AIP-1: Arbitrum Improvement Proposal Framework

I think the minimum amount for a proposal is necessary but it cannot be 10,000 $ARB

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Yeah, I agree, was just spitballing. It looks like the actual number is supposed to be 1-5 million.

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Hi @0xMonke

Wanted to address some of your questions here

1. In the proposal, the ability for The Arbitrum Foundation to issue Special Grants without undergoing a full on-chain AIP process is mentioned. How will the community ensure that these Special Grants are transparent and follow the wishes of ARBI token holders?
The grants process is currently being finalized and will be presented to the community for review and approval. For special grants there will be full transparency with reports issued to the community to communicate how grants were issued.

2. The Security Council plays an essential role in emergency actions. Can you provide more context on the types of situations that would warrant an emergency action and the process the Security Council would follow in such cases?
The Security Council would mobilize in cases where proposals or activities place the DAO in a situation that could conflict with laws, regulations, or where a critical vulnerability has been identified that could significantly compromise the integrity, confidentiality, or availability of a chain governed by the ArbitrumDAO, where awaiting the typical 27-to-37-day AIP process would prove detrimental to the DAO. These could include preventing fraudulent proposals designed to syphon funds into illegitimate holdings, or implementing an immediate infrastructure update in the event previous proposals introduced unforeseen vulnerabilities. The initial process for performing Emergency Actions is detailed in the Arbitrum DAO Constitution

3. In the AIP process breakdown, Tally.xyz is mentioned as the initial on-chain voting platform. Are there any plans to review or potentially change this platform in the future, and what criteria would be considered when evaluating alternative platforms?
Service providers, such as Tally.xyz, can be reviewed by the DAO at any time, with changes being prompted through the submission of a proposal in the manner described in the Arbitrum Constitution.

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Blockworks Research is voting Against AIP-1: Arbitrum Improvement Proposal Framework

We are committed to improving DAO governance and transparency, and this proposal represents a step backwards in its current state.

Our core concern lies within the 750M ARB tokens worth more than $1B at current prices that will seemingly be held under the control of the Arbitrum Foundation, with unknown wallet signers.

As per the Arbitrum Foundation’s documentation, 4.278B ARB tokens are meant to be allocated to the Arbitrum DAO treasury. However, as outlined in AIP-1, only 3,527,046,079 ARB tokens will be controlled by the DAO treasury. 750M ARB tokens will be transferred to the Administrative Budget Wallet for purposes of making Special Grants, reimbursing applicable service providers for the Total Setup Costs, and covering ongoing administrative and operational costs of The Arbitrum Foundation. As further stated, this separate wallet will be controlled by The Arbitrum Foundation.

750M ARB tokens represents a significant amount (7.5%) of the total supply, so we believe this vote requires careful consideration. Without further clarity on the grants process, how funds are held, and what oversight there will be, we cannot vote in favor of this proposal.

Too often we have seen funds go into a black box of expenses. It is time to make DAO transparency a priority.

A few questions we have include:

1.Who are the people responsible for the 750M ARB tokens? Specifically, who are the signers on the designated Administrative Budget Wallet?

1a. Will the three initial directors of the Arbitrum Foundation mentioned in the proposal control the funds?

  • Campbell Law
  • Edward Noyons
  • Ani Banerjee

The proposal provides no introductions with respect to these individuals or their backgrounds. Also, having only three people in charge of such a large percentage of the token supply is a concern for security and decentralization, especially without enough information for the community to make an informed decision. There is also no clarity as to whether these are the only signers of the designated Administrative Budget Wallet or if there are other actors we need to consider. If there are only three signers that could be a security threat, and if there are more there is no transparency regarding that information.

2.Why is this 750M ARB taken out of the treasury, when it states that the ArbitrumDAO will have direct on-chain governance powers over the treasury?

These 750M tokens were supposed to be part of the treasury but now seemingly lay under the centralized control of 3 individuals. Furthermore, we have reason to believe that Offchain Labs has preemptively separated the Administrative Budget Wallet, as seen from the two DAO Treasury wallets below.

