Entropy Advisors Delegate Communication Thread

Governance Delegate Statements
1

Delegate Address: 0xb4c064f466931B8d0F637654c916E3F203c46f13
Forum Handle: @Entropy
Team Member Handles: @MattOnChain, @swmartin, @pruitt
Website: https://entropyadvisors.com/
Twitter: x.com/EntropyAdvisors

About Us

At Entropy, we believe that effective coordination within DAOs is a prerequisite to crypto delivering on its promise of a globally accessible internet of value. As the leading scaling tech stack, we view Arbitrum as best primed to deliver on this vision and have therefore committed to work exclusively with the Arbitrum DAO. Our team is composed of crypto natives, with previous experience at Blockworks Research and 404 DAO.

Delegate Statement

Our primary objective for the Arbitrum DAO is to ensure that the Arbitrum tech stack becomes the most widely adopted infrastructure in the entire blockchain ecosystem. We envision a world where investors, users, and developers focus on contributing to the Arbitrum ecosystem without even making the conscious decision to do so, primarily because the network effects have grown so exponentially that “Why Arbitrum?” is no longer a question being asked. We believe the Arbitrum tech speaks for itself in practice, and that with proper stewardship and contributions to the Arbitrum DAO, the aforementioned question will turn into “Why not Arbitrum?”.

We are interested in contributing to all areas of the Arbitrum ecosystem as needs arise, but will be focusing on improving governance participation as well as tooling and protocol decentralization. The Arbitrum DAO is Entropy Advisors’ only customer, which is not something many other Arbitrum delegates can tout today. Our employees have extensive experience in research and have been active across numerous DAOs in the past, but have identified Arbitrum as the most promising technology stack and want to put all of our time, effort, and collective brainpower into ensuring the sustainable growth of the ecosystem – powered by the Arbitrum DAO.

Put simply, we believe in a diverse and highly capable delegate base, a DAO that is sustainable through diversified and robust revenue streams, responsible and carefully calculated spending that encourages the growth of the ecosystem, a highly intellectual group of service providers that can effectively execute on tasks on behalf of the DAO, and measures for accountability/processes that can stand the test of time.

Conflicts of Interest

Entropy Advisors often authors or is directly involved in several proposals within Arbitrum DAO. As a delegate, we acknowledge that there will likely be instances where it will be a conflict of interest for us to vote on a proposal. Going forward we will be abstaining from Snapshot and Tally votes that directly place Entropy in a position of power.

In general, our team will lean towards overcommunication and abstaining in the event of any other perceived conflicts of interest.

2

Voting Rationale: Sept 13-19th, 2024

Snapshot

ArbitrumDAO Off-site

Entropy Advisors has hosted delegate events in the past and has plans to do so at future conferences. Therefore, we voted ABSTAIN due to what we view as a possible conflict of interest. We have ranked our choices in the following manner:

Based on our team’s experience hosting events, the outlined budget appears high, especially for the online option. This influenced our rankings, which are placed from lowest to highest cost.

Terms of Tenure for STEP program manager

Entropy has voted FOR additional funds for one year as it is vital that Arbitrum DAO honors its commitments with service providers and is viewed in a professional manner. The STEP program is one of the most high-profile and successful DAO initiatives to date. Making sure that it can operate effectively through its intended term should be a priority. We have ranked our choices in the following manner:

Constitutional AIP: Proposal to adopt Timeboost, a new transaction ordering policy

Entropy has voted FOR collecting bids in ETH. Our team has previously commented about the benefits of adding ETH to the treasury over burning ARB. Arbitrum DAO should take the long-term approach and set itself up to be well capitalized for the coming decades. Additional ETH in the treasury can be leveraged to earn yield or attract strategic growth partnerships.

[Aave DAO] LTIPP Grant Extension Request

Entropy has voted AGAINST Aave’s LTIPP extension request, primarily because allowing Aave to continue to run incentives would unfairly increase the cost of capital for its competitors on Arbitrum who are unable to run incentives in return. Additionally, with the Incentive Detox proposal passing a temperature check, we feel it is best for the DAO to turn its focus to designing a proper, well structured program for the future.

