The following reflects the views of L2BEAT’s governance team, composed of @krst, @Sinkas, and @Manugotsuka, and it’s based on their combined research, fact-checking, and ideation.
We are generally not convinced about the concept of incentives and their efficacy in attracting and retaining capital and users in the long term. That said, we are not experts in that domain, and as such, we are inclined to rely on those who have a stronger background in incentives. Beyond feedback on the high-level concept of incentives, we can offer our perspective on aspects that can be improved or better clarified in this particular proposal.
Accountability
A crucial aspect that we should all be clear about is who is responsible for managing the program itself and ensuring its success. While Entropy, Arbitrum Foundation, and Offchain Labs will form the selection committee, the proposal does not clarify who is going to manage and coordinate work of all the parties involved in the program’s execution.
We would like to know who will monitor the success of the program, make adjustments as needed, and also be responsible for pausing or canceling the program if it is not delivering the expected results. We believe that this responsibility should not be diffused within a tripartite committee, but that there should be a clear point of contact with whom delegates can communicate to get more information, file complaints, or request changes.
It might be a good idea to have the OpCo be in charge of the program, with Entropy, AF, and OCL serving as the selection committee. With this setup, OpCo will be explicitly responsible for ensuring the program’s success, ensuring proper coordination between the committee and partners. However, it creates a dependency on OpCo, which isn’t operational yet, and it’s unclear whether it will be ready to take on this responsibility when it is finally operational.
Continuity
While we are supportive of Entropy being both in the committee and serving (at least partially) as the Evaluation Partner, there is a question of continuity. Here’s what we mean by that:
- The program is intended to run for one year, and in the best-case scenario, it is expected to begin in early June.
- Entropy’s proposal to work with Arbitrum DAO was executed in late August, and it lasts a year, which puts it to end in August.
- With that in mind, there is only a two-month overlap (June and July), after which the future is, at this time, unclear. If, for whatever reason, Entropy’s collaboration with the DAO is not renewed, what is the expectation in terms of Entropy’s involvement (and compensation) in this program? Will they request additional compensation for the program? Will they be replaced by someone else?
Processes & Metrics
We appreciate the thinking behind DRIP and share the goal of making Arbitrum’s incentive programs more targeted and measurable. However, we see little in the way of processes and quantifiable outcomes or KPIs that we can use to better understand exactly what we’re voting for. Currently, the proposal appears to be simply approving 80M ARB for incentives and trusting that it will be put to good use.
It is not clear to us who is going to be responsible for designing the seasons and their goals - are these supposed to be coming from the partners, the committee, or from the public RFP? Who is responsible for sourcing proposals for seasons and working on them to ensure they are designed with Arbitrum’s interests in mind? We understand that the SSC will be responsible for selecting programs and allocating capital to them, but who will work on the programs themselves? How is the process going to look like and what are the expected milestones? Without that information, the DAO cannot track the program’s progress and help it achieve success.
It’s also not clear what is expected of the DAO and delegates regarding this program - how is the DAO going to be informed about the program’s progress, and should delegates be providing feedback? To whom, at what stage? In the comments, it was mentioned that the funds will be held in a structure that will allow for potential clawback, but when and how should the delegates even be considering that? And when should they not be using this nuclear option, what other options should be used for providing feedback? We believe having those details clarified in the beginning will help set proper expectations and avoid confusion and conflicts later on.
Next Steps
While holding a temp-check to gauge the DAO’s sentiment towards approving an incentive program in general, and the DRIP in particular, is a good move, we’re not so sure if it needs to proceed directly to a Tally vote, at least not before clarifying the details. All the parties involved in the design of the details of the program are not requesting for any budget to cover the expenses, so they can start the work as soon as they receive the confirmation from the DAO that the DAO is supportive of the overall direction and the size of the program.
As L2BEAT, while we’re not against the proposed program, we cannot, at this time, justify voting in its favor without first getting clarifications on the points above.