Adopting USDG as a Core Strategic Initiative for the ArbitrumDAO

[Entropy]

Non-Constitutional | Proposed by Entropy Advisors, developed jointly with Offchain Labs, the Arbitrum Foundation, and OpCo

Abstract

Arbitrum has partnered with Paxos by joining the Global Dollar Network (GDN), giving builders an ecosystem-aligned dollar with committed liquidity, incentives, and integration support behind it from day one. This proposal asks the DAO to back a coordinated effort across the Arbitrum Aligned Entities (AAEs) to grow USDG adoption, so that incentives, grants, and partnerships compound in one direction: toward builders first, and back to the DAO over the long term. The DAO becomes the steward of USDG’s growth on Arbitrum and the recipient of the economic value that growth creates.

To make USDG growth a credible and well-resourced effort, this proposal seeks DAO approval for the following:

1. Bolster the DRIP budget with an additional 100M ARB, adjust the season structure, broaden the program’s permitted activities, and extend its timeline. The existing Season Selection Committee, ⅔ approval threshold, AF custody of funds, and DAO termination rights all remain unchanged.
2. The ATMC will deploy assets falling within its umbrella in support of USDG growth, including seeding protocol-owned liquidity, redirecting returns to incentivize USDG usage, and enabling co-incentive and integration deals, among other growth-related levers, through the established structure of OAT oversight and AF custody.
3. Route all AEP fees, net of the 20% allocated to the Arbitrum Developer Guild, to the TM Portfolio, and authorize the ATMC to convert incoming and accrued AEP fees to USDG, with the Arbitrum Foundation executing conversions.
4. Confirm the USDG initiative as a Special Project under Entropy’s existing Year 2-3 scope of work, led by Entropy with support from other relevant AAEs. USDG’s success will become one of Entropy’s core responsibilities under its existing mandate, and the OAT will establish KPIs for the initiative. Entropy requests no additional compensation and its role remains subject to the existing terms of its mandate.

Entropy developed this proposal jointly with Offchain, the Arbitrum Foundation, and OpCo. The OAT and each AAE are read in on the full strategy, including the parameters that we are not able to publish publicly. Each authority requested above runs through a structure the DAO has already approved, retains its own oversight, and remains ultimately subject to delegate control through existing termination and governance rights.

Motivation and Rationale

USDG, an Ecosystem-Aligned Dollar

Arbitrum One remains a leading L2 with over ~$4B in stablecoins. However, competing chains now offer builders defined advantages in distribution and stablecoin economics, and Arbitrum needs an answer of its own to keep and grow its stablecoin base. GDN membership provides Arbitrum a competitive offering as USDG gives builders access to stablecoin economic upside without the cost, regulatory burden, or technical lift of launching a stablecoin.

Why the Global Dollar Network

The Global Dollar Network is built for the post-Genius framework. Rewards accrue to network partners based on the USDG they hold, mint, and accept, and each partner decides how those rewards are used. Entropy’s research across the full landscape of stablecoin issuers, including incumbents, revenue-share issuers, yield-bearing products, decentralized protocols, and white-label infrastructure platforms, led us to GDN and USDG, issued by Paxos, for three reasons.

• Scale and distribution: USDG is live today and currently sits near $3.2B in supply across Ethereum, Robinhood, X Layer, Solana, Ink, and Mantle. It sits at the center of the Global Dollar Network, which has grown past 150+ enterprise partners, including Kraken, Robinhood, OKX, and Mastercard. USDG is already integrated into earn programs, unified order books, card products, and cross-border payment flows at these institutions. USDG arrives on Arbitrum with that demand already attached.
• Regulatory depth: USDG is issued by Paxos Digital Singapore, a Major Payments Institution supervised by the Monetary Authority of Singapore, and in the EU by Paxos Issuance Europe under FIN-FSA supervision and in compliance with MiCA. This multi-jurisdictional structure reduces counterparty and regulatory risk for the DAO.
• Issuer track record: Paxos has over $245B in tokenization activity since 2018 across multiple products and institutional partners, including serving as the issuer of record for PayPal USD (PYUSD). It publishes monthly transparency reports with independent attestations of reserve assets held in segregated, bankruptcy-remote accounts. Paxos has maintained full reserve backing across multiple market cycles under prudential supervision.

