Arbitrum's Short-Term Incentive Program (Arbitrum Improvement Proposal)

Thank you for the invite. I expect to get more involved in October. I run a burning man camp and basically took July pretty slow and August and September off to make it happen.

But now my schedule is clear and I hope to get involved more into Arbitrum Governance.

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I find this exciting but would really like to know how to participate as a newbie

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Absolutely, I couldn’t agree more. It’s not that established projects don’t deserve support, but they likely already have a substantial user base and are generating profits from transaction fees. Do they really need additional incentives? In my opinion, their key need isn’t financial backing but rather the space for innovation, something that the Arbitrum Foundation could certainly assist with.

If the primary KPI for these incentives is to boost user engagement with already established projects, I believe the initiative may miss its mark. These projects already have a large user base; further incentives would likely only drive transaction volumes and temporarily inflate TVL due to the ‘incentive effect.’

On the other hand, smaller projects with less than $1M TVL are the ones in dire need of such incentives. Creating a balanced ecosystem is crucial for the long-term health of any platform, and Arbitrum is no exception. If we only focus on bolstering the projects that have already achieved scale, we risk turning the ecosystem into a walled garden, monopolized by a few big names.

The consequences of this could be far-reaching: stifling innovation, discouraging new entrants, and ultimately leaving no room for disruptive ideas. The DeFi space is fueled by innovation, and if Arbitrum becomes a network where only the already successful can succeed, then we’re going to lose that innovative edge.

So instead of concentrating resources on projects that have already established their place in the ecosystem, let’s use these incentives to help smaller, promising initiatives rise to prominence. Otherwise, we risk turning the ecosystem into an exclusive club, with barriers too high for most to climb.

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Dear community members, we at Chronos Finance would like to also express our support for this proposal. We welcome a direct path for the DAO to support builders and believe that programmes like this will be essential to guarantee the long-term success of Arbitrum. We look forward to seeing how this will come together for the community and hope to contribute to improve the framework where possible. Finally, we’d like to thank the members from the Arbitrum Incentives Working Group who contributed to this proposal.

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Exactly as we should have expected it, the wash trading has started to get those sweet ARB tokens: https://twitter.com/cryptofishx/status/1702641093592973806
@tnorm What’s your plan to deal with this?
When projects hear grants, they hear free money. Many of the criterions you listed are gameable and they will be gamed. Overall, there seems to be no clear plan for your program, just throw money at protocols and hope it does something. Why such urgency?
It would be useful, to determine how we want Arbitrum to evolve and how the grant tokens can help with this vision. So far there is nothing.

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I played a role in leading a group of delegates and protocols to establish this basic framework. This was in response to the community’s inability to do so, which led to an urgent situation. Had we not intervened, protocols would have applied directly to the DAO, and more than likely leading to outcomes in line with Camelot, or an unfair distribution of incentives to only proposals that got visibility.

I think most agree the lack of support for protocols is deterring builders, and users, driving them towards chains like Optimism, which has flipped Arbitrum in Market Cap, Transactions, and appears to be securing major partnerships and strategic deployments such as Base, Farcaster, and more.

This proposal is a blatant interim solution - an imperfect band-aid intended to provide the DAO some time to devise a more sustainable approach. I’ve acknowledged this format’s faults, and I concede we will see some programs designed better than others. This proposal aims to mitigate that risk by empowering delegates to accept applications with a limited, pre-approved budget while being encouraged to review and judge proposals based on their discretion.

Furthermore, the proposal recommends a finite duration for the program to prevent prolonging any potential downsides. I urge you to voice any concerns about individual applications that may lead to problematic consequences.

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We are voting FOR this proposal with our preferred budget allocation being 25M, followed by 50M.

The Arbitrum Incentives Working Group has put in considerable effort and exceeded expectations for communicating with the community and addressing the concerns with this proposal.

The amounts being requested are quite large considering the allocations made to previously approved Grant programs for Questbook and Pluralist Labs ($1M and 4M ARB, respectively). We understand the importance of getting funding into the network to reaccelerate Arbitrum’s growth and get the ecosystem back on track after months of DAO delays.
However, we also share concerns that this method of flooding the DAO forums with proposals and ushering out funds without proper mechanisms for due diligence or means of tracking and analyzing the success of the distributions has not been historically successful. Given this, we hope to provide this first iteration with a portion of the original requested budget to still jolt ecosystem growth and learn from the process as we continue to reiterate and develop an effective and sustainable funding program.

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Ab wallet with transaction above a certain threshold should still qualify for incentives

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Thank you for the active feedback and the engaging discussion. Currently, the DAO is on course to approve the Snapshot this Sunday. Delegates are also gearing up to launch the multisig and the onchain proposal by mid-next week. Once these steps are finalized, our intention is to concurrently kick off the first application phase.

