[ARDC] DAO Advocate Communication Thread

Intro

Following the success of the proposal to establish the Arbitrum Research and Development Collective (ARDC), elections were held to determine the members of the collective. In the context of those elections, Ant Federation and L2BEAT joined forces and together we were elected in the role of the DAO Advocate. The mandate of the DAO Advocate is to represent the DAO and direct the ARDC’s efforts. It essentially functions as the bridge between the Arbitrum DAO and the ARDC.

As the DAO Advocate, we’re committed to transparency and we’ll use this communication thread to regularly provide upgrades on what we, as well as all the other members of the ARDC, are working on.

Following our election, we hit the ground running by first establishing a direct line of communication between us and all the members of the ARDC. We’ve also already had 2 calls so we can coordinate among all members of the ARDC to discuss the next steps and operational procedures going forward.

ARDC Public Notion Page

For transparency’s sake, we’ve set up a publicly viewable Notion page that contains all information relevant to the ARDC’s operations. Specifically, there’s a section that will have meeting minutes from all the ARDC calls, and a kanban board that will contain all the tasks the ARDC will work on, is working on, and has worked on.

Additional sections and subpages will be added if and as needed.

You can find the Notion page here.

Communication

Given the role, communication between the DAO and the DAO Advocate is essential. To that end, we want to make our communication channels known so you can reach out to us at any time.

1) This communication thread. You can use this thread to publicly bring up topics in which our involvement in our capacity as DAO Advocate is needed.

2) Bi-weekly status update call. As per the mandate of the original proposal, we’ll be hosting 2 calls per month that will be open to the public to address any and all topics relevant to the ARDC. During those calls, both the DAO Advocate as well as representatives from all the members of the ARDC are going to be present.
The calls are going to happen every other Monday at 1 pm UTC / 9 am EST starting on Monday 8th of April 2024. You’ll find the links to the calls in the Arbitrum DAO Governance Calendar.

3) ARDC Meeting Minutes. You’ll be able to find meeting minutes from each call (both private and public) of the ARDC in this Notion page we’ve set up.

5) L2BEAT Arbitrum Office Hours. We already host weekly office hours where stakeholders can discuss all things relevant to Arbitrum with us. We’re inviting people to freely use our office hours to discuss DAO Advocate matters. The call takes place every Thursday at 3 pm UTC.

6) Open Arbitrum Governance Call. The monthly open governance call is also a good place for discussions relevant to the whole ARDC. We’re always present at those calls and happy to discuss any topics relevant to the ARDC and DAO Advocate. The next call is happening on Wednesday, 3rd of April at 3pm UTC / 11 am EST.

7) Telegram. For a quick and direct way to reach us, you can send a message to Krzysztof on Telegram. Turnaround time will be within 24 hours on a business day.

Next Steps

Going forward, you can expect regular updates from our involvement in the DAO in our capacity as DAO Advocate in the form of written updates. Of course, you can find us to discuss anything in more detail in any of the communication channels mentioned above.

From a process standpoint, all ARDC members are going through the KYC/KYB process to sign an agreement with the Foundation and have submitted the necessary documentation. Once that process is complete, we’ll be set to officially kick things off.

Operationally, and in parallel with the KYC/KYB process, we’re working on identifying and deciding on key areas of interest in which the ARDC could already be of help, on top of establishing how we’ll collectively respond to the DAO’s needs as they arise.

Call to action

We invite everyone to participate in our inaugural call on Monday 8th of April at 1 pm UTC to discuss all of the above and more relevant to both the ARDC, but also Ant Federation’s and L2BEAT’s role as DAO Advocates.

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All members of the ARDC have now finished the legal procedures of completing the KYC/KYB process and submitting the grant agreement (Chaos Labs grant agreement pending) and thus the 6-month term of the ARDC officially begins.

To avoid unnecessary downtime due to operational details, we commenced planning the work for each member and started assigning some tasks in advance. Some of the tasks have now already been completed or are almost done and some of the deliverables have been published to the DAO. Since last week, you can consider the ARDC fully operational and working at full steam!