As stated in the Arbitrum Foundation docs, the DAO treasury address is 0xF3FC178157fb3c87548bAA86F9d24BA38E649B58. What is 0xc24e24383120669512a336fb3b5b19afb4cc2a56? An address not listed in the token distribution addresses in the Arbiturm Foundation docs.

We can see on arbsican.io that the second contract address is a Gnosis Safe proxy, representing a multi-sig. But even with a multi-sig, this leaves a massive security risk for Arbitrum if malicious actors were to gain access. Providing no clarity to voters means that the community cannot make an informed decision when it comes to risk management, and is completely antithetical to the goal of decentralization and transparency. The primary rationale for an ARB token was to decentralize one of the leading Ethereum L2s, and this goes against that precise logic.

3.We would like further clarity on how the 750M ARB tokens will be used, and what the distribution will be.

750M ARB represents a significant sum of money. For example, the next largest comparable proposal was by Uniswap. Uniswap proposed to create the Uniswap Foundation, funded with a total of $74M, more than 10x less than the 750M ARB requested at current prices. In addition, the $74M will be broken into two disbursements, with a first disbursement of $20M. We find it hard to believe that the Arbitrum Budget Wallet controlled by the Arbitrum Foundation needs 750M ARB tokens worth over $1B in one go. More clarity over the necessary expenditures and a reassessment after a year for further budgeting is likely warranted.

Blockworks Research represents over 2,000 Arbitrum token holders and we have the responsibility to ask these questions on behalf of our delegators. We hope The Arbitrum Foundation and Offchain Labs will sufficiently address and clarify our concerns.

We hope other token holders and delegates echo our concerns. We are open to all feedback from Arbitrum community members and are willing to change our stance upon new information that is surfaced

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Hi @BlockworksResearch, thank you very much for your comment. We really appreciate the well thought out feedback on the proposal. We are working on a response to address all the points raised.

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As Bristol Blockchain Society, we initially voted FOR the AIP-1: Arbitrum Improvement Proposal Framework. However, after careful consideration and review of the information provided by Blockworks Research, we have decided to change our stance to AGAINST the proposal.

We concur with Blockworks that the allocation of 750M ARB tokens needs further clarification. The concerns raised by Blockworks are valid, and we believe that addressing these questions is crucial for ensuring transparency, security, and decentralization in the governance process.

We would like to emphasize that we believe the Arbitrum Foundation and Offchain Labs share the same goal as the rest of the community: the success of Arbitrum. However, based on the current parameters, we believe that the issues raised need to be addressed before moving forward with this proposal.

Until the Arbitrum Foundation and Offchain Labs can provide satisfactory answers to Blockworks’ questions and address the community’s concerns, we will maintain our position against the proposal. We hope that other token holders and delegates will also express their concerns and encourage open dialogue for the betterment of the ecosystem.

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Hi all,

Thanks for the great questions and we do really appreciate the community interest/involvement!

We at the Arbitrum Foundation have taken the key questions posted in the forum and we have prepared answers to them.

@DisruptionJoe

Is there a reason this amount needs to be tied into this proposal? It seems like $750 million is a lot when there aren’t criteria yet. This industry is about creating systems where we don’t need to trust the operator. I would vote to fully reimburse the $3.5 million in setup costs to the foundation, but sending $750 million without criteria… it doesn’t seem as though this is necessary to bundle in with the passing of the first AIP.

Without clear criteria, I’d even approve the 750 million tokens, but funded through a vesting contract that releases them proportionally over the course of 10-20 years and the DAO has the ability to cut off the funding if they are not pleased with the foundation’s execution.

It is worth emphasizing that the Foundation’s treasury represents 7.5% of the token supply, which is in-line with, if not lower than, the majority of other peer foundations (see an answer below for more details).

The Foundation’s primary objective is to serve as a steward to the DAO, ensuring that the necessary guardrails are in place to maintain a safe and smoothly operating self-governing environment. To achieve this, the Foundation facilitates legal teams, personnel, and service agreements as part of its guardrail measures.