3

Voting Rationale: Sept 20-26th, 2024

Security Council Cohort 3: Nomination Phase

It is our team’s belief that at least one member of Offchain Labs should be present on the Security Council, as their technical expertise and unparalleled knowledge of the Arbitrum tech stack are crucial in war room situations. With Gzeon having already received sufficient votes in the Nomination Phase, Entropy has instead split its votes between ConsenSys Diligence and Emiliano Bonassi. Both candidates are qualified, with ConsenSys Diligence being a reputable audit firm and Emiliano having deep expertise of the Arbitrum Orbit Stack.

Snapshot

GovHack Devcon in Bangkok - Hack Humanity

Entropy Advisors has hosted delegate events in the past and has plans to do so at future conferences. Therefore we voted ABSTAIN due to what we view as a possible conflict of interest.

[Non-Constitutional] Funds to Bolster Foundation’s Strategic Partnerships Budget

Entropy has voted FOR, and as previously commented, our team is fully in support of this proposal. The Arbitrum Foundation has proven itself to be a credible entity over the last year and a half, and such an amount is necessary to secure high-impact partnerships for Arbitrum.

Several other delegates have suggested an oversight board composed of DAO members who would have insight into the deal process. While this may sound like an appropriate solution, there are many important questions being overlooked:

  • What powers does the board have to stop a deal it doesn’t approve of?
    • Does every deal have to be approved by the board?
    • Does the board have a veto ability? In what situations could it utilize this authority?
  • What relevant information can members even share with the DAO if under NDA?
    • What happens if a board member leaks private information about a deal?

Once diving into the details, such a board seems impractical, and ultimately would just serve as a hindrance to the Foundation’s ability to properly execute rather than providing the DAO any real transparency.

[Non-Constitutional] Arbitrum DAO Delegate Incentive Program

Entropy has voted FOR DIP V1.5 as we considered the first rendition of the Delegate Incentive Program to be successful and a meaningful driver in increasing delegate participation in the Arbitrum DAO.

Compared to V1.1 presented, we are more supportive of qualitatively assessing a delegate’s contribution and the fact that V1.5 helps encourage participation in conversations that may not make it to Snapshot. Additionally, while the Karma Score was a better mechanism than voting performance, it is still relatively easy to game and the forums saw a noticeable increase in bot activity after DIP V1 launched.

Qualitatively assessing the impact of delegate contributions will be difficult and managing the DAO’s compensation program is a serious responsibility, but we have faith that the SEEDLatam team can be trusted for the task.

Two points of constructive criticism:

  1. Echoing some of the other comments made by delegates, a minimum participation rate of 60% for onchain votes in the last 90 days is low. Granted there are not as many Tally votes, but an 80% participation rate feels more appropriate given that being up to date on onchain proposals is the most important delegate function.

  2. While we recognize the amount of time and effort a delegate must put in to be truly effective, most delegates arguably shouldn’t be in the $6-7K payment range. We will be keen to see the first few months of data to see what the average compensation is in this updated version. A suggestion for a future iteration is to set a lower base pay ($2,500 in ARB) with the remainder being, e.g., delegated to the recipients’ address and vested over 1 year. This would help promote long-term alignment with Arbitrum and its token.

Overall though, Entropy is supportive of the program and hopes it continues to attract top talent to the Arbitrum DAO.

4

Voting Rationale: Sept 27-Oct 3rd, 2024

Snapshot

[Non-Constitutional] Whitelist Infura Nova Validator

Entropy has voted FOR to whitelist Infura as a Arbitrum Nova validator. This vote served more as formality given that Infura was already operating as a validator. They have been an excellent infrastructure partner thus far so our team sees no reason not to whitelist them.

Research on context and retention

Despite being supportive of the idea and research, after consideration Entropy has voted ABSTAIN primarily due to concerns surrounding the inclusion of Arbitrum’s Discord data. As several delegates mentioned, the DAO has no control over the Arbitrum Discord Channel. It is therefore unclear if the DAO even has the ability to grant permission to collect data from Discord. Given this point was never directly addressed by the authors or the Arbitrum Foundation, Entropy decided to abstain over outright voting against due to being generally supportive of the research opportunity presented.

