Catalyze Gaming Ecosystem Growth on Arbitrum

[SavvyDAO]

Savvy DAO has voted FOR this proposal. See voting rationale here:

Savvy DAO - Delegate Communication Thread

Savvy DAO votes FOR the proposal to launch the Gaming Catalyst Program (GCP) on Arbitrum. Key Reasons: Expand the Arbitrum Gaming Ecosystem: The GCP aims to attract top game developers and studios, fostering a thriving gaming ecosystem on Arbitrum. A $250 billion gaming market today is expected to grow to over $500 billion by 2030, presenting a significant opportunity for Arbitrum. Strategic Resource Allocation: The proposal earmarks 200 million ARB over three years to support game deve…

[krst]

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

We have been following the progress of the GCP proposal since its inception and have also been involved by providing feedback through the different iterations that led to the proposal’s current form. We’re happy for the support the proposal has garnered so far and for the fact that it’s finally at the on-chain vote stage of its lifecycle, months after its inception.

It’s one of the first initiatives of this size and time horizon. It’s also one of the first initiatives of its kind with a strong focus on investment, rather than just distributing grants. We believe this approach will result in a much better alignment between the funded projects and the DAO. We hope this proposal (and the underlying legal structure) will lay the groundwork for other similar initiatives, such as M&A, AVI, and others currently being discussed in the DAO.

However, we know that with this amount of funding, the program is taking on an enormous responsibility for the entire ecosystem, as it will set the standards for proper investment decision-making and future accountability and oversight. We already declare that we will pay close attention to its execution and reporting, ensuring that the DAO remains informed and in control of the overall direction of the program.

[GFXlabs]

How did this go from 200m ARB on Snapshot to 225m ARB on Tally?

[Djinn]

Hey GFX. A $10m operational budget with detailed breakdown was specified in the Snapshot draft but it was not included in the overall headline number.

We did have many opportunities within open community calls with delegates and DAO members to review the proposal, and had extensive collaboration across many months - transparency was super important to us (see timeline below!).

I responded to another question above about the budget breakdown as well. Feel free to reach out if you have more in-depth questions / feedback.

[GFXlabs]

@Djinn

The 200m on snapshot did not include the operational expenses (which were also updated to reflect more accurate budget assessments as well).

An extra $25m is not a small amount. We think it’s a mistake and against the spirt of open governance to simply add in a discretionary $25m. Even a couple hundred thousand dollars after getting bids or collecting new information would be one thing. But you have added more than 10% to an already enormous cost. This is a very bad look, and has raised alarm bells amongst some investors and community members.

We have voted against this proposal and ask other delegates to defeat this proposal, which is far too expensive.

[Michigan_Blockchain]

Michigan Blockchain agrees that the addition of $25M as operating expenses is not a small amount. We still believe gaming is important to catalyze growth on the ecosystem, but have switched our vote from ‘for’ on Snapshot to ‘against’ on Tally because of the reasons outlined by GFXlabs

[Djinn]

Thanks for all the feedback guys. I just wanted to share some thoughts in response to the questions around the overall budget as well as a timeline of the GCP communications.

Feedback is always welcome so please feel free to reach out to me or any other working group member if you have any additional concerns or want to deep dive into any of the GCP topics.

The working group has been super transparent about collaborating with delegates, the Foundation, and DAO members across many AMAs, open offices, and smaller discussions - so dialogue is extremely important to us.

I also don’t want to downplay the size or challenges that this program will face.

Just like any trailblazing effort, there is risk associated with this effort. But we added many checks to make sure the DAO has insight into performance and has a voice in the future of this program. These include but are not limited to an oversight council, transparency reports, and of course the ability to clawback funds.

The multi-sig that would hold funds (should the vote pass) currently consists of five trusted Offchain and Foundation signers. If we need to increase the total count of signers, let’s do it.

This is our chance to make a big difference for the Arbitrum gaming community, and the strong signals that propagated the crypto space after the successful Snapshot vote tells me people are resonating with the potential the GCP brings to what I believe could be the best gaming network in the small, but rapidly growing web3 gaming ecosystem.

#1 Why did the operational budget change from $0m on Snapshot to $25m on Tally?