For a deeper understanding of the application phase: the working group is in communication with the Foundation and plans to introduce a new forum category specifically for applications early next week. In this category, we will provide detailed information about the application process as described in the proposal. This structured process will assist both applicants and delegates, streamlining the review and signaling of applications through Snapshot for the multisig.

Please stay tuned for an updated timeline once the steps mentioned above have been executed.

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It was a great movement

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we must confront the reality: strong opinions, including my own personal opinions, haven’t translated into actionable outcomes in Arbitrum governance.

@Griff just curious were you actively involved or engaged with any of the discussions so far? As far as I know, it was a public process that progressed over many months, allowing everyone an opportunity to voice concerns beforehand.

The above quote would appear to summarise many of the large delegates who have strong opinions, yet their engagement and involvement seems to be lacking. Voicing your opinion unfortunately is not enough.

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I will not make claims that this is specifically for the grants, but this is clear as day wash trading to artifically increase volume.

There are more than one protocols actively engaged in “wash trading” already. This is very clear to see when looking onchain, and I expect that the review process will allow the DAO and community to sufficiently filter out any malicious or deceiving proposals.

It is our duty as the DAO to ensure that protocols cannot lie or manipulate numbers - anyone caught doing this should face restrictions in the future.

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I keep seeing repeating comments throughout this post but here is my attempt to make a tdlr.

Summary

  • Tnorm has spearheaded this program alongside support from other contributors and delegates.
  • This program will make it an attractive place for both builders and users.
  • This program is a short-term solution and is not perfect by any means, but purely to get the DAO to use its funds to support protocols within the ecosystem.
  • It’s well acknowledged that a similar grant program occurred in season 1 in optimism prior to them moving to a grants council. Delegates and contributors are aware of how inefficient it was in optimism, but this is a temporary solution, instead of going the council route right now

There are a lot of shortcomings in this program and I have my own concerns, but for an initial program, it’s a start and will help the arb ecosystem. Nothing is ever perfect, but it’s better to get the ball rolling rather than continuously debating for the next few months.

Still, there will need to be further work in supporting applications and recording grant distributions which I explain below.

Program Considerations

  • Someone will need to take control of ensuring that applications adhere to the timeline. Tnorm is suited for this, but everyone can and should support it here, as we saw in the Optimism version.
    • Ensure that grants adhere to the template, provide the relevant information, and make sure that they follow the timeline
  • Accountability reports
    • A google sheet that tracks the grant distributions for each protocol for both cycles would be helpful
  • Delegates, contributors and others should voice their concerns about any malicious grant proposals.
  • Time spent on improving the next iteration

As Olimpio mentioned, the DAO should also consider paying additional for these services assuming Tnorm is interested in reporting, facilitating forum ops. This would help cover some of the concerns in this program.

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What are your thoughts on retaining the remaining amount for a future grant program or distributing it proportionally to approved projects based on their requested amounts, if the grant program receives requests for less than 50 million ARB, instead of returning the surplus to the treasury?

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Final Updates (September 23, 2023)

  • BUDGET: Per Snapshot results, the maximum budget will be set at 50M ARB for granted funds expected to be distributed by the end of January 31, 2024.

  • STIP-ARB Multisig: A new 5/9 multisig has been created with the signers from the original PL-ARB multisig, under the name of the Arbitrum DAO, with the addition of to three community members:

    • Karel Vuong, Treasure DAO
    • Jack Sanniota, 404 DAO
    • Lindsey Winder, Hedgey Finance
  • Clarification on Halting Funds: Further Clarification concerning Halting of Funds: Funds can be stopped by the STIP-ARB Multisig with a 5/9 consensus. Funds will be stopped in the event of negligent actions in violation of the previously defined grant requirements. If halted, the multisig must publish the justification of its decision on the Arbitrum Forum. The stream can restart either through a Snapshot Veto or if the multisig decides the grantee has corrected their actions and it’s appropriate to continue.

  • Clarification on Exceeded Budget: If requested grants do exceed the allocated budget, funding will be allocated based on the amount of votes in favor of each grant proposal, and then on a first-come, first-serve basis dependent upon the time the proposal was submitted to the Arbitrum Forum.

  • Plurality Labs Grant Collaboration: Plurality Labs has expressed interest in backing a grant for Service Provider support, concentrating on data aggregation, collection, and analysis. This will add additional cost to the DAO, significant in nature, but funded by the pre-established Plurality Labs grant budget. Once selected in an independent RFP process, I will interface directly with this Service Provider to streamline reporting and accountability to help facilitate communications with the DAO and multisig.

