Name: Vending Machine
Email Address: woo.sung@vendingmachine.design , jean-luc@vendingmachine.design, jack@vendingmachine.design (please contact all)
TG Handle: @woosungD94, @jeanluc_sh, @JackMgn (please contact all)
Role: Risk Member
Twitter: Vending Machine
Website: https://www.vendingmachine.design/
Hourly rate: USD 125 per team member
SUMMARY
Vending Machine is a token design and research firm with over two years of experience in crafting and simulating token systems, crypto-economic mechanisms, and incentive strategies for more than ten protocols. Our team excels in data engineering, modeling, simulations, and mechanism design. Recently, we’ve been active participants in the ARB Staking and Incentive Detox working groups, providing incentive recommendations and methodological approaches to meet Arbitrum’s objectives. Our extensive experience aligns perfectly with the key skills required for the Risk Member role in the ARCD. Motivated by Arbitrum’s leadership in DeFi and innovation, we aim to bring a methodical and rigorous engineering approach to support critical decisions during this pivotal time. We propose to conduct a comprehensive design and simulation process for ARB staking and governance attack vectors, guiding the DAO through an end-to-end design that includes stakeholder engagement and iterative feedback. Throughout this process, we’ll keep the community involved by posting updates for feedback. By the end, the DAO will have a fully designed and simulated token system addressing governance concerns.
BACKGROUND AND SKILLS
Vending Machine is a token design and simulation firm. We design and simulate token systems, crypto-economic mechanisms, and incentive strategies. We have been operating for over two years and have designed and monitored token and incentive systems for over 10 protocols. Our team has a math and data background, with data engineering, modeling, simulations, and mechanism design being our core skill set.
Previous work we have done includes parameterizing slashing conditions for dPoS networks; modeling and simulating L2s to parameterize inflation rates for network security; designing and parameterizing token systems for L2s to dApps; economic risk management for L1s; as well as designing launch mechanisms.
More recently, we have been active participants in both the ARB Staking working group and the Incentive Detox working group. We have supported the ARB Staking working group by providing incentive recommendations derived from our simplified inflation model and have also helped determine the final recommendations to deliver to the DAO. We have also supported the Incentive Detox group by sharing an approach to transition from reflecting on past campaigns to methodically defining a new campaign to meet Arbitrum’s objectives.
Our past experience in crypto-economic design, simulations and modeling, token design, and incentive design comprehensively covers the key skills required from the Risk Member of the ARCD. Our recent involvement in the Arbitrum ecosystem has allowed us to become intimately familiar with the core pain points and is why we are well suited for the role.
MOTIVATION
As long-time participants in crypto, we have always viewed Arbitrum as an exciting leader in the ecosystem and one we naturally align with. It is the home of DeFi and token design innovators such as GMX and Camelot, highlighting the ecosystem’s emphasis on experimentation and innovation. These are qualities that Vending Machine values highly, and we strive to adopt a similar approach in our work. This is how we would approach our involvement in the ARCD—not to deliver results based on common practices, but based on first principles.
With a number of working groups exploring token design updates for ARB and a new incentive campaign to follow the STIP and LITPP programs, we recognise that this period is consequential for Arbitrum. As a Risk Member in the ARCD, Vending Machine aims to bring a methodical and rigorous systems engineering approach to support decisions on these two fronts, helping to achieve the best possible results for the ecosystem.
RISK-RELATED EXPERIENCE
As mentioned above, Vending Machine has extensive experience in the required skill set for the Risk Member position in the ARCD.
Our token design and simulation process follows a Model-Based Systems Engineering approach (MBSE), which allows us to methodically design and parameterise mechanisms. It is multistep, involving research, objective definitions, design concept generation, concept selection, simulations, parameterisation, and then delivery. It requires both strong technical competency as well as market and mechanism knowledge.
