2.5.4.2: New AVC Members are included based on an application that is either accepted or rejected through an AVC decision. The effective verified MKR of members is specified in their application, and can only be increased or decreased through another application that must be accepted by another AVC decision. The effective verified MKR of the creator of an AVC is determined when they create the AVC. If an AVC Member’s blockchain account has MKR in excess of their effective verified MKR, they don’t gain additional voting power in the AVCs internal governance process, but it does count towards AVC rewards qualification. If an AVC member’s blockchain account has less MKR than their verified amount, they are automatically removed from the AVC.

2.5.4.3: Existing AVC Members can be removed through an AVC decision.

2.5.4.4: A minority quorum of AVC Members based on verified MKR can trigger an AVC split. GOV5 must specify the minority quorum to ensure it serves its role well. All AVC Members then vote to support one of two new AVCs, with the naming rights and infrastructure inherited by the side with more MKR in support. The AVC Members of each of the two new AVCs is determined based on who voted to support each side. The Aligned Governance Strategy Links from ADs are divided proportionally into two new Protocol Delegation Contract, each containing an amount of delegated MKR that is proportional to the MKR in support for each side of the AVC split.

2.5.4.5: AVC Subcommittee Meetings must be scheduled through an AVC Decision.

2.5.5: An AVC must, through an AVC decision, create a legitimate Aligned Scope Proposal for each of the 5 Scopes, each quarterly governance cycle. AVCs must also convene 2 scheduled AVC Subcommittee Meetings to discuss the creation of the Aligned Scope Proposals for each of the 5 Scopes, each quarterly cycle.

2.5.5.1: The AVC Subcommittee Meetings must be held during the first ten whole weeks of each quarter, in the following order:

• Week 1: Governance Scope

• Week 2: Support Scope

• Week 3: Protocol Scope

• Week 4: Stability Scope

• Week 5: Accessibility Scope

• Week 6: Governance Scope

• Week 7: Support Scope

• Week 8: Protocol Scope

• Week 9: Stability Scope

• Week 10: Accessibility Scope

2.5.6: AVCs must represent the interest of MKR holders, and cannot represent or be closely affiliated with an external entity. AVCs must always operate with awareness of members’ conflict of interest and take all reasonable steps to make sure that their alignment is preserved. GOV5 must specify ways to deal with this risk.

2.5.7: AVCs must vote according to their strategic perspective. Clearly voting against the stated strategic perspective is misalignment and GOV5 must specify ways to detect and deal with this possibility.

2.5.7.1: *A key objective of AVCs is to act as reliable, aligned sources of opinions about which decisions are in MKR holders’ interest, given a particular strategic perspective of Maker Governance. This allows them to enfranchise MKR voters that are participating through the EGF to earn governance participation incentives.

2.5.8: AVCs must limit their participation in Maker Governance to the creation of Aligned Governance Strategy and Aligned Scope Proposals that function resiliently based on open, objective processes and stay at a high enough level to ensure micromanagement isn’t possible. AVCs must not attempt to create biased or unfair conditions for specific Ecosystem Actors, or attempt to put in place unjustified, granular decisions directly, or indirectly through biased processes. GOV5 must specify processes in which AVCs are deactivated and their members derecognized in case there is clear misalignment risk.

2.5.8.1: *Any attempt by AVCs to micromanage governance significantly increases the risk of misalignment as there could easily be a hidden conflict of interest behind the attempt at micromanagement.

2.5.9: Aligned Voter Committee Support and Infrastructure

A AVC receives support and infrastructure from the Support Scope, specified in SUP2

2.5.10: AVC Member participation rewards

AVC Members that participate in an AVC can be eligible for AVC Member participation reward that recognizes the time they are spending to support Maker Governance.

2.5.10.1: The AVC Member participation compensation is paid out based on full participation within each scope every quarter. To qualify for the participation reward for a particular Scope the AVC Member must:

2.5.10.1.1: Have attended the two AVC Subcommittee Meetings and be co-author on the AVC Aligned Scope Proposals.

2.5.10.1.2: Be a co- author on the Aligned Governance Strategy.

2.5.10.1.3: GOV5 must specify minimum standards of work and contribution based on best practice to prevent spam or inferior outlier AVCs from qualifying for rewards.

2.5.10.2: The yearly total AVC Member participation rewards is 1 million NewGovToken. This amount is broken into tranches of 50000 NewGovToken for each Scope per quarterly governance cycle, and shared across the reward slots for that Scope.

2.5.10.3: The number of rewards slots for each tranche is equivalent to the total amount of PDs and RDs.

2.5.10.4: The reward slots of a tranche are awarded to the AVC Members that have fulfilled the participation requirements for the tranche and have the highest verified MKR balances.

2.5.11: Display of AVCs in EGFs

AVCs are shown on a ranked list on the landing page of the EGFs, with name and AVC Profile displayed alongside their logo. The ranked list is determined based on the highest total voter weight of the AVCs.

2.5.11.1: Total voter weight is calculated based on total undelegated or self-delegated, verified MKR holdings of members of the AVC plus total amount of MKR delegated to GSLs to the AVC

2.6: Aligned Delegates (ADs) - GOV6

ADs are Alignment Conservers that have registered based on the processes specified in the Governance Scope Artifact. ADs operate Governance Strategy Links (GSLs), and receive various benefits while being subject to specific requirements in addition to the general Alignment Conserver requirements. ADs have significant physical power over the Maker Protocol as they control votes obtained from the Governance Participation Rewards. As a result their focus is to protect the Maker Ecosystem against abuse of this power by themselves or others, and to use the power to protect the Maker Ecosystem in case other parts of the Governance Process take misaligned actions. To avoid politicization of their power, ADs must not become involved in day to day marginal governance decisions or have their own strategic perspectives.

2.6.1: Protocol Delegation Modules (PDMs)

Protocol Delegation Modules are NewChain Modules that can be created and controlled by external smart contracts or accounts, and can receive delegated voting power from MKR holders and Sagittarius Engine users.

2.6.1.1: PDMs function with a season system begins on the monday of the 11th full week of the first quarter of the year, and ends on the friday of the 12th full week of the first quarter of the following year. The period where seasons overlap, from the monday of the 11th full week of the first quarter to the friday of the 12th full week of the first quarter in the same year, is called the Election Season.

2.6.1.2: PDMs are Seasonally Active from the moment they are created, until the Season they were created in ends. If they are created during the Election Season, then they count as being created in the later overlapping Season. PDMs expire and lose their voting power at the end of the second season of their existence, with a total lifetime of up to approximately 2 years and 2 weeks.

2.6.1.3: Delegating to Seasonally Active PDMs will qualify Sagittarius Engine users for Governance Participation Rewards throughout the entire Season, until the monday of the 12th full week of the first quarter of the year for PDMs of the earlier overlapping season.

2.6.2: Aligned Governance Strategy Links (GSLs)

A PDM can be upgraded to an AD PDM through a user action. AD PDMs are split up into multiple delegation submodules, called GSLs, that each can receive delegated votes separately. Each GSL specifies one AVC, and the AD is required to vote according to the Aligned Governance Strategy of the AVC, unless doing so would result in misaligned actions.

2.6.2.1: GSLs are Seasonally Active in the same way as normal PDMs, and this determines whether the ADs qualify for income.

2.6.2.2: An AD PDM also has a Neutral GSL, which is a special GSL that is not linked to any AVC, but that the AD must instead use to vote for a balanced strategy that achieves the mean of the positions of all AVCs and is Universally Aligned.

2.6.3: Aligned Delegate (AD) Income and Participation Requirements

ADs are eligible to receive significant income from the Maker Protocol if they are among the top ADs based on total votes delegated to their Seasonally Active GSLs, and they fulfill specific participation requirements. There are two income levels for ADs: Prime Delegates (PDs) that receive the highest level of income and have a degree of income security, and Reserve Aligned Delegates (RDs) that receive a lower level of income.

2.6.3.1: The Governance Scope Artifact specifies the number of PD slots, and the number of RD slots. There is always an equivalent amount of both. The number of slots must be increased over time if the income level of PDs and RDs increase above their baseline. The number of slots must be decreased over time if the income level of PDs and RDs decreases below their baseline. The baseline should generally increase over time if the number of PD and RD slots are increasing, ensuring that the internal operations of PDs and RDs also grows larger over time as the number of PDs and RDs increase.

2.6.3.1.1: The process for modifying the number of PD and RD slots must generally aim to have changes in the number of slots happen at the end of the Election Season, but in extraordinary circumstances, which must be specified by the Governance Scope, they can be done with 1 month warning.

2.6.3.2: The top qualified ADs by total amount of MKR delegated to their Seasonally Active GSLs at the end of the Election Season are the PDs, with the amount of PDs corresponding to the number of PD slots. The next top qualified ADs by total amount of MKR delegated to their Seasonally Active GSLs are the RDs, with the amount of RDs corresponding to the number of RD slots.

2.6.3.3: The Election Season is a period of time that begins on the Monday of the 11th full week of the first quarter of the year, and ends on the Friday of the 12th full week of the first quarter of the year. At the beginning of the election season, all ADs can deploy new GSLs that will be Seasonally Active for the coming season, and that Sagittarius Engine users can redelegate to in order to keep their Governance Participation Reward before it expires on the Monday of the 12th full week of the first quarter of the year.

2.6.3.3.1: At the end of the election season, the PD slots are determined directly based on the top ranking of the total amount of MKR delegated to the later Seasonally Active GSLs of the ADs.

2.6.3.3.2: Outside of the Election Season, a PD can only lose their slot if an RD achieves twice as much total delegated MKR to their Seasonally Active GSLs compared to the incumbent PD.

2.6.3.3.3: The available RD slots change in real time based on the top ranking of ADs that aren’t PDs by total amount of MKR delegated to their Seasonally Active GSLs.

2.6.3.4: AD Buffer: The AD Buffer is an account of MKR that builds up when an AD achieves an income rank of either PD or RD. The initial income that the AD earns accumulates in the AD buffer, until it contains 1 month’s worth of income. At that point, the AD income starts paying out the to account that controls the AD-PDM.

2.6.3.4.1: If an AD loses all its income, or loses a part of its income by moving from PD to RD, the AD Buffer starts paying out the excess funds it contains so that it reaches 1 month’s equivalent income after 1 month. In case the AD has no income, this means that all of the contents of the AD Buffer are paid out over the course of 1 month.

2.6.3.4.2: The AD Buffer is used as collateral for a whistleblower bounty in case the AD acts misaligned or has their privacy compromised.

2.6.3.5: Each of the PD and RD slots earns up to an equal share of the total compensation available to their level each month, paid out continuously in real time. The income that gets paid out can be reduced if the ADs don’t fully comply with participation requirements

2.6.3.6: Actual AD income payouts are modified based on the requirement to have a minimum amount of participation in AVC Subcommittee Meetings. PDs must participate in at least 85% of the AVC Subcommittee Meetings hosted by AVCs whose strategies they follow each quarter to qualify for their full share of AD income. RDs must participate in at least 50% of the AVC Subcommittee Meetings hosted by AVCs whose strategies they follow each quarter to qualify for their full share of AD income. If ADs participate in less than the minimum amount of AVC Subcommittee Meetings, accounted for on a monthly basis, they receive a proportionally reduced amount of the total AD income they are eligible for the following month. If ADs participate in all the AVC Subcommittee Meetings of a month, they always receive the full amount of their AD income. Participation in AVC Subcommittee Meetings that the ADs have a broken GSL with does not count towards participation for the purposes of calculating AD income.

