Castle Labs: Strategic Review of SOS Submissions & Path Forward for the DAO

DAO Programs & Initiatives Strategic Objective Settings (SOS)
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The Strategic Objective Setting (SOS) process is one of the most consequential experiments the Arbitrum DAO has undertaken to date. It sets the tone for long-term priorities and the execution models that will bring them to life. Castle Labs has reviewed all eight SOS submissions using a principled, research-backed evaluation framework. This document outlines our view on the submissions, our preferred direction for consolidation, and our recommendations for the DAO moving forward.

Castle’s Evaluation Framework Definition

We evaluated each submission across four pillars that reflect Castle’s approach to governance, strategic focus, and execution:

  1. Governance & Operations: Scalable execution with clear scopes, hybrid flexibility, and accountability.

  2. Vertical & Strategic Focus: Core verticals (DeFi, RWA, apps) and modular experimental bets (DePIN, financial services, AI).

  3. Builder Funnel & Ecosystem Growth: Distribution infrastructure, DevRel, accelerators, KPIs, and outcome-based incentives.

  4. Infrastructure, Interop & Modularity: DAO-backed funding in Orbit, support for interop standards, and builder-aligned tooling.

Each proposal was scored using this framework. Our alignment rankings are summarized below.

Strategic Evaluation Walkthrough

This document outlines the refined pillars Castle Labs is using to evaluate SOS submissions and frame our governance positioning. It incorporates findings from SOS alignment exercises, internal strategy meetings, and ARDC insights on DAO-wide priorities.

1. Governance & Operations

Castle supports a hybrid execution model that embraces the strengths of AAE-led delivery while ensuring flexibility for DAO-aligned contributors and vendors to engage where appropriate. We recognize the unique capabilities and institutional knowledge AAEs bring to the table, and aim to complement, not compete with, their role by ensuring other actors can contribute meaningfully when AAEs are at capacity, choose not to lead a particular initiative, or where distributed execution is structurally preferable.. This model balances effectiveness with inclusivity, ensuring aligned vendors and community contributors can add value when AAEs are over-capacity or out-of-scope.

Sub-pillars:

  • Hybrid AAE Execution: AAEs should lead within defined scopes, but proposals can be routed to OpCo or preferred vendors as needed. [@Entropy, @SEEDGov]

  • Guardrails & Accountability: Each AAE must operate under clear terms, budgets, scopes, timelines, performance metrics. Guardrails create confidence in decentralization.

  • Community Input & Transparency: Proposals (e.g., DRIP) must clearly explain their scope, allow feedback, and avoid vague mandates. Oversight mechanisms should exist for budgeted programs.

  • KPI-Driven Governance: Decision-making should be outcome-based. All workstreams must set clear, trackable KPIs that are visible to delegates and contributors.

Castle Position: Strongly aligned with a hybrid governance vision. We oppose language or structures that centralize discretionary power or eliminate DAO input. Clear scope definitions, feedback loops, and clawback frameworks are essential.

2. Strategic and Vertical Focus

Castle separates core verticals from experimental explorations, and distinguishes what Arbitrum should lead in from areas it may support as an enabler.

Sub-pillars:

  • Ecosystem Differentiation: Arbitrum should define a strategic lane among L2s. Castle supports a strong narrative around Arbitrum as “the home of app builders” -a developer-first platform with distribution, composability, and product-led funding at its core. [@maxlomu]

  • Core Vertical Focus:
    ** DeFi: Still the heart of the chain. Castle supports proposals that strengthen liquidity, improve user experience, and increase protocol composability. [@Gabriel, @tnorm, @Entropy]
    ** RWA: Arbitrum should lead in integrating sustainable, yield-generating, real-world assets. [@Gabriel, @Entropy]
    ** Application-Focused Funding: Priority should go to user-facing applications with traction potential, not just tooling. [@maxlomu]

  • Modular Experimental Verticals:
    ** DePIN: High-potential, long-tail experimentation in hardware and infra. DAO should support this with milestone-based grants. [@dragonawr]
    ** Enterprise/Financial Services: Well-aligned with RWA and regulatory infrastructure, but must be scoped tightly and justified via throughput. [@0xDonPepe & @JuanRah]

Castle Position: We support doubling down on DeFi, RWA, and end-user applications as Arbitrum’s core. Modular bets like DePIN and financial services are worth exploring but must be budget-conscious, goal-oriented, and complementary, not competing.

3. Builder Funnel & Ecosystem Growth

Castle sees the builder journey as the DAO’s most critical responsibility. A fragmented funnel results in poor conversion, underused grants, and lost developer loyalty. We believe in funding distribution, support scaffolding, and clear feedback loops.