For more information on USDG and the Global Dollar Network, visit globaldollar.com.

Predictable, Dollar-Denominated Revenue

The DAO’s revenue base is structurally skewed toward non-fiat, market-correlated sources. Sequencer and PGA (prev Timeboost) revenue scale with volatility and are denominated in ETH, so the DAO is hit twice during low-volatility or downward-trending markets due to lower absolute ETH revenue and a declining ETH-to-dollar conversion rate. AEP fees, defined as a percentage of chain revenue, suffer from the same dynamic. Treasury management yield includes meaningful dollar-denominated positions, but the TM portfolio is not yet sizable enough to provide dollar-denominated revenue in excess of DAO annual outlays.

Being part of the GDN helps address this structural problem. It introduces a dollar-denominated, demand-driven revenue line that is largely uncorrelated with the rest of the DAO’s income, and the underlying activity that generates this revenue (stablecoin activity and total supply in circulation) is something that can be directly influenced sustainably through incentives, integrations, and capital deployment. Stablecoins are the single largest growth vector in crypto, with institutional forecasts placing supply in the trillions by 2030. As USDG scales on Arbitrum, the DAO is positioned to capture a share of that growth.

Specifications

This proposal uses programs and entities the DAO has already approved and each operates under the oversight already established for it. The OAT and each AAE are read in on the full strategy for USDG’s growth. Delegates retain the ability to amend or end any component through the standard governance process. Below is a summary of each request and the oversight functions in place:

Program	What changes	Approval and custody	DAO control
DRIP	+100M ARB; single USDG-focused season; broader permitted activities; extended timeline	Season Selection Committee, ⅔ threshold (unchanged). AF custody (unchanged).	Offchain vote can end the program; uncommitted funds return to the treasury
ATMC	Treasury assets deployed toward USDG growth: minting, POL, co-incentive deals, reinvested proceeds	Council approval thresholds under the Investment Policy Statement; OAT oversight. AF custody (unchanged).	Standing governance process can direct or wind down
AEP fees	Routed to the TM portfolio and converted to USDG	ATMC authority under the Investment Policy Statement. AF executes conversions.	Standard governance process can amend or reverse
GDN rewards	Majority reinvested into builder growth during the growth phase; net proceeds to the ATM portfolio	Each reinvestment deal needs ⅔ approval by the DRIP Season Selection Committee.	Standard governance process can amend or reverse

1. DRIP: Broadened Scope, Budget & Timeframe Extension

DRIP was originally approved with an 80M ARB budget across four seasons over a one-year window, with the first season focusing on DeFi lending incentives. At the time of its approval, the DRIP budget was worth ~$40M; however, ARB’s price action since then has compressed the program’s effective purchasing power. Bootstrapping USDG also requires activities beyond DRIP’s original scope. Rather than run a parallel USDG program, we propose broadening DRIP itself, since it already has Merkl as its distribution partner and an established oversight structure.

We propose the following:

• Bolster the budget by 100M ARB. DRIP’s total budget increases from the ~65M ARB unspent from the original budget to ~165M ARB. These funds will be used to secure USDG integrations and other growth strategies.
• Soften the season structure. Seasons 2 through 4 are combined into a single season focused solely on the growth of USDG. The committee is no longer bound to discrete cycles and can deploy capital where and when it is most effective.
• Broaden permitted activities. DRIP’s scope is expanded to include POL seeding, liquidity arrangements, incentive structures with USDG-integrating teams, and other distribution surfaces.
• Extend the time frame. The DAO recently approved an extension of the DRIP mandate to July 1, 2027. This proposal seeks to extend the mandate through the 1-year milestone mark of when this proposal passes an onchain vote, estimated at this time to be November 12th, 2026. As we approach the new conclusion date, Entropy may return with another extension. If the mandate is not extended, any unused funds at the end of the deployment window will be returned to the DAO.