It is our intention to foster the growth of the Arbitrum protocol, decentralized networks, and ecosystem under the guidance of the Foundation’s directors. It should be noted, the DAO does hold the power, as outlined in its constitution, to change the Directors of the foundation. Their service to the Foundation is bound by its by-laws, which enshrine the mission of servicing the DAO community:

I think it is important for Tally to remain at a level where 10-25 people have enough delegations to be able to post on-chain actions. At Gitcoin, we had it at a level where only 3-4 people could post to Tally. This caused problems and it is now widely agreed that we should have loosened that setting.

The initial 5,000,000 ARB token for submitting a proposal on SnapShot was picked as a conservative number. We are still waiting for ARB tokens to be claimed and delegated. If it remains true that 3-4 people can post to Tally, then the community can propose a new AIP to fix this to 1 million or another suitable number.

@BlockworksResearch

Who are the people responsible for the 750M ARB tokens? Specifically, who are the signers on the designated Administrative Budget Wallet?

As the community is aware, there can be significant personal and operational risks involved with disclosing the specific signatories of any wallet. For that reason, we are required to be extremely cautious about identifying any particular individuals related to the Administrative Budget Wallet. What we can disclose is that this is a 4-of-6 multi-signature wallet with a mixture of unique individuals all suitably qualified for the role, who have each signed agreements with the Foundation.

Why is this 750M ARB taken out of the treasury, when it states that the ArbitrumDAO will have direct on-chain governance powers over the treasury?

The DAO will have direct control over ~3.5bn ARB tokens.

The 750M ARB in the Administrative Budget Wallet is to put the Foundation in a position of strength and quickly execute on initiatives. From an operational perspective, the ability to execute on grants, form partnerships and relationships that benefit the Arbitrum community. Again, the DAO can elect and remove Directors at any time. More information about that process can be found in the bylaws and the Foundation is legally bound to do that.

If we compare this allocation with other comparable arrangements in the ecosystem:

We do not want to compare it with our competitors, but as you can see as a percentage of outstanding tokens, 7.5% ARB tokens for the Foundation is in line and/or below what is seen in the industry. It allows the Arbitrum Foundation to execute on beneficial initiatives and developments within the ecosystem and in accordance with the Foundation’s bylaws and in a manner that is consistent with its peers.

We would like further clarity on how the 750M ARB tokens will be used, and what the distribution will be.

All tokens held by the Administrative Budget Wallet can only be used in accordance of the Foundation’s bylaws:

The mission statement can give an overview on how the tokens will be used. We will focus on technical improvements for the Arbitrum protocol, help foster the ecosystem with grants, and organize educational initiatives that are Arbitrum (and Ethereum) aligned. In order to carry out this mission, the funds will help hire a top quality team, set up service level agreements with external companies working on the Arbitrum Protocol, and of course kick-start the much anticipated grant initiatives as soon as possible.

@Westie:

Instituting a Security Council without any election process is antithetical to the decentralized governance process. While having elections every 6 months does seem reasonable, there should be an election process for the initial council instead of them being appointed all at once by the foundation.

The Foundation’s goal was to instantiate the system with well-respected technical experts in the community who are qualified to participate in the security council. All the on-chain governance smart contracts are now deployed with the security council onboard. If we had waited to instantiate the security council with elections, it would have impacted how long it takes to transition control of the Arbitrum networks to the DAO. If the community believes the Security Council elections should be brought forward, this can be proposed as an AIP in line with the DAO constitution.

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Hi this is Dan Smith from @BlockworksResearch

Thanks for this insight @stonecoldpat.

The docs state the DAO Treasury allocation is 4,278,000,000 ARB. It appears the allocation was split between two addresses. The first is 0xf3, which was sent 3,527,046,079 ARB and is controlled by DAO governance. The second is 0xc2, which was sent 750,000,000 ARB and is controlled by a 4-6 multi-sig. Together, these addresses seemingly make up the total DAO Treasury allocation, but the docs only mention the 0xf3 address.

Please confirm if it is accurate to say the DAO Treasury is held in both 0xf3 and 0xc2.

