Arbitrum Treasury and Sustainability - Working Group

Treasury & Sustainability Working Group

Proposal: Plurality Labs Milestone 1 Grants

Grant Program: DAO Momentum

Grant Round: Firestarter Streams

Grantee Project: Treasury & Sustainability

Grantee: Treasury & Sustainability Working Group

Funding Decision & Accountability

We are pleased to announce the start of the treasury and sustainability firestarter under the framework of the plurality labs grant.

This post lays out the focus of this working group and its management structures. It will be updated with information as the program proceeds

TL;DR: The Arbitrum DAO treasury currently holds nearly 3.5 billion ARB. The treasury will be diversified over the coming years along with ARB liquidations from grant allocations

This group aims to kickstart a discussion on how to limit price impact from ARB distribution and diversification.

Why was this working group needed?

This working group will play 2 roles;

  1. Surveying the best practices out there for the following challenges:
  • Price Impact of large liquidations from grants and incentive programs
  • Treasury management and diversification
  • Sequencer fee utilization
  • Converting Grants into Investments
  1. Providing a judgment on which practices, tools or service providers we should integrate with

Who will the Working Group Comprise?

This group will comprise service providers, delegates and community members to come together with the goal of understanding how to best manage ARB distribution unlocks

It will be stewarded by 2 liaisons Devansh Mehta and Siddique Patel, each spending 20 hours/week at 100 ARB/hour

We are also allocating 2000 ARB a month (upper limit: 4000 ARB) for thoughtful engagement and help with tasks by the community

What KPIs for the Working Group?

  1. Productive engagement on this thread

  2. Number of proposals brought to an onchain vote

  3. Number of service providers engaged with on this forum

When will Working Group operate?

Updates will be posted by the liaisons on this group

Office hours will be held as a Twitter space or on request, communicated via the telegram group and updated on this post

Telegram: Join Group Chat

How will this Working Group Operate

Citations on the taskboard to posts addressing the challenges outlined below


  1. Taxonomy of all ways to mitigate price impacts

  2. Deep dive into over collateralized debt positions as a strategy to provide alternatives to liquidations

  3. Lit review of how other chains are using their sequencer revenue

  4. Categorising sentiment on Arbitrum for planned use of sequencer revenue

  5. Methods or case studies for how DAOs can diversify treasury holdings to traditional instruments like stocks/US bonds. Example: avantgarde finance or Centrifuge Prime

  6. Methods or case studies for treasury management . Example: how ENS or Gnosis manage their treasury with the help of Karpatkey

  7. Methods or case studies for increasing the amount of native token that is locked. Example: Golem Foundation creating Octant to lock up GLM supply

  8. Any other valid research contribution with references helping make progress on how to convert grants to investments, allocation of sequencer revenue, treasury diversification, earning yield and price impact of ARB distribution

Suggested : Pitch your proposal, research idea or interest to work on a bounty by posting on this forum, DM or twitter/telegram to @TheDevanshMehta

Who made the decision to fund this working group?

This working group is funded by Plurality Labs grants program as part of their Firestater Streams round of funding which is part of the DAO Momentum Grants Program.

Who is accountable for the working groups actions?

Both the liaisons are in charge of the working groups directions and allocation of resources

Devansh ( @thedevanshmehta )is a journalist by training and currently working as a next billion fellow at Ethereum Foundation

Siddique ( @sids2000 ) is a seasoned cryptocurrency researcher, involved in the space since 2013 offering insights to investors and providing applicable use cases to businesses.

Who is accountable for the working group results?

This working group serves to coordinate stakeholders and provide recommendations . No part of it should be construed as a fiduciary obligation or legal advice.

None of these activities are representative of plurality labs, which has provided seed funding for the working group under AIP-3 but operates independent of their direction.

Who has the authority to turn off or increase the stream?

The grant starts and streams payment from the PL-ARB Grants Safety Multisig. This multisig has the ability to shut off the stream. In the case of a dispute from PL or the working group, it can be forced to a snapshot vote. The current streams are set until the end of January. The Plurality Labs team will be designing pulse evaluations to continuously receive DAO feedback as to the support for this stream. While this grant lives as a program selection of Plurality Labs, it is the intention to use this experimental model in the capture-resistant framework PL is building for the future.