Unlike prior incentive programs, DRIP spend on USDG generates predictable revenue for the Arbitrum ecosystem as supply grows. The DRIP budget funds the incentives that kickstart USDG adoption and early supply growth, and partnership agreements will align each project’s interests with the long-term objectives of the Arbitrum ecosystem. We view this 100M ARB as an investment in a revenue line, and the DAO has made this kind of investment before. In late 2024, the DAO approved an investment of 250M ARB to bolster the Arbitrum Foundation’s strategic partnerships budget which has steadily expanded the Arbitrum ecosystem and helped the DAO accrue $6.19M in protocol revenue in H1 2026 alone, as detailed in Foundation’s latest transparency report.

In the growth phase, we propose that the DAO reinvests the majority of this revenue into builder incentives, integrations, and partnerships that expand USDG supply on Arbitrum. These reinvestment deals are subject to review and ⅔ approval by the DRIP Season Selection Committee, applying the same oversight that governs DRIP spend. Net proceeds flow to the ATM, and that share grows as supply scales and reinvestment needs decline relative to revenue.

The existing Season Selection Committee composition and ⅔ approval threshold remain unchanged. The Arbitrum Foundation continues to hold DRIP funds in the existing custody arrangement. The DAO maintains the ability to end the program at any time via an offchain vote where the number of FOR votes to end the program outweighs against votes and the number of FOR + ABSTAIN votes reach the non-constitutional quorum level (previously stated in the original DRIP proposal as 3% of votable supply, but is now considered 40% of DVP). If this occurs, all non-committed funds will be returned to the treasury.

2. ATMC: Mint USDG, Seed POL, Strike Partnerships

The ATMC currently holds ~$66M in tokenized MMF and stablecoin positions. One of the largest costs of bootstrapping any stablecoin is establishing deep onchain liquidity for peg stability, low-friction access, and DeFi utility. The treasury management portfolio is uniquely positioned to provide this without the DAO needing to fund liquidity from scratch. Some USDG allocations will earn a lower direct return than alternatives in the short term. We view this as an acceptable tradeoff because USDG supply growth generates revenue for the DAO beyond each position’s own return.

Under the Investment Policy Statement published in Q4 2025, the ATMC already has the authority to allocate portfolio assets into ecosystem growth opportunities. We are surfacing some of the ways the portfolio may be used to accelerate USDG growth so the community has visibility. These include, but will not be limited to:

• Minting USDG from the existing stablecoin allocation
• Seeding protocol-owned liquidity for USDG pairs
• Negotiating co-incentive arrangements and other bilateral deals with protocols where ATMC capital deployment is part of the consideration

USDG-related proceeds falling within the ATMC umbrella may also be directly reinvested to accelerate growth, through, e.g., the form of incentives, with all existing ATMC oversight remaining in place. Allocations stay subject to the council’s approval thresholds, the current custody arrangement, and the OAT and other AAEs are read in on deployment activity. The DAO can direct or wind down this activity at any time through its standing governance process.

3. Converting AEP Revenue to USDG Under ATMC Oversight

Arbitrum Expansion Program fees are generally paid to the DAO in volatile tokens. Holding these assets as received leaves this revenue exposed to market correlation and introduces position management overhead across a growing number of assets with varying liquidity profiles.

This proposal authorizes all AEP fees, net of the 20% allocated to the Arbitrum Developer Guild, to be routed directly to the ATM portfolio. The ATMC will hold authority over the conversion of incoming AEP fees to USDG, with the Arbitrum Foundation executing each conversion within a reasonable window and managing slippage, particularly for low-liquidity assets that may require an OTC quote. This authorization will also apply to AEP fees already accrued to the DAO.

