Name: Areta (Organization)
Wallet Address or ENS: aretagov.eth / 0x8b37a5Af68D315cf5A64097D96621F64b5502a22
Tally Profile: Areta Governance Profile URL
What area are you most interested in contributing to?
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- DeFi development on Arbitrum
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- Improving Governance participation
Please share your stance on overall goals for the DAO:
As DAOs emerge from their infancy, their structures have proven powerful tools for enabling decentralisation and autonomy. We view a well-designed governance system as a critical enabler for decentralised projects to allow them to leverage decentralisation as a strategic advantage, rather than treating it as an inconvenient necessity (where most of the market is currently at).
Arbitrum DAO, like many others, still encounters challenges in maintaining the organisation, highlighted by governance issues such as non-effective capital allocation, difficult contributor onboarding, and delegate decision-making overload. This scenario has highlighted areas where Arbitrum DAO can improve in establishing structured processes for better collaboration and is open to further strengthening against inefficiencies.
In our opinion, the primary goal of Arbitrum DAO should be to sustainably steward the Arbitrum protocol and ensure its long-term growth and prosperity. This should be done while ensuring that:
- DAO members work towards commonly aligned longer-term objectives;
- Contributors are well-equipped to come up with ideas and initiatives that improve and grow the ecosystem;
- The ecosystem can grow organically within the right structure, including using the ARB token as an advantage.
Arbitrum DAO, moreover, should strive to be both sufficiently decentralised and ensure that contributors are able to operate efficiently in a well-defined and outlined organisational structure. Arbitrum DAO, at the end of the day, should be an organisation that has a clear vision and strategy, clear operational processes, capital allocation and budgeting model, and diversified and sustainable revenue streams. The Arbitrum community, in such a structure, should ideally be well-positioned to work towards this goal together, harnessing the ideas and brainpower of the entire collective to be greater than the sum of its parts.
Sample Voting Issue 1:
- Uniswap planned to use Flipside to attract new users to Uniswap through bounties. Although the program outline and funding was sufficiently detailed out, the proposal was contentious because it gave Flipside crypto too much control over allocating UNI to bounties and oversight of the entire program.
- For instance, Flipside had 3/7 seats on the allocation committee and 1/3 seats on the Oversight committee. There was also concern since none of the other analytics service providers were involved in the proposal.
- This proposal flew under the radar but at the 11th hour got very heated. Large votes from university clubs supported the proposal since they would get a seat on the allocation committee. However, Dune and Leshner spoke up about the issue because of the centralization of power and favor of one service provider.
Prompts to Answer:
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How would you vote?
Against
There is a tricky trade-off to achieve between decentralisation and efficiency. Voting for or against would depend on the circumstances of the proposal. For example, if the proposal allocated a large amount with little oversight over the program manager and a relatively long engagement period, then voting against would be the sensible option. If the funding amount was reasonable, and the program outline also made sense, then voting in favour would ostensibly be a vote to enable efficiency and speed and reduce any unnecessary delays.
However, there is a need to avoid conflicts of interest in these cases at all costs, especially in competitive environments where there are multiple interested parties (including other analytics providers). Here, the fact that Flipside had a position on the allocation committee and the oversight committee is a clear conflict and could lead to significant bias in the decision-making. While all other aspects of the proposal seem to make sense and are in line, it is this very obvious conflict of interest that we would like to avoid and would therefore vote against in order to, at the very least, set a precedent for DAOs and committees going forward. Even though we are strong believers in optimising for efficiency and being measured about the decentralisation vs. efficiency trade-off, it is crucial to avoid conflicts of interest in any situation.
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What amendments would you make to the proposal if any?
In such a case, we would institute a staged disbursal of funds over ‘staged’ time periods, for example, once every 6 months. KPIs would be set (though would not be too rigid to not enable any unforeseen circumstances or situations) and if an oversight committee composed of a maximum of 3 individuals judged the KPIs to have been met over the quarter, funding for the next phase would be released.