From here on forward, you’ll be able to find all deliverables on the newly created “Arbitrum Research & Development Committee (ARDC)” forum category, where each member has a subcategory in which to publish their work.

That way, we ensure the work isn’t siloed away from the DAO in our ARDC Notion page (even though it’s publicly viewable here), but it is at an arm’s length for delegates to get to.

So what have we been working on the past month?

STIP Analysis Case Studies

The first task assigned to the research members was an analysis of the results of the STIP. The deliverables, 2 case studies on GMX and JOJO (see them here), have informed them and us of the direction we need to take to have a broad view of the efficiency and pitfalls of the STIP for all receiving protocols.

Risk member was also tasked with reviewing both STIP and LTIPP from a financial risk perspective and presenting a report with their findings.

Gaming Catalyst Program Review

Research members were also assigned to review the Gaming Catalyst Program proposal and analyze it to identify strengths and weaknesses as well as to identify any potential red flags that we could point out to the proposers behind the GCP.

Additionally, we asked the research members to look into the salary ranges of similar roles to the ones proposed in the GCP in traditional funds to have a benchmark for what’s reasonable. That way, delegates who do not have experience or knowledge of traditional VC salaries can better assess the costs with the information acquired through ARDC’s research.

The deliverables are currently under review and will be published in the forum as soon as possible.

Event Horizon proposal security considerations

The proposal by Event Horizon successfully passed temp-check and is now heading towards an on-chain vote. We assigned the security member to review the proposal and compile a list of technical considerations that delegates should be aware of. At the same time, we connected the Event Horizon team with the security member so they could answer any questions and at the same time receive input from ARDC as guidance to refine their proposal before going to an on-chain vote.

We are currently working on a report which will be published in the forum as soon as it concludes so delegates can cast an informed vote.

Call to Action

We want to remind delegates that the ARDC is here to support the DAO and the work delegates are doing and it’s at their disposal through the direction of the DAO Advocate. To that end, there’s a biweekly call every other Monday at 12 pm UTC the link for which you can find in the Arbitrum Governance calendar.

In addition, we invite delegates to reach out to us (L2BEAT) in our capacity as DAO Advocates if they have topics in mind that they believe the ARDC should be assigned to. To that end, we are available at the biweekly call mentioned above, on Telegram (Krzysztof & Sinkas), and during our L2BEAT Arbitrum Office Hours which happen every Thursday at 3 pm UTC.

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gm!

Following @BlockworksResearch research on GMX and JOJO STIP performance, which is great and I recommend everyone must read it, they have identified certain shortcomings in the planning, execution, and reporting of the STIP. Many of these shortcomings have been addressed by the new LTIPP process, but there are still challenges and improvements to be made.

One of the issues raised, and the reason for my writing, is that we have not allocated resources to analyze whether the growth in TVL of the protocols during the STIP was due to the genuine influx of new users and TVL to Arbitrum, or if it was merely a result of fierce internal competition.

As advisors during the STIP Bridge, we have noticed that the TVL of most protocols has dropped significantly over the last month, which could call into question the sustainability of the TVL attracted to the chain through incentives.

This coincides with a TVL decline of approximately 24% since March 11, when the network peaked at 3.931 billion, according to Defillama.

In their GMX report, Blockworks mention that " It should be noted that although the incentivized TVL on GMX hasn’t been sustainable, the liquidity incentives could still be considered a success if they attracted new capital to Arbitrum, which is now rotating into other ecosystem projects. If there is demand from the DAO, this is something the ARDC could focus on going forward".

With this context and looking forward to properly setting up the Long Term Incentives Program for Arbitrum, I request the ARDC, through the DAO Advocate L2BEAT @Sinkas @krst, to deliver research that analyzes the origin of the TVL that has gone to the main protocols during the STIP, so that the DAO can determine whether the investment through incentives has attracted new users and capital to Arbitrum that has remained in the network or has left once the incentives ended.