To summarize, this places AEP revenue under the ATMC’s existing mandate and oversight, where it can be deployed in support of USDG growth and broader treasury objectives. This routing operates under the ATMC’s current Investment Policy Statement and approval processes, and delegates retain the ability to amend or reverse it through the standard governance process.

4. Entropy’s Role in USDG Growth

Entropy will champion the USDG initiative under the Special Projects vertical of its Year 2-3 scope of work, which covers working with partners to diversify the DAO’s revenue streams. USDG’s success becomes one of Entropy’s core responsibilities, and the OAT will establish KPIs for the initiative.

Entropy will lead this work with a small team drawn from the other AAEs. The growth strategy targets two sources of supply, new inflows to Arbitrum and the existing stablecoin float. On the first, we aim for the majority of new inflows to arrive as USDG, so that a growing share of the ecosystem’s stablecoin base becomes revenue-generating. On the second, we aim to convert a portion of the existing stablecoin float already on Arbitrum into USDG. Arbitrum One currently has approximately $4B of various circulating stablecoins, excluding the Hyperliquid bridge. Capturing 15-20% of that addressable float in the first year of launch would represent hundreds of millions in USDG supply generating dollar-denominated revenue for Arbitrum, on top of whatever share we capture of new inflows. A notable share of this revenue then gets reinvested back into one of the ecosystem’s most important assets, the builders.

Going forward, a large share of Entropy’s existing DRIP and treasury management work will be focused on USDG growth, and this involves no adjustment to Entropy’s compensation. Entropy’s role remains subject to the existing terms of its mandate, including the DAO’s rights to amend or terminate it through the standard governance process.

Consistent with Entropy’s established reporting practices across its existing mandates, the community can expect the following in relation to all USDG-related activity.

• Monthly updates: Entropy publishes monthly updates covering treasury management activity, DRIP deployments, and broader strategic workstreams. USDG-related reporting will be integrated into this cadence.
• Ecosystem analytics: A dedicated USDG page covering supply and activity on Arbitrum One has already been launched at arbdata.com/usdg.

Targeted Timeline

• Forum Discussion: Oct 6th - 15th
• Offchain Vote Period: Oct 15th - Oct 22th
• Onchain Vote: Oct 29th - Nov 12th

Closing Thoughts

Joining the GDN gives Arbitrum builders an ecosystem-aligned dollar and gives the DAO a direct stake in the growth of the stablecoin sector. The strategy runs through programs and entities the DAO has already approved, was shaped and endorsed jointly by the AAEs and the OAT. Entropy sees this as the highest-ROI use of the DAO’s existing capital allocation infrastructure over the next 12-24 months.

We would like to thank everyone we spoke with in shaping this proposal, including but not limited to Arbitrum delegates, all AAEs, the OAT, stablecoin issuers, stablecoin protocol teams, infrastructure projects, and Arbitrum investors.

Disclaimer: Although Entropy Advisors will do everything possible to maximize the success and safety of the USDG strategy on Arbitrum, crypto is experimental technology from a security and economic design perspective. Entropy Advisors cannot be held responsible or liable for any of the risks associated with stablecoin growth initiatives, capital deployment, or third-party partnerships described herein.

[stonecoldpat]

I’m in favour of this proposal.

There has been significant work across multiple organisations to launch the USDG initiative, especially by Entropy Advisors who have been invaluable during the process.

A good opportunity to put our best foot forward and do what we can to maximise its potential success.

[Arbitrum]

The Arbitrum Foundation supports this proposal. We’re proud to have developed it alongside Entropy Advisors, Offchain and OpCo and will collaborate with other AAEs to drive adoption and TVL growth.

The launch shows how much of the ecosystem is already organised around USDG, with integrations across lending, trading, on- and off-ramps and cross-chain transfers from day one. The next step is for the wider ecosystem to build on that, from builders and protocols to delegates and partners. The Foundation is glad to help where it can and teams integrating USDG can apply to the Foundation’s USDG on Arbitrum program for hands-on integration support.