Regarding how the 750M ARB distributed to the Administrative Budget Wallet from the DAO Treasury via AIP-1 will be held, your response states:

“What we can disclose is that this is a 4-of-6 multi-signature wallet with a mixture of unique individuals all suitably qualified for the role, who have each signed agreements with the Foundation.”

Please confirm if 0xc2 is the 4-6 multi-sig you mentioned.

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Hi @smyyguy.

0xc2 is the Administrative Budget Wallet. It is indeed the 4-6 multi-sig. The 750m ARB tokens for the multisig is funded from the DAO’s treasury.

1 Like

Hi this is Dan Smith from @BlockworksResearch

Thanks @stonecoldpat

The Administrative Budget Wallet (0xc2) was funded 15 days ago during the initial distribution phase – before the user airdrop occurred. Why does AIP-1 speak in the future tense, implying 0xc2 has not been created yet? Quoted from the text of AIP-1:

“… a separate account controlled by The Arbitrum Foundation will be created … 750 million $ARB tokens will be transferred to the Administrative Budget Wallet for purposes of making Special Grants, reimbursing applicable service providers for the Total Setup Costs and covering ongoing administrative and operational costs of The Arbitrum Foundation.”

Since being funded with 750M ARB 15 days ago, 0xc2 has distributed 50.5M ARB to 3 “child wallets.” The child wallets then sent millions of ARB to various “grandchild wallets.” The grandchild wallets have numerous transactions with CEXs (namely Kucoin and Binance). This activity looks similar to what the stated purpose of the Administrative Budget Wallet is: to fund operating expenses.

But how? There was never a vote to fund the Administrative Budget Wallet, yet the Administrative Budget Wallet is already using the 750M ARB allocation.

Your response states:

“The 750m ARB tokens for the multisig is funded from the DAO’s treasury.”

Further, can you please confirm if the 750M ARB used to fund the DAO treasury was ever actually owned by the DAO?

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It’s great to see a proposal to create and structure the ArbitrumDAO, and thanks to the people who spent a lot of time thinking about the structure of the ArbitrumDAO and its core principles. This is very inspiring and cool!

But in our opinion, this AIP unites too many items that do not have to be together, and for which it is better to vote separately. Otherwise, disagreement with at least one of the points will lead to a vote of “against” the whole proposal, despite the fact that in general the proposal may seem correct and logical for the most part.

Our suggestions/remarks based on this:

1. A note about the Constitution of the ArbitrumDAO. We would like to note that the constitution is very well thought out and looks like a stable structure.

But we would like to discuss this unit:

Security Council members may only be removed prior to the end of their terms under two conditions:

  1. At least 10% of all Votable Tokens have casted votes “in favor” of removal and at least 5/6 of all casted votes are “in favor” of removal; or
  2. At least 9 of the Security Council members vote in favor of removal.

The first question is: who are 5 out of 6 in this quote?
From the context, it can be assumed that this is most likely 5 out of 6 members of the security council of the cohort in which the member being removed is located. But in any case, it seems that this should be clarified in such a global document so that there is no ambiguity.

If this is so, then in our opinion Security Council members have too much power here, since both possibilities to remove a member of the Security Council require a binding decision from the members of the Security Council, i.e. tied to themselves, which in our opinion is bad practice.

Thus, if for some reason the security council turned out to be corrupt or clearly does not correspond to the goals assigned to it, then this cannot be changed in any way until the next election to the desired cohort.

In our opinion, it is necessary to add one more possible condition, when only holders of tokens with a higher threshold can make this decision.

Our suggestion:

Security Council members may only be removed prior to the end of their terms under three conditions:

  1. At least 10% of all Votable Tokens have casted votes “in favor” of removal and at least 5/6 of all casted votes are “in favor” of removal; or
  2. At least 20% of all Votable Tokens have casted votes “in favor” of removal; or
  3. At least 9 of the Security Council members vote in favor of removal.

