Thank you for the response. GFX and its allies are appreciative of how open the proposal’s proponents have been to seeking a middle ground we can all be comfortable with. As you know, at the moment we’re still at an impasse around governance oversight.
Let’s summarize our objections.
11% expense ratio is just very high. If this is what is required to administer this program, then it shouldn’t happen. Full stop. There are other opportunities that have more certain yield for lower cost. The cost structure needs significant improvement.
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There is no legitimate reason why 225,000,000 ARB needs to be transferred to a multisig. That prevents any governance oversight. In theory governance can claw it back, but the history of DAOs is littered with such promises. Cayman and other offshore jurisdictions do not provide easy environments for DAO governance to exert its rights. It is better to keep control unambiguously with governance – which means the funds should stay in the treasury.
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This is an enormous amount of money for an industry vertical with no visible winners. This is highly speculative and looks like a YOLO.
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This is intensely dilutive. Messages we have gotten the last few days about ARB from current and past ARB holders, which has underperformed ETH and OP, are intensely negative.
Ethereum and Optimism are positive over the last year. Arbitrum is down. The Arbitrum fundamentals are strong and this weak price performance is a reflection on the constant dilution that Arbitrum’s spendthrift programs have inflicted upon the token. Arbitrum has a spending problem, and putting 8% of the chain’s entire TVL into a highly speculative venture is bad financial stewardship. ARB in the treasury effectively does not yet exist. It’s like shares authorized but not yet issued. 225,000,000 new ARB issuance is very dilutive and will affect your bags. Dilution isn’t evil, but it needs to be thoughtful, efficient, and compared to alternative uses of the funds.
Our recommendations:
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Lower operating cost. This is an uneconomical administrative cost. If expense ratios cannot come down, the entire thing should be cast aside. 8% is already expensive, but would at least be in the realm of realistic vs other alternative uses for the funds.
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Implement actual oversight. Once the tokens leave the treasury, they are gone. They will be spent. There will not be any practical oversight by governance. Promises will be made, legalese will be trotted forth, but there will be little real-life ability to get the money back. A 5-person multisig should never have a quarter billion dollars of the DAO’s money. There is no legitimate reason why the program cannot accept 6 months of funding and come back to the DAO for a top-up regularly. This keeps the program accountable to the DAO.
It’s incredibly strange that this would be structured to provide three years of funding at a quarter billion dollars entirely upfront. This reflects a lack of experience and expertise. We have lived through too many island foundations, trusts, and SPVs to have faith the DAO will actually retain control of these funds. Once this vote passes, the funds are gone. They will never come back if recalled a year or two years later.
Between the high certainty of dilution by minting 225,000,000 ARB, the low certainty of returns on investment, and the high operating costs, this proposal should fail on its merits. If it passes by some stroke of good luck or inertia, we and other stakeholders will consider moving to repeal it immediately if left as is.