Beyond growth, this is a new revenue line for the Arbitrum ecosystem, and one unlike any it has today. As a Global Dollar Network partner, Arbitrum earns rewards on the USDG held across it, paid in dollars. Where sequencer fees, Timeboost and AEP fees move with network activity, this line is denominated in dollars, is largely uncorrelated with onchain activity and scales with USDG supply rather than with transaction volume.

During the growth phase, the proposal puts forward reinvesting the majority into the builders, integrations and liquidity that grow that supply, with net proceeds flowing to the treasury management portfolio. Every dollar of USDG integrated and held across Arbitrum widens the ecosystem’s share of those economics, which is why we see the growth measures in this proposal and the revenue they create as one and the same objective.

[NikitaOnchain]

Before the vote, here is some post-season data that may be useful.

DRIP Season 1 ended on February 18. I looked at outstanding borrowing for the six S1 lending protocols on Arbitrum at +30, +90 and +180 days. I compared it with a 56-day pre-campaign baseline and with the same protocol on chains without DRIP (DefiLlama data).

Borrowing at +180 days, % of baseline:

Protocol	Arbitrum	Ethereum	Base
Fluid	128%	47%	49%
Morpho	203%	107%	228%
Aave V3	36%	40%	51%
Dolomite	28%	n/a	n/a
Silo V2	15%	2%	n/a
Euler V2	2%	27%	62%
Compound V3 (not in DRIP)	32%	61%	33%

n/a: no deployment on that chain, or a baseline below $5M (too small for a fair %).

What I take from it:

1. Retention was very uneven. Fluid stayed above its baseline, while Fluid on Ethereum fell to 47%. Morpho kept about 5% of its campaign-end uplift. A market-level study of Morpho’s DRIP markets gives 7.7% for USDC and 11.3% for USD₮0: GitHub - NikitaOnchain/morpho-drip-retention: Onchain analysis of lending-demand retention across 45 DRIP-eligible Morpho markets on Arbitrum. · GitHub
2. For Aave and Dolomite, the result is close to the market. Compound V3 on Arbitrum, which was not in DRIP, is at 32%.
3. I could not find published post-season retention numbers for S1. If they exist, I would be glad to compare.

A suggestion for the USDG season: publish retention targets per protocol in advance, for example USDG borrowed and supplied at +30 and +90 days vs a pre-season baseline and vs a non-incentivized comparison. Then tie the taper, or part of the budget, to those targets.

Caveats: protocol-level DefiLlama data in USD, covering all markets, not only DRIP-eligible ones. It is observational, not causal. Other events (Stream Finance, Silo v3, Dolomite’s USD1 market on Ethereum) affect some numbers. Script and data: GitHub - NikitaOnchain/drip-s1-180d: DRIP Season 1 on Arbitrum, 180 days later: borrowing vs baseline for 6 lending protocols (DefiLlama data) · GitHub

Disclosure: independent analyst, not affiliated with any protocol named here and not funded by the DAO.

[TodayInDeFi]

I support this proposal as an opportunity to grow stablecoin adoption and diversify Arbitrum’s revenue through USDG. I encourage phased deployment of the additional budget, tied to measurable adoption and revenue milestones. Reporting should distinguish gross rewards from net returns after incentives and costs, and track retention after subsidies end.
I also request clear treasury exposure limits and periodic reviews so spending can be adjusted if results fall short.

[cp0x]

We voted Against in the Snapshot temperature check.

We understand the concern behind this proposal, since most of the DAO’s costs are in dollars while its revenue comes in ETH and other volatile tokens. That mismatch can be addressed by converting revenue as it arrives, and the ATMC already holds around $66M in money market funds and stablecoins. It does not by itself justify committing an additional 100M ARB to USDG growth, alongside AEP fee conversions and treasury allocations to a single issuer’s stablecoin. We are also not convinced the GDN line is as uncorrelated as described. Supply growth would be driven by ARB-denominated incentives whose dollar value falls when ARB declines, and rewards are paid from the yield on USDG reserves, which moves with interest rates.