Participation in a Subcommittee involves a reasonable and meaningful amount of contribution with useful research and information that must be specified in the Governance Scope.

2.6.3.7: Actual AD income payouts are also modified by voting activity metrics for the last 12 months, which includes overall voting activity in all of the votes that the ADs are able to vote on. If an AD is active in less than 95% of all votes over the last 6 months, they receive a reduced amount of AD income. The reduction in income is proportionally linear until it reaches 0 AD income at 75% voting activity. If an AD falls below 75% voting activity over the last 6 months, it loses qualification for AD income and any AD income rank they may be eligible for is passed on to the next highest AD by total amount of MKR delegated to their Seasonally Active GSLs. A PD can lose their PD status this way, and even if their activity metric recovers they do not automatically become a PD again, except through the regular process of becoming a PD outside of the Election Season.

2.6.3.8: Actual AD income payouts are modified by AD communication metrics for the last 12 months, which requires the ADs to write an explanation for each vote that ties it to the Aligned Governance Strategy and their independent strategy, to help the MKR holders that delegated to them to understand the logic they use when executing the chosen Governance Strategies. If the AD actively communicates on less than 95% of all votes over the last 6 months, they receive a reduced amount of AD income. The reduction in income is proportionally linear until it reaches 0 AD income at 75% communication activity over the last 6 months. If an AD falls below 75% communication activity over the last 6 months, it loses qualification for AD income and any AD income rank they may be eligible for is passed on to the next highest AD by total amount of MKR delegated to their Seasonally Active GSLs. A PD can lose their PD status this way, and even if their activity metric recovers they do not automatically become a PD again, except through the regular process of becoming a PD outside of the Election Season.

2.6.3.9: The PD slots share a total of 3 million NewGovToken per year amongst them.

2.6.3.10: The RD slots share a total of 1 million NewGovToken per year amongst them.

2.6.4: Default Display of Aligned Delegates (ADs) in the Easy Governance Frontend (EGF)

ADs are displayed by default in randomized order in the EGFs, if they have at least two active GSLs to two active AVCs.

2.6.5: Aligned Delegate Alignment Risk Mitigation

ADs are generally not allowed to engage directly with Ecosystem Actors and other counterparties to the DAO, or in other ways engage in operational activities. They must remain focused on their job of using their physical voting power over the protocol to safeguard its alignment. Additionally, they must publicly provide governance information and research material to AVCs, and can interact with ecosystem participants for this purpose. They are also not allowed to provide “kickbacks” from their compensation to MKR holders that delegate to them. Any violation of these requirements constitutes breaching the Alignment Conserver requirements.

2.6.5.1: If a FacilitatorDAO finds that an AD has performed a misaligned act or breached their requirements, they can derecognize the AD and confiscate their AD Buffer. The AD Buffer can be used as a whistleblower bounty in case an ecosystem actor provided useful data, information or evidence that led to the derecognition of the AD. GOV6 must specify sufficient safety mechanisms around the payment of the whistleblower bounty.

2.6.5.1.1: All FacilitatorDAOs must immediately review the evidence and either support the decision to derecognize the AD, or propose a vote to overturn the derecognition and penalize the FacilitatorDAO.

2.6.5.1.2: If FacilitatorDAOs fail to take action against misaligned ADs, they must be severely penalized.

2.6.6: Aligned Delegate Privacy

Aligned Delegates must keep their identity and whereabouts hidden to prevent physical risk to the Maker Ecosystem. If there’s clear evidence or significant suspicion that the identity of an AD has been revealed, a FacilitatorDAO must immediately derecognize the AD. Half of the AD Buffer can be confiscated and used as a whistleblower bounty in case an ecosystem actor provided useful information for determining that the privacy of an AD was compromised. GOV6 must specify sufficient safety mechanisms around the payment of the whistleblower bounty.

2.6.6.1: FacilitatorDAOs must err on the side of caution and act in case there is any kind of real possibility that the privacy of an AD is compromised.

2.6.6.1.1: All FacilitatorDAOs must immediately either support the action or propose overturning it and penalizing the FacilitatorDAO. Failing to act is itself misalignment and results in penalties for all the FacilitatorDAOs that failed to act.

2.6.7: Aligned Delegate Charity

While ADs are not allowed to be involved in operational activities, or allocate their AD income towards operational activities that goes beyond their task of providing research and information to AVCs, the one exception is using a portion of their AD income for donations to charity. It is encouraged that ADs compete and campaign on their ability to achieve some level of charitable impact with the resources available to them, in order to demonstrate alignment with the public good purpose of the DAO.

2.7: FacilitatorDAOs and Facilitators

FacilitatorDAOs are a type of SubDAO that can be given responsibility over MakerDAO Scopes and SubDAO Scopes in return for tokenomics rewards.

2.7.1: When a FacilitatorDAO has responsibility for an Alignment Artifact, they are fully required to follow all instructions and rules of the Alignment Artifact elements. If they fail to follow the instructions and rules correctly, they can be penalized by the Governance Scope. The penalties and process for penalizing must be specified in the Article 6 of the Governance Scope.

2.7.2: Assigning Responsibility of MakerDAO Alignment Artifacts to FacilitatorDAOs

The Governance Scope must specify a process used by Maker Governance to assign responsibility of a particular MakerDAO Alignment Artifact to a particular FacilitatorDAO. A process must be in place to enable FacilitatorDAOs to request responsibility of a MakerDAO Alignment Artifact, and in ordinary times Maker Governance should only assign responsibility of a Scope based on a request by the FacilitatorDAO.

2.7.2.1: All FacilitatorDAOs always have responsibility for the Governance Scope.

2.7.2.2; There must always be a FacilitatorDAO assigned to all Scopes, and if necessary due to extraordinary circumstances, Maker Governance must directly assign responsibility of a Scope to a FacilitatorDAO. GOV7 must ensure a process for detecting and acting on such situations to minimize risk.

2.7.2.3: If a FacilitatorDAO has responsibility for the Support Scope or the Stability Scope, they are considered Core Facilitators and cannot be assigned responsibility to SubDAO scopes.

2.7.3: Assigning Responsibility of SubDAO Scopes to FacilitatorDAOs

GOV7 must specify the process with which AllocatorDAOs and MiniDAOs can assign Responsibility of their Scopes to FacilitatorDAOs. Being assigned responsibility of a SubDAO Scope requires the FacilitatorDAO to agree to take on the full responsibility of the Scope.

2.7.3.1: Once a FacilitatorDAO has agreed to take responsibility, they cannot exit their responsibility with less than 3 months notice, unless justified by an event of misalignment or clear breach of good faith occurs.

2.7.3.2: If a FacilitatorDAO does not have responsibility for the Support Scope or the Stability Scope, they are considered SubDAO Facilitators and can be assigned responsibility to SubDAO Scopes.

2.7.4: FacilitatorDAO Responsibility Rewards

FacilitatorDAOs benefit from a special tokenomics system called FacilitatorDAO Responsibility Rewards, which rewards them based on the amount of Responsibility they have over Scopes.

A total of 15 million NewGovToken are distributed to all FacilitatorDAOs per year.

2.7.4.1: MakerDAO Scope FacilitatorDAO Responsibility Rewards

6 million goes to responsibility for MakerDAO Scopes

2.7.4.1.1: 2 million is distributed proportionally to Scope Weight. Scope Weight is as follows:

Scope	Scope Weight
Support Scope	3
Protocol Scope	1
Stability Scope	3
Accessibility Scope	1

When multiple FacilitatorDAOs are responsible for the same Scope their Scope Weight is divided between them.

2.7.4.1.2: 2 million NewGovToken is distributed according to Budget Weight.

Budget Weight is calculated by determining the relative amount of budget each FacilitatorDAO controls, including both fixed budgets and Allocated Budgets. When multiple FacilitatorDAOs are responsible for the same Scope, the fixed budgets of the Scope are divided between them.

• 2.7.4.1.2.1: Adjusted Budget Weight In some cases Budgets will have specified an adjusted weight inside the Budget Element. This is in case the budget is not meant to be spent on a regular basis and as a result the actual number is higher than what would be used on average. The Adjusted weight must still account for the work involved in preparing for the contingency situation where the budget would need to be spent.

2.7.4.1.3: Minimum Threshold

2 million NewGovToken is distributed proportionally to all Core FacilitatorDAOs.

2.7.4.2: SubDAO Scope FacilitatorDAO Responsibility Rewards

9 million NewGovToken is provided as reward for Responsibility of SubDAO Scopes, divided accordingly:

2.7.4.2.1: 4 million NewGovenToken distributed according to AllocatorDAO Weight, which is determined by the proportional amount of Maker Elixir that the AllocatorDAO holds, compared to the total amount of Maker Elixir held by all AllocatorDAOs.

2.7.4.2.2: 3 million NewGovToken distributed according to MiniDAO Weight, which is determined by the proportional amount of Allocator Elixir the MiniDAO holds times the proportional amount of Maker Elixir its parent AllocatorDAO holds.

2.7.4.2.3: 2 million NewGovenToken proportionally for any FacilitatorDAO that is actively Responsible for at least 1 AllocatorDAO Scope, or at least a fraction of total MiniDAO Weight equivalent to one divided by the total amount of SubDAO FacilitatorDAOs.

2.7.5: Facilitators

Facilitators are anonymous Alignment Conservers that can be engaged by FacilitatorDAOs to directly access governance processes and smart contracts that the FacilitatorDAOs control, to help ensure the FacilitatorDAO fulfills their responsibility under the Alignment Artifacts.

2.7.5.0: Facilitators allow a FacilitatorDAO to scale up its ability to be responsible for multiple Alignment Artifacts, but also create the risk of misaligned Facilitators attacking the system or stealing funds.

2.7.5.1: The FacilitatorDAOs are responsible for any wrongdoing by their chosen Facilitators, and will be penalized for any theft or abuse of budgets or protocol access. The FacilitatorDAOs have to manage this risk through carefully set, limited permissions and fallback mechanisms that ensure the FacilitatorDAOs cannot take a significant loss in the worst case scenario.

2.7.5.2: Facilitators are encouraged to be anonymous, and this will eventually be required.

2.7.6: Decision making powers of FacilitatorDAOs

FacilitatorDAOs can make interpretations and take discretionary decisions based on the language of the Alignment Artifacts. 2.2 and 2.3 of The Atlas and GOV2 and GOV3 place significant checks and restrictions on how FacilitatorDAOs can do this. FacilitatorDAOs are not meant to be experts on how to run ordinary business operations, but instead must follow the instructions and make judgment calls based on the language contained in the Scopes.