The operating budget for the GCP was never set at $0M.

$10M for operating expenses was clearly noted in the proposal draft.

See the original post here.

The $10M figure was not included in the headline number for Snapshot, but was in the details of the budget breakdown. We recognize that more consistency should observed in terms of adding opex in Snapshot votes (proposals including the STIP for example also did not include the operational costs in the temp check proposals Arbitrum's Short-Term Incentive Program (Arbitrum Improvement Proposal) - #102 by tnorm). Honestly even the naming and details included within the Snapshot text itself were debated between myself and @coinflip in terms of what made the most sense.

#2. Why the increase from $10m to $25m in operational costs between Snapshot and Tally?

After the successful Snapshot vote concluding on Mar 22nd, the working group consisting of Dan Peng, @Soby from Xai Games, @karelvuong from Treasure, Helika, and the Arbitrum Foundation (as facilitators) continued to harden the existing proposal, which included a hard look at the timeline and budget needed to execute on an ambitious 200m ARB multi-use program.

We also started to bring in potential candidates for the GCP team to get feedback. These extremely experienced operators who came from top venture and gaming firms worked closely with us to battle test the operational setup and bring theory to reality.

What we found after speaking to these potential team members and a variety of industry advisors:

• 2 years was not enough time to thoughtfully deploy capital and see significant results in an industry with multi-year development cycles - especially if we are targeting serious games and developers. The decision was made to increase the program to 3 years.
• The $10m allocated to opex in the Snapshot vote was not adequate for several reasons:
  • Timelines were updated to 3 years
  • Salaries + bonus structures would need to be adjusted due to the lack of carry as compensation for GCP investment team members (carry typically starts to come into play 5+ years after the start of a fund).
  • The program includes a mixture of investments, grants, and RFP creation / management and would need a more diverse staff than a typical fund
  • Immutable X, Ronin, and other competitors in the space provide extensive Developer Relations and Support to drive success in development, live ops, community activation, etc… ,The GCP does not need to match Ronin or Immutable but it does need to support its builders
  • Legal costs were better scoped after several calls with Foundation legal partners

The timeline of updates and public communications are detailed below.

Timeline

Gaming Research Forum Post (Feb 15th)

Link: Arbitrum and the Future of Web3 Gaming

Other communications:

Arbitrum Gaming AMA (Feb 12th): x.com

Eth Denver Working Group Onsite (Feb 26th - Feb 28th)

Initial Forum Post (March 12th)

Link: Catalyze Gaming Ecosystem Growth on Arbitrum

Details:

• 200m ARB
• $10m opex budget
• 2 year program

Snapshot Vote (Mar 5th - Mar 22nd)

Link: Snapshot

Details:

• 200m ARB
• $10m opex budget
• 2 year program

Other communications:

Treasure GCP AMA (3/15): x.com

L2Beat Gaming Interview (3/21): https://twitter.com/Sinkas_/status/1770818902408282124

Updated Draft for Tally v1 (Apr 18th)

Link: https://forum.arbitrum.foundation/t/catalyze-gaming-ecosystem-growth-on-arbitrum/22368/173
Details:

• 200m ARB
• $20m opex budget (+$10m)
• 3 year program (+1 year)
• Updated with additional advisory from former / current publisher and studio executives, former / current venture partners, potential GCP team members

Other communications:

Arbitrum AMA (May 8th) : x.com

Updated Draft for Tally v2 (May 10)

Link: Catalyze Gaming Ecosystem Growth on Arbitrum - #176 by Djinn

Details:

• 200m ARB
• $25m opex budget (+$5m)
• 3 year program
• Updated with additional advisory from former / current publisher and studio executives, former / current venture partners, potential GCP team members

Tally Vote (May 24 - Jun 7)

Link: Tally | Arbitrum Proposal

Details

• $25m opex budget
• 3 year program

Last note:

This is one of the first (if not the first) DAO programs that will stand up a professional, full time team ready to deliver grants and invest in game developers within Web3.

I believe that transparency is going to be key to maintaining trust, and as delegates like @krst @thedevanshmehta @Frisson @gauntlet and many more who voted FOR have mentioned, there are going to be lots of diligent folks ready to hold us accountable. This program cannot succeed without an open line of communication and results driven execution.