One alternative is to conduct this research over the 5 (?) protocols that received the biggest grants. This would be: GMX, MUX, Camelot, Vertex and Radiant.

Of course, in their expertise and if deemed necesary, I look forward to the ARDC modifying the criteria for selecting the protocols or refining the data that needs to be collected to achieve the desired outcome.

Thank you very much!

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**Quick Announcement:
We’ll be hosting an open call to discuss and explore how the ARDC could help delegates and other governance contributors with their ongoing initiatives.

The call will happen on Friday 10th of May at 1 pm UTC / 9 am EST / 9 pm SGT.

More information here.

We discussed this request in the last ARDC weekly sync on Monday 7th of May (meeting notes here) and we asked Delphi Digital to tackle it as we agree that it’s an interesting data point to have. However, there might be technical challenges in tracking whether the new (specifically) TVL remained in the ecosystem. The increase/decrease in TVL can be measured, but we might not be able to know whether entities or individuals who deposited capital to Arbitrum during STIP kept their capital on Arbitrum after STIP concluded. Delphi will consult with their engineering team on feasibility and get back to us on that matter. In turn, we’ll also inform on whether we’ll be pursuing this request further as ARDC.

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Hello @Sinkas.

While involved in LTIPP and STIP, I am convinced that most of the analysis, at least as initial overwiew, should be something like this.

https://twitter.com/ElBarto_Crypto/status/1757036165520036299.

Will attach some screenshots for clarity (not putting the whole thread but only half).



Let me explain. In this topic, Artemis (a firm i don’t know nor i am affiliated to) has conducted an initial study of STIP effect normalized for market conditions. Their measurement was statistic based, we can likely get to similar measures by using points of control.

What does that mean? In a normale environment, you measure normal activity, you measure activity with incentives → you get some sort of quantitative answer.

However, in crypto we have such a volatility, even intra year and intra cycle, that sometimes could be difficult to understand if any meaningful change in metrics depends from the incentive program, the overall crypto market conditions, or both. If the latter (likely), what is the weight of each component.

In other way: we should use other chains and ecosystem as point of control. Quick and dirty example, for which I will use mock numbers and mock proxies:

  • if arbitrum, as a chain, growth in tvl by 150%, users by 220%
  • if optimism as a chain, in the same time, growth in tvl by 50%, users by 75%
  • if, in positive market conditions, so far optimism and arbitrum have shown a 1:2 ratio in growth of tvl, 1:2 ratio in growth of tvl

This means that in the period of december-march, since op growth by 50% in tvl and 75% in users, for arbitrum, of the 150% growth in tvl, only 50% was due to incentives, and for the users, only 70% was due to incentives.

Now, I understand that there are a ton of nuances and caveat above. Is not trivial as a measurement, depends a lot on the control set you use (in this case is OP, and might make sense to use more than 1), there is likely to calculate this beta of metric in different market environment in relation to the total crypto market value and/or l2 total value, etcetera.

But I think this is the starting point: we need to be able to achieve a measurement of how much of the metrics changes are due to incentive programs, and how much by market. And then, we iterate this measure for single protocols.

I think there is a merit in this approach, to have clearer numbers. Let me know if you think it makes sense, also you know where to find me to have clarifications.

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Hey Jojo, thanks for your comment!
The ARDC is already working on analyzing the STIP, although on a protocol-by-protocol basis and aggregation of the findings. There have been several instances already in the preliminary data that indicate further analysis controlling for different factors is needed to draw decisive conclusions. As you mentioned, there are a ton of nuances and caveats to conducting an analysis while trying to control for the rapidly changing environment that is crypto. However, I agree that it’s an important data point to have, to the extent that we can have it.

I’d love it if you could be on the call tomorrow to discuss it more, but I’ll also make sure we discuss the request on our next ARDC sync next week.

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The official start date for the ARDC is April 1st, 2024, with the conclusion of the ARDC’s mandate being on October 1st, 2024, after a 6-month term, as described in the original proposal.