2.7.6.1: All FacilitatorDAO decisions related to ordinary operations must be clearly explained and justified based on public information. FacilitatorDAOs must not claim to make decisions based on some internal knowledge or undisclosed data.

2.7.6.1.0: Generally, FacilitatorDAOs are supposed to minimally “think for themselves” and instead just faithfully follow the instructions of the Scopes and focus on the critical role of monitoring that the spirit of the Alignment Artifacts isn’t violated.

2.7.6.2: FacilitatorDAOs are allowed to take unilateral action based on the Alignment Artifacts in determining whether an Alignment Conserver or other governance participants are acting misaligned and must be derecognized. If there is evidence that an Alignment Conserver needs to be derecognized, all FacilitatorDAOs are responsible for taking action.

2.7.6.2.1: FacilitatorDAOs that fail to take action against misalignment must be penalized, including failure to promptly derecognize ACs that have acted misaligned.

2.7.6.2.2: FacilitatorDAOs control one or more EGF instances and must immediately remove derecognized ACs from their instances of the EGF.

• 2.7.6.2.2.0: To prevent the damage possible for malicious or negligent abuse of the derecognition powers, each FacilitatorDAO controls only specific EGF instances. This means a single rogue FacilitatorDAO cannot instantly cut off all EGF access to an AD.

2.7.6.2.3: If FacilitatorDAOs act misaligned and abuse the ability to derecognize ACs or abuse other leverage available to them under the guise of penalizing misaligned actions, they must themselves be severely penalized.

• 2.7.6.2.3.1: All other FacilitatorDAOs must also be penalized if they don’t immediately propose penalties when a FacilitatorDAO takes misaligned actions. If all FacilitatorDAOs are simultaneously misaligned, the situation can be resolved through the whistleblower process.

2.7.6.2.4: All the restrictions that apply to FacilitatorDAOs also apply to Facilitators. Facilitators cannot directly engage with counterparties. The only exception to this rule is in situations where Facilitators are coordinating to set up governance processes, if the interactions are clearly documented.

2.7.7.0: It is critically important that all interactions by the Facilitators are documented, so there is clear documentation that details what work is required for the governance processes to function. This reduces the risk that things will fail if a particular Facilitator becomes inactive for any reason.

2.8: Professional Ecosystem Actors - GOV8

Professional Ecosystem Actors are external actors that are paid through the Scopes to do important work that benefit the MakerDAO ecosystem. Two types of Professional Ecosystem Actors exist: Advisory Council Members and Active Ecosystem Actors. Advisory Council Members is the most direct check on Active Ecosystem Actors, and as a result there is significant conflict of interest risk that must be avoided by ensuring Ecosystem Actors always fall into only one category or the other.

2.8.1: Advisory Council Member Ecosystem Actors

Advisory Council Member Ecosystem Actors perform research and publish advice for the DAO to use in improving the Scopes Artifacts and their contained processes. Often, this is used as a check for choosing the best Active Ecosystem Actors available to supply a need defined in a Scope Artifact. The work of Advisory Council Members is implemented exclusively through modifications to the Scope Artifacts, and can also be used to receive advice regarding the specific interpretation of Scope Artifacts (which, if followed, must then be included in the Scope Artifact).

The Scope Artifact improvements researched and suggested by the Advisory Council Members are presented to the AVCs who then determine to what extent they want to follow their suggestions for designing their Aligned Scope Proposals.

2.8.2: Active Ecosystem Actors

Active Ecosystem Actors work according to the specifications of Scope Alignment Artifacts to receive funding for performing specific projects such as developing new features, performing data collection or analysis, performing marketing, growth, outreach or educational activities, legal work, government outreach, and other operational activities that benefit the Maker Ecosystem. Active Ecosystem Actors are the only type of actor that interacts with the Scopes that is allowed to do “real work” that isn’t strictly defined in, and bounded by, the Alignment Artifacts.

2.9: Interaction of Aligned Voter Committees (AVCs), Aligned Delegates (ADs), FacilitatorDAOs and Advisory Council - GOV9

The interactions between AVCs, ADs and FacilitatorDAOs define how Maker Governance operates from the highest level of informing long term AVC strategic perspectives, to the lowest level of reactively modifying risk parameters or funding individual projects.

2.9.1: AVC and AD Aligned Governance Strategy Links (GSLs)

A GSL is a submodule of a PDM controlled by an AD. When delegating to the AD using the EGF, MKR holders use one of the ADs Seasonally Active GSLs.

2.9.1.1: ADs must create GSLs to at least 2 AVCs when applying for AD recognition.

2.9.1.2: AVCs and ADs can choose to Break a GSL at any time, if they deem that the other party has acted misaligned. When a GSL is broken, the votes delegated to the broken GSL count as having been delegated to the ADs Neutral GSL.

2.9.1.3: An AD creating a GSL is permissionless, and ADs can create new GSLs at will to AVCs they do not have a broken link with.

2.9.1.4: If an AD has less than 2 GSLs, either because an AVC they had a GSL with became inactive, or they had a link broken, then the AD becomes unranked, and will not be shown at the top of the EGF.

2.9.1.5: It is permitted for AVCs to set participation requirements for PDs and RDs that have a GSL to them, and break the GSL if the participation requirements aren’t being met.

2.9.1.5.0: The threat of a link break may in some situations be an important tool for AVCs being able to keep ADs productive and acting aligned.

2.9.2: Aligned Delegate support for Aligned Voter Committees

Aligned Delegates are expected to provide crucial support to AVCs in the domains where they are the most aligned actors.

2.9.2.1: ADs can help with the design and improvement of the Scope Improvement Articles, which are the first Articles of each of the Scope Alignment Artifacts.

2.9.2.1.1: ADs can support AVCs in proposing specific elements that provide unambiguous and objective constraints on which types of Advisory Council Members will be most in the interest of MKR holders for Facilitators to propose to onboard.

2.9.2.1.2: ADs can support AVCs in proposing specific elements that provide unambiguous and effective boundaries on what advisory council projects the Facilitators can fund, and how to prioritize them and choose which Advisory Council Member to perform the project.

2.9.2.2: ADs can do research and knowledge gathering about relevant things in the Maker ecosystem and how it relates generally to governance or to specific AVCs and their strategic perspective, and present it publicly to AVCs

2.9.2.2.0: It is important that this activity doesn’t create risk of politicization, which is why the transparency and the strict focus on objective fact finding is the central element of ADs interactions with Ecosystem Actors.

2.9.2.3: ADs can help AVCs write and shape elements and sets of elements for Scope Aligned Scope Proposals, ensuring that they are congruent with best practice for writing elements and that they maximally capture the intent of the AVC and the Advisory Councils.

2.9.2.3.0: As they work closely with the Alignment Artifacts and the correct interpretation thereof, and are generally deeply involved in core governance, ADs are well positioned to provide this kind of neutral, governance-technical support to AVCs.

2.9.2.4: ADs can help AVCs craft the language of the AVC Aligned Governance Strategy to ensure that it gives them the flexibility and the directions that properly reflect the AVCs intention.

2.9.2.4.0: ADs can give AVCs feedback on how they will interpret different drafts of the AVC Governance Strategies, and the AVCs can then use that to fine tune the result they want to get.

2.9.3: FacilitatorDAOs and Scope Advisory Councils

A critical governance interaction is AVCs getting professional input from Advisory Council Members about specific improvements that are possible in the Scope Alignment Artifacts. This happens with the FacilitatorDAOs following the instructions defined in the Advisory Council Articles. FacilitatorDAOs can also provide input directly to AVCs.

2.9.3.1: AVCs must ensure that their Aligned Scope Proposals describe in as much detail as possible the kind of advice they consider most important, and how to prioritize it and allocate resources.

2.9.3.2: FacilitatorDAOs follow the instructions in the Advisory Council Articles to propose the onboarding of new Advisory Council Members, and to allocate resources for Advisory Projects to existing Advisory Council Members.

2.9.3.3: AVCs must not micromanage the membership of the Advisory Councils, but must define objective requirements that the FacilitatorDAOs can follow to ensure the best and most suitable potential members are proposed for onboarding.

2.9.3.3.0: There’s significant risk of misalignment in how the AVCs choose Advisory Council Members. All relevant Alignment Conservers can reduce this risk by making potential conflicts as transparent as possible and create a culture where conflicts can be openly disclosed, while secrecy is discouraged.

2.9.3.4: FacilitatorDAOs can directly provide advice to AVCs, but this is restricted to only governance-technical implementation of the intention of the AVCs into a Aligned Scope Proposal, and alignment analysis.

2.9.3.4.1: FacilitatorDAOs can also inform AVCs how they believe the implementation of a particular element should be interpreted, and based on this feedback the AVCs can ratify or change their Position Documents in order to ensure that the actual implementation will be as intended.

2.9.4: Prioritization of Self-Sustainable Continuous Improvement based on strong Advisory Council Scopes

Unless prevented by an urgent challenge, AVCs should prioritize improving the Scopes towards a state of Self-Sustainable Continuous Improvement based on highly detailed Advisory Council Scopes. This means focusing on a careful and long term-oriented methodology for improving the Scopes, that may initially move slowly, but will automate its own improvement over time and become more resilient to the short term whims of the AVCs.

The methodology is relevant when AVCs can identify and formulate areas for improvement in the Scopes, and possibly even potential solutions. Instead of jumping towards a quick fix, the AVCs should instead, if possible, always move slowly and aim to sustainability identify and solve the generalizable underlying challenge rather than just focus on a straightforward one-off fix. This means breaking down and identifying the recurring patterns that point to shortcomings and opportunities for improvement, and then optimizing the Advisory Council Article to ensure that the Facilitators are instructed to find the right Advisory Council Members to perform projects that target the biggest opportunities for improvements. The goal should be that AVCs do not need to actively intervene in the long term when things are generally going well. The specifications of the Advisory Council Article in each Scope should ensure that it automatically improves itself over time and AVCs just have to review and make final adjustments to the Self-Sustainable Continuous Improvement process.

2.9.4.1: As per 2.9.2.1 ADs are expected to support AVCs in translating their intentions and ideas for how to achieve self-sustainable continuous improvement of the Scopes into actionable elements that can be proposed through the Aligned Scope Proposals of the AVCs.

2.10: Core Governance Security - GOV10

GOV10 must cover Governance Security processes for deploying and reviewing executive votes. This must include multiple types of security review and automated tests.

2.11: SubDAO Governance Security - GOV11

GOV11 must cover the minimum security rules related to SubDAO governance actions. This includes ensuring SubDAOs do not take unnecessary technical risk. It also covers defining and preserving the MKR holder veto over all SubDAO governance actions. Attempts by SubDAOs to circumvent or remove the protections from the MKR voter veto is considered misalignment.

2.12: Scope Bootstrapping - GOV12

Before the Endgame State, the Governance Scope articles must be modified to accommodate the needs of the bootstrapping phase leading up to the Endgame State, and to minimize transition costs and friction. GOV12 must also contain processes for quickly fixing issues in any scopes that put the bootstrapping of governance at risk.

The bootstrapping measures can override requirements and specifications in the Atlas as long as they are temporary and needed, and must all come to an end when the NewChain is launched.

