Thank you for the proposal.
Posting to support the vote in the temp check.
First, there is a general appetite from builders to renew an incentive program, albeit with differences from the past we have had.
Regardless of the general opinion that DAO members can have about these programs, incentives do make a difference at the ecosystem level and protocol level: with more and more competition from alternative L1s, and new L2s, and an always more fragmented mindshare, it does make sense to utilize economic incentives to strengthen the metric of Arbitrum.
I also welcome an approach that is KPI-centered, with measures and goals established beforehand, something we honestly didn’t do in the past.
I have a few remarks that I want to list below.
- I can understand how the DAO wants an “owner” of the program, in terms of responsibilities for success/failure. It makes sense. I don’t think Entropy, though, should be treated as the only responsible for this program. I partially echo @GFXlabs comment above on the 2/3 decision process, not because I see Foundation and Lab teaming up against Entropy, but because in the end Entropy does not have the final decision, which again relies on a vote for majority. I don’t think the solution is to curb down the commission, nor to give Entropy full control: I think all 3 stakeholders are both well-intended and rightly positioned to make the best decision possible. For these reasons, while Entropy might indeed have more weight in the operations and granular decision process, the initiative will ideally have to be evaluated as one of the first explicit ones run by three AAEs.
- KPI definition will be where the devil lives. It would be superficial to define meaningless KPIs that are easy to reach; it would be unfruitful to define KPIs that, while good on paper, won’t necessarily allow us to reach goals that can be seen as pragmatic in the current market and for the Arbitrum ecosystem; it would be simplistic to define KPIs that are not normalized based on current and past conditions and receptive to the markets’ narratives. This is not a critique of the program, Entropy, or others, just a reminder of what we (already) saw in the past. The work on these metrics will be the key unlock of the program; and I will add, I don’t think the DAO should necessarily define them, because while it might seem simple on the surface, it is instead an extremely hard job. In my very personal opinion, one way to solve this would be to interview the most important protocols in Arbitrum, and find a common denominator between these findings and the experience of the analysts we have available, alongside the strategic goal that OCL wants to pursue for the next year.
- As I already mentioned privately, one of the main risks of the program is choosing the right technological partner. I will be honest: so far we haven’t seen in our DAO entities and proposals that are able to go into the nuances of incentive programs, such as avoiding the situation where multichain DEXes reduce the spread of pools in Arbitrum to 0 to subsidize LPers with incentives, while the protocol itself still has revenue from other chains (and so hurting DEXes that are mainly focused in Arbitrum), or analyzing what % of fee rebate in all perps protocols gives an equilibrium between organic growth in demand versus simply creating farming dynamics. We just didn’t see the granular breakdown up to these details in the last several months of calls, and it might also mean that there is no entity out there specifically able to minimize these unhealthy situations.
Wanting to be optimistic about it, if we are able to choose a partner that is constantly available to hear from both the DAO and protocols, and is capable of properly measuring, almost in real time, the data needed, and has a mandate that is flexible enough to intervene with even important changes on the fly, then we can probably obtain a good result.