An EIP-4824 powered daoURI for Arbitrum DAO

Entropy has voted FOR - ENS txt records as in this case we feel it is best to proceed with the implementation of least resistance. Regarding publishing a daoURI that follows the EIP-4824 standard, our team is very supportive of bringing more information of the DAO’s activities onchain. Making this information easily and freely accessible at no cost is a no-brainer in our opinion.

5

Voting Rationale: Oct 4-10th, 2024

Tally

UPDATED - Ethereum Protocol Attackathon Sponsorship

Arbitrum was built with the purpose to scale Ethereum and as a protocol is reliant on Ethereum security. Entropy has therefore voted FOR the Attackathon Panda Tier sponsorship. Participating as a sponsor communicates Ethereum alignment and attractively positions the Arbitrum brand, which will help reinforce user perception of Arbitrum as a leader in the Ethereum community. Entropy was supportive of sponsoring the Attackathon at the highest tier (Unicorn), but the 30 ETH sponsorship cost includes an appropriate list of benefits and we are looking forward to having Arbitrum participate in some capacity.

[NON-CONSTITUTIONAL] Arbitrum DAO Procurement Committee: Phase II Proposal

Entropy is supportive of the ADPC and has voted FOR funding Phase II. In the future, one of OpCo’s primary functions will be procurement and interfacing with service providers during negotiations. We foresee the ADPC and its services eventually being rolled up into OpCo, but until this entity is stood up it makes sense to continue building out the DAO’s procurement abilities.

Constitutional AIP - Extend Delay on L2Time Lock

Entropy has voted FOR extending the delay on the L2Time lock to 8 days, thus extending the exit window by 5 days for constitutional proposals. We are very supportive of this proposal as it brings Arbitrum closer to a Stage 2 rollup as outlined by L2Beat’s guidelines and increases overall security for users.

[Non-Constitutional] Funds to Bolster Foundation’s Strategic Partnerships Budget

Early in this discussion, our team communicated support for bolstering the Foundation’s strategic partnership budget and Entropy has subsequently voted FOR on the Tally vote. We commend the ethical approach taken by the Foundation to not commit unvested tokens:

Unlike other foundations, the AF is subject to a 4-year vesting schedule, implemented as a result of AIP-1. While AIP-1 was a demonstration of power that helped cement the DAO’s legitimacy, and in our opinion helped lay the foundation for its more decentralized approach when compared to other DAOs, it has undoubtedly constrained the Foundation in its ability to secure a certain caliber of partnerships.

In the year and half following AIP-1, The Foundation has proven to be a trustworthy actor and has been a tremendous asset for the DAO and Arbitrum as a whole. We believe this strategic partnership budget is crucial in strengthening Arbitrum’s position against intense competition from other L2 ecosystems.

While Orbit partnerships are explicitly highlighted in the proposal and serve as a key piece to Arbitrum’s long-term strategy, we believe the community may be over-indexing its focus on Orbit in the short-term. In light of recent announcements from competing ecosystems, the concern expressed by delegates that Arbitrum is falling behind is understandable. However, it is important to highlight that Arbitrum One holds significant competitive advantages in other products like Stylus and its existing relationship with traditional asset managers like Blackrock and Franklin Templeton. We encourage the Foundation to utilize this extra budget to secure partnerships in these realms so that Arbitrum leans into its advantages rather than spending significant capital playing “catch up” in other competitor’s narratives.

ArbitrumDAO strategic “Off-site” (online) updated proposal

As communicated during the Snapshot vote, our team has perceived a possible conflict of interest; therefore, we have once again voted ABSTAIN.

However, we are pleased to see the cost for the online event has been significantly reduced, aligning more closely with the scope of work required. Furthermore, we are supportive of the proposed 5K ARB bonus, as it provides a tangible incentive for successful facilitation.