The key economics are not disclosed. Delegates are asked to vote without knowing the terms of Arbitrum’s GDN agreement, which entity receives the rewards, or what revenue to expect, while the text notes that the OAT and the AAEs are read in on parameters that cannot be published. Most rewards would be reinvested during a growth phase with no defined end, and the proposal does not specify what share of rewards will reach the treasury management portfolio during that phase or when that share will increase.

The proposal leaves the OAT to establish KPIs rather than specifying them for delegates before the vote, and we think they should be known before funds are approved. When we studied spending at Lido, Aave, Sky and Uniswap in 2023–2025, only 14 of 58 major spending and incentive decisions stated a goal in terms of public metrics, and growth incentives showed mixed results a year later (cp0x study). The DRIP Season 1 data @NikitaOnchain shared above also shows uneven retention, with four of the six lending protocols below their pre-campaign borrowing levels 180 days later. The proposal more than doubles the program’s remaining budget without publishing retention targets or tying the taper to results. Phased deployment tied to milestones and clear treasury exposure limits were also raised earlier in this thread, and we think both should be in place before funds are committed.

The mandate is broad and hard to unwind. The list of ATMC actions, including bilateral deals with protocols, is explicitly open-ended. DRIP expands to POL, liquidity arrangements and deals with integrating teams whose terms are difficult to assess from outside. The remaining separate seasons are also merged into a single USDG-focused season. Conversion covers already accrued AEP fees as well, without quantitative slippage limits or OTC execution requirements disclosed in the proposal. If the program is ended, only uncommitted funds return to the treasury, spent incentives cannot be recovered, and existing positions may need to be unwound.

The plan also concentrates a growing share of treasury value in one issuer’s stablecoin, chosen through a review of issuers that has not been published and without a USDG-specific exposure cap disclosed in the proposal. Finally, four separate decisions are bundled into a single ballot, so delegates cannot express support for individual components through their vote.

[Zeptimus]

Voting FOR. In general I’m more bullish on ETH than on dollar things, so I’m glad the main ETH income stays as ETH and only the AEP fees get turned into USDG. Still, I see the potential in this partnership, and adding a dollar income stream next to the ETH one makes sense to me.

I trust Entropy and the other AAEs on this. DRIP brought Morpho and Euler over and the ATMC has been making the DAO money, so their track record is a big part of why I’m comfortable.

The deal has to be a good one though, and 100M ARB on top of DRIP is a lot. I would prefer having the deal details to make a more informed decision, so I’d like to see the KPIs and some retention targets published before the onchain vote, with the spend tied to them.

Based on previous performance I’m voting for it. This sounds very promising and I want to see it work.

[offchain]

Offchain Labs is supportive of the proposal. We’re excited to see USDG adoption grow on Arbitrum and want to thank Entropy Advisors and OpCo for their collaboration with AAEs to help structure this campaign. We believe this launch demonstrates how the Arbitrum DAO and ecosystem can grow new business lines that productively employ the DAO’s capital.

[Flook]

Merlyn Labs is voting FOR this proposal. USDG gives the DAO steady dollar revenue and builds on structures we already trust. Good for the chain.

[shogun]

The following reflects the views of GMX’s Governance Committee, and is based on the combined research, evaluation, consensus, and ideation of various committee members.

As apart of the DRIP Season 2, GMX was fortunate to launch alongside Morpho Vault curators in launching the GMX Dollar Vault, which is a first for GLV vaults, in supporting a single sided USD denominated stablecoin USDG for trading liquidity. To date has amassed $11.84M in TVL.

Therefore, we share a parallel objective in driving early USDG adoption, and acknowledge the work @Entropy and OpCo have undergone in making this venture successful (as you’ve mentioned in 2.) Therefore we’ll be in approval for this fiscal request, and would like to watch closely of the KPIs.