The potential GCP team members and working group embraces this call for transparency and I believe it has the potential to pave the way for future DAO incentives and programming if done correctly. Thank you again everyone for the support!

[GFXlabs]

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.

@Djinn

#2. Why the increase from $10m to $25m in operational costs between Snapshot and Tally?

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.

2. 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.

3. This is an enormous amount of money for an industry vertical with no visible winners. This is highly speculative and looks like a YOLO.

4. 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:

1. 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.

2. 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.

[Elkronner]

When I see a comment like this, it reinforces my belief that the Arbitrum DAO plays a crucial role in making the future of this project different from other chains.

For those in the gaming market, the proposal is cohesive and viable, given all the indicators and validations of the power of games in today’s society and their value on the internet.

However, this same skepticism from investors about the gaming market is understandable. Many have invested in games or studios that didn’t perform well—not because the studio didn’t deliver the software, but due to a lack of business maturity and management skills. Game studio leaders often lack the entrepreneurial behavior necessary for success, focusing more on development than on critical aspects like management and business strategies.

At Osten Games, we developed our own game to demonstrate the best path for the studios we accelerate. We’ve created an acceleration model that teaches entrepreneurial behaviors, emphasizing that making a game is only a small step toward a studio’s success. Business and management are much more important for survival than just creating a blockbuster AAA game.

I suggest a very strict acceleration program for game studios, focused on the gaming market and business practices. This would create a sustainable ecosystem with validated milestones for funding, allowing better monitoring of company performance and distinguishing those truly delivering quality software from those focusing only on marketing.

In another chain we were part of before Arbitrum, we saw many unfounded projects developed by outsourced teams, which is extremely risky. Quality software delivery depends on committed teams directly involved in the product’s outcome.

We are evaluating this behavior to create a sustainable growth space for companies in this segment, especially in Brazil, but it can be replicated worldwide. I’m accredited to apply a UN/UNCTAD program called EMPRETEC, designed to train entrepreneurial behaviors and increase business success rates, which I’m adapting for the gaming market.

The care GFXlabs is taking with its points, along with the dedication of Djinn and the team to create this program, mirrors the ongoing struggle between VCs and game studios worldwide. Both sides are right, but we need a validation model where everyone benefits and SYNERGY.

This gives me even more confidence to continue building on Arbitrum. I’ve participated in other chains, and this one inspires much more trust to invest my time and grow with you.

[Frisson]

I voted FOR this proposal on Tally. Arbitrum is the leading gaming chain. We should use the DAO treasury to double down on this success. I think this proposal is a reasonable approach, as it is simply not feasible for the DAO to directly evaluate and negotiate deals directly with gaming projects.

[karpatkey]

While the gaming industry is an interesting vertical, the significant budget required for this initiative and the various unsolved issues raised, albeit late in the proposal cycle, are concerns for us. Specifically, the GCP’s main focus and budget are dedicated towards investments (135m ARB) and grants and bounties (65m ARB). Despite this, there is no clarity on the legal structure to be used for these investments and the legal liabilities are unclear even though they are critical elements to the foundation of the program. Operational expenses are also considerable ($25m) and various delegates have raised concerns around this point. The specifics around the obtained funding are also vague. The funds’ management appears to be delegated to the Arbitrum Foundation with no ringfencing of assets or separation of risk and the clawback mechanism appears missing.

Additionally, we prefer to see an organic strategy aimed at the sustainable growth of the Arbitrum ecosystem rather than standalone allocations of funds. This proposal represents a large disbursement for the Arbitrum DAO to be added to the already high annual spending impacting the Treasury.

Although we are not opposed to opening Arbitrum to the gaming ecosystem, it’s difficult to endorse such a large ask without clarity on the issues identified above. We believe it is critical to address the legal, funds management and treasury considerations before supporting this proposal.

For these reasons, we have voted against it.

[coinflip]

Voted FOR

[reserved to provide reasons for vote, and concerns to be addressed by future GCP council or DAO snapshots]

[maxlomu]

This program is a huge bet on the onchain gaming industry.