2. About Special Grants

We consider the creation of “Special Grants”, which has the ability to avoid inundating governance, very good and important, but its proposal should contain the application process and the selection criteria on the voting process, because not only the intentions, but also the structure determines what the special grants will look like in the end.

Since the application process and criteria is not yet ready, we think that the item on Special Grants should be moved to a separate AIP.

We also believe that as part of the control of possible damage, it is necessary to immediately determine the upper limit of possible grants both in time (for example, per month) and the maximum amount for any grant.

3. About Directors
As far as we understand, the Arbitrum foundation has already been established as a Cayman Islands foundation, and has directors. We are against the ArbitrumDAO approving the decisions already made by someone.

If the organization does not currently have directors, then we can begin the process of selecting directors, and Campbell Law, Edward Noyons and Ani Banerjee may be the first candidates in this process.

In our opinion, either the Arbitrum foundation is a completely separate organization on which the arbitrumDAO does not make any decisions, or such big decisions as the choice of directors should be open to ArbitrumDAO and the elections should be open and made by ARB tokenholders.

We propose to remove the item “Directors” in the AIP-1.

4. About Security Council

We do not understand why the choice of the initial members of the Security Council should be different from subsequent ones. Considering that these 12 people seem to have a desire to participate in the Security Council, then we will not have less than 12 participants in the elections for the initial composition, and therefore there will be no need to solve the problem with the lack of candidates and replacing them from the previous council, as described in Constitution.

We propose to leave the item about the security council, but propose to set dates for the election of initial members of the security council in AIP-1 and describe minor amendments to the election procedure that are relevant to the initial selection of members.

5. About Data Availability Committee
As far as we understand (correct us if we’re wrong), initial members of the Data Availability Commiittee is already working on the Arbitrum Nova chain.
As we wrote above, we are against approving by ArbitrumDAO decisions that have already been made by someone. In our opinion, this contradicts what was stated in the unit 1, “$ARB tokenholders … play the most critical role in the proper functioning of decentralized governance in the pursuit of a trustless, transparent and verifiable Arbitrum ecosystem”.

In our opinion, elections to this committee should also be open and made by tokenholders, and it is better to do this in a separate AIP.

6. About Arbitrum Voting Protocol Procedure

As we mentioned above, we are against the approval of already adopted decisions. In our opinion, the competition for on-chain voting should be open among the platforms, especially given the raw of the Tally.xyz and a large number of bugs and problems with work under load.

7. About Steps to implement

In addition to the already described objections to the inclusion of paragraphs 3, 5, 8, 9 in this AIP, we also believe that the approval of the L2 base fee for the Arbitrum Nova, paragraph 4, should not be part of this proposal, but should be submitted for discussion and voting in a separate AIP.

8. About Overall Costs

We believe that within the framework of the announced principles of transparency, it is necessary to describe in more details list of service providers and prices for their services and spending 3.5 million of the total cost of setting up.

9. About DAO Treasury and The Arbitrum Foundation Administrative Budget Wallet

We believe that token transfers/financial questions are not directly related to the question of the structure of a DAO, and therefore should be placed in a separate AIP.

Also in the Administrative budget item it would be great to see a list of ongoing administrative and operational costs of The Arbitrum Foundation.

10. Additional proposals and questions.

  • The proposal and structure of the DAO does not include network validators. We believe that they should be described in this AIP, as well as the principle by which they are currently selected and by which they are planned to be selected in the future.

  • Do we understand correctly that the transfer of assets from the ARB to other assets in the DAO treasury and in the Arbitrum Foundation Administrative Budget will be agreed through the AIP each time?

    In our opinion, it would be more convenient and practical to make a committee that would have the authority to manage some limited amount from both wallets in order to be able to more quickly resolve questions/issues without waiting min 27 days for execute.

Final conclusion: In our opinion, AIP needs to focus on certain proposals and solutions. At the moment it brings together too many things to debate.
In this form, by virtue of the above, we will vote against AIP-1.

