Arbitrum Treasury Management Council - Consolidating Efforts

[JoJo]

Thanks for the proposal, and for the lenghtly discussion in calls.

A first feedback on the overarching scope, having a single body managing the treasury of the DAO.
We need this. We have a lot of assets deployed in RWA, we are now starting to utilise the Ethereum of the treasury as productive assets, and we have a cash account. It does only make sense, from both a cost and management perspective, to have a unified approach to all of this.
Would still like to explore a few points mentioned, both here and also in the calls that we had.

@Entropy

Observatory Body

• Arbitrum Foundation - Manages movement of funds/custody
• Offchain Labs - Inform the aforementioned council members of any ongoing BD efforts that may conflict with fund allocations

We want, and need, AF/OCL to be perfectly aware of what we are doing and eventually inform us of potential opportunities.

@Entropy

Execution Body

• Entropy Advisors - Responsible for strategic financial management, data transparency, and procurement

While there are several entities in the DAO that have treasury expertise (thinking KPK, Avantgarde to name a couple) there is for now only one entity that is exclusive to our DAO and so has the most aligned nature. So it makes sense to have if any external SPs as executor/risk consultant, with strategic planning coming from Entropy.
We have also seen how Entropy does have financial capacities, so I think this choice is the right one. One hope, not necessarily a request, is that Entropy, in evaluating over time how to deploy assets, will also take in consideration the secondary goal of using these assets also for growth. As long as we are in proper risk parameters, allocating for example for a slightly lower APR but utilsing a protocol deemed key in our ecosystem would be, to me, the optimal outcome.
To reiterate: this can be a secondary goal not a primary one. But I am pretty sure that this will be taken in consideration, knowing that also OCL and AF are involved.

@Entropy

It was made evident in the recent community call, as well as on the forum, that the DAO needs to have a process for spending stables/cash during periods in which it would rather not monetize treasury ARB to cover dollar-denominated expenses, or to cover service provider shortfalls that arise due to downward ARB price volatility.

Moving forward, we propose giving the entity tasked with custody (in this case, the AF) full discretion over covering service provider shortfalls or spending treasury assets instead of using issued ARB to cover dollar-denominated expenses in proposals that pass through Tally. The AF will be required to adhere to any future structures that arise, including but not limited to a DAO budget or Net Working Capital requirements. It’ll be of great importance that the AF, through OpCo, informs a proposer whether or not the proposal’s expenses should be covered through the DAO’s non-native assets instead of issuing more ARB well before the proposal is moved to the voting stage. This way, delegates know whether or not the proposal is asking to dilute ARB when casting their votes or to spend down cash positions from the treasury. However, if this communication does not occur and the language is not included in the original Tally proposal, but the AF still wishes to spend treasury assets, it may do so with the requirement that the ARB moved from the Tally proposal is converted over the subsequent 30-day period for cash-like assets (or the same asset that was spent) and redeployed to the strategy in which the original position was drawn from. Note that such an occurrence should be considered a failure in operations, and this clause is only put in place such that the existing portfolio composition isn’t unexpectedly changed in cases where there has been a breakdown in communications.

This point can likely be considered controversial at first glance by some. But I think is a somehow pragmatic approach to the reality that we have, which is

• as of today, AF is the only entity really capable of converting both small and large sum of ARB into stables
• AF has internal policies, rules and framework to do so, which might (conditional because I have no knowledge but makes sense to theorize) include converting only up to a certain amount of ARB per day/week/month, understanding market conditions and volatility etc
• for this reason, the cash flow needs of new proposals might just be inconsistent with the policies of AF, policies that we collectively don’t know, and that we don’t need to know in my opinion.

Going back to the initial point, this solution seems pragmatic with a reality that has seen several proposals not being funded in a timely fashion due to these externalities.