3: The Support Scope

The Support Scope covers various critical tasks that support the ecosystem, including governance process infrastructure and management, SubDAO and Ecosystem Actor support, and management of the Public Good Purpose System.

3.1: Scope improvement - SUP1

SUP1 must cover the key specifications and processes necessary for the Scope to reliably improve itself long term without risk of misalignment.

3.1.1: The Support Scope must have a specialized Advisory Council that is able to propose improvements to the language of the Scope Artifact that increases its Alignment Artifact Strength and increase efficiency and security of the Maker Ecosystem.

3.1.2: The Support Scope must have a customized strategy towards its display and interaction through the DAO Toolkit to make it maximally user friendly.

3.2: Governance Process Support - SUP2

SUP2 must cover the Support Scopes role in ensuring the Maker Governance processes function smoothly and reliably, making governance participation attractive and user friendly.

3.2.1: AVC internal governance process support, including communication channels and internal tools.

3.2.2: Facilitating the support necessary for the quarterly Scope Proposal process to ensure that the Scope Artifacts are reliably improved over time.

3.2.3: Ensuring that all Scope defined processes are monitored and properly covered.

3.2.4: Rules for prioritization of resources in case of scarcity to prevent overload or spam.

3.3: DAO Toolkit core development - SUP3

The DAO Toolkit is a unified system for displaying the Alignment Artifacts and all of the data, processes and interaction necessary for Maker Governance and internal SubDAO governance to function optimally. It is distributed by all AllocatorDAOs and FacilitatorDAOs as a part of their SubDAO Frontend. SUP3 must cover all necessary processes to ensure its underlying technology develops appropriately.

3.3.1 Core development and maintenance management and strategy.

3.3.2: Identification and development of standardized, common reusable modules.

3.3.5: Research and specification of best practice for using the DAO Toolkit by Scopes.

3.3.6: Monitoring of adherence with best practice and flagging to governance in case of issues.

3.3.7: Development of the client side Tookit AI systems for using the DAO Toolkit and interacting with the CAIS.

3.3.8: Contributor and Alignment Conserver privacy tools and support.

3.4: Core Artificial Intelligence System (CAIS) - SUP4

MakerDAO must have a cutting edge system of diversified AI tools that is accessible by Alignment Conservers and tokengated for MKR holders and SubDAO token holders.

3.4.1: SUP4 must define a robust and aligned solution for the core model to ensure it will have the greatest possible positive impact on the ability of Maker Governance to strengthen the Alignment Artifacts and monitor all governance processes for alignment and efficiency. The Core Model must also be a powerful tool for the incubation and growth of the SubDAOs.

3.4.2: The CAIS must use a technical approach that is diversified, and continuously improved based on the latest science and practical experience of operating and using the CAIS.

3.4.3: SUP4 must maintain a well balanced model for token gating access to CAIS, weighted in favor of MKR holders but ensuring that SubDAO token holders can also access and unleash the benefit of CAIS for SubDAO governance, innovation and growth.

3.5: Budgets, Milestones and results reporting standardization - SUP5

SUP5 must ensure that there is a solid baseline understanding of how to measure and monitor results and how to distinguish between goals that actually benefit the DAO and goals that are misaligned.

3.5.1: SUP5 must develop and maintain best practices for how to ensure budgets are tightly connected to results and milestones, and that this connection is easy to understand and it is possible to comprehend whether a budget is performing or not.

3.5.2: SUP5 must ensure that there is adequate research into hidden risks that may compromise transparency over time or hide inadequate results.

3.5.3: SUP5 must ensure processes are in place for monitoring and flagging of failure to properly implement best practice to prevent risks.

3.5.4: SUP5 must contain a real time, up to date overview of all data and information relevant to understand budgets and the results they are producing.

3.6: SubDAO Incubation - SUP6

New SubDAOs are continuously created by the core protocol logic of NewChain, and SUP6 must ensure that the necessary infrastructure is available to maximally support this incubation process and support the new SubDAOs in generating as much value as possible for the Maker Ecosystem.

3.6.1: SUP6 must specify Genesis Scope template elements designed for FacilitatorDAOs, AllocatorDAOs and MiniDAOs, to ensure that they have everything they need from the moment they are incubated to function properly and carry out their specific roles.

3.6.2: There is always a Major SubDAO incubating, and as it is incubating the communication channels for its future community must be maintained and moderated, based on specifications provided in SUP6.

3.7: Ecosystem Actor Incubation - SUP7

Alongside the new Major SubDAOs that continuously incubate, SUP7 must ensure the proper elements are in place to incubate relevant Ecosystem Actors that can support the new SubDAOs

3.7.1: Clear Incubation Objectives must be specified that describe what gaps and opportunities exist in the ecosystem that Maker Governance wants to promote new companies to inject innovation for.

3.7.2: SUP7 must specify a strong proposal review process that describes how Facilitators must review and choose Incubation Proposals. AVCs or MKR holders must not interfere or micromanage with the selection process beyond setting objective guidelines, as this creates significant risk misalignment.

3.7.3: A high quality milestone and budget review process must be defined that applies specifically to Incubating Ecosystem Actors, in addition to the regular requirements specified in SUP5.

3.7.4: Infrastructure for monitoring and recording currently incubating Ecosystem Actors.

3.7.5: Maker Governance is allowed to have a relatively granular influence on the long run development of the ecosystem through SUP7, and as a result it must be monitored for misalignment risks, and must develop checks and balances that are as robust as possible over time.

3.8: Ecosystem communication channels - SUP8

SUP8 must cover the overall unified communication infrastructure used for governance ecosystem communication, including channels for inter-SubDAO communication and Ecosystem Actor interaction.

3.9: Ecosystem Agreements - SUP9

SUP9 must specify and standardize how Ecosystem Agreements work, to make it as convenient and easy as possible for Ecosystem Actors to do business in the Maker Ecosystem with guardrails and fair treatment.

3.9.1: SUP9 must specify a standardized way to publish and formally agree to Ecosystem Agreements.

3.9.2: SUP9 must specify a process for Ecosystem Agreement standardization that ensures that recurring patterns are dealt with uniformly, and that deviations from established standard patterns will incur proportional penalties and still be treated in the standardized way.

3.9.3: SUP9 must cover the methods for Ecosystem Agreement enforcement.

3.9.4: SUP9 must cover dispute resolution and the appeals process.

3.10: Resilience Fund - SUP10

SUP10 must cover the Resilience Fund, including relevant definitions and a secure claims process.

3.11: Resilience research and preparedness - SUP11

SUP11 must cover the resilience research and preparedness efforts.

3.12: Purpose System - SUP12

The Purpose System aims to fund public good open source AI and software projects that benefit the Maker Ecosystem and public good. At all times, at least 10% of the Purpose System funds must be used for more direct and specific impact solutions.

3.12.1 The Maker Protocol emits 3 million NewGovToken per year for the Purpose System from the moment NewChain is launched.

3.12.2 SUP12 must cover the long term Purpose System and the process for allocating purpose funds to SubDAOs in the yearly purpose contest, from the moment NewChain is launched.

3.12.3: SUP12 must also cover the short term Purpose Fund process. This includes setting up an advisory group that can help allocate 40 million NewGovToken towards public good open source AI, with at least 10% going to more directly impactful public good initiatives. The Purpose Fund must be fully spent before 2033.

4: The Protocol Scope

The Protocol Scope covers all processes related to developing and maintaining NewChain and its core protocol, modules and smart contract ecosystem, and its bridges to other blockchains. It also covers other situations where the Maker Protocol has direct technical over something relevant to Maker Governance.

4.1: Scope Improvement - PRO1

PRO1 must cover the key specifications and processes necessary for the Scope to reliably improve itself long term without risk of misalignment.

4.1.1: The Protocol Scope must have a specialized Advisory Council that is able to propose improvements to the language of the Scope Artifact that increases its Alignment Artifact Strength and increase efficiency and security of the Maker Ecosystem.

4.1.2: The Protocol Scope must have a customized strategy towards its display and interaction through the DAO Toolkit to make it maximally user friendly.

4.2: NewChain protocol specification, maintenance and upgrades - PRO2

NewChain contains the complete Endgame specification and its deployment causes the Maker Ecosystem to reach the Endgame State. PRO2 must cover the required preparatory and development work to enable Maker Governance to activate NewChain and reach the Endgame State.

4.2.1: General blockchain requirements:

4.2.1.1: NewChain must support native delegation compatible with the Sagittarius Engine, and the staking power of nodes must be regulated by Maker Governance.

4.2.1.2: NewChain must have state rent.

4.2.1.3: Gas fees and state rent must be paid in NewStable, staking must be done with NewGovToken.

4.2.1.4: NewChain must have native protocol MEV capture.

4.2.1.5: NewChain must have a chain halt mechanism triggered by NewGovToken executive vote for scheduled chain upgrades or through an emergency halt mechanism where only a minority of NewGovToken voters are required. When a chain halt occurs, the chain must be restarted through a hard fork. This is specified in more in detail in 4.6.

4.2.1.6: Native ZK rollups built into the protocol.

4.2.1.7: Neural Tokenomics and core governance processes built natively into the NewChain protocol. Specified in more detail in 4.3.

4.3: NewChain native Governance mechanics and neural tokenomics - PRO3

NewChain implements as native protocol modules all of the internal governance mechanics, incubation mechanics and tokenomics of MakerDAO and SubDAOs. PRO3 must cover the required preparatory and development work relevant for these concepts to enable Maker Governance to activate NewChain and reach the Endgame State.

4.3.1: The Core Pause Proxy of MakerDAO, has a governance delay defined by PRO3 and is used to hold external assets and perform forced liquidation or forced actions on SubDAOs.

4.3.2: The SubDAO proxies are core governance contracts that enable SubDAOs to take actions to create and control smart contracts. They have a security delay, and Maker Governance can veto their actions during this security delay. The safety measures around using the veto must be specified in PRO3.

4.3.3: NewGovToken and SubDAO tokens are covered by a protocol native token standard. As they are permanently inflationary, SubDAO tokens have a migration standard as they will need to migrate to new tokens in the long run when their supply gets too high.

4.3.4: The Incubator system creates new AllocatorDAOs and FacilitatorDAOs based on a fixed algorithm.

4.3.4.1: If there are less than 5 AllocatorDAOs, the Incubator immediately creates the amount of AllocatorDAOs required to bring the total to 5.

4.3.4.2: If there are less than 3 FacilitatorDAOs, the Incubator immediately incubates the amount of FacilitatorDAOs required to bring the total to 3.

4.3.4.3: If less than or equal to one third of all major SubDAOs are FacilitatorDAOs, then the next incubation will be a FacilitatorDAO.

4.3.4.4: If more than one third of all major SubDAOs are FacilitatorDAOs, then the next incubation will be an AllocatorDAO.

4.3.4.5: If 8 or more SubDAOs exist, then a new SubDAO is incubated at a time interval since the last SubDAO incubation. The interval in years is equivalent to the larger number of 1 or (number of SubDAOs divided by 16)^1.5.