IF

we believe that games can become a big component of the onchain economy, and
we believe Arbitrum can be one of the poles of this industry, and
we believe the best way to attract professional builders (gaming studios) is with incentives,

THEN

the only way to compete with other ecosystems is to set up the right arm chest (funds), culture, tooling, and find ways to attract those builders. It is the DAO’s task to enable these factors.

Yes the plan is still lacking some structure, and looks quite costly, however I believe it can be refined and improved once kickstarted.
I understand this amount requested is unheard of at Arbitrum and raises some red flags (but where was everyone in the last 3 months??), but it seems to be aligned with what other chains are doing.

This is a vote of confidence that the Council, the Foundation and the elected teams can execute for Arbitrum to compete in the space.

The extreme scenarios are:

• Worst case: onchain gaming never takes off. We waste a big part of that money which wakens the price of $ARB (and so reduces our resources). However, it could result in: better tooling that can be used for more performant apps, and a new wave of builders that are connected with the Arbitrum ecosystem.

@GFXlabs

Once this vote passes, the funds are gone. They will never come back if recalled a year or two years later.

I also disagree with this take - As the multisig is controlled by Foundation and Offchain Labs members, which I am sure will promptly return the funds if the DAO decided so.

• Best case: onchain gaming becomes massive; new types of experiences, dynamics and game-players relationships are created. Arbitrum manages to invest in a few successful projects, which are tied to Arbitrum, the Orbit chains, and the DAO. These become invaluable assets that can generate revenue for the DAO, and repay the investment.

Attracting builders and new use cases should be our #1 priority, and both cases can potentially cover that. I am buying the optimistic vision.

Voting FOR.

[Griff]

@GFXlabs

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.

I have to agree. But if this was completely the case I would be voting no on this proposal.

However

@Djinn

Since the multisig will be receiving the ARB in lump sum to fund both the program and operations, we added a section to specify how we approach underfunding or overfunding of the operational cost.

The funding for operations will be calculated at the USD value of ARB at the time of the Tally vote setup (5/21/24). In the case of overfunding, the program will return any funds to the DAO treasury.

In the case of underfunding, the GCP team will have two options to continue operations:

• Utilize any earmarked amounts for investments or grants to close the gap on funding up to the total allocated amount for operations
• Stand up a vote to add additional operational funding to continue running the program

I am in full support of this proposal, I believe it can help Arbitrum dominate the gaming market, and I believe in the future of on-chain gaming. However, if ARB’s price escalates greatly, we should consider clawing back the funds for other verticals.

I’m voting to support this proposal on Tally

[0xTALVO.ETH_MTY]

Voted “For”…
The strategic allocation of resources, coupled with transparent oversight and robust support mechanisms, will undoubtedly position Arbitrum as a leader in web3 gaming. This initiative is an exciting opportunity for the community and promises significant advancements in the gaming vertical.

[Bob-Rossi]

Despite voting “Yes” on Snapshot, I will be voting “Against” on Tally. My Snapshot vote was made in favor of seeing where changes would lead, however upon additional reflection and review of the changes to the proposal I don’t believe the proposal should move forward as stands.

I previously expressed hesitancy towards the size of the grant, mainly as a % of the DAO budget, but also the size in relation to the potential benefits funding specifically gaming could provide. The extension of the program from 2 to 3 years is appreciated, however I think ultimately this is too large of a grant to focus specifically on gaming. I don’t really believe the gaming ecosystem is worth pursuing with this type of funding and given how far behind Arbitrum already is in the gaming space I fear we will just be throwing funding at hopelessly catching up. Additionally, people I represent as a delegate have shown either apathy or opposition to this type of spend. I am all for ‘spend it if you got it’, but I think this is too narrow of a focus over too short of a timeframe to be spending this large of a budget on.

I will note that I see value in the Infrastructure Bounties portion of this proposal, and as such on the off chance this does not pan out I’d be for further discussion / funding of something like that.