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404 DAO is voting Against AIP-1

While we support the existence and funding of the Arbitrum Foundation, this proposal combines several key decisions into one vote. We align with the critiques mentioned by @BlockworksResearch and @cp287; below we highlight our main objections:

1. Administrative Budget Wallet

Regarding the Administrative Budget Wallet, we are displeased with the ambiguity around the ownership and timing of funding. Furthermore, we would like to see more structure and clarity regarding the use of the 750M ARB tokens. As mentioned by @cp287, it would be helpful to have more insight into ongoing and forecasted administrative and operational expenses. We propose modifying AIP-1 to account for two years of expenses to get the foundation up and running, during which the DAO can vote to approve additional funding. Ultimately we foresee at least 7.5% of funds flowing to the Foundation; however, we believe this should be evaluated over time in accordance with the Foundation’s success.

2. Lack of Forum Discussion and Clarification

Despite receiving numerous questions for clarification and feedback from delegates, the proposal went live on Snapshot with no revisions on March 27th. A response was not given until three days later on March 30th. We appreciate the responses from @stonecoldpat and @Arbitrum on the points mentioned above, but a lot regarding this proposal has still not been clarified, and overall we believe this vote has been rushed given its importance and density.

3. Foundation Bylaws and Director Rejection

After our team reviewed the Foundation Bylaws, we are concerned with point D in the following excerpt:

(b) Foundation Director Rejection: If, following the approval of an AIP by the ArbitrumDAO, a majority of the Foundation Director(s) acting in the best interests of the Foundation Company reasonably determine that such AIP, if implemented, would:

(A) compromise the Foundation Director(s)’ fiduciary duties as they are owed to the Foundation;
(B) be in violation of these Bylaws, the Foundation Articles, the ArbitrumDAO Constitution, the AIP Process, any statutory requirements of Cayman Islands Laws or the laws or regulations of any other applicable jurisdiction;
(C) cause the Foundation to be in breach of any contracts, agreements or any other arrangements; and/or
(D) be against the best interests of the Foundation,

such Foundation Director(s) may direct the Security Council or take such other steps as are required to reject such AIP.

At face value, it appears that the directors have the ability to reject any AIP that is “against the best interests of the Foundation”. We see this as a legal catch-all that could be abused in the event of a contentious decision and thus propose removing (D) from the bylaws. Alternatively, we would appreciate a response from the Arbitrum Foundation on the criteria that this might entail and the possibility of modifying the clause to reduce its scope.

Conclusion:
We would like to reiterate that 404 DAO is committed to the success of the Arbitrum DAO and Foundation and therefore welcomes critiques and discussion of our analysis. On behalf of our delegators, we vote against this proposal and hope for future improvements.

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This answer and the clear evidence of @smyyguy once again show us that many decisions were maid before the AIP-1 vote (transfer of funds, contracts with addresses of members of the security council who have not yet been approved), and carried out without the approval of the DAO.

In our opinion, this is not how the DAO should start with the statement

$ARB tokenholders, who make up the ArbitrumDAO, play the most critical role in the proper functioning of decentralized governance in the pursuit of a trustless, transparent and verifiable Arbitrum ecosystem.

I would also like to draw your attention to these two quotes:

We are still waiting for ARB tokens to be claimed and delegated. If it remains true that 3-4 people can post to Tally, then the community can propose a new AIP to fix this to 1 million or another suitable number.

If the community believes the Security Council elections should be brought forward, this can be proposed as an AIP in line with the DAO constitution.

@stonecoldpat twice suggests that we create new AIPs to change some things.

But we don’t need to create a new AIP. We are currently discussing things that have not yet been approved.
AIP-1 didn’t pass on-chain vote and has not yet been approved, so there is no need to create other AIPs that change it.

We are just in the stage of its discussion, temperature check and off-chain voting (phase 1 in the constitution). If we come to a common vision that it is necessary to change something in this AIP, we must make adjustments to this AIP. Proposal to correct in some future AIP what has not yet been approved seems very strange and illogical to us.

This once again gives us the feeling that at least some people in the Arbitrum Foundation view some of the decisions as made, and we should do our part and just vote “for” the decisions already made.