With June now upon us, we’re posting a monthly update to let everyone know what the ARDC has worked on for the past month and what is currently on our plate.

Deliverables

STIP Analysis — Concerns Regarding Possible Misconduct by Synapse with Respect to the Usage of ARB Incentives Allocated Through the STIP by Blockworks Research

While Blockworks was conducting research for its analysis of the STIP, serious concerns were raised regarding Synapse’s use of the ARB incentives. Given the perceived misconduct’s potential severity, we decided to immediately create a forum post and invite Synapse to address the concerns in public. Following that publication, Synapse withdrew its application to STIP Bridge.

STIP-Bridge — Support Material for the Community by Blockworks Research

Following their case studies on GMX and Jojo, Blockworks, in their capacity as one of the research members of the ARDC, created and published a workbook that included qualitative data on the applicants’ incentive structures, operational approaches, reporting standards, notable protocol changes, etc. This data was primarily collected from protocols’ original STIP applications, bi-weekly updates, final reports, and STIP-Bridge addendums. They also included some relevant commentary and any possible red flags and minimal/open-to-interpretation rule deviations they encountered.

Using Hedgey for Proposal Payment Vesting — Security Review by OpenZeppelin

OpenZeppelin, as the Security Member of the ARDC, reviewed a proposal for WakeUp Labs, building a front-end interface to force transaction inclusion during sequencer downtime. The security review focused on the executable payload from the on-chain vote on Tally and the use of Hedgey smart contracts for the streaming of funds, and no issues were found. The review was published in the forum.

Gaming Catalyst Program - SWOT Analysis by Delphi Digital

Delphi Digital put together and published a SWOT analysis for the proposed Gaming Catalyst Program (GCP). The analysis seeks to highlight the program’s various opportunities and issues that need to be addressed as the program’s mandate is further fleshed out.

Gaming Catalyst Program - Compensation Structure Memo by Delphi Digital

As a follow-up to their SWOT analysis, Delphi Digital, at the request of the team behind the Gaming Catalyst Program proposal and with the approval of the DAO Advocate, put together and published a short memo outlining reasonable compensation ranges for the roles the GCP is looking to hire for in the near term.

STIP Risk Analysis — Case Study #1: Vertex Protocol by Chaos Labs

Chaos Labs has been working on conducting case studies on STIP recipients. The first case study completed and published provides an in-depth analysis of the Arbitrum STIP program’s impact on the Vertex Protocol, focusing on its efficiency and associated risks. This analysis is part of a broader series that evaluates the STIP program across three major protocols.

STIP Risk Analysis — Case Study #2: Silo Finance by Chaos Labs

Following their first analysis on Vertex, Chaos Labs worked on and published a second case study, this time on Silo Finance. The scope of the analysis is the same as of the previous case study and focuses on an in-depth analysis of the STIP program’s impact on Silo Finance.

BOLD Proposal Analysis

Following the submission by Arbitrum Foundation of the proposal to upgrade Arbitrum One and Arbitrum Nova’s Rollup Contracts to use Arbitrum BOLD, we (the DAO Advocate) instructed all the members of the ARDC to review the proposal and inform on the potential areas that the ARDC could be helpful in.

BOLD Dispute Mechanism Summary & Comparisons by Delphi Digital

Delphi Digital created and published a summary of BOLD, the newly proposed dispute resolution mechanism for Arbitrum, and compared it with other such mechanisms in Optimistic Rollups. The delivered report is comprehensive and walks the reader through what a dispute is in the first place, how disputes are resolved, different kinds of attack vectors for rollups, and the differences between Arbitrum’s BOLD, Optimism’s Canon, Cartes’is DAVE, and Fuel’s dispute mechanisms.

Security Council Improvement Proposal — Security Review by OpenZeppelin

OpenZeppelin conducted a security review of L2BEAT’s proposal that seeks to introduce changes to the structure of the second Security Council and specifically increase its threshold from 7/12 to 9/12. The security review of the proposal was focused on the executable payload from the on-chain vote on Tally, and no issues were found. The review was posted in the forum.