I also must echo concern expressed about the administrative costs. This is a hefty cost, both in terms of straight ARB as well as a percentage of the total ask. In fairness to the proposal, there has been some expanded explanations of the costs, but I still think they aren’t fully substantiated and a little underwhelming given the time this proposal has been worked on. For example, an independent analysis of staffing costs was done, but then it was doubled without much explanation beyond “our estimates were higher”. I will caveat all this with this - if the analysis is accurate and this is just the cost of business in the gaming space… then fair enough. However, I think then the discussion circles back to my main point - I’m not sure the cost to run this is worth the potential benefits.

Also, as a more general point — I’m not a fan of the precedent being set to just start paying people to draft proposals. I understand a lot of effort goes into these things (100s of hours as noted above), but this wasn’t part of the Snapshot vote and to throw it in as part of the Tally vote makes it feel pork barrel-ish (for a lack of a better word). In that obviously no one is going to reject a 225m ARB tally vote solely over a $100k spend… so it puts a voter in a difficult position where even if said voter is against that specific spend they are forced to stomach it to get a proposal through they would otherwise support.

[ocandocrypto]

I voted FOR this proposal on Tally.

The growth of the Arbitrum stack, its infrastructure, active addresses, and ecosystem demonstrates our potential to become the leading ecosystem in the gaming industry.

The execution of this proposal and the level of operational effort in the coming months will be challenging, but it is certainly an interesting bet that we, as a DAO, are taking.

I am excited to see the upcoming reports that will show us the progress and development of this initiative.

[0x_ultra]

I will be voting “Against”

Although on Snapshot my vote was in favour of the proposal passing, the change in budget allocated to salaries and extra costs as well as all the discussions that went on in the forum and delegate chats makes it uncomfortable to let such a proposal pass. The required budget is obviously extremely high and many issues that have been raised remain unclear. The specifics of the funding are extremely vague for something that has been crafted and planned over the last 6 months + .The DAO wouldn’t have the necessary oversight over funding use.

I’m absolutely not against a gaming fund of this size, I think its a great idea to push arbitrum gaming. I just dont agree with the non-clarity on spending for such an enormous budget.

I also echo Bob-Rossi’s point on not wanting to set a precedent where budgets are snuck in to pay people that drafted a proposal.

My hope is that this proposal does not pass on Tally, a few final changes are made and we are able to pass it on Tally a second time without so much controversy.

[JasonW]

Coming to this as a relatively new delegate, I want to first say how impressive the proposal’s authors have been in their willingness to adapt and refine the proposal in dialogue with the DAO. I was especially glad to see @Djinn and others on the team participate in this week’s governance call and share the latest developments. It has also been great to see members of the broader web3 gaming ecosystem get involved.

I’m voting abstain since I wasn’t around for the Snapshot vote for this important proposal.

While I think the GCP has transformative potential for Abritrum, and I have growing confidence in the team putting it together, there are a few aspects that would have led me to vote against had I participated in Snapshot. I detail these below in the spirit of suggesting areas for improvement as the program moves forward because we all have a vested interest in its success.

1. Information asymmetries. From their comments, it’s clear that the proposal team has been doing a lot of hard work behind the scenes to determine how best to structure the GCP. However, the results of that work - and especially the insights gained from groups like Delphi - has only filtered to the DAO in pieces, and it strikes me that we’d be more comfortable with taking the big swing here if more of those findings were shared with the DAO while in flight. I gather that may be happening in the tg channel and in conversations with involved delegates, which is a great step. Would love to see that taken further so that we can all be more conversant with the insights that are driving the decisions being made.

2. The f word. Establishing a legal entity is crucial for the investment component of this program but raises significant concerns, particularly regarding fiduciary duty. If there is a legal entity, then there will need to be some form of duty to someone. But if the DAO can’t be a legal signatory, then who is the entity legally bound to benefit? If things go south, how can the DAO ensure that its interests are protected if it’s not an LP, investor, board member, or whatever the counterpart is for the chosen structure? The ability to vote a single Council member out is necessary but not sufficient protection here.

We need to avoid a situation where the DAO is taking the most economic (and, as the deep pockets, potentially legal) risk while getting the least protections in whatever deals are struck. If the Foundation isn’t willing or able to act as the DAO’s proxy, then it will be extremely important for the DAO to have more clarity and voice at some stage in the legal setup, up to and including potentially hiring its own counsel to advise the DAO directly on whatever structure is adopted.