Overall, the proposal on USDG strategy is an economically advantageous decision for the DAO to realise USD denominated revenues as a way to diversify its income.

For these reasons we’re FOR this proposal.

[SEEDGov]

We support making USDG growth a core initiative so Arbitrum has an ecosystem-aligned dollar, constituting a very promising revenue stream and a highly strategic initiative.

Reaching the stated objectives entails an immense go-to-market effort fueled by DRIP, the alignment of the ATMC and AEP, and the possibility of integrating USDG both into products that already hold stablecoins on Arbitrum and into the apps that bring new deposits in as USDG. As mentioned, in this growth phase reinvesting in builders is a necessary step in order to increase the supply.

With the custody frameworks in place and under OAT oversight, we endorse Entropy in leading the initiative and undertaking the coordination efforts.

[Entropy]

Thank you to everyone who has engaged on the proposal so far, both here on the forum and in the various governance calls over the last two weeks. We have grouped our responses around the questions that came up most often.

What the DAO can expect in revenue

The USDG reserve mix currently earns an estimated 3.5%-3.75%, based on the most recently posted attestation report (all reports available here) and current rates. At that rate, every $100M of USDG generates roughly $3.5M-$3.75M a year in rewards across the Global Dollar Network. Arbitrum receives a share of the rewards on USDG held across its ecosystem, under terms that are confidential under the GDN membership agreement. While those rewards will move with interest rate changes, they create a revenue line that is less correlated with ETH price or onchain activity, which drive the DAO’s current primary revenue lines.

The net amount attributable to the DAO during the growth phase is difficult to estimate because each deal draws on a different mix of support. The Arbitrum Stablecoin Growth Program, launched by the Foundation on October 15th, is one example. It pairs performance-based milestones with technical assistance, marketing, and ecosystem introductions for teams that adopt USDG as their primary stablecoin. Other partners may receive DRIP incentives or a reward-share arrangement, and the mix varies by deal.

How the DRIP budget is deployed and measured

As we outlined in the DRIP S1 retrospective, incentives have the largest impact on 0 to 1 markets. USDG launched on Arbitrum One on October 6th starting from zero supply, so its growth on Arbitrum is more easily attributable to the incentives and integrations behind it. USDG supply on Arbitrum One and the list of integrated applications are tracked publicly at arbdata.com/usdg, and, as outlined in the Accountability and Reporting section, USDG activity is covered in our monthly updates.

Several delegates asked about phased deployment of funds and retention. The DRIP committee has already shown it will hold back spending where it doesn’t make sense, like when it paused incentives after Season 1 despite having the budget to continue. We are applying the same approach to USDG, structuring campaigns and integration deals to stretch the budget as far as possible. Having the full budget approved lets the committee negotiate liquidity arrangements and integration deals from a credible position. Additionally, since Season 1, Merkl has launched a new campaign type called Target Total APR, which pays only the gap between a vault’s native yield and a target rate. This allows DRIP spend to drop automatically as organic yield grows and helps stretch the effectiveness of the budget. We are already taking advantage of this campaign type in Season 2 for the campaigns on Morpho. Lastly, retention and stickiness of funds are always key factors that the DRIP committee considers when evaluating and setting up campaigns.

ATMC activity

As outlined in the Specifications section, the ATMC already holds the authority to deploy portfolio assets toward ecosystem growth under its Investment Policy Statement. The proposal lists the relevant activities for visibility and does not expand that authority. For example, if a protocol adopting USDG needs liquidity to bootstrap its market on Arbitrum (e.g., the canonical USDG vaults on Morpho), the TM portfolio can supply it.

Concentration is managed under the Investment Policy Statement with OAT oversight, and as outlined in the Accountability and Reporting section, ATM activity in support of USDG is covered in our monthly updates. AEP conversions under Section 3 are executed by the Foundation under parameters set by the ATMC. We will not publish specific thresholds in advance, because doing so would leak information to counterparties and weaken the DAO’s position on quotes. All TM portfolio assets and USDG-related rewards are held in custody by the Arbitrum Foundation and are governed in line with the already established oversight structures.