Sub-pillars:

  • Top-of-Funnel & User Distribution: Attract users that devs can build for. Arbitrum needs front-door pathways, partnership distribution, and GTM support that drives product-market fit. [@maxlomu, @Gabriel]

  • Builder Development Pipeline: Castle supports end-to-end builder programs; accelerators, hackathons, DevRel, scaling grants, mentorship. This should evolve from current ARDC research. [@Gabriel, @dragonawr, @404DAO]

  • Incentive Design Maturity: Effective incentive programs should target specific builder and user cohorts, evolve across multiple seasons, and include dynamic reward structures that iteratively channel incentives to real-time growth. Every program should articulate a core hypothesis, whether it’s bootstrapping usage, sustaining engagement, or growing a vertical, and measure success accordingly.

Castle Position: We strongly support Max and Gabriel’s direction. Infrastructure should be funded only when it measurably accelerates builder throughput. Distribution and funnel strategy deserve equal funding to DeFi or L3s.

4. Infrastructure, Interop & Modularity

While Offchain Labs leads on core protocol development, the DAO must take a more active role in co-investing in the Orbit ecosystem. This means using DAO resources, grants, coordination, documentation, and incentives, to accelerate adoption and usability of Orbit chains, especially where they contribute to Arbitrum’s broader goals around user growth, app diversity, and modular expansion.

Sub-pillars:

  • Orbit Ecosystem & L3s: DAO should help fund Orbit adoption - L2/L3 onboarding, templates, grants, and ecosystems. Modular expansion must align with product and user growth.

  • Composable Infrastructure: Standards for integration, dev onboarding, and tooling must be built with simplicity and interoperability in mind.

  • Infrastructure That Serves Builders: Funding should be impact-linked. If infra doesn’t support funnel performance or app success, it should not be prioritized.

Castle Position: We support infra as a strategic enabler, not a silo. DAO funding here must relate back to goals in Pillars 2 & 3. Orbit especially deserves capital allocation to succeed.

Summary

Castle Labs is prioritizing:

  • Governance systems that blend accountability and openness

  • A strong identity around application-layer builders

  • Core verticals (DeFi, RWA) and mapped ecosystem pipelines

  • Measurable incentives with clear KPIs

  • Modular bets framed around DAO-supported experimentation

We back proposals that:

  • Empower contributors with clear scopes and feedback loops

  • Create user and builder growth, not just activity

  • Respect the DAO’s role in strategic direction and budget discipline

This framework will guide our SOS evaluations, public forum responses, and Castle’s ongoing participation in Arbitrum governance.

Castle’s Scoring Overview

Governance & Operations Vertical & Strategic Focus Builder Funnel & Ecosystem Growth Infrastructure & Modularity Overall Alignment Score
Gabriel 5 5 5 4 4.75
Max Lomu 4 5 5 3 4.25
Entropy Advisors 3 4 4 4 3.75
Tnorm 3 4 2 3 3.0
Dragonawr 2 3 2 5 3.0
404Gov 3 2 3 3 2.75
SEEDGov 4 2 2 2 2.5
0xDonPepe & JuanRah 2 3 2 2 2.25

Top Alignment: Gabriel, Max Lomu

Structured but incomplete: Entropy, SEEDGov

Focused, modular contributions: Dragonawr, 404Gov, DonPepe & JuanRah, Tnorm

Pillar-by-Pillar Review

Governance & Operations

  • Gabriel: “Define clear roles, responsibilities, and mandates for all major ecosystem actors.” Gabriel offers a clear mandate structure with scoped ownership and vertical accountability, strongly aligned with Castle’s hybrid governance preferences, and among the few proposals to explicitly define execution roles within a DAO context.

  • Entropy: “Establish Arbitrum Aligned Entities… and financial policies prioritizing ecosystem growth.” Entropy proposes a detailed operational vision with treasury and execution focus, but its centralization risk needs offsetting with better DAO input mechanisms and role reversibility. Still, it sets a precedent for treating governance as infrastructure.

  • SEEDGov: “Empower decentralized units with flexible execution.” SEED leans heavily on OpCo, which lacks precedent and clarity, but it introduces a crucial idea: enabling preferred vendors to operate with autonomy under DAO-aligned mandates. This reflects Castle’s belief in institutional memory and long-term vendor participation. With clearer scopes and controls, SEED’s approach could form the backbone of a sustainable execution layer.

Vertical & Strategic Focus

  • Gabriel: “DeFi as the core, expanded with real-world assets and financial primitives.” Gabriel presents the most structured and compelling case for Arbitrum’s vertical identity, framing DeFi and RWA as economic base layers that should guide both funding and execution mandates. His proposal outlines how vertical-specific working groups would execute on these themes with measurable KPIs.

