Arbitrum Now: a pragmatic approach for the Moment

[olimpio]

On decentralization

There’s a very important balance between remaining stagnant and rubber-stamping any disbursement of funds that comes the DAO’s way. As delegates, we have to remain critic, fair, and work towards a clear and well-communicated vision. I advocate for the decentralization of finance, and to express to the best of my abilities what my community and the people who entrusted me with voting power communicate they align with.

What’s happening here is truly a reflection of the potential decentralized future we all envision. If proposals were to pass without question, if all power was concentrated in a single entity, if a collection of organizations or protocols were to determine the turnout and future of the chain… then it truly would be a valueless governance token, which is not the case here.

@karelvuong

Pragmatically speaking, bets will need to be made to allow the ecosystem to seize the advantage sitting in our collective laps and continue moving forward, even if mistakes may be made along the way. Marks will be missed and resources will probably be misallocated from time to time but making fast moves while quickly validating / course correcting will be better than opting and waiting for perfection.

This view from @karelvuong is precise. Every delegate has a different risk tolerance on the size and context of “bets” and “mistakes” that would like to see the DAO make or not make. Personally, I tend to align with a more conservative approach when reviewing ideas and proposals. This does not have to be something negative for the DAO, since it’s healthy to have multiple opinions, points of view, -and importantly- risk tolerances between delegates participating in a DAO. Moreover, the approaches can, and will, change. As will the context, proposals, and different other factors that impact a specific decision from a specific delegate for a specific proposal on a specific point of the DAO lifetime.

Arbitrum’s Position

There’s also the fact of actually measuring impact and analyzing what it means to have an impact. Arbitrum is the leading chain by TVL, it has 56% of the Market Share, while Optimism has 27%, according to L2 Beat. Here’s DefiLlama’s graph of its evolution:

In terms of transactions, you can see there’s clearly an uptick in Optimism’s transactions in the last few weeks in relation to Arbitrum, as well as other L2s that have been appearing (and will probably continue to do so, even more with chains like Fantom and Celo touting to transition from L1 to L2).

There is a sense of ultimate urgency that’s being communicated by some entities and that I disagree with. Other L2s are aggressively operating to obtain market share, this can clearly be seen, however, it should not be the reason why we lose criticality. It’s also not a reason to remain halted, this is why I welcome this discussion.

Delegate responsibilities

Enabling each delegate to contribute in the way they see fit is core to a DAO. If delegates want to abstain, if delegates want to vote against, if delegates want to vote for, if delegates want not to vote - that’s their decision. Each and every one of us can choose to delegate and re-delegate based on the impact we believe that delegate choice is able to create.

Conflict of interest

Unfortunately, this topic has not yet gathered much discussion, and it would be really positive to see some more Foundation involvement for better accountability. Some unanswered questions:

1. Should protocols use ARB that was airdropped to them to vote?
2. Should protocols vote in proposals that directly impact them?
3. Where should the DAO draw the line of protocol voting power?
4. Should protocols abstain in votes of proposals that affect their competitors?
5. Should protocols use ARB tokens received via grants in governance?

In Camelot’s proposal, JonesDAO utilized their 2.3M ARB (which they received on their ARB airdrop) to vote “For”. Were Camelot’s proposal to pass, JonesDAO was going to have a pool with their own token be incentivized with ARB. Was it okay that they were able to vote with ARB that was airdropped to them by the initial DAO to ultimately be the beneficiaries of token incentives?

To give more context, the Synthetix Council was involved in a similar situation in the early stages of Optimism, and ultimately the Foundation created the Code of Conduct and the Collective Grant Policies. That explicitly addressed ambiguous situations like this one. It would really be impactful to see better delegate and protocol engagement on topics like this one.

Foundation’s involvement

Abitrum has been the leader in many L2 metrics for quite the amount of time, but other L2s are aggressively competing with it.