[Entropy]

Entropy Advisors recognizes that a conflict of interest exists due to its role in DRIP, the ATMC, and proposed role for the USDG initiative. We are disclosing this conflict before voting FOR on the offchain vote. As outlined throughout the proposal, our team believes USDG is one of the highest-impact opportunities available to the DAO today. It gives Arbitrum builders an ecosystem-aligned dollar with economic upside and the DAO a dollar-denominated revenue line.

[Griff]

Voting FOR… with some hesitation.

I’m a believer in what Entropy has done with DRIP, it seems to have created demand but it still has a lot of cost… but a dollar income stream that doesn’t crash when ETH crashes is something valuable.

We have been thinking about this same problem with TheDAO Security Fund when considering the ETH issuance debate, so i can 100% empathize.

But 100M ARB is a LOT of sell pressure on a token that’s already down bad… really really bad. It’s really not a great idea to drop 100M ARB on the market.

I’d support this a lot easier if there were some metrics attached to the release… metrics that show we are making more than what we could get with an OTC sale of the ARB. And then it could be released in milestones, unlocked only when USDG supply on Arbitrum hits a number we all agree on, or when USDG has been added as the default stable for X Y Z apps.

And either way the KPIs should be published before the onchain vote, and show the ARB spent right next to the USDG revenue earned so we can all see if this pays for itself.

This is a lot of money.

[cornellbc.eth]

Cornell Blockchain is voting FOR this proposal.

We agree generally in expanding Arbitrum activity as well as bringing in revenue for the DAO, and USDG seems like a great opportunity to do this.

Although we are hesitant about the 100m ARB being spent considering the lacking price currently, we are bullish on DRIPs expansion being able to bring in more activity into Arbitrum.

[Manugotsuka]

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Manugotsuka, and is based on their combined research, fact-checking, and discussion.

We voted ABSTAIN.

We see the logic behind the proposal. USDG gives Arbitrum a chance to create a new source of revenue while also supporting more liquidity and integrations across the ecosystem.

During a governance call, we asked how delegates should think about the expected revenue. The team explained that giving precise estimates is difficult because GDN terms are confidential and different deals can have different economics. We understand that.

Our main hesitation is that the proposal still leaves some important details open. In particular, it is difficult to tell how the additional capital will be deployed in practice and what the strategy will look like once the different parts of DRIP, the ATMC, and the broader USDG initiative start working together.

The call helped clarify some of this, especially the role of the ATMC in using treasury liquidity to help bootstrap protocols integrating USDG. Still, we would have liked a more complete picture before being asked to support the full allocation.

That said, we do not see a reason to block the proposal from moving forward. The teams involved appear aligned around the strategy, and we do not have a clearly better alternative to put forward at this stage.

For that reason, we are abstaining rather than voting against.

[Jean_MUX]

MUX is in favor of this proposal, as it could help accelerate stablecoin adoption and create an additional revenue stream for Arbitrum through USDG.

However, we believe the expanded budget should be rolled out gradually, with further allocations dependent on clear performance indicators. It’s important to evaluate actual net returns rather than gross rewards alone, while also assessing whether user activity remains sustainable once incentives are removed. Additionally,conducting regular performance reviews would help ensure capital is deployed responsibly and adjustments can be made when necessary.

[maxlomu]

gm, voted FOR.

Excited to see a new revenue stream for Arbitrum.

Seems like proposals have been getting lighter on details lately, with only the AAEs able to see the full picture.

My only request would be to set a deadline for the “OAT will establish KPIs for the initiative” task, where both Entropy and the OAT are accountable.

We’ve been waiting for KPIs on too many initiatives over the past few years. We should be more rigorous in assessing whether initiatives are successful and how actual outcomes compare to initial expectations, so we can learn and improve going forward.

Thanks