4.3.5: The Native token standard allows NewGovToken and SubDAO tokens, and other tokens made with the Native token standard, to embed their tokens into an NFT following the native NFT standard, or mint a new NFT and embed into it. A token standard NFT can have its tokens extracted from the NFT again through the NFT marketplace simulation which penalizes extracting tokens from the NFT if a lot of users are extracting at the same time. The income from the penalties are then earned by the remaining NFT holders, increasing the amount of tokens embedded in their NFT.

4.3.5.1: The parameters for extracting NewGovToken and SubDAO tokens from NFTs are 1% of the total embedded supply that can be extracted per day, and users willing to pay the highest penalty are extracted first.

4.3.6: Native NewStable farms for farming NewGovToken and SubDAO tokens. Supports 4 modes of farming:

4.3.6.1: Free token farming. This mode of farming gives the user tokens that are not lockstaked in the relevant lockstaking engine. The amount of tokens farmed are reduced by an amount equivalent to half of the relevant lockstaking exit fee.

4.3.6.2: Free NFT farming. This mode of farming embeds tokens into the users free NFT that is not lockstaked in the relevant lockstaking engine. The amount of tokens embedded are reduced by an amount equivalent to half of the relevant lockstaking exit fee.

4.3.6.3: Lockstaked token farming. This mode of farming gives the user tokens that are lockstaked in the tokens native lockstaking engine.

4.3.6.4: Lockstaked NFT farming. This mode of farming embeds tokens into the users lockstaked NFT that is lockstaked into the tokens native lockstaking engine.

4.3.7: Maker Lockstake Engine

The Maker Lockstake Engine enables users to lock up their NewGovToken or NFT embedded with NewGovToken.

4.3.7.1: The Maker Lockstake Engine is usually accessed through an EGF, and using it requires that the NewGovTokens are delegated.

4.3.7.2: When lockstaked, NewGovTokens can farm any of the Major SubDAO tokens, or Dai from the Maker Surplus Buffer. The SubDAO tokens can be farmed either as free tokens, free NFTs, or Lockstaked NFTs.

4.3.7.3: NewGovTokens can also be used to generate Dai, with parameters set by the Stability Scope.

4.3.7.4: The Maker Lockstake Engine has an exit fee of 15%, when NewGovTokens exit the Maker Lockstake Engine 15% of the tokens or embedded tokens are burned. Additionally, for Lockstaked tokens, there is a 3 day delay until the tokens are free and can be sold.

4.3.7.4.1: When new tokens or NFTs with embedded tokens are lockstaked, the Maker Lockstake Engine emits NewGovToken equivalent to the exit fee in advance (15% of the newly lockstaked tokens) and sends them to the Maker Reverse Burn Engine.

4.3.8: Facilitator Lockstake Engine

Each Facilitator is incubated with a native Facilitator Lockstake Engine. The Facilitator Lockstake Engine enables users to Lockstake an NFT embedded with FacilitatorDAO tokens.

4.3.8.1: The Facilitator Lockstake Engine is usually accessed through an EGF, and using it requires that the embedded FaciltiatorDAO tokens are delegated

4.3.8.2: When lockstaked, the embedded FacilitatorDAO tokens self-farm additional FacilitatorDAO tokens that are directly embedded into the existing lockstaked NFT.

4.3.8.3: The FacilitatorDAO Lockstake Engine has an exit fee of 30%, when FacilitatorDAO tokens exit the FacilitatorDAO Lockstake Engine 30% of the tokens are transferred to a yield boost pool that increase the self- farming of the Lockstake Engine by transferring 1% of its contents per day as extra self-farming to the Facilitator Lockstake Engine users.

4.3.9: Allocator Lockstake Engine

Each Allocator is incubated with a native Allocator Lockstake Engine. The Allocator Lockstake Engine enables users to lock up their AllocatorDAO tokens or NFT embedded with AllocatorDAO tokens.

4.3.9.1: The Allocator Lockstake Engine is usually accessed through an EGF, and using it requires that the AllocatorDAO tokens are delegated.

4.3.9.2: When lockstaked the AllocatorDAO tokens farm the AllocatorDAOs MiniDAO tokens. The MiniDAO tokens can be farmed as free tokens, free NFTs, or Lockstaked NFTs.

4.3.9.3: The Allocator Lockstake Engine has an exit fee of 25%, when AllocatorDAO tokens exit the Allocator Lockstake Engine 25% of the tokens are transferred to a yield boost pool that provide self-farming farming for the Lockstake Engine users by transferring 1% of its contents per day as self-farming directly embedded into the Lockstaked NFTs of the Allocator Lockstake Engine users.

4.3.10: MiniDAO Lockstake Engine

Each MiniDAO is incubated with a native MiniDAO Lockstake Engine. The MiniDAO Lockstake Engine enables users to Lockstake an NFT embedded with MiniDAO tokens.

4.3.10.1: The MiniDAO Lockstake Engine is usually accessed through an EGF, and using it requires that the embedded MiniDAO tokens are delegated

4.3.10.2: When lockstaked, the embedded MiniDAO tokens self-farm additional MiniDAO tokens that are directly embedded into the existing lockstaked NFT.

4.3.10.3: The MiniDAO Lockstake Engine has an exit fee of 40%, when MiniDAO tokens exit the MiniDAO Lockstake Engine 40% of the tokens are transferred to a yield boost pool that increase the self- farming of the MiniDAO Lockstake Engine by transferring 1% of its contents per day as extra self-farming to the MiniDAO Lockstake Engine users.

4.3.11: NewGovToken emissions

The Neural Tokenomics emits up to 100 million NewGovTokens per year to power all of the tokenomics of the Maker Ecosystem. Up to 90 million per year of the NewGovTokens are recaptured, while 10 million per year of the NewGovTokens are for governance upkeep that cannot be recaptured.

4.3.11.1: 90 million NewGovToken emissions that are recaptured.

Recapturing the value of the emissions means that the emissions directly drive users or income to the protocol in some form.

4.3.11.1.1: 46 million NewGovToken to AllocatorDAO Axon

46 million NewGovToken per year are sent to the AllocatorDAO Axon from where it is distributed to the AllocatorDAOs based on their Elixir holdings.

4.3.11.1.2: 15 million Facilitator Responsibility Rewards

15 million NewGovToken per year are sent to the FacilitatorDAO Responsibility Reward system from where it is distributed to FacilitatorDAOs based on their Scope Responsibilities.

4.3.11.1.3: 12 million NewGovToken to FacilitatorDAO Axon

12 million NewGovToken per year are sent to the FacilitatorDAO Axon from where it is distributed to the FacilitatorDAOs based on their Elixir holdings.

4.3.11.1.4: 10 million NewGovToken to Dai NewGovToken farming

10 million NewGovToken per year are available in the standard Dai farms.

4.3.11.1.5: 7 million to SubDAO Incubation

7 million NewGovToken per year accumulate in the Incubators reserve burn engine, and are used to fund the next SubDAO that launches.

4.3.11.2: 10 million Governance upkeep emissions that are not recaptured.

4.3.11.2.1: 3 million NewGovToken for Prime Delegates

Prime Delegates receive 3 million NewGovToken per year paid out through the AD PDMs.

4.3.11.2.2: 3 million NewGovToken for Purpose System

3 million NewGovToken are accumulated per year in the Purpose System account, from where it is distributed to one of the AllocatorDAOs each year, based on their public impact performance.

4.3.11.2.3: 2 million to Validator operation rewards

2 million NewGovToken are distributed per year in staking rewards to the NewChain validators. These rewards do not go to Sagittarius Engine Lockstakers, who automatically stake to the Validators through their chosen delegates.

4.3.11.2.4: 1 million NewGovToken to Reserve Delegates

Reserve Delegates receive 1 million NewGovToken per year paid out through the AD PDMs.

4.3.11.2.5: 1 million NewGovToken to Aligned Voter Committees

Aligned Voter Committee Members with the highest number of verified NewGovTokens receive 1 million NewGovToken per year paid out through the AVC Module system.

4.3.12: AllocatorDAO emissions

AllocatorDAOs have a genesis token emission that occurs over the first 10 years of its existence, and an additional permanent emission that continuously occurs forever.

4.3.12.1: AllocatorDAO Farm distribution

70% of all AllocatorDAO tokens emitted for farming are for Dai farming, and 30% of all AllocatorDAO tokens emitted for farming are for Sagittarius Engine users.

4.3.12.2: AllocatorDAO Genesis emissions

The Genesis emissions of Allocators are 230 million tokens over 10 years, with the following breakdown.

4.3.12.2.1: Genesis farming emissions

200 million Allocator tokens are for Genesis farming.

• 4.3.12.2.1.1: For the first 2 years, the rate of Genesis farming is 50 million AllocatorDAO tokens per year

• 4.3.12.2.1.2: For the following 2 years, the rate of Genesis farming is 25 million AllocatorDAO tokens per year.

• 4.3.12.2.1.3: For the following 2 years, the rate of Genesis farming is 12.5 million AllocatorDAO tokens per year.

• 4.3.12.2.1.4: For the final 4 years, the rate of Genesis farming is 6.25 million AllocatorDAO tokens per year.

4.3.12.2.2: The workforce bonus pool starts with 30 million AllocatorDAO tokens. The Workforce bonus pool can be further topped up through the permanent emissions.

4.3.12.3: AllocatorDAO permanent emissions

The permanent emissions of AllocatorDAOs are a total of 10% tokens emitted per year.

4.3.12.3.1: Permanent MiniDAO Axon emissions

5% of the total supply is emitted per year for the MiniDAO Axon.

4.3.12.3.2: Permanent farming emissions

3.75% of the total supply is emitted per year as farming emissions

4.3.12.3.3: Permanent workforce bonus pool emissions

1% of the total supply is emitted per year as workforce bonus pool emissions, if the workforce bonus pool contains less than 5% of the total supply of AllocatorDAO tokens.

4.3.12.3.4: Permanent purpose system emissions

0.25% of the total supply is emitted per year for the Purpose System.

4.3.13: FacilitatorDAO emissions

FacilitatorDAOs have a genesis token emission that occurs over the first 10 years of its existence, and an additional permanent emission that continuously occurs forever.

4.3.13.1: FacilitatorDAO Farm distribution

70% of all FacilitatorDAO tokens emitted for farming are for Dai farming, and 30% of all FacilitatorDAO tokens emitted for farming are for Sagittarius Engine users.

4.3.13.2: FacilitatorDAO Genesis emissions

The Genesis emissions of Facilitators are 230 million tokens over 10 years, with the following breakdown.

4.3.13.2.1: Genesis farming emissions

200 million FacilitatorDAO tokens are for Genesis farming.

• 4.3.13.2.1.1: For the first 2 years, the rate of Genesis farming is 50 million FacilitatorDAO tokens per year

• 4.3.13.2.1.2: For the following 2 years, the rate of Genesis farming is 25 million FacilitatorDAO tokens per year.

• 4.3.13.2.1.3: For the following 2 years, the rate of Genesis farming is 12.5 million FacilitatorDAO tokens per year.

• 4.3.13.2.1.4: For the final 4 years, the rate of Genesis farming is 6.25 million FacilitatorDAO tokens per year.