20 hours each per week from both liaisons, at 100 ARB a hour = 48,000 ARB

Help from community/service providers - 30,000 ARB

Total budget from September 2023 to Jan 2024: 78,000 ARB


It’s great to see this initiative kickstarted :blue_heart: :rocket: I personally can’t w8 to learn more about:


We are extremely supportive of this initiative and believe that research and thought leadership across these areas is timely, given the DAO’s goals to diversify the treasury over the coming years.

We represent Avantgarde Treasury. Our team members have been developing tools for on-chain asset management for as long as eight years through a smart-vault technology called Enzyme. Our principles are clear and simple. We believe in

  • Transparency: through verifiable real-time reporting, using on-chain data
  • Self-custody: where full ownership stays with the DAO (or sub-DAO)
  • Trustless delegation: leveraging smart-contract based roles & permissions to delegate asset management in a flexible and trustless manner

Aside from developing technological solutions, we also have a fast growing asset management business which supports DAOs and institutional clients with their portfolio management goals. We look after more than $50m worth of assets for leading names in the space.

Looking at the taskboard, we would be very interested in contributing towards the following tasks:

  • (1) Taxonomy of ways to mitigate price impacts of selling $ARB.
  • (4) Methods or case studies for how DAOs to diversify treasury holdings to traditional instruments like stocks/US bonds like avantgarde finance or Centrifuge Prime
  • (9) Producing research in the “other” category involving how to think about asset liability matching and building a framework for investing around that.

On the topic of mitigating price impact from $ARB we would recommend a relatively easy and quick first step. Currently an $ARB price feed is not supported by Chainlink on Ethereum. We think that having an $ARB price feed, together with some community coordination will increase the use-cases of $ARB token across DeFi. This could help counter some of the selling pressure that may come as a result of the recent distributions being made. For example, teams like Index Coop and Avantgarde Asset Management can add $ARB to indexes more easily. Another idea is that the community can work on getting $ARB added to Compound v3 so that long term holders can use it as collateral to borrow against. This increases the “buy” and “hold” appeal to $ARB. It can also increase the capital efficiency of long term $ARB holders.


This proposal covers two areas:

  1. For Avantgarde Treasury to contribute to three research tasks (1, 4, 9) on the Treasury & Sustainability Working Group taskboard as detailed above
  2. To establish a Chainlink price feed for ARB on Ethereum

We appreciate any feedback where appropriate and are happy to answer any initial questions.


TL:DR; Use coordinated limit orders to sell your ARB at designated price bands over time

Best Practices for Arb Grant Liquidations:

As you consider liquidating your grant funds, implementing some best practices can substantially mitigate potential market disruptions. Here’s a curated list for Arbitrum grantees:

  1. Break Up Your Order:

    • Avoid liquidating your entire position simultaneously. Segment your order into manageable portions and execute them incrementally via limit orders.
    • This phased approach stabilizes the price by curtailing any abrupt shocks to supply and demand
  2. Use Limit Orders:

    • Forego the allure of market orders, which transact instantaneously at prevailing market prices. Instead, employ limit orders letting you set ARB price levels to liquidate at.
    • Limit orders might not always be fully executed if the market doesn’t reach your designated price. However, traders can use stop-limit orders to optimize further.
  3. Trade During Peak Hours:

    • Engage in liquidation activities when trading volumes are at their zenith, typically during peak hours.
    • Elevated volumes more comfortably accommodate heftier trades, mitigating drastic price deviations.
  4. Collaborate and Liquidate:

    • If multiple grantees or projects are contemplating sizeable liquidations, coordination is beneficial
  5. Stay Informed:

    • Don’t dump in FUD. Regularly review market conditions, news, and sentiment. An informed decision, based on current market health, can significantly affect outcomes.

Strategic liquidation, especially with collaboration and adherence to these best practices, ensures grantees reap the full value of their awards. Moreover, it provides a more stable and healthier market ecosystem for everyone.

In the following days, we will provide price impact models to help determine strategies for even larger liquidations. We will also present case studies on how CDPs can be a scalable solution to mitigate price impact


We’re glad to see the thoughtful and opportune preparation of this Working Group. Given the relatively new nature of the Arbitrum DAO and its significant investment in growth initiatives—it is of the utmost importance to start laying the foundations for a sound DAO finance practice—one that allows for the sustainable development of the Arbitrum ecosystem moving forward.

karpatkey is a DeFi-native organisation specialising in professional DAO finance through industry-leading research and tooling since 2020. We’ve been working with GnosisDAO, Balancer, ENS, CoW Protocol, and Lido on financial planning, operations, and strategy, diversifying their treasuries into sustainable portfolios of DeFi investments designed to support DAOs in executing their missions.