  • Max Lomu: “80% of funded projects should be applications, not infra.” Max reinforces Castle’s product-first funding stance. His explicit prioritization of app-layer deployment over generalized tooling sets a clear filter for how Arbitrum should approach ecosystem investments.

  • Dragonawr: “Support DePIN builders through Orbit.” Castle supports the inclusion of DePIN as a modular vertical for experimentation. However, we do not believe DePIN-specific tooling should be the basis for strategic identity. The DAO should fund such efforts through goal-scoped pilots, not ecosystem-wide prioritization.

Builder Funnel & Ecosystem Growth

  • Max Lomu: “Launch 5+ initiatives to improve the developer funnel… track conversion to mainnet.” Max’s is the only proposal to treat builder onboarding, retention, and launch as a measurable system. His suggested metrics, conversion targets, and downstream support make his the most operationally grounded strategy for funnel development.

  • Gabriel: “Onboard non-native users via accessible flows and professional-grade training.” Gabriel expands the builder funnel upstream, emphasizing how user acquisition and onboarding drive application success. His call for accelerators and non-crypto-native GTM aligns with Castle’s user-first funnel philosophy.

  • Entropy: Entropy offers sound structural enablement, but its proposal lacks funnel-specific segmentation or performance KPIs. Builder outcomes will depend on how well its aligned entities map and serve real pipeline bottlenecks.

Infrastructure & Modularity

  • Dragonawr: “Deploy Orbit integrations and DePIN-friendly L3 tooling as an ecosystem differentiator.” While we applaud Dragonawr’s commitment to Orbit adoption, Castle is cautious of strategies that frame Orbit primarily through vertical use cases like DePIN. Orbit should remain an ecosystem enabler, not a brand extension of any one vertical.

  • Entropy: “Position Arbitrum as a digital sovereign… orbit plays a central role.” Entropy’s framing of Orbit as infrastructure for sovereign expansion is well-aligned with Castle’s view. It reinforces the idea that modular infrastructure should serve as the foundation for composability, not fragmentation. DAO co-investment in Orbit should prioritize general tooling, onboarding support, and interop readiness across chains.

Castle’s Preferred Path Forward

If consolidation occurs, Castle recommends:

  • Max’s builder funnel strategy, which provides a clear, outcome-oriented plan for supporting builders, with an emphasis on conversion metrics and app-first funding priorities. This approach is reinforced by Gabriel and 404Gov’s shared emphasis on top-of-funnel access and developer onboarding infrastructure.

  • Gabriel’s vertical thesis and mandate structure, which emphasizes DeFi and RWA as Arbitrum’s strategic base and proposes scoped execution mandates tied to measurable vertical goals. Tnorm and Entropy also target DeFi and RWA respectively as core economic layers, Tnorm through a liquidity-first DeFi strategy and Entropy via long-term treasury integration.

  • Entropy’s execution design led by AAEs, with the allowance for a more hybrid approach that leverages OpCo as a coordination layer while empowering DAO-aligned specialist vendors, as suggested by SEEDGov, to lead and execute strategic programs where relevant expertise and track records exist.

  • Entropy’s Orbit framing, which positions Orbit as a foundational component of Arbitrum’s evolution as a digital sovereign, with DAO-led infrastructure support that remains vertical-agnostic

This synthesis reflects Castle’s vision for Arbitrum as a strategically differentiated Layer 2; not just a fast chain, but an ecosystem defined by:

  • Products with users, not just protocols with incentives

  • Builders who scale, supported by a mapped pipeline and outcome-tracked programs

  • Modular infrastructure should extend Arbitrum’s reach through Orbit, empowering sovereign ecosystems while remaining interoperable by default.

  • Scoped governance, where roles are clearly defined, verticals are owned, and execution is judged by delivery

Castle believes this identity is essential to attract long-term builders, grow the economic base, and compound ecosystem knowledge, all while retaining flexibility to experiment, evolve, and scale.

A platform that compounds builders and users, interoperable by default, governed with clarity, and enriched by the apps and ecosystems it enables.

Closing

Castle will support any SOS implementation that delivers:

  • A mapped and measurable builder-to-user growth strategy

  • Clear execution mandates across high-conviction verticals: DeFi, RWA, and product-layer applications

  • Hybrid governance models that empower AAEs and aligned contributors while preserving DAO oversight and the retention of institutional ecosystem knowledge

  • Modular infrastructure positioning Orbit as a foundation for ecosystem expansion.

We thank all SOS submitters for pushing DAO thinking forward. We look forward to supporting the next phase of strategy formation and execution.

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