I sincerely hope that this is just a feeling, and most people in the Foundation really want to properly build a DAO from scratch, which will be trustless, transparent and verifiable.

It is impossible to immediately violate the principles laid down and then hope that in the future they will be respected.

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THIS PROPOSAL MUST NOT PASS, IN THE PUBLIC INTERESTS OF THE DAO

This is a terrible and undemocratic governance proposal that can only be seen by neutrals as the insiders VC and team cashing out from the DAO.

Excuses like “voter fatigue” are a terrible way to gaslight the community members, while hiding the actual plan i.e to siphon 750 million ARB tokens from the DAO to a blackbox that can be distributed without any transparency.

Optimism governance has shown that it is possible to democratically distribute tokens towards good causes that bring value to the network. A similar strategy must be adopted where each project allocation is publicly voted on, if not by the entire DAO, by a select committee of the DAO who have shown intent or experience in helping allocate the tokens in a way that can add value to the DAO.

Instead, this proposal seems to propose a black box approach where 750m tokens are allotted once and then forgotten about. This is not in the best interests of the DAO.

I would suggest all token holders and delegates to read the proposal carefully, especially the opaque system of allocation thats being proposed here, and vote against this proposal as its not in the interests of the DAO to engage in this kind of opaque governance, especially when other succesful models exist and have been utilized successfully by other DAOs.

Moreover the practice of clubbing several important proposals into one proposal must be both deprecated and reprimanded as a terrible form of governance. A governance proposal must have one well defined goal. A funding proposal, especially one that seeks to fund a centralized entity with 750m ARB tokens should be discussed at length before it even becomes eligible for voting.

On all these counts, this proposal is a poorly drafted and malicious proposal that the community must vote down, to retain a sense of democracy in the DAO.

If this passes, the 750m ARB allocation will be nothing but a slush fund for the VCs and insiders to cash out whenever they want, with least transparency.

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As it stands we believe that this proposal should not pass. There have been serious concerns raised regarding the way the proposal was drafted and the seemingly pre-transfer of funds before the AIP approval raised by @BlockworksResearch.

Overall there is a lack of transparency regarding the allocation of the funds especially given the sum. In this regard, we would like to highlight a previous proposal by LIDO.

This is our decision pending a sufficient explanation/amendment to the proposal.

We would like to highlight a few points of discussion:

2. Special Grants

The rationale behind the ability of The Arbitrum Foundation to issue Special Grants is to avoid inundating governance with grant applications, while at the same time alleviating voter fatigue.

If we look at any governance board out there I’d argue that this ability will not prevent the board from being inundated with grant applications. At best it will prevent good applications from going through the process. Furthermore, the delegate system already works to combat voter fatigue. This is a flawed argument to justify such discretionary spending power.

4. Security Council

Some members have raised concerns about the creation of the initial council without due process. We do not share these concerns and understand the need for pragmatism in this case.

See @stonecoldpat reply for further clarification.

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I am quite shocked by the discrepancy of this forum and social networks opinion vs. the current snapshot results.

I’ve been humbly watching this space for a while now and I am feeling like the “Arbitrum DAO” is falling into the same pitfalls as some “not-so DAO”. Even if such models have become the rule during the last bull run, it doesn’t mean it is good enough.

Sure, Arbitrum innovates beyond the scope of DAO, and DAO management is not in their original skillet, but there is so much missed opportunities to innovate and this proposal and the reactions demonstrates it.

Afaik there are models and technical solutions that exist for:

  • Giving some DAOs a legal status and an ability to indirectly influence real world decision.
  • Innovating in the way decisions are voted, in a way that satisfies the most.
  • Veto systems by independent on-chain courts, where a proposal doesn’t adhere with some values or the constitution, or where the solution of a proposal is disproportionate/rushed. Such solutions exist on-chain afaik.
  • 1 human = more vote voting systems.
  • Transparency tools than expose on-chain activities humanly to everyone.

Again, none of this is directly the business or skillset of Arbitrum and OffchainLabs, but all of those are awesome opportunities to innovate with and would all happen on Arbitrum and L3s.