The f-word also matters because of the lack of clarity on how the investment decision process - which is typically geared to producing some hurdle rate of return - can instead be mapped to the broad and more qualitative goals of the program. This lack of clarity is a concern in terms of both return of funds (which is not a base case goal here but could be in the worst case) as well as the returns on funds. I think it makes a lot of sense to wait to initiate the investment part of the program until the mechanisms and structure of returns to the DAO are clarified in greater level of detail.

3. Scale mismatch. The lack of clarity around the above indicates a mismatch between the scale of the ask and the benefits to/protections for the DAO and its treasury. I buy the importance of the vertical, and I get the need for urgency. But given the amount of other potential claims on the treasury for other worthy projects, I do think this ask is too large in the absence of clear metrics and accountability to the DAO.

The best of all worlds would be to get to the fully requested amount, but that should be the outcome of successful execution over time rather than a binary decision. I agree with others above and on Tally that the best way to fix this is to move forward in stages following a very public and clearly documented pilot, with progress from one stage to the next subject to some form of DAO oversight given the amount of money involved. I’ve been impressed by other projects that propose some variation on this kind of structure even though they are much smaller. There’s no reason the GCP couldn’t be slightly modified to make this possible.

Congratulations to the team for taking the proposal this far - there’s a lot to be excited about here, and I hope we can all come out ahead as the project develops.

[BlockworksResearch]

After much internal deliberation, and striving to stay in line with our general philosophy of refraining from establishing a precedent wherein votes are cast on onchain proposals that lack finalization and absolute clarity, Blockworks Research has decided to vote AGAINST this proposal on Tally.

While we at Blockworks Research believe Arbitrum should make a strong attempt at becoming the gaming ecosystem in the space, and think the high-level direction of the proposal is sound, there is some ambiguity related to the operational structure of the program, the size of the potential market opportunity, as well as risks associated with such a large upfront investment in this initiative that we cannot ignore.

First, we would like to point out the things we are in favor of with respect to this proposal:

1. The co-fund mandate imposed on the Game Publishers
2. The anti-poaching clause to ensure we see net new growth in the ecosystem
3. Multi-year KPIs (the studio deal KPIs in particular) with the flexibility to refine the 3rd year KPIs
4. The high-level structure between the Council, Core team, and IC

Generally, Blockworks Research is not against earmarking notable capital on catalyzing the gaming ecosystem on Arbitrum, but we are unsure if the market opportunity for deploying 200M ARB is there today.

While we are in favor of an “optimistic governance” approach, we think giving all 200M ARB upfront is not a best practice and is not a good precedent to set. We believe giving a sizable amount upfront to give the program contributors latitude in making operational decisions is warranted and propose giving 50% of the total ask in advance, with the ability for the GCP Council/Core team to come to the DAO at a later date to unlock the remaining 50%. Even if the multisig has clawback functionality, having to use that clawback is much more politically and socially difficult than putting the onus on the GCP Council/Core to prove that the remaining 50% of funds are needed. We think this is a compromise and having 100M ARB upfront at the team’s disposal should give certainty to the eventual GCP team that Arbitrum is serious about this initiative while creating an incentive for core contributors to perform at a high level.

Additionally, there is currently no Conflict of Interest clause for the Core team members, only the Council members. Seeing as the Core team is the one predominantly handling the capital allocation on behalf of the DAO (majority of the seats on the Investment Committee), we believe this is a gap in the proposal that needs correcting before we would feel comfortable voting in favor. Moreover, there are no details in the proposal around the hiring process of the Core team, which feels like a gap we’d like to have more insight into.

Lastly, we’d like to see more detail on the revenue-sharing agreements between the game developers and the DAO. Our understanding is that these will be outlined in the quarterly transparency reports given to the DAO, but ideally, the DAO is given more transparency on what these deal structures could look like.

After a conversation with the GCP contributors, our understanding is some of our concerns highlighted above will be resolved and brought forward to the DAO post-approval (primarily around Conflict of Interest/hiring policies for the Core Team members). We appreciate the time all proposal contributors have taken over the past 6mo to move this initiative forward and look forward to hopefully seeing these as well as other community members’ concerns addressed in the future.