Arbitrum Treasury Management Council - Consolidating Efforts

[Entropy]

First, thank you to everyone who has taken the time to comment/provide feedback on this proposal, and for those who have attended the open governance calls related to treasury management to go over this proposal live. We would like to address some of the comments

@bertani

While the OAT members are no doubt highly capable, respected contributors to the Arbitrum ecosystem, it’s important to highlight that the OAT was created to guarantee Oversight and Transparency over OpCo. The role description for OAT members did not explicitly include responsibilities related to financial oversight or asset management. Financial qualifications such as Corporate Finance, Capital Allocation, and Financial & Risk Management were listed only as “desired,” not as required. As a result, none of the currently elected OAT members appear to have a professional background in finance or capital allocation.

Given the significance of the DAO’s treasury and the complexity of managing digital assets at scale, I think it’s worth asking:

• is the OAT best suited to serve as the final authority on fund allocation decisions?

We have already spoken with all of the OAT members individually prior to posting this proposal to ensure their buy-in on the role described within the proposal.

To clarify: while the proposed structure does position OAT as a final reviewer for decisions made by the Council, this is meant to function more as a governance backstop rather than a body actively driving asset allocation decisions. The day-to-day financial strategy and execution will fall on Entropy and third-party SPs, as well as the AF for operational related tasks.

@Jose_StableLab

• How many additional hours (weekly/monthly) are expected to be allocated to treasury management across Entropy, OpCo, AF, and OAT under this structure?

• Are these teams currently close to capacity under their existing mandates?

• What contingency planning exists for scaling headcount or adding budget once bandwidth constraints emerge?

• Could resourcing gaps lead to bottlenecks elsewhere (e.g. protocol BD, program execution, or operational oversight)?

This is likely to be a large lift in terms of hours required by Entropy and the OpCo, but very minimal hours required of the OAT, OCL, and to some extent, the AF (whose role will likely shift over to OpCo over time).

The proposal repurposes the budget that was previously approved by the DAO to pay GMC and TMC members to hire third-party SPs that can help execute on tasks that members of the Arbitrum Treasury Management Council do not possess. Additionally, each time the council goes to the DAO with a new proposal seeking funds from the treasury to allocate, it can carve out a portion of the budget for outsourcing certain tasks to SPs, depending upon the goals of the allocation. We are not concerned with resource constraints for these reasons.

@jameskbh

Regarding the funds already deployed:

• I don’t see any mention of monthly reports like the ones done for STEP I. Who would be in charge of that for the other initiatives and for STEP I after the current funding ends in September?

• The DAO voted for specific allocations for STEP II and TMC & GMC. If there is anything that has not already been deployed, will it be changed before the initial allocation? While I like the idea of Entropy eventually optimising the portfolio, I believe this should be done AFTER the initial deployment. Can you clarify this point?

Entropy will be taking on the role of reporting under this proposal. We will have live dashboards (ideally with a custom frontend rather than just living on Dune to increase the DAO’s professionalism) available to anyone for free to track treasury positions, and will also post quarterly reports with insights related to treasury performance/the DAO’s financial health. We also hope to host regularly cadenced calls to go over these dashboards for the community to ask questions/learn how to leverage the insights.

In terms of the STEP II and TMC/GMC funds, nothing will change as it relates to the previously DAO-approved allocations. These are still in the process of being deployed by the AF, and an update will be posted to the forum regarding the status of these assets soon. In short, no allocations here will be changed prior to deployment, although they will be subject to reallocation over time as we collect data on their impact/performance.

@CastleCapital

1. How Service Providers Are Chosen:

We fully agree with @Tane’s concern around the selection of external service providers.

@Tane

However, we have important concerns regarding the process by which these service providers will be selected. Since detailed asset allocation and risk management expertise will no longer reside directly within the council, the selection process for external providers becomes even more critical. We strongly advocate for a clearly articulated, transparent, and accountable selection mechanism. Specifically, we recommend implementing procedures that involve the DAO directly, such as comparative evaluations or collective deliberation on multiple provider proposals. This level of transparency and accountability is essential to mitigate potential conflicts of interest, favoritism, or any perception of preferential treatment toward closely associated projects or parties.