We’d like to apply for a grant to conduct research on the Arbitrum DAO’s treasury focused on the following topics:

  • (1) Taxonomy of ways to mitigate price impacts of selling ARB;
  • (2) Deep dive into over-collateralised debt issuing;
  • (3) / (4) Sequencer revenue allocation;
  • (5) DAO treasury diversification into traditional finance instruments, e.g. equity; t-bills;
  • (6) Treasury management best practices; and
  • (8) Any other valid research contribution.

We’re requesting a 10k ARB budget for a 2-months engagement, with the folowing deliverables:

  • Preliminary Results: a public report containing key data points and findings ahead of the Arbitrum Day in Istanbul (November 16th), designed to promote community discussions around the topic.
  • Final Report: a comprehensive public report containing all details and recommendations.

As DAO treasury developers and contributors to some of the most reputable DeFi protocols in our industry, we believe that our team has the knowledge, trust, and alignment to meaningfully contribute to the Treasury & Sustainability Working Group. Check out our values to understand more about our guiding and decision-making principles.

We’re looking forward to any feedback or questions the community may have.


I can attest to the quality and consistency of Karpatkey as we work closely in ENS DAO. Karpatkey continually is present, implements DAO feedback well, and goes above and beyond their role as treasury manager.


I am happy to announce that we are holding our first meeting as a Twitter space, on the coming Thursday at 3 pm UTC. Save the link!

The agenda for the upcoming meet:

  1. Our selection of service providers for a 2 month, rapid research grant.

Only organizations with experience of managing DAO assets are eligible. The purpose of these rapid grants are to help the community assess their capability our DAO manage its assets & for them to get acquainted with arbitrum’s treasury.

  1. Discussion on price impact of $ARB from STIP allocation & how to vote on proposals seeking additional funds to backstop 24 mn ARB of successful proposals from round 1 and/or go in for a 2nd round

We need an estimate on the expected price impact of the 50 mn arb allocation from STIP before being able to rationally vote on any extension or backstop of the program.

  1. Work with groups or individuals on proposals that seek a review from our working group before being presented on this forum for feedback & vote.

Aera is supportive of this working group. Having been built by Gauntlet and a team of experienced developers, Aera is an autonomous, data-driven treasury management protocol with the ethos that it is a DAO’s right to manage its treasury in a non-custodial, fully transparent, and risk-aware manner.

The Aera protocol consists of non-custodial vaults, which are constructed on a per-protocol basis and can hold a combination of stablecoins, native tokens, and other cryptocurrencies. Each DAO determines its own treasury management approach and can fully customize it for their own needs, ranging from simply keeping fund proportions in line with liabilities to complex strategies using liquidity positions to provide POL. Vaults are automatically rebalanced after acceptance of recommendations by Vault Guardians, who compete on-chain to propose the best combination of assets in the portfolio. This ensures that the vault strategy is met across a wide range of market scenarios and time horizons.

Aera is applying for a 2-month, 10k ARB grant to leverage its deep-rooted experience in quantitative modeling, parameter optimization, and economic research as a means of furthering research in the following areas:

  1. Taxonomy of all ways to mitigate price impacts

  2. Methods or case studies for treasury management

  3. Any other valid research contribution with references helping make progress on how to convert grants to investments, allocation of sequencer revenue, treasury diversification, earning yield and price impact of ARB distribution

Here are some additional resources to learn more about us:

Feel free to reach us on X: @aerafinance or @gauntlet_xyz

Happy to answer any questions.


We had a successful first meeting, with 122 people tuning in to our space! Some highlights were presenting our WG recommendations on the spending limit we should set ourselves (post forthcoming from @sids2000 ) and an announcement on the service providers selected for a rapid research grant. Recording link here

@karpatkey , @elisafly of Avant Garde Finance & @Aera have each been selected for a rapid research grant of 10k ARB , from today until January.

We look forward to seeing the results of their analysis! What’s particularly exciting is the mix of service providers for our first season: @karpatkey with their experience in DAO asset management across the ecosystem, @elisafly’s understanding of bridging crypto assets into real world financial instruments like stocks & @Aera’s familiarity with the Arbitrum ecosystem. Congratulations!