  • Strengthening Admin Accountability & Costs: Addressing concerns (@olimpio, @Bobbay, others) about the current managerial framework, we’re amplifying administrative capacities to ensure things run smoothly as possible. To be candid, the expectations of the community regarding the functioning of this framework exceed the admin capacity it was originally endowed (to be lean, quick, and risky). Consensus has been achieved, but in order to meet the expectations of delegates, I believe my role must expand to a paid admin position, overseeing the application process, reporting, and ensuring accountability.
    Further, the expansion of the Multisig and the expansion of signers responsibilities in setting up streaming, and enforcing accountability, justify an increased acknowledgment beyond the small 2,000 ARB gesture of the original proposal. The final proposal increases this acknowledgment to 6,000 ARB per signer.

  • For overseeing the application, review, and accountability of this program, from this date forth, I will propose a 30,000 ARB admin compensation (7,500 ARB streamed each month). This is a rate of ~$150/hour at current ARB prices, for an average of 10 hours per week over the programs duration. I think this is fair given the expressed demand for further involvement in the operations of the program and the expected hourly commitment. Admin Responsibilities will include:

    • Overseeing application and forum review stages.
    • Facilitating and tracking progression of applications throughout the application process.
    • Collaborating with the Foundation for forum setup and oversight.
    • Facilitating Delegate x Grantee Community Calls during review periods.
    • Ensuring forum operations and scheduling.
    • Coordinating the Plurality Labs-sponsored data provider to establish data pipelines and communicate findings to the DAO.
    • Oversee grantee data reporting deliverables and accountability reporting from grantees.
    • Deliver a program retrospective by February 15, 2024.
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Hi Everyone,

As we move the proposal to an on-chain vote, the first application period has started:

Please be aware that while the application, review, and voting periods are underway, funding will only happen if the on-chain proposal passes. We’ll update this thread with the on-chain proposal details once the vote goes live.

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The changes on management expenses at the last moment (increment) is not what I call the best fair play. I’ve seen this tactic before and I don’t like it. Obviously I can’t prove that was intended/planned but I’m free to think bad.
Just because of this I will vote ‘no’ this time. I voted for 25M on snapshot.

@tnorm you already asked for 20K ARB (~$16K) just for making the proposal. I don’t know how many hours of work did take from you because you didn’t even attach a breakdown detailing the tasks and amount of hour each, but since an incentive program is not even an original idea I assume it’s not more than 50 hours.

16000 / 50 = that’s $320 per hour.

I don’t know about other countries, maybe across the pond this is so different, but in the UK this ratio for an office job is waaaaay overpriced. It’s just so arbitrary and in my opinion too greedy.

I rather support the libertarian economic principles from Adam Smith theory. I think we should let the competition take place when it comes to perform jobs for the DAO.

Now you ask for an extra of 30K ARB (~$24K) just for 10 hours a week of an accountancy work during the period of 3 months.

13 weeks x 10 hours = 130 hours. That’s $185 per hour.

Can anyone here seriously explain me how is that not extremely overpriced?
There are many professional accountants who use to do this job for less than $30 per hour.

If we were a private entity instead of a public one, I’m 99,99% sure this ask would be like 10x lower.

Same apply for signers. You just increased the bill by 3x and I still don’t know how is that explained. Question: How many hours of work do you estimate they are going to put on this?

Don’t you think if you allow people compete for price you will find dozens of them willing to do it for the original price of 2K ARB?

Are there signers involved in projects that are planning to apply for a grant?

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StableLab Engagement
StableLab has offered to handle the management of the forum process starting September 22, 2023, and has agreed to accept back pay (from the proposal’s passing) via weekly streams forward through January 31, 2023. This arrangement was initiated due to their proactive outreach regarding a competitive rate and interest under unique time constraints and circumstances. If at any point the multisig feels StableLab has not upheld diligence in its responsibilities the multisig is empowered to halt the stream and appoint a new service provided by election.

Further, due to these last-minute circumstances, the DAO is entitled to elect competitive service providers during the first voting round by signaling a competitive offer in this proposal thread. If a counteroffer(s) is endorsed by a delegate with over 500,000 ARB VP the DAO will hold an election for the remainder of the contract length (endorsement to avoid spam).

I will continue to stay involved in helping @Matt_StableLab and the StableLab team support the forum process, contributing toward the data and reporting side (working w/ PL-funded data provider). Given the magnitude of funds and the amount of applications, I hope the community can support this added help on short notice.

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Clarified wording on quorum: “To succeed, eligible applications must receive a greater than 50% majority in favor of the proposal, and receive greater than 71.51 million ARB.”

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They have been thinking about extending the review time, in total there are 54 proposals and each of them needs to be analysed. I think it would be prudent to extend the review time, and there is still 1 day left to submit applications. We have to bear in mind that we are handing out millions of dollars.

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