Current ARDC Work

A high-level overview of the work that is currently on the plates of the members of the ARDC is as follows:

Blockworks Research:

  • STIP Retroactive Analysis - Perp DEX protocols report

Delphi Digital

  • Research on the creation of a DAO Budget

OpenZeppelin

  • BoLD Proposal Analysis with a focus on the concerns against hardcoding a reward distribution to honest validators is the potential for dishonest actors to profit from collusion
  • Analysis of the security considerations of the DAO staking the ETH accrued from the sequencer
  • Security oversight for the creation of a DAO Budget

Chaos Labs

  • Third STIP case study on Pendle
  • Risk analysis of the DAO staking the ETH accrued from the sequencer
  • Risk analysis of the governance parameters

We want to remind you that anyone can follow along with the progress of the ARDC’s work in our Notion Dashboard.

Requests for the ARDC

Over the past month, we’ve had 5 different requests for the ARDC from proposal authors and other governance participants. The requests were the following:

  1. @Jojo requested an analysis of the LTIPP and STIP that controls and accounts for the market environment and/or other ecosystems.
    • Blockworks Research is already working on such an analysis as a research member of the ARDC.
  2. @danielo requested the ARDC’s help with validating the impact report of their Arbitrum DAO x RnDAO CoLab (funded by Plurality Labs) and with reviewing and recommending improvements to their active proposal for Arbitrum Collab Tech Business Cluster.
    • Upon discussing the proposal internally, the ARDC members concluded that there are no obvious ways to add value at this stage.
  3. @RikaGoldberg requested ARDC’s support with reviewing a proposal for ‘Empowering Underrepresented Delegates.’
    • Due to the ARDC’s resources being expended on endeavors of higher priority, we provided high-level thoughts.
  4. @EntropyAdvisors requested/proposed that the ARDC lead the charge in creating a comprehensive budget for the Arbitrum DAO.
    • The ARDC will be working on the groundwork necessary to create a budget for the DAO.
  5. @Jojo requested (during the ‘DAO Advocate Call’ - see below) that the ARDC look into the governance parameters and provide recommendations on whether they should remain as is, or if there are any recommended changes to be made.
    • We believe examining the governance parameters might be beneficial, so we have asked the ARDC members to add it to their backlog.

The requests coming in made us realize that there are no guidelines from the original proposal to establish the ARDC on how requests should be treated. Our understanding and interpretation is that the decision-making ultimately lies with the DAO Advocate and that we (in our capacity as the DAO Advocate) are responsible for triaging the workload for the ARDC.

ARDC handling of requests

The course of action we have decided upon is to discuss all the requests with all the members of the ARDC in our weekly calls, create a brief overview of areas that we could potentially help with, and then we (as in, the DAO Advocate) decide whether or not to expend the ARDC’s resources on them. It’s mostly a process of setting priorities rather than a process of ‘accepting’ or ‘rejecting’ requests.

Additionally, we want to clarify that any proposal author that has requested the ARDC’s help and their respective proposal has passed the temp check will receive priority over others that haven’t, without that, however, being a requirement.

We appreciate all the requests and encourage all delegates and other interested parties to provide feedback on what the ARDC could do to help with the DAO’s activities.

ARDC DAO Advocate Open Call

On May 10th, 2024, we hosted a ‘DAO Advocate Open Call.’ We invited delegates and other governance participants to discuss all matters related to ARDC, from a brief update on what we were working on to questions or requests they might have.

Although the call wasn’t recorded, brief meeting notes are here.

Call to Action

We want to remind delegates that the ARDC is here to support the DAO and the work delegates are doing, and it’s at their disposal under the direction of the DAO Advocate. To that end, there’s a biweekly call every other Monday at 12 pm UTC. You can find the link for it in the Arbitrum Governance calendar.

In addition, we invite delegates to reach out to us (L2BEAT) in our capacity as DAO Advocates if they have topics in mind that they believe the ARDC should be assigned to. To that end, we are available at the biweekly call mentioned above, on Telegram (Krzysztof & Sinkas), and during our L2BEAT Arbitrum Office Hours every Thursday at 3 pm UTC.

