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Applicant: Nethermind Research
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Applicant Representative: James Baggett
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Applicant Website: website
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Telegram Handle: @jamesbaggett
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Role being applied for: Risk Working Member
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Hourly Rate (in USDC):
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Mid Level Researcher: $130 per hour
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Senior Level Researcher: $180 per hour
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Summary
Nethermind is a leading infrastructure builder, researcher and core development team in the blockchain space. We empower enterprises and developers worldwide to access and build on the decentralized web. Our work touches every part of the web3 ecosystem - from layer 1 and layer 2 engineering, research, and security to application-layer protocol development. We collaborate with a global developer community and strategic partners to advance Ethereum and the broader blockchain industry.
Nethermind’s risk research team was a member of the STEP Committee, where we rigorously vetted yield bearing stable coin issuers with the goal of diversifying the DAOs funds. The work from this committee led to a successful vote and $35m of DAO funds were deployed into yield bearing stablecoins per the committees recommendations.
Background and skills
Our research team possesses extensive and diverse experience in risk management. We are composed of highly skilled professionals with expertise in finance, risk management, quantitative modeling, and on-chain data analysis. Many team members hold CFA charters and have worked at prestigious financial institutions such as Santander and Nomura, as well as established hedge funds like Janus Henderson.
Additionally, our team has developed strong blockchain expertise, having conducted research on Ethereum’s recent upgrades, including EIP-4844 and the Shapella upgrade. We were among the first to propose a framework for analyzing AVS restaking risks back in January 2024.
Our team will leverage Nethermind’s broad expertise, built from over 400 employees with specialized skills across Layer-2 solutions, DeFi protocols, infrastructure development, node operations, pre-confirmation research, and tokenomics. This diverse knowledge base allows us to allocate resources flexibly and adapt to the evolving needs of the Arbitrum DAO, addressing ad hoc and strategic tasks raised by the Supervisory Council with a commitment to detail and efficacy.
Motivation
At Nethermind, our mission is to deliver pioneering research and development that promote accessible, transparent, and borderless economic and governance systems. We believe in the power of decentralized solutions and are committed to fostering the growth of Ethereum and the broader blockchain industry. In this context, we aim to play a pivotal role in Arbitrum’s growth, engage in intellectually stimulating projects, and contribute to its success.
We are enthusiastic about continuing our previous collaboration and applying our comprehensive approach to enhance Arbitrum’s growth, governance, and technological advancement.
Experience
Nethermind Research has been a long term partner of hedge funds and VC funds, providing due diligence on projects, assessing technical and financial risks, and identifying areas for improvement. We also assist in designing trading strategies and risk management frameworks.
More recently, we worked with dYdX on their latest tokenomics and calibrating incentives in preparation for their Megavault product. We published a comprehensive report focusing which looked at the efficiency of current trading rewards, how much incentives to allocate to Megavault. We also studied how to optimize the size of the active validators set and the risk and rewards associated with the closure of their ETH Bridge,
As an active member of the STEP Committee, we assisted the Arbitrum Treasury in selecting optimal RWA investments, gaining a deep understanding of the Arbitrum ecosystem and its strategic goals.
The team has designed a Gas Fee Derivatives market to hedge against volatility. This research includes modeling and pricing base fee options.
Additionally, we’ve helped Puffer Finance design their Validator Ticket pricing system, allowing operators on the network to perform validator duties and earn rewards.
Our team has strong analytical capabilities, including retrieving and analyzing blockchain data to understand agent behaviors and designing multi-agent simulations for stress testing and model comparison.
Project Management Initiatives
Under our Chief Project Officer, Nethermind has developed efficient and effective project management systems. When working with external teams, we bring our time-tested systems and adjust them to work within the flow of the partner team. In DAOs, transparency is critical. We set a regular cadence for updates, e.g. weekly, and send ad-hoc updates when milestones or other critical items present themselves. We use industry standard software tools for project management. With dYdX, we also worked alongside the foundation to understand their needs and communicate our research with the various stakeholders. We also took the time to listen to their feedback and address their concerns.
Scope of Work
Should we join ARDC, we plan to focus on studies that directly improve Arbitrum’s ecosystem whilst maximizing the impact of incentives distributed by the Foundation. These include and are not limited to
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Making DeXes more competitive versus other L2s and CeXes
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Impact Analysis after deployment of:
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ARB Staking: comprehensive impact assessment covering how staking affects treasury funding, user engagement in governance, potential price volatility, and liquidity conditions in the ARB market. The report will also include recommendations for optimizing staking incentives to align with community and DAO objectives.
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Impact of the Timeboost upgrade on the Arbitrum ecosystem. This research focuses on how Timeboost changes transaction ordering policies, its influence on miner/extractor value (MEV), and its potential effects on user fees and sequencer revenues.
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Restaking (Ethereum and BTC) and LRTs what are their risks, which AVS should arbitrum strategically incentivize. On this subject Nethermind has been a long term partner of EigenLayer which give him a unique expertise to work on this.
We looking forward to discussing these with the DAO. Our diverse knowledge base allows us to allocate resources flexibly and adapt to the evolving needs of the Arbitrum DAO, addressing ad hoc and strategic tasks raised by the Supervisory Council with a commitment to detail and efficacy.
Conflict of Interest
Nethermind works with many teams in the Ethereum space, and part of our pre-engagement process includes screening for potential COIs. Nethermind must navigate potential COIs often, and we do so in earnest. As an Ethereum centric organization, we understand that working with DAOs requires the utmost amount of transparency and communication. While we do not anticipate any COIs when it come to risk research, any and all potential COIs that may arise will be immediately disclosed through the appropriate DAO channels.