4.3.13.2.2: The workforce bonus pool starts with 30 million FacilitatorDAO tokens. The Workforce bonus pool can be further topped up through the permanent emissions.

4.3.13.3: FacilitatorDAO permanent emissions

The permanent emissions of FacilitatorDAOs are a total of 12.5% tokens emitted per year.

4.3.13.3.1: Permanent Lockstake Engine self-farm emissions

7.5% of the total supply is emitted per year for self-farming rewards for FacilitatorDAO Lockstake Engine users.

4.3.13.3.2: Permanent farming emissions

4% of the total supply is emitted per year as farming emissions

4.3.13.3.3: Permanent workforce bonus pool emissions

1% of the total supply is emitted per year as workforce bonus pool emissions, if the workforce bonus pool contains less than 5% of the total supply of FacilitatorDAO tokens.

4.3.14: MiniDAO Emissions

MiniDAOs have a genesis token emission that occurs over the first 10 years of its existence, and an additional permanent emission that continuously occurs forever.

4.3.14.1: MiniDAO Farm distribution

15% of all MiniDAO tokens emitted for farming are for Dai farming, 35% of all MiniDAO tokens emitted are for regular farmers of the parent AllocatorDAO token, and 50% of all MiniDAO tokens emitted are for parent AllocatorDAO Lockstake Engine users.

4.3.14.2: MiniDAO Genesis emissions

The Genesis emissions of MiniDAOs are 92 million tokens over 10 years, with the following breakdown.

4.3.14.2.1: Genesis farming emissions

80 million MiniDAO tokens are for Genesis farming.

• 4.3.14.2.1.1: For the first 2 years, the rate of Genesis farming is 20 million MiniDAO tokens per year

• 4.3.14.2.1.2: For the following 2 years, the rate of Genesis farming is 10 million MiniDAO tokens per year.

• 4.3.14.2.1.3: For the following 2 years, the rate of Genesis farming is 5 million MiniDAO tokens per year.

• 4.3.14.2.1.4: For the final 4 years, the rate of Genesis farming is 2.5 million MiniDAO tokens per year.

4.3.14.2.2: The workforce bonus pool starts with 12 million MiniDAO tokens. The Workforce bonus pool can be further topped up through the permanent emissions.

4.3.14.3: MiniDAO permanent emissions

The permanent emissions of MiniDAOs are a total of 12.5% tokens emitted per year.

4.3.14.3.1: Permanent Lockstake Engine self-farm emissions

5% of the total supply is emitted per year for self-farming rewards for MiniDAO Lockstake Engine users.

4.3.14.3.2: Permanent farming emissions

6.5% of the total supply is emitted per year as farming emissions

4.3.14.3.3: Permanent workforce bonus pool emissions

1% of the total supply is emitted per year as workforce bonus pool emissions, if the workforce bonus pool contains less than 5% of the total supply of MiniDAO tokens.

4.3.15: Elixirs

Elixirs are 50/50 LP tokens of the native AMM engine on NewChain. They have a prominent role in the Neural Tokenomics.

4.3.15.1: Maker Elixir

Maker Elixir is an LP token of 50/50 MKR/DAI

It is held by the Maker Smart Burn Engine, the Incubator, the AllocatorDAO Dendrites and the FacilitatorDAO Dendrites.

4.3.15.2: FacilitatorDAO Elixir

FacilitatorDAO Elixir is an LP token of 50/50 FAC/MKR

It is held by FacilitatorDAO Dendrites.

4.3.15.3: AllocatorDAO Elixir

AllocatorDAO Elixir is an LP token of 50/50 ALL/MKR

It is held by AllocatorDAO Dendrites and MiniDAO Dendrites.

4.3.15.4: MiniDAO Elixir

MiniDAO Elixir is an LP token of 50/50 MIN/ALL

It is held by MiniDAO Dendrites.

4.3.16: Axons

Axons are modules of the Neural Tokenomics that distribute tokens of a parent DAO to its SubDAOs, split based on the SubDAO holdings of the parent’s Elixir.

4.3.16.1: AllocatorDAO Axon

The AllocatorDAO Axon receives a total of 46 million NewGovToken per year that it splits across all active AllocatorDAOs proportional to their Maker Elixir holdings and sends to their AllocatorDAO Dendrite.

4.3.16.2: FacilitatorDAO Axon

The FacilitatorDAO Axon receives a total of 12 million NewGovToken per year that it splits across all active FacilitatorDAOs proportional to their Maker Elixir holdings and sends to their FacilitatorDAO Dendrite.

4.3.16.3: MiniDAO Axon

The MiniDAO Axon of an AllocatorDAO receives a total of 5% of the AllocatorDAO tokens per year that it splits across all active MiniDAOs proportional to their AllocatorDAO Elixir holdings and sends to their MiniDAO Dendrite.

4.3.17: Dendrites

Dendrites are modules of the Neural Tokenomics that receive incoming tokens from a parent DAO and converts it either to its own Elixir or to the parent’s Elixir, based on an Economic Resilience Model determined by the Stability Scope. Dendrites work identically for all types of SubDAOs.

4.3.17.1: Economic Resilience Switch

The Economic Resilience Switch receives the incoming Parent DAO tokens, and at a regular pulse interval, sends the tokens onwards after checking the price of the SubDAOs token compared with the Economic Resilience Model.

4.3.17.2: Native Elixir Accumulator

If the price of the SubDAO token is lower, then the parent DAO tokens are sent to immediately accumulate the SubDAOs native Elixir. Once accumulated in the Dendrite the native Elixir tokens can never leave.

4.3.17.3: Reverse Burn Engine

If the price of the SubDAO token is higher, the parent DAO tokens are sent to the Dendrites Reverse Burn Engine. The Reverse Burn Engine converts the parent DAO tokens into the parent DAO Elixir if the parent DAO token price is above the parent DAO Economic Resilience Model, and the rate of conversion depends on the gap between the price and the ERM. The obtained Parent Elixir is sent to the Parent Elixir Burn Engine.

When new Major SubDAOs are incubated, the Incubator Reverse Burn Engine may still have leftover NewGovToken. The leftover NewGovToken is then transferred directly to the Dendrite Reverse Burn Engine of the SubDAO.

4.3.17.4: Parent Elixir Burn Engine

Parent Elixir accumulated in the Dendrite’s Parent Elixir Burn Engine is a central element of the Neural Tokenomics. It is slowly used to burn SubDAO tokens, and also determines the distribution of tokens from its parent’s Axon.

The parent Elixir Burn Engine receives Elixir from multiple sources.

4.3.17.4.1:

All parent Elixir from the Reverse Burn Engine specified in 4.3.16.3 is sent to the Parent Elixir Burn Engine.

4.3.17.4.2: All Maker Elixir accumulated in the Incubator is sent to the newly intubated SubDAOs Parent Elixir Burn Engine.

4.3.17.4.3: SubDAOs can at any time use assets from their treasury to buy more Parent Elixir. This is the only method a SubDAO has of returning value from their assets to their own token holders

• 4.3.17.4.3.1: Enforcing the exclusivity of parent Elixir accumulation as the only way for a SubDAO to return value to its token holders is a core assumption of the economic resilience of the Neural Tokenomics. The relevant Scopes must describe detailed processes and principles for detecting attempts to circumvent the requirement of parent Elixir accumulation being the only permitted way of returning value to token holders, as this is a severe risk of misalignment.

4.3.17.4.4: If the total market cap of the SubDAO token is less than the total value of the contents of the parent Elixir Burn Engine, the Parent Elixir Burn Engine begins to use its Elixir contents to buy and burn the SubDAO token at a fixed rate of 0.5% of its contents per month.

4.3.19: The Budget System

The Budget System is a protocol module that enables token holders to set up budgets associated with Scopes, based on the specifications in the relevant Scope. The budgets that can both be controlled manually by the token holders through executive votes, but also can be accessed by FacilitatorDAOs that have been assigned FacilitatorDAO Responsibility to the Scope that covers the budget, and the FacilitatorDAO is able to delegate access to the budget to smart contracts that can in turn be controlled by Facilitators and be given specific restrictions and security measures.

4.3.19.1: When multiple FacilitatorDAOs have assigned Responsibility for the same Scope, their control of its fixed budgets are split in half. Additionally, each FacilitatorDAOs budget access can be increased through the Budget Allocation System, which will increase the accessible budget only for the specific FacilitatorDAO that is receiving Allocated Budget.

4.3.20: FacilitatorDAO Responsibility System

The FacilitatorDAO Responsibility System is a module that lets MKR holders assign Responsibility for specific Scopes and its associated budgets. The weight of the Scope and the size of the budgets determine the rewards earned by the FacilitatorDAO from the FacilitatorDAO Responsibility Rewards.

4.3.21: Budget Allocation System

The Budget Allocation System is a mechanism that can be turned on and off by Maker Governance or SubDAO governance. It allows Maker to set an Allocated Budget, which can be either fixed or relative to the average income of the system. It is a flexible system that allows Budget Allocators to flexibly and quickly distribute budgets to specific FacilitatorDAOs that have good performance or are doing things that are strategically or tactically important.

4.3.21.1: Budget Allocator Module

The Budget Allocator Module is a protocol module that can be created by a Budget Allocator. FacilitatorDAOs can recognize the Budget Allocator as an Aligned Budget Allocator and activate their Budget Allocator Module as an Aligned Budget Allocator-Budget Allocator Module, which gives the Budget Allocator a fee of all Budget they control.

4.3.21.2: Budget Power Assignment

Delegates can use their PDMs to assign Budget Power, based on their delegated MKR, to Budget Allocator Modules. Each Budget Allocator Module will control a fraction of the total Allocated Budget, based on their relative level of Budget Power.

4.4: Two-stage bridge - PRO4

The two-stage bridge is a blockchain bridge system that is designed to be able to withstand a malicious majority of NewGovToken holders attacking the protocol and NewChain. It works based on a normal operating model where it is controlled by the NewChain validators, but can then have a fallback mode triggered by the NewGovToken holders (not delegates or validators) that turns over its control to a Fallback Multisig of external centralized and decentralized entities.

4.4.1: Normal bridge operation by NewChain Validator Set

During the normal operation of a two-stage bridge it runs as a weighted multisig on the target blockchain that is connected with a smart contract on NewChain. The Validators of NewChain control the weighted multisig with their weight determined by their voting power, just like on NewChain.

4.4.1.1: The Validators have the ability to send funds out of the bridge, and to confirm reception of incoming funds on NewChain.

4.4.1.2: The Validators have the ability to modify the Validator Set, and must use this power to update it based on the latest stake weightings on NewChain.

4.4.1.3: The Validators have the ability to update the Fallback Multisig, and must use this power to follow the instructions of the Maker Governance based on 4.4.3.1.

4.4.1.4: If a Validator does not instantly follow the instructions from the Scopes, all other Validators must slash their stake on NewChain rapidly.

4.4.2: The Trigger Mechanism is a technically isolated smart contract on the target chain that uses zero knowledge proofs to allow MKR holders from NewChain to prove they are “end-holders” (not delegates or validators) of MKR. A minority of MKR end-holders from NewChain can delay the actions of the Validators, or trigger the Fallback Multisig. The parameters for delaying actions and triggering Fallback are determined by PRO4, and must be continuously updated and reassessed.