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Another month of the ARDC concluded, and here’s what we’ve been up to, and what is currently on our plate.

Deliverables

STIP Retroactive Analysis - Perp DEX Protocols Volume Report — by Blockworks Research

In the context of their retroactive analysis of STIP, Blockworks conducted research and put together a report focusing on how the STIP impacted trading volumes in the perp DEX vertical. They employed a Synthetic Control approach to isolate the program’s effects from broader market trends.

BOLD Security Analysis — by Open Zeppelin

OpenZeppelin was assigned to review the AIP to activate BOLD on Arbitrum One and Arbitrum Nova and to focus specifically on the parameters of the BOLD involving the distribution of confiscated funds and their implications for the future. They conducted and published a comprehensive report.

STIP Risk Analysis — Case Study #3: Pendle Finance by Chaos Labs

Following their analysis of Vertex and Silo Finance, Chaos Labs worked on and published a third case study, this time on Pendle Finance. The scope of the analysis is the same as of the previous case studies and focuses on an in-depth analysis of the STIP program’s impact on Pendle Finance.

Current ARDC Work

A high-level overview of the work that is currently on the plates of the members of the ARDC is as follows:

Blockworks Research:

  • STIP Retroactive Analysis -Spot DEX protocols report.
  • STIP Retroactive Analysis - Yield Aggregator protocols report.
  • STIP Operational & Incentive Mechanism Analysis.
  • Treasury Backed Vaults Analysis - due diligence and research recommendations.

Delphi Digital

  • Research on the creation of a DAO Budget.
  • Creation of an expenses overview to inform the creation of a DAO Budget.

OpenZeppelin

  • Analysis of the security considerations of the DAO staking the ETH accrued from the sequencer.
  • Security oversight for the creation of a DAO Budget.
  • Event Horizon proposal - formal security review
  • Security Audit of the governor contract upgrades to be implemented by Tally.
  • Treasury Backed Vaults Analysis - Security Considerations
  • Contribution to the DAO Budget creation workstream (backburner)

Chaos Labs

  • Summary of learnings from STIP analysis and the 3 case studies.
  • Arbitrum gas fees backtestig
  • Treasury Backed Vaults Analysis - Risks associated with the DAO using CDP protocols
  • Risk analysis of the governance parameters (backburner)

We want to remind you that anyone can follow along with the progress of the ARDC’s work in our Notion Dashboard.

Requests for the ARDC

  1. @EntropyAdvisors requested that the ARDC, and specifically Chaos Labs, collaborateS with them to help with backtesting the potential impact to network use at different minimum base fee parameters (0.02 through 0.1 gwei).
    • Chaos Labs has been assigned to prepare the necessary groundwork, and we’ll then facilitate the coordination between Chaos Labs and Entropy to carry out a proposal for the DAO’s consideration.
  2. There were multiple different requests for the ARDC to conduct research relevant to the proposal submitted by @cupojoseph about Treasury Backed Vaults (TBV).
    • We have assigned all members of the ARDC to the aforementioned task, and we plan to approach it from multiple different angles, taking into account all aspects of introducing TBV to the DAO.

:bulb: We covered how the ARDC handles requests in the previous update here.

Call to Action

We want to remind delegates that the ARDC is here to support the DAO and the work delegates are doing, and it’s at their disposal under the direction of the DAO Advocate. To that end, there’s a biweekly call every other Monday at 12 pm UTC. You can find the link for it in the Arbitrum Governance calendar.

In addition, we invite delegates to reach out to us (L2BEAT) in our capacity as DAO Advocates if they have topics in mind that they believe the ARDC should be assigned to. To that end, we are available at the biweekly call mentioned above, on Telegram (Krzysztof & Sinkas), and during our L2BEAT Arbitrum Office Hours every Thursday at 3 pm UTC.

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Great to see the Treasury Backed Vaults Analysis going forward with blockworks!

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