I feel like the DAO should be thinking about those meta-concerns first - or explicitly decide that those are not concerns - before rushing on big proposals.

A perfect example of this is the following: Who, one day, decided that 1 week was an OK window for any type of decision involving the project ? I mean, a few of the delegates may be taking well deserved holidays for a couple of weeks (more in non-US). What justifies this “1 week” thing ? Are we voting for our classroom representative or are we moving billions ?

Maybe Arbitrum DAO should take the lead in taking a step back and start using common sense.

(Personal opinion)

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Hi all,

@smyyguy, @cp287, @neozaru, Your comments are getting to the heart of a chicken and egg problem associated with AIP-1.

The Foundation. smart contracts, and essentially all infrastructure needs to be established before the DAO is announced. For example, decisions around the security council, network fees, and the data availability committee, must be decided in order for the Arbitrum network to be safely transferred to the DAO. The DAO plays a critical role in governing the Foundation and has the authority to make changes to the Arbitrum network, Constitution, Security Council and the Directors. The community can propose further AIPs to rectify issues that arise.

The “Steps to Implement” section of AIP-1 highlights the ratification nature of this voting procedure and its goal is to resolve this chicken & egg problem.

To @smyyguy, in terms of smart contract implementation for the DAO-controlled treasury contract treasury, the initial Arbitrum Deployer sent the ARB tokens to the DAO-controlled treasury contract and to the Foundation. However, the 750m ARB tokens are accounted for as part of the DAO’s ~4.2bn because the DAO has governance authority over the Foundation.

@cp287* As mentioned above. AIP-1 focuses on ratifying the system with an initial configuration and we hope you can appreciate that is a necessity before the Arbitrum network can be safely transferred to the DAO.

@404DAO*, In regards to the forum discussion, we at the Foundation are all grateful for the comments to date on AIP-1. It demonstrates that the community and delegates are actively participating in the DAO process. It is also providing clarity on potential AIPs the DAO may want to propose in the future. Again, the Foundation will both be governed by the DAO and act as a Steward and help guide the DAO/community/delegates through the process for proposing/executing new proposals.

Just like any part of the constitution, the Director Rejection clause can be changed by a DAO vote (subject to compliance with law) and the scope can be reduced/tailored to be more specific. Keep in mind, if that clause is used by the Directors, then it is a transparent action and will initiate discussion amongst all participants.

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The siphoning off of 750 million tokens from the DAO and wrapping that number into the proposal is straight up fraud and potential embezzlement. Do you really want to kick off the foundation with a potential court case from holders?

The solution here is very simple: we need a separate proposal with a variety of fund amounts and greater transparency on what funds will be used for. The fact of the matter is this is either a DAO or it’s not, as a holder I don’t want $ARB to have a reputation as the first L2 rug.

Suggest immediate take down of this proposal and restructuring into part A that includes everything as is minus the foundation fund and part B that outlines a variety of options including foundation funding by year that can be cut off for non performance by the DAO.

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I don’t see a chicken and egg problem here.

You can simply write the general structure of the DAO and the decision-making structure in the first AIP without any problems, and then in the following AIP make decisions on filling these structures with people, select directors, make financial decisions and transfers, deploy contracts after the decisions made.
Can you please tell me where the problem occurs with the approach that I wrote?

I do not understand why the initial ratification should immediately contain the selected people in various structures, deployed contracts and transfer of money from one address/structure to another, and not describe the general structure of the DAO and the way decisions are made in it.

And you again offer us to change something in future AIPs. We don’t need future AIPs, we can change that in this AIP.

Also as @enzo7 wrote, absolutely unnecessary and harmful combine several important proposals into one.

This is a bad practice, which is usually used in corrupt structures, for people to vote for one decision they need, and in parallel take another, which is most often harmful for them, but less harmful than the benefits of the first.
So corrupt management gets things that it wouldn’t get if it separate these proposals.

A governance proposal must have one well defined goal!

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Hello @OilySirs , this post goes against the community guidelines Welcome to Discourse and will be removed. We will allow the comment if the language changes.

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