Some specific examples of our work that are most applicable for this role are listed below:
- Fuel Network: token design, dPoS design, and validator simulations
- Arch Network: token design, dPoS design, and validator simulations
- Berachain: economic research, network simulations
- Everclear: token design and network simulations
- Aerodrome: mechanism research
- Bio Protocol: protocol design and simulations
- Arbitrum: preliminary modelling for ARB Staking
Our work directly involves highly consequential mechanisms and components, which warrants a high degree of risk awareness that we carry into every design process.
Here are some examples of our public work with other DAOs, highlighting our ability to work in public alongside the community:
- Everclear: Full Simulation Report (censored)
- Everclear: Token Design
- Everclear: Simulation Process
- Everclear: Parameter Recommendations
- Bio Protocol: Full list of forum updates
And some of the initial work we have done with Arbitrum Staking Working group:
- Arbitrum: Simple Reward Model
PROJECT MANAGEMENT AND COLLABORATION
With every project we undertake, we lead and manage the design process end-to-end. This involves conducting necessary stakeholder interviews, confirming the legitimacy of the objectives we define, generating design concepts and seeking review, determining the final design and presenting the selection process to stakeholders, building the simulation environment, sourcing the required input variables, analysing the simulation results, and presenting the final parameterised design to stakeholders.
Importantly for Arbitrum, we have experience performing this process openly with DAOs and including the community as a stakeholder in the design and simulation process.
We have led this process for over two years with more than 10 protocols and networks, including all the examples mentioned above.
SCOPE OF WORK
The scope of work we propose to complete for ArbitrumDAO is to conduct a comprehensive design process for ARB staking and governance attack vectors. This scope will cover two months of the six-month period, which is the typical duration of our design process, pre-simulations. From our time participating within the DAO’s staking working groups, it is clear that there is a need for a team to be fully accountable for delivering a comprehensive end-to-end exploration of what the future of the ARB token could look like, as well as exploring and resolving any security threats via governance attacks.
Our work will pick up where we left off in the working group. We will take the research conducted in this group to supplement our design process. With this, Vending Machine will guide the DAO through an end-to-end design, where we will:
- Conduct stakeholder interviews to define system objectives and requirements
- Create multiple design concepts and present these to the DAO for discussion and feedback
- Iterate if necessary and select the final design with the DAO
After the 2-month period where we draft a proposed design to the DAO for feedback, if it is deemed worthwhile to continue exploration, we will then:
- Build a model of the token system to parameterize the design
- Simulate the design and present the DAO with a simulation report
- Present the DAO with a fully parameterized token design
Throughout this process, we will post updates to the forum so that the DAO and key stakeholders can share feedback, allowing them to be part of the design process.
By the end of the process, the DAO will have a fully designed and simulated token system that addresses governance concerns while also potentially extending the utility of the ARB token.
With our wide skill set expanding across risk, incentive design, modelling, and simulating, we can remain flexible to other tasks the Supervisory Council puts forward.
Here are some examples of what the DAO could expect in terms of deliverables. Each deliverable would be delivered in the public forum.
- Preliminary System Architecture Documentation: an outline of the existing stakeholders and mechanisms in the Arbitrum Ecosystem, as well as value exchange mapping.
- Design Objectives, Requirements and Constraints Documentation: an outline of the objectives of the design, the requirements of the design and the constraints of the design surface area.
- Design Concept Generation Documentation: construction of multiple mechanism designs that would achieve the objectives, requirements and constraints previously outlined.
- Final Design Concept Documentation: a document that clearly outlines the architecture of the final design, ready for simulations.
And if the DAO deemed it important to continue exploring the design, Vending Machine would then deliver:
- Final Design Simulation Model: a python based model of the design to stress-test and parameterise the mechanism.
- Final Design Documentation: a document breaking down the final design and optimal parameter settings as defined by the simulation process.
CONFLICTS OF INTEREST
As an advisory firm, we work with many projects across the ecosystem; however, we take conflicts of interest seriously. Any potential conflicts of interest will be promptly reported to the Supervisory Council, and we will cooperate to determine the most appropriate path forward to ensure maximal integrity.