When thinking of a “Framework”, what first comes to mind is a Delegate Code of Conduct, stipulated Voting Times and structure, The Constitution per se, Conflicts of Interests, Grants Policies. It’s a broader structure for the DAO to operate within. The Arbitrum Foundation set the initial Community Guidelines, How to submit a DAO Proposal, and Constitution. These, however, fall short in some specific areas that have undoubtedly come up in the past few weeks.

The approach of the Arbitrum Foundation so far has been to have limited involvement and let the DAO sort things out. This is what the DAO sorting things out looks like, for better and for worse, and it is though indeed making progress. However, and this is a personal opinion, it is undeniable that a degree of centralization (I know, explicitly against some of the views expressed above) could be helpful to enable and better allow the DAO to be self-governing in the long run.

Grant Frameworks status

With no accountability there is potential funds misusage. Here we find, again, the balance between the risk of not using funds so efficiently, and effectively delaying progress by not incentivizing builders. It’s healthy that there are diverse risk tolerance factors amongst delegates to propel discussions like this very same one, escaping a situation where everything and everyone thinks the same and operates under the same views.

There are four Grants structures in the works:

1. QuestBook

Voting has passed in Tally. They will distribute 1M.

2. Pluralistic Labs

Voting has passed in Tally. They will distribute 2.8M ARB tokens. Initially voted against in Temperature Check, and, after discussions, feedback and amendments from the team, voted For in the final on-chain vote.

This comment is good feedback on the state and progress, reported by @DisruptionJoe.

3. The Arbitrum Foundation

New, ongoing Program. There’s not much information yet on dates and deadlines, but they will be impacting protocols, projects, and individuals in areas like Gaming, DeFi, NFT, and Social.

4. Arbitrum Grants DAO

In forum discussion.

Regardless of the amount of ongoing initiatives, the potential impact they might have (excluding Arbitrum’s official one) is not at an immense scale, given the amount of funds put at the disposal of PL and QB. For context, Camelot was asking for 11M, and this greatly surpass what PL and QB is managing.

What did protocols do with their airdrops?

There were 125M of ARB tokens airdropped.

• GMX received 8M ARB tokens that are still on their multi sig.
• Treasure has 6.3M of the original 8M airdropped to them.
• Dopex only used 13% of the 3.8M ARB they received.
• Camelot is holding 100% of their 2.1M ARB, JonesDAO the same with their 2.3M.
• Some of the only prominent airdrops that were used were Radiant (31%), Balancer (67%), Cap Finance (36%), PlutusDAO (31%), Dforce (100%), Gains Network (31%).

Source: Dune Analytics from Shogun and Castle Capital.

Overall, there is more than 70% ARB from the initial DAO airdrop still held in protocol multi signatures.

The Arbitrum DAO and token were launched and created 5 months ago. So were these airdrops to the Arbitrum DAOs. So far, there has been little utilization of these funds.

Moving forward: opinion

I respect and read all feedback, and I share thoughts whenever possible.

I relate this discussion to something @krst has said on Camelot’s discussion:

@krst

I also don’t think that approving this request sets a precedent for future requests from other parties. Arbitrum DAO does not have to be a fair judge, treating all existing and future parties fairly, it should always act in the subjective interest of the ecosystem at the given time. If a similar proposal from another DEX appears in the future, we should judge it in the context given at that time and through the lens of the ecosystem benefits provided in the proposal at that time.

My initial reflex reaction to a proposal similar to another one from the past would have been to act inversely to the idea transmitted here on this comment. However, indeed circumstances and context do change, and if a grant is approved, it does not mean another one, similar, cannot be rejected. Consequently, if a proposal is voted against, it does not mean another one, similar, cannot be voted for. The idea of setting a precedent is a powerful idea, and it can have effects in both ways. After reading and after the interexchange of these different ideas, my opinion is that precedents are important, but they don’t have to be forever binding.

Moving forward, I personally like the spirit and central idea of this thread (to take a pragmatic approach at the present time and with current given DAO conditions) and asses individual proposals under this optic, maintaining core values and a critical way of thinking.