Since the council won’t directly handle asset allocation and risk directly, who we bring in to manage those functions becomes even more important. There absolutely needs to be transparency around how service providers are selected but we don’t think it makes sense for Entropy to be the one defining those best practices.

A more neutral and structured approach would be for a group like the ADPC to oversee initial vendor engagement and negotiation. They could help standardize the selection process, run comparisons across providers, and ensure decisions are made in a way that’s fair and open. That kind of separation would go a long way in building trust and avoiding any perception of bias.

2. Defining KPIs and Performance Expectations:

With the creation of this new council, we’re effectively watching one of the first real tests of role separation between AAEs play out. That makes it even more important to clearly define how coordination will work between Entropy and the DAO, and what role OpCo will play in ensuring accountability.

At the moment, there are no concrete KPIs, reporting timelines, or clarity around how performance will be evaluated. We’d like to see a framework that outlines when and how updates are shared, what success looks like, and what mechanisms the DAO has to step in whether that’s through feedback, defunding, or replacing underperforming contributors. Without those checks and balances in place, we risk entrenching roles without recourse if expectations aren’t met.

3. Limited Options for Dispute Resolution:

If a decision turns out to be flawed or controversial, the only way to undo it is through a full council disbandment.

It would be helpful to have some middle-ground options like a review mechanism, lightweight dispute process, or a way for delegates to raise concerns and prompt re-evaluation without needing to burn the whole thing down.

We’re aligned with the general direction of the proposal and appreciate the work that went into it.

Entropy will be handling the asset allocation recommendations, which will require OAT approval in order to ensure checks and balances are in place. The risk monitoring component will likely be outsourced on a case-by-case basis to qualified SPs, dependent upon the goals the DAO approves in the treasury allocation proposal. In terms of the process of procuring these SPs, Entropy will be leveraging its network to contract the best talent at the fairest price on behalf of the DAO, and the OpCo will be posting communications/rationale for vender selection on the forum to ensure transparency.

In terms of reporting timelines, this information is in the proposal and answered above.

In terms of KPIs, this will be defined in the proposals to the DAO that seek treasury allocations, which then go through the normal voting process. The DAO will essentially approve each allocation’s goals, and the success of the council should be measured based on how well it accomplishes these goals. This is another reason the OAT made sense as the approval body, as it serves as a check on recommendations made by Entropy that the allocations do in fact align with the DAO’s desires.

In terms of disputes, the proposal was recently modified to enable the OAT to make emergency actions, and the DAO has the ability to refute/reverse/clawback any allocation via Snapshot (Defined in the proposal).

@maxlomu

The treasury has four objectives IMO:

1. Generate yield so the DAO is self-sustaining. This is the core of the Entropy plan and matches the focus of previous committees.

2. Grow the DAO’s real-world-asset exposure and diversify risk.

3. Support established Arbitrum protocols.

4. Bootstrap liquidity for new Arbitrum projects. Early liquidity means other users feel confident to deposit funds, and all the DeFi flywheels that protocols enable can actually work.

One million dollars spread across nascent protocols is probably far more valuable than the same sum parked in T-bills.

This is distinct from the DRIP incentives proposal; here I am speaking about direct liquidity provision, for example:

• The DAO provides backstop liquidity to tokenised houses from Estate Protocol at a predefined floor to anchor prices.

• $200k of liquidity is supplied to a new perpetual exchange to compress funding costs.

• $500k is lent to solver pools so intents can settle promptly (RIP Chain Abstraction Proposal ).

The Treasury Management Council should publish its intended allocation split for the year and retain discretion to redeploy capital quickly into high-impact liquidity pools.

Under the proposed structure, the DAO will approve the goals of each treasury allocation prior to moving funds to the AF and its subsequent deployment in line with recommendations from Entropy that are finally approved by the OAT. The OAT’s primary role is ensuring that the allocation recommendations are in-line with what the DAO approved. We agree with these 4 treasury goals.

In terms of the allocation split, we will attempt to establish a high-level target allocation structure in tandem with our budget creation process.