Disclaimer: This content is for educational purposes only and not financial advice. It’s based on historical data which may not predict future market trends. Cryptocurrency markets are volatile and risky, and the authors bear no responsibility for any decisions made from this analysis.

In a recent call regarding backfund of successful STIP proposasls, @krst from l2beat mentioned his delegators were asking him about the $ARB price impact from grant programs approved by ArbitrumDAO. This linked with the objectives of our group in ascertaining a DAO spending limit.

Our analysis show that using a soft-cap on DAO spending within the range of 135-210 million USD this quarter (Oct-Dec ‘23) can be implemented without incurring a significant price impact assuming steady market conditions.

Here’s some back of the envelope numbers on major proposals passed & pending this quarter:

  1. Arbitrum STIP: $50 million
  2. Backfunding STIP: $21 million
  3. Arb Staking: $25 million per quarter ($100 million annually)

From our rough estimates, if the backfunding and ARB staking proposals are both passed the Arbitrum DAO has an additional ~ $100 million discretionary spend until December end without incurring significant price impact.

We hope to influence Arbitrum’s culture so that proposals list amounts requested as % of quarterly budget instead of % in treasury size.

Assumptions & Challenges:

  • We have analyzed data across exchanges with a liquidity score above 450. We have excluded exchanges that portray anomalies, have a low confidence score, and those that were omitted from aggregate data set.

  • We have estimated order-book depth to fluctuate between 7-10 million dollars within a 2% price slippage. For the pursuant discussion we will be using $10million as buy side liquidity.

  • All grants are liquidated, and orders are executed proportionately across pairs and exchanges using an optimized execution strategy.

  • Market sentiments and liquidity doesn’t change drastically and remains within bounds. No major spike on the supply side through unlocks or investor liquidations.

  • Order-book data reliability such as errors in aggregating data from multiple sources, unharvested data, trading bots, wash-trading, etc.

  • Opaque OTC markets lead to closed order-books which are not included.

  • <20% of the daily open bids within a 2% price slippage can absorb selling pressure.

  • Estimates are based on historical data and not real-time trades which would create a feedback loop for optimization of our modeling.

Here are the liquidity metrics based on the last 90 days of trading data:

  • Average Daily Volume: Approximately $153.56 million was traded daily on average.
  • Cumulative Volume: Over the 90-day period, the total trading volume was about $13.82 billion.
  • Average Market Cap: The average market capitalization was approximately $1.17 billion.
  • Average Daily Price Movement: On average, the daily price movement (high - low) was about $0.0388.
  • Volume-Weighted Average Price (VWAP): The Volume Weighted Average Price (VWAP) is approximately $0.9342. This helps us determine a benchmark with relatively higher volume.

Based on the above metrics here are some observations

  • Order-book depth: Current bid levels suggest that selling $1.5-2 million worth of the ARB which accounts for 15-20% of cumulative open bids is likely to keep slippage within a limit of 2%.

  • On the day with the lowest trading volume in the last 90 days, which was September 9, 2023, the volume was approximately $47.23 million. On this day, a $2 million trade size would have represented about 4.23% of the total daily volume.

  • Total Liquidation Size : Cumulative Quarterly Volume (USD)

    • 180 million: ~1.3%
    • 135 million: ~1.0%
    • 210 million: ~1.52%

Based on our analysis, we recommend a soft cap of between $135-210 million for grant programs in Q4 2023.


Thanks Siddique for this important analysis. We had 45 people tuning in to our weekly Twitter space last Thursday at 3 pm UTC and there were some important clarifications that need to be shared on this group for the written record

  1. $135-210 million for Q4 is a spending cap, NOT a budget. The analysis is based on the NARROW parameter of minimizing price impact from $ARB liquidation. There are many other considerations like runway that are far more important to determining optimum quarterly expenses on grant programs

  2. So if it’s not a budget, what is the use of the analysis? We now have a methodology for determining the rate of treasury diversification every quarter. We currently have 4 billion+ ARB in our treasury; we can’t diversify too quickly as it would impact price, but we now know the rate of diversification (spending cap - grant allocations = diversification ceiling)

  3. HOWEVER, our analysis looks at optimum liquidation strategies which is likely NOT to be the case. Grant recipients choosing to market sell the entire amount can cause sudden spikes in downward pressure resulting in cascading liquidations from limit orders

We urge grantees to follow the guide @sids2000 laid out earlier on best practices for getting the most bang from your $ARB grant


It is great to see the engagement within the community for this working group. With a treasury as large as Arbitrum’s, we believe this is a critically important initiative.