Enhancing Multichain Governance: Upgrading RARI Governance Token on Arbitrum

Following the technical review by the ARDC and code audit for upgrading the RARI governance token, Entropy Advisors has voted FOR and is supportive of the migration. We agree with L2Beat’s comment that such configurations should not require a constitutional vote every time, as this likely serves as deterrent for other projects considering the move from Ethereum mainnet to Arbitrum One.

6

Voting Rationale: Oct 11-17th, 2024

Security Council Cohort 3: Election Phase

As previously stated above, it is our team’s belief that at least one member of Offchain Labs should be present on the Security Council. Their technical expertise and knowledge of the Arbitrum tech stack are crucial in war room situations. Therefore, Entropy has placed 3m of its votes towards Gzeon in the Security Council elections.

Snapshot

LTIPP Retroactive Community Funding Selections

Entropy is voting ABSTAIN as our team lacks sufficient information and context to pick who deserves a retroactive grant or if the amounts requested properly reflect work completed. At first glance, the requested grant amounts seem very high, with a few applicants requesting more ARB than was given to either the council members or advisors. In general, retroactive funding is difficult without predefined criteria, and in hindsight, this part of the LTIPP proposal could have been structured more appropriately in our opinion. We think this is a learning for the DAO and should be incorporated into any future retroactive funding initiative.

Having said that, since retroactive rewards were promised as part of LTIPP and contributors have performed work with the expectation of possibly being eligible for compensation, Entropy feels that returning the funds risks discrediting the DAO, which is why we decided to abstain from this vote

Establishing a DAO Events Budget for 2025

Entropy Advisors has voted ABSTAIN on establishing an event’s budget for 2025 as we have facilitated this proposal and, more significantly, our team, along with ADPC and Disruption Joe, will serve as leads in running ongoing RFPs to satisfy the DAO’s event demands and interfacing with the OCL and AF event teams for the 3 listed events (ETH Denver, Bitcoin 2025, and ETH CC). All three members of the quoted group are waiving payment as part of the 2025 Events Budget proposal.

Tally

[Non-Constitutional] Arbitrum DAO Delegate Incentive Program

Our team maintains its support for the Delegate Incentive Program and voted FOR on Tally. As previously stated, we considered the first version of the DIP to be successful in increasing voter turnout and overall participation, although we do acknowledge that some of the increased metrics might be a result of some participants “gaming” the system—something that is extremely difficult to prevent. Nevertheless, going forward, we believe the DIP can serve as an effective soft enforcement mechanism for our recently proposed Delegate Code of Conduct.

Our team would also like to reiterate our opinion that the average compensation for delegates should be well below $7k. This maximum is already much higher than a vast majority of comparable delegate compensation programs in other ecosystems, but we trust the SEEDGov team to appropriately manage the DIP, who have already proved their capability in running such a complex program. For future iterations, we would prefer to see payments denominated in ARB rather than USD, so that delegates are long-term aligned with Arbitrum and its token.

Fund the Stylus Sprint

Entropy has voted ABSTAIN as our team is a member of the Stylus Sprint Evaluation Committee. As a member of the committee, Entropy is waiving payment.

7

Voting Rationale: Oct 18-24th, 2024

Security Council Cohort 3: Election Phase

In addition to placing 3m of our votes towards Gzeon, on October 20th, 2024 Entropy split the remainder (~4.01m) of its voting power over the following candidates: Dennison Bertram, Immunefi, Emiliano Bonassi, and ConsenSys Diligence.

Emiliano and ConsenSys were both applicants that we supported during the nomination phase. Dennison and Immunefi also bring technical expertise and security backgrounds to the Council.

Snapshot

(V2) Arbitrum Research & Development Collective

Entropy is voting FOR extending the ARDC’s term by 6 months with a budget of $1.73m. Despite requiring a significant investment from the DAO, the ARDC produced some useful deliverables over the course of its first term, especially the research analysis and some of the STIP-related deliverables.

Our team also intends to apply for the Supervisory Council, which we stated in a COI disclosure before voting. Given Entropy’s full-time involvement in the Arbitrum DAO, we believe our level of context regarding upcoming proposals and initiatives will be useful in informing the