4.4.2.1: When using the Trigger Mechanism, the MKR holders become vulnerable to slashing in case they abuse the power to attack the system with no legitimate reason.

4.4.3: The Fallback Multisig

The Fallback Multisig is a simple multisig consisting of DAOs with fully decentralized and mature governance on the target blockchain, and physical Arranged Structures separate from those that interact with Legal Recourse Assets.

4.4.3.1: PRO4 must specify a process for researching, monitoring and developing the best strategies for keeping the bridge and its fallback multisig secure, including monitoring physical or misalignment risks. The output of this process is used to direct the Bridge Validators when and how to modify the Fallback Multisig.

4.4.3.2: Depending on the situation that led to the Fall Multisig taking control of the Bridge, it can either restart the bridge by returning control to the Validator Set, Define a new Validator set according to the specifications of PRO4 and hand over control to it, or it can manually settle the assets contained in the bridge in case of complete and irreversible failure of the Maker Ecosystem.

4.4.4: PRO4 must specify processes for actively monitoring, maintaining and upgrading the active Two-Stage Bridge implementations.

4.4.5: PRO4 must specify processes for selecting and prioritizing the development of new Two-Stage Bridges, or the deprecation of existing Two-Stage Bridges. The costs and benefits of having many bridges must be considered to minimize risk to the Maker Ecosystem.

4.5: Developer tools and support - PRO5

PRO5 must specify detailed principles and processes for supporting developers building on NewChain, and developers building for SubDAOs on relevant target chains. The tools must include secure code generation systems, and standardized libraries of reusable code. Rules for SubDAOs to use standard code systems must also be developed and enforced to maximize security of the Maker Ecosystem.

4.5.1: NewChain must maintain a set of Protocol Standard Modules, that are popular smart contracts that get turned into native protocol code for better performance and security. If a bug occurs in a Protocol Standard Module it is considered a bug in NewChain and must be solved through a Chain Halt and hard fork.

4.6: NewChain halt - PRO6

NewChain can be halted, which stops the blockchain entirely, requiring a hard fork to restart it.

4.6.1: The Emergency Halt Module is a Protocol Module of NewChain that allows a minority of NewGovToken holders to trigger a Chain Halt in case governance attacks or misalignment occurs. After an Emergency Halt occurs, the new hard fork may need to remove NewGovTokens from accounts involved in the Governance Attack. This could also be the NewGovTokens of the accounts that triggered the Emergency Halt, if the Emergency Halt itself was considered an attack. It could also be a legitimate situation where no one is at fault and the Chain is just restarted with its state intact.

4.6.2: The Chain Halt process is used to upgrade NewChain with hard forks. In the long run this can include protocol security and efficiency upgrades, and also include addition of new Protocol Standard Modules as defined in PRO5.

4.6.3: Emergency halt scheduled tests

To test and verify the security of Maker Governance against dangerous edge cases, the Emergency Halt feature should be periodically tested. PRO5 must detail processes for competently testing the Emergency Halt feature in a way that maximizes security of the Maker Ecosystem without disrupting its efficiency. A scheduled Emergency Halt test must occur at least once every 10 years. A bounty must be provided for those who participate in the Emergency Halt test, and if the test fails, the bounty must be increased until the test succeeds.

4.7: SubDAO Frontend client diversity - PRO7

PRO7 must specify principles and processes for ensuring that the SubDAO Frontends contribute to client diversity of NewChain, and apply penalties to SubDAOs that cause client concentration risk.

4.8: The Dai Stablecoin - PRO8

The Dai Stablecoin is a native implementation on NewChain that must always remain permissionless. It cannot contain any blacklisting functionality or otherwise prevent users from using it, and Dai Stablecoin assets cannot be seized or frozen, even through a hard fork of NewChain. PRO8 must specify processes that research and monitor risks of misalignment with these requirements.

4.9: Scope Bootstrapping - PRO9

Before NewChain launch the Protocol Scope must be adapted to accommodate the bootstrapping of the ecosystem. This allows parts of the Atlas to be temporarily overridden when needed to ensure a smooth launch and bootstrapping phase. This ends with the launch of NewChain.

5: The Stability Scope

The Stability Scope covers the management of the Dai Stablecoin. The Dai Stablecoin must be a permissionless and useful currency available to anyone. Its stability and risk must be managed to generate as much value for MakerDAO and public good as possible.

5.1: Stability Scope improvement - STA1

STA1 must cover the key specifications and processes necessary for the Scope to reliably improve itself long term without risk of misalignment.

5.1.1: The Stability Scope must have a specialized Advisory Council that is able to propose improvements to the language of the Scope Artifact that increases its Alignment Artifact Strength and increase efficiency and security of the Maker Ecosystem.

5.1.2: The Stability Scope must have a customized strategy towards its display and interaction through the DAO Toolkit to make it maximally user friendly.

5.2: Dai Stablecoin reference asset - STA2

The Dai Stablecoin is stable relative to a reference asset.

5.2.1: The Dai Stablecoin must have predictable stability relative to a suitable reference asset, which can be a widely adopted world currency or a diversified basket representing the cost of goods or other relevant metrics of stability and utility as a currency. STA2 must specify processes relevant for monitoring and ensuring this requirement is fulfilled.

5.2.2: Any change to the reference asset of Dai by Maker Governance must be done to protect the value of the users and be carried out in a way that minimizes harm and maximizes stability and reliability for the Maker Ecosystem. STA2 must specify processes for doing this in the safest and most secure possible way.

5.3: Core Stability Parameters - STA3

The Dai Stablecoin is stabilized with the help of the core stability parameters. STA3 must specify principles and processes for optimizing these core stability parameters to be Universally Aligned with their purpose.

5.3.1: The Base Rate is the base yearly increase in debt on Allocator Vaults and Sagittarius Lockstake Engine Vaults. The Base Rate is determined algorithmically based on the Dai Price Oracle and the Price Deviation Sensitivity algorithm.

5.3.2: The Dai Savings Rate is the rate Dai holders can earn on their Dai in the Dai Savings Rate smart contracts. It is determined algorithmically based on the Base Rate and the DSR Spread parameter.

5.3.3: Price Deviation Sensitivity is an algorithmic parameter set by Maker Governance that uses the Dai Price Oracle to determine if Dai is above or below its target price. If Dai is above the target price, the Base Rate is reduced. If Dai is below the target price, the Base Rate is increased. The rate of increase or decrease is determined by the algorithm chosen by Maker Governance with the aim of maximizing the Stability of Dai.

5.3.4: The DSR Spread is a parameter that determines how to calculate the DSR. The DSR is calculated as Base Rate - DSR Spread.

5.4: Allocator Vaults - STA4

Allocator Vaults are native protocol modules that all Allocators are incubated with. The allocator can use them to generate Dai, by accruing debt that increases over time at the Base Rate. The Dai can be used for specific purposes defined by the Stability Scope, with some restrictions encoded directly into the Allocator Vaults, while most of the restrictions are enforced by Maker Governance.

5.4.1: Allocator Vault Standard Valve

For standard operations that aren’t otherwise specifically defined in STA4, the Allocator Vaults have a maximum Valve Rate, meaning amount of Dai that can be generated per time interval. The Valve Rate is an adjustable parameter determined by Maker Governance based on a process specified in STA4.

5.4.2: Allocator Vault Special Valves

STA4 can define certain Special Bandwidth conditions, where separate, higher bandwidth Dai generation is enabled for preprogrammed actions that are verified to be secure through STA4. AllocatorDAOs have unlimited Special Bandwidth for deploying Dai to SubDAO farms.

5.4.3: Funnel modules are smart contracts that are connected to an Allocator Vault Valve, and use it to perform automated operations.

5.5: Legal Recourse Assets - STA5

Legal Resource Assets are assets used as collateral for the Dai Stablecoin that are enforced through legal recourse by Arranged Structures. They have unique risks that must be safeguarded against.

5.5.1: Arranged Structures are special legal structures set up by Ecosystem Actors to secure Legal Recourse Assets to help stabilize the Maker Ecosystem. PRO5 must define strict and detailed standards for how to properly establish, fund, interact with, monitor, improve and wind down Arranged Structures. Each Arranged Structure has a Conduit system that is automatically connected to all AllocatorDAOs, and allows them to send and receive Dai or other assets.

5.5.1.1: Arranged Structures must have an AllocatorDAO owner. The owner assigns instructions to the Arranged Structure on behalf of MakerDAO, and determines if and how other AllocatorDAOs can access the Conduit of the Arranged Structure.

5.5.2: Arrangers are Ecosystem Actors that assist in the design and operation of Arranged Structures. They are generally prohibited from ever being in a position where they can cause damage or loss to the Maker Ecosystem, beyond delays or annoyance. They advise in the creation of Arranged Structures, and Arranged Structures must always have an Arranger attached to it, to perform reporting on it. All details related to this must be covered in PRO6. The Arrangers manage a restricted function on the Arranged Structure Conduit that allows them to send assets onwards to the predetermined blockchain account of the Arranged Structure.

5.5.2.1: The AllocatorDAO owner of the Arranged Structure can change the blockchain account of the Arranged Structure and change the Arranger.

5.5.3: Advanced Asset Managers are Ecosystem Actors that manage and deploy advanced assets as collateral to help stabilize the Maker Ecosystem. Arrangers to help set up opportunities for AllocatorDAOs to deploy assets to Advanced Asset Managers. Arrangers and Advanced Asset Managers must be kept separate to prevent conflict of interest, and STA5 must specify principles and processes for ensuring this and preventing misalignment.

5.6: AllocatorDAO Junior Capital - STA6

AllocatorDAOs depend on having Junior Capital to use most of the functionality of their Allocator Vaults. Their Effective Junior Capital is determined based on processes that must be specified in STA6.

5.6.1: The AllocatorDAO Surplus Buffer counts as Junior Capital.

5.6.2: The AllocatorDAO Maker Elixir Pool counts as Junior Capital, with a modifier determined by STA6.

5.6.3: Additional reserves held by the AllocatorDAO can also count as Junior Capital, this must be specified in STA6.

5.6.4: Unencumbered assets are any assets that either don’t conform to the requirements in 5.6.1, 5.6.2 and 5.6.3, or that the AllocatorDAO has specifically marked as being unencumbered. Unencumbered Assets do not count towards the AllocatorDAOs Junior Capital, but in return can be freely deployed for any Universally Aligned purpose the AllocatorDAO wants.

5.7: AllocatorDAO collateral and market requirements - STA7

AllocatorDAOs are subject to requirements for how they deploy Dai generated from their Allocator Vault Standard Valve. The requirements do not apply to Special Valves, that instead have any requirements built into their smart contracts.

5.7.1: Capitalization Requirements

AllocatorDAOs are subject to Capitalization requirements based on their Effective Junior Capital and the assets they are deploying their Dai to. All of the individual Capitalization Requirements for each of the asset allocations are added together, and if the AllocatorDAO does not have enough Effective Junior Capital to meet the requirement they are penalized with penalty rates as specified in STA8. Multiple Capitalization Requirements can overlap for the same assets, in which case they are added together.