In addition to the other service providers here, the Centrifuge team would like propose an interim research initiative on items within the Taskboard.

We would like to conduct and present case studies and research on:

  • Diversification of treasury holdings using real world assets, including a deep dive into portfolio considerations, relevant asset classes, and overall portfolio execution
  • Operational and execution considerations for RWA investments, including legal and compliance considerations for decentralized entities, deal structures for relevant investments, and best practices across financial and risk considerations

The basis of our research is the Centrifuge Prime managed services offering for DeFi native organizations. This is the result of our years of work with DAOs such as Maker and Aave, our significant time in market as the first RWA protocol and current leader by TVL, and our expertise with legal and deal structures that have supported hundreds of millions of RWA investments. To date, Centrifuge and our ecosystem of partners represents the largest RWA investments within the DeFi and DAO landscape.

Centrifuge is actively working on deploying to Arbitrum and has been collaborating with the ecosystem in bringing RWAs here.

We believe our perspective and expertise is a significant value-add in relation to the work of other providers within this thread. We view providers such as AvanteGarde and KarpatKey as ideal partners for whom Centrifuge Prime can augment and expand their inherent capabilities. We see our role alongside these providers as collaborative, with the ability to offer bespoke expertise, legal and technical infrastructure, and an broad ecosystem of assets and issuers.

We look forward to hearing from the community and Plurality Labs. We’d like to thank the team for their time and engagement so far!


Hi - I know I’m a little late to the party… but we’ve (FrontierDAO) been enjoying participating in the ARB Metagovernance Research round for GG19.
Jumping in to Tg to see if we can offer the community / working group anything.

Thanks for setting up this working group @thedevanshmehta and @sids2000 !


Our Working Group had its 3rd Twitter space yesterday, on the proposal we have put before the DAO for diversifying into RWAs. It was well attended with 296 people tuning in.

We gave a brief overview of the proposal and how stable assets can be used to create innovative instruments like CDPs which allow grantees to convert ARB without liquidating them.

We also had Ondo finance, Backed fi, Centrifuge and Open Eden come up on the stage and take the audience through the nitty gritties of RWAs and how to judge a service provider and their compliance with the law.

In the last segment, the audience came up on stage and asked clarifications of the providers.

Our next few updates will pertain to passage of STEP 1, along with the research reports from the partners we have awarded rapid research grants. Our WG co-lead will also soon be releasing the results of his research into CDPs.


We are thankful to @Khan and the Centrifuge team for their help with providing research into Real World Asset diversification. You can find their full post and report here

Their report directly addresses point 5 on our taskboard, viz

Accordingly, they are the winners of 2000 ARB for the month of December!

Below is a review of their report

The Good

I loved the first half of the report: it is quite thought provoking in terms of how we should be approaching treasury diversification. Specifically,

  • creating an investment policy that balances the conflicting objectives of capital preservation, generating income (yield) and maximizing return. As a DAO, we need to think of the relative proportion of holdings fulfilling these 3 objectives

  • creating a risk framework that sets the tolerance limit for the volatility our treasury is exposed to. Currently, we are entirely vulnerable to price swings of ARB. And maybe that’s a good thing! In any case, we need to consciously decide the limits of volatility for our treasury.

  • tech tooling to manage volatility and achieve our investment policy. We are curious to see the research output from @Aera and how autonomous treasury management tools can help our DAO both in managing risk-reward and also figuring out the right level for it in the first place

The Bad

Perhaps the most high level criticism of the report is there is nothing specific in it for Arbitrum - it could have been prepared for any DAO (not alleging this to be the case, just that it was so high level as to not be particularly specific to our own situation)

After the exhaustive analysis of liquid real world assets, I would have liked some actionable recommendations or insights. For example, after their breakdown of the difference between US treasurys, bonds and securities, I would have liked a range for how much of each we (or even more generally a treasury similar to our position) should optimally hold in proportion to our native token or crypto assets

I would have also liked some hard numbers on other DAOs and their holdings of these assets (at least those where such numbers are publicly available).

The Ugly

While praising the benefits of RWAs and talking up their interest rates, Centrifuge did not run any comparisons with the de-fi world. Understandably so, as their business focuses on t-bills and RWAs.

I would still have liked some comparison between the yield on these products and for eg what USDC on compound might offer, so we can accurately assess the risk-reward ratio.