Depending on the total funding amount, length of the program, and plans to extend the program over a longer time, we would also prefer to have a procurement process for an analytics provider through an RFP. This would ensure standardisation of prices and a more consistent and fair process, and would make sure that there are no claims of favouritism. It would also make sure that the selected provider is the most fit-for-purpose.
Lastly, and most importantly, we would make sure that there is no overlap between oversight and allocation committee members and, in the best case scenario, allow for one seat from one entity only (i.e., each member of the allocation committee has to be from a different entity and even two of them cannot be from Flipside).
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How would you approach the tradeoff between centralization of authority and the ability to get things done?
It has been established that there is a trade-off between efficiency and decentralisation. For us, the most critical form of decentralisation is in the tech stack where there is the option to switch and build permissionlessly without censorship. For the Arbitrum protocol itself, this is paramount.
Decentralisation in governance is indeed important, but we do not see it as the be-all-or-end-all. Instead, we think there has to be a certain balance that has to be found since a DAO is, at the end of the day, an organisation composed of a community that still needs to be profitable, steward the growth of the protocol and its treasury well, and ensure that the protocol remains attractive and lasts over the long run.
As such, we think centralised points of efficiency are necessary even in a DAO, but it is critical for these points to be surrounded by utmost transparency, oversight, and regular reporting and accountability to the DAO. It is also important for there to be ‘term limits’ or ‘succession plans’ in these centralised points to minimise any entrenchment of power, and there need to be checks and balances as well. However, there should be a level of autonomy for individual parties within the DAO to be able to execute on decisions without constant check-ins and approval required, and they should be allowed to be judged on their performance over a certain time period.
Sample Voting Issue 2:
Issue Overview:
FEI RARI Hack Reimbursement: In April 2022 Rari was hacked for 80M, a vote was passed to reimburse those affected. Then in May 2022 another vote to refund the Rari hacked was brought forward this time it was not passed.
Prompts to Answer:
Outside the flipping of the vote, how would you choose to handle this situation, i.e should parties be reimbursed for an exploit or not? (Please choose one of the below options and then elaborate upon your reasoning)
Please elaborate on what instances you believe it is right to refund and which are not.
Split Reimbursement
We would choose to reimburse hacking victims to a certain number of cents on the dollar. The crux of the matter is that DeFi is permissionless and smart contract code is always liable to be hacked. Even in a security audit, it is almost close to impossible to patch all vulnerabilities, and all it takes is one small attack vector to hack a smart contract. It is for this very reason that 1) security is paramount, and 2) we are still very early in this space. As such, the motto of crypto and DeFi especially is more akin to ‘buyer beware’. Given that most DeFi participants are aware of this maxim, it would not be sensible to set a precedent and reimburse the entire amount.
However, there is a spectrum of risk and crypto marketing also tries to attract ‘regular’ users who are not as aware of the risks as DeFi natives. Moreover, these users trusted the smart contracts built by Rari, and if protocols try to say that it is all buyer beware and there is no recourse whatsoever for users, usage of protocols will drop precipitously. Therefore, to have a balance, a split reimbursement would make most sense to send the right signal.
In a situation where the protocol is fighting for its survival, then a reimbursement of any kind may not make any sense and the protocol has to optimise for it staying alive. However, on the flip side, if a protocol is relatively profitable, then a higher reimbursement may allow it to restore its image and be more trusted by users, potentially even attracting new users. Therefore, it depends on the state of the protocol’s finances as to the level of reimbursement that is instituted.
Languages we speak and write: English, German, Spanish, Mandarin, Hindi
Disclosure of Conflict(s) of Interest:
Areta currently does not have any material conflicts of interest. We do not hold any other cryptocurrencies.
We are currently involved with the following initiatives:
- Arbitrum: ADPC (Procurement Committee), M&A Pilot Phase, RWA Innovation Grants Program
- Aave: Top 5 Delegate (profile here)
- Safe: Contributors
- Uniswap: Running the Uniswap-Arbitrum Grants Program (UAGP)
- dYdX: Trust Member of Operations Sub-DAO
Given our Arbitrum initiatives, conflict of interest situations could occur in the future. In these cases, we pledge to abstain from voting and divulge any conflicts publicly.