5.7.1.1: Capitalization Requirements for ALM categories

STA7 must specify a model of Capitalization Requirements for AllocatorDAOs based on the ALM categorization of the assets in their portfolio.

5.7.1.2: Capitalization Requirements for Risk categories

STA7 must specify a model of Capitalization Requirements for AllocatorDAOs based on the financial risk of the assets in their portfolio.

5.7.1.3: Capitalization Requirements for physical concentration risk

STA7 must specify a model of Capitalization Requirements based on physical concentration risk.

5.7.2: Market Requirements

AllocatorDAOs are required to use funds generated from their AllocatorDAO vault to perform certain market actions.

5.7.2.1: Required Minimum Liquidity Provision

AllocatorDAOs are required to use a fraction of their asset portfolio to market make Dai at specific spreads, provide Dai liquidity, or have a specific amount of low duration assets available on short notice. STA7 must specify the conditions for this to ensure it maximizes the Stability and Efficiency of Dai. Failure to follow these requirements result in penalties.

5.7.2.2: Dai Price Deviation Reaction Requirement

If Dai is undervalued or overvalued, AllocatorDAOs are required to use a portion of their assets to acquire Dai and correct the price deviation, specified by STA7. If an AllocatorDAO uses less than the required amount of assets, it is penalized according to STA8.

5.8: Allocator Penalties - STA8

AllocatorDAOs can suffer penalties for different reasons that must be managed and specified by STA8.

5.8.1: Penalty Rates

Penalty Rates are the most common form of penalties that AllocatorDAOs can get. It is acceptable for an AllocatorDAO to deliberately take actions that accrue some penalty rates for technical or practical reasons, as long as they quickly return to proper capitalization requirements. This must be clearly specified in STA8.

5.8.2: Forced Dilution

If an AllocatorDAO becomes severely undercapitalized, or doesn’t return to proper capitalization within a timeframe, as specified in STA8, Stability FacilitatorDAOs must activate Forced Dilution of the AllocatorDAO. Forced Dilution causes the AllocatorDAO to emit tokens at a high rate that are sold to accumulate Maker Elixir.

5.8.3: Forced Liquidation.

If an AllocatorDAO remains undercapitalized after having Forced Dilution activated, the Stability FacilitatorDAOs must directly liquidate their assets to bring them back to proper capitalization. This also results in an additional severe liquidation penalty for the AllocatorDAO. STA8 must specify a secure process for Forced Liquidation.

5.9: Surplus Buffer and Smart Burn Engine - STA9

STA9 must cover the processes for setting various economic parameters related to Maker Protocol Surplus.

5.9.1: The Surplus Buffer upper limit determines when the Surplus Buffer sends its funds to the Smart Burn Engine.

5.9.2: Smart Burn Engine Dai Algorithm is the algorithm for determining when and how the Smart Burn Engine will use received Dai to buy Maker Elixir, based on the Maker Economic Resilience Model.

5.9.3: The Elixir Burn Algorithm determines when and how the Smart Burn Engine will use accumulated Maker Elixir to buy and burn MKR, based on the Maker Economic Resilience Model.

5.9.4: The Maker Reverse Burn Engine algorithm determines when and how the Maker Reverse Burn Engine will use MKR to accumulate Elixir and send it to the Smart Burn Engine, based on the Maker Economic Resilience Model. The Maker Reverse Burn Engine algorithm is replicated in the AllocatorDAO and FacilitatorDAO Dendrite Reverse Burn Engines.

5.9.5: The Maker Economic Resilience Model is a mechanism that sets a target price for MKR based on monitoring various onchain factors such as asset reserves and average income. STA9 must specify principles and processes for researching and development of the Maker Economic Resilience Model to be Universally Aligned and help support stability of the Maker Ecosystem.

5.9.6: Maker decentralized asset reserve, a system for accumulating strategically important decentralized assets to help overcollateralize Dai. STA9 must specify the model used to determine which assets to accumulate.

5.10: SubDAO Economic Resilience Models - STA10

The SubDAO Dendrites require Economic Resilience Models to function. These Economic Resilience models are mechanisms that set a target price for the relevant SubDAO token based on monitoring various on-chain factors such as asset reserves and average income. STA10 must specify principles and processes for researching and development of the Economic Resilience Models for FacilitatorDAOs, AllocatorDAOs and MiniDAOs to be Universally Aligned and help support stability of the Maker Ecosystem.

5.11: MKR backstop - STA11

If the Dai Stablecoin becomes undercollateralized, the Maker Protocol will automatically generate and sell MKR to recapitalize the system.

5.11.1: STA11 must define an emissions rate for the MKR backstop function that prevents risk of sudden failure. This must be continuously assessed and improved to maximize stability of the system in worst case scenarios.

5.11.2: STA11 must define a maximum level of MKR emission per undercollateralization event. This must be continuously assessed and improved to maximize stability of the system in worst case scenarios.

5.11.3: The protocol must contain an override mechanism that allows Maker Governance to continue emitting MKR beyond the maximum level. STA11 must cover processes for research and principles for which situations it should and can be safely used.

5.11.4: The protocol must contain an MKR backstop halt mechanism that immediately halts the backstop event in case of severe risk of total failure.

5.11.5: In case the backstop limit is reached and not overridden, or in case the backstop is halted during the event, the Dai target price receives a haircut to settle the remaining bad debt of the system. STA11 must cover this worst case scenario and research ways the damage can be mitigated.

5.12: Dai Stablecoin decentralization - STA12

The Dai Stablecoin must maintain the ability to shift its collateral assets into decentralized collateral in case of physical threats.

5.12.1: When there is no immediate physical threat the protocol should maximize income in order to accumulate decentralized assets through the Maker Decentralized Asset Reserve

5.12.2: In case of an immediate physical threat, Maker Governance can determine a Legal Recourse Asset penalty parameter that applies an additional penalty rate to all Legal Recourse Assets, in order to encourage an immediate or gradual shift to decentralized collateral backing. STA12 must cover the process for this adequately.

5.12.3: When there is no immediate physical threat, there must still be a small scale subsidy program in place to subsidize decentralized collateral based generation of Dai, to ensure a market is available that can be quickly ramped up if it becomes necessary. This must be specified by STA12.

5.13: Sagittarius Engine Dai generation Risk Parameters - STA13

The Sagittarius Engine enables MKR holders to generate Dai based on the surplus owned by the Maker Protocol. It has the following risk parameters, most of them unchangeable my Maker Governance to prevent misalignment.

5.13.1: Hard liquidation ratio of 200%. At this collateralization level, vaults will be instantly liquidated.

5.13.2: Soft Liquidation Ratio of 300%. At this collateralization level, vaults will be marked for soft liquidation, and if they don’t increase their collateralization level above 300% again within a week, they are liquidated. New Vaults cannot be opened with less than 300% collateralization.

5.13.3: Sticky Oracle

The MKR oracle for the Sagittarius Lockstake Engine Vaults has sticky upwards price movement. It works by operating both on a market price measured from Maker Elixir, and a Sticky Price. The Sticky Price is what is actually used for calculating Liquidation Ratio and Soft Liquidation Ratio.

Whenever the real price is below the Sticky Price, the Sticky Price instantly adjusts down to be equal to the real price.

When the real price is above the Sticky Price, the Sticky Price adjusts upwards at a throttled rate of at most 5% per month.

5.13.4: Debt Ceiling

The Debt Ceiling of Sagittarius Lockstake Engine Vaults is determined based on the surplus and reserves owned by the Maker Protocol. The total value of the debt ceiling is adjusted automatically through an algorithm that must be defined by STA13 to incentivize users to lock their MKR in the Sagittarius Lockstake Engine while also protecting the stability of the Maker Ecosystem.

5.13.5: Stability fee

The Stability Fee of the Sagittarius Lockstake Engine Vaults is equal to the Base Rate.

5.14: Scope Bootstrapping - STA14

STA14 must cover all necessary measures to ensure the Stability Scope is properly bootstrapped before NewChain is launched and the Endgame State is reached. During the bootstrapping phase other Atlas Articles may be temporarily overridden if necessary for ensuring the success of the bootstrapping, until NewChain is launched.

6: The Accessibility Scope

The Accessibility Scope covers accessibility and distribution efforts, and regulates user-facing frontends of MakerDAO Core and SubDAOs. Operational rules are defined in the Accessibility Scope Mutable Alignment Artifact, which can specify and optimize behavior and processes within the following constraints.

6.1: Scope improvement - ACC1

ACC1 must cover the key specifications and processes necessary for the Scope to reliably improve itself long term without risk of misalignment.

6.1.1: The Accessibility Scope must have a specialized Advisory Council that is able to propose improvements to the language of the Scope Artifact that increases its Alignment Artifact Strength and increase efficiency and security of the Maker Ecosystem.

6.1.2: The Accessibility Scope must have a customized strategy towards its display and interaction through the DAO Toolkit to make it maximally user friendly.

6.2: Brand identity - ACC2

ACC2 must specify the brand identity of Maker, and processes for refining and improving the details and examples of the brand identity to ensure it is as good as possible. The brand should be reliable and stable over the long term.

6.3: Accessibility Reward System - ACC3

ACC3 must specify accessibility reward systems for third party frontends and SubDAOs to incentivize them to attract NewStable users, DSR users and SubDAO farm users. ACC3 must also specify an accessibility reward uniquely available to SubDAOs that bring MKR holders to Lockstake into the Sagittarius Lockstaking Engine.

6.4: Accessibility assets - ACC4

ACC4 must specify principles and processes for managing the accessibility assets, such as communication channels and communication presence on external websites.

6.5: Accessibility campaigns - ACC5

ACC5 must specify principles and processes for managing accessibility campaigns.

6.6: SubDAO frontend standards - ACC6

ACC6 must specify best practice for SubDAO frontend standards in terms of security, user experience and required features.

6.7: Easy Governance Frontend (EGF) requirements - ACC7

The EGFs are the standardized and regulated applications that most users will use to access the Sagittarius Lockstake Engine and its Governance Participation Rewards. It is critically important for the resilience of Maker Governance and must be treated as such by Alignment Conservers. It is designed to withstand attempts by individuals to manipulate the contents or design of the EGF in order to give them an advantage in the political dynamic of Maker Governance.

6.7.1: Design of the Easy Governance Frontend (EGF)

The EGF must be simple and gamified in order to lower the barrier of meaningful contribution enough to enable MakerDAO to benefit from the wisdom of the crowd of all the incentivized voters that receive the MKR voter incentives, and are expected to have minimal alignment.

6.7.2: Delegation to Aligned Governance Strategies

The user experience of the EGF reduces the central governance decision MKR holders have to make down to picking a Delegate and an Aligned Governance Strategy that the Delegate must vote according to.

6.7.3: Importance of Immutability

Because the design of the EGF has an outsized impact on the outcome of Maker Governance, the design must be near-immutable and rigorously defined to ensure all attempts at manipulation will be impossible.