Overall, its an easy to read report that has provided a very valuable framework for diversification (balancing objectives of capital preservation, maximizing returns and passive income generation); underlined the need for a risk framework that sets the bounds of acceptable volatility in our treasury’s net worth; and broke down the offerings available as bonds/treasury’s from the US government that we can invest in.


Hey all, we’ve just published our research:

We’re looking forward to any feedback or questions the community may have!


Hi all, you can find our research here. We look forward to joining the Twitter Spaces later this week to discuss and welcome any comments/questions/feedback!


Hey all, here is our research:

We hope it is helpful for the community and look forward to any questions


We are pleased to announce the conclusion of season 1 for the Treasury Working group! We presented our major end of season findings at a Twitter space that attracted 669 people.

When we started this group, our primary mandate was finding answers to 4 burning questions. Today, we are pleased to announce that we have actionable paths forward for each one!

The lowest hanging fruit for mitigating price impact is simply improving the absymal onchain liquidity for ARB.

The second lowest hanging fruit is the DAO owning its execution.

Our options are :

  • use in grant programs (not recommended)
  • improve ARB onchain liquidity (pathfind other ways to do this without touching sequencer revenue)
  • stake ETH from sequencer to earn rewards (recommended)
  • Leave untouched (recommended)

It appears many de-fi protocols in the Arbitrum ecosystem do not want free money through STIP like grants; instead, they want the legitimacy that comes from having ArbitrumDAO as their customer and earning money from their product

We diversify the treasury by putting money into different financial products built on Arbitrum; so the goal of ecosystem support guides our treasury diversification mandate.

Additionally, our treasury is already trending towards diversification as we are spending in ARB while earning in ETH.

Updated Taskboard for WG Season 2

  1. Seeing through the passage of STEP 1, a framework diversifying our treasury into stable RWAs that doubles up as an ecosystem support program for tokenized tbills or yield bearing stablecoins on Arbitrum.

  2. Creating STEP 2, a framework for any de-fi protocol on Arbitrum to apply for the DAO to invest treasury assets into their (income generating) product.

  3. Research or proposals for improving ARB onchain liquidity, ideally without the use of sequencer revenue

  4. Research or proposals to unlock ARB utility, such as getting our token included in pools on Aave/Compound plus having Chainlink price feed support

  5. Research or proposals for DAO owned or supported execution of ARB liquidations into other assets for grant recipients

  6. Research or proposals for staking ETH from sequencer

We welcome any contributors interested in these topics to get in touch with us.


Now that all deliverables have been completed, we are able to engage in some comprehensive self-evaluation of our WG in Season 1. This will also help keep context for any other leads of the Treasury WG that are selected over time.

Let’s begin! We’ll start with KPIs for measuring our group;

This thread didn’t see widespread engagement - maybe we framed the KPI too narrowly. Even if we widened it to discussions we’ve driven across the DAO (Twitter spaces, Telegram groups and the forum), we’d rate our progress as “can do better”.

We’ve learnt that its better to put something out frequently rather than keep finessing and have only a few releases. In the next season, we will aim for more and frequent communication. Our goal is not to provide definitive answers but to spur discussions.

1 proposal brought to a vote: STEP 1.

We are proud of this as our 1st season was intended to be research oriented more than action based. We did not expect to diversify 1% of Arbitrum’s treasury in the first season itself.

Ah this was a good one. May have missed some but the answer is 27 !!!

We would give ourselves a pat on the back here, speaking with one provider every 3 to 4 days is more than we anticipated.

We got a fair amount of inbound as many projects didn’t know who to speak with when they wanted something from Arbitrum DAO; here’s a list of those we engaged in the context of our WG

  1. Myso
  2. Revest
  3. Backed Finance
  4. Angle Protocol
  5. Flowdesk
  6. Mountain Protocol
  7. Superstate
  8. OpenEden
  9. Ondo
  10. Wintermute
  11. Fortunafi
  12. BlockTower
  13. Acumen
  14. The Standard
  15. Chainflip
  16. Fractal
  17. Matrixport
  18. Hashnote
  19. RWA . XYZ
  20. GFX Labs
  21. Nethermind
  22. North Lakes Legal
  23. Karpatkey
  24. Steakhouse Financial
  25. Avant Garde
  26. Aera
  27. Centrifuge

Let’s now go to the taskboard and see how we did here

Very broadly, the 2 ways to mitigate price impact from ARB liquidations are through DAO owned execution and increasing onchain liquidity.

Methods for DAO owned execution

  1. A Balancer pool that auto adjusts to maintain a fixed total value of ARB/Stablecoin/ETH, so we can pay out in stables (page 70 Karpatkey report)

  1. Aera vault that auto adjusts ARB/Stable/ETH based on volatility of these assets. These are ideal for grant programs as it follows a minimax strategy, where upside is limited but downside is minimized. More details in this post by @Aera
    1. A DAO owned CDP. Instead of liquidating positions when ARB deposited as collateral for grantees falls below a threshold, the DAO injects more ARB from the treasury to cover the shortfall. When price increases, the CDP strategically liquidates ARB to sqaure off open debt positions. This offers a significant time alpha compared to other DAO owned executions.More details in forthcoming post by @sids2000
  1. Teams request funding in USD and conversions done via OTC or centralized exchange by an intermediary before handing over to grantee. This is important as there is much more liquidity in a CEX/OTC compared to onchain

  1. The current situation of paying in ARB is disadvantageous to the DAO both ways: if ARB increases we are overpaying, if it decreases the project we funded is affected.

They also make a compelling case for the DAO to own its execution to mitigate price impact from grants made by our treasury

Methods for Increasing onchain liquidity

  1. Use sequencer revenue in the DAO owned liquidity, buyback and make strategy detailed in Karpatkey’s report (page 69 in Karpatkey report)

  1. Diversify assets from treasury to bolster ARB onchain liquidity

We have only recently come to know of the poor state of ARB onchain liquidity and have not dug deep into methods for ameliorating the situation, which we would need to explore further in S2.

Aera uncovered some eye popping statistics on what happens with onchain ARB liquidations

They propose some general strategies for mitigating price impact

We also have karpatkey’s own taxonomy on strategies for mitigating price impact

Many thanks to Karpatkey for diving into sequencer revenue use at Optimism, Metis and Base in their report (page 53-63).

Thanks once more to Karpatkey for digging deep into forum activity and undertaking this task (page 63-65)

I appreciate Centrifuge and Avantgarde for their report on RWA diversification at DAOs.

It’s exciting that these are the first research artifacts to be converted into a proposal (STEP 1), currently on Snapshot!

Thank you Karpatkey, your case studies on how you work with Gnosis and ENS to manage their treasuries was very useful (page 89-99). It provides good reference to the DAO on how we can potentially go about working with a treasury manager to better handle our assets.

I also appreciated the principles they lay down for working with a treasury manager


and investment philosophy Arbitrum should adopt for its treasury

Aera’s exposition on the trilemma in DAO treasury management also gave good guidance on the trade-offs involved in diversification

Their case study on Aera breaking this trilemma with Threshold was insightful

Karpatkey to the rescue again! Thankful for their case study on Octant and how we can stake sequencer revenue to fund our grant programs (page 81-83)

If we interpret the task more broadly as increasing ARB utility, we have the following suggestions

And from Aera

Additional ARB utility such as collateral for shared sequencing like Metis, use in L3 payments, distribution of revenue to holders and more in page 41 - 47 of Karpatkey’s report

Thank you @sids2000 for your excellent analysis on an advised limit for ARB liquidations for diversification or grant programs.

Complemented by Karpatkeys more recent analysis

Finally, let’s now look at our budget and try mapping cost incurred to outcome achieved

If we had to give a break up on how we spent these hours , here’s some rough numbers

  1. 30k ARB to each of the partners

  2. 15k in time we spent onboarding partners, determining agenda, feedback before final release, summaries of report ( 1 2 ) and a tweet thread post release. This includes a recruiting trip I had to make to Berlin dappcon for recruiting Karpatkey and Avant Garde

  3. 15k towards the STEP framework and the extensive time taken in recruiting the highly qualified committee members, speaking to RWA providers, drafting the framework, holding calls about it, incorporating feedback, etc

  4. 10k towards @sids2000 analysis in price ceiling analysis and the CDP research report

  5. 2k to Centrifuge for their report

  6. 6k in miscellaneous (KYC/admin work, meetings with projects & people reaching out to us, reviews on other proposals etc)

As the PL grant has ended, our WG will be on hiatus until we figure out funding for season 2. However, we are happy to write up any additional details that might be left out in our self-evaluation for season 1!

We invite discussion on whether we have delivered value commensurate to cost incurred and how/whether we should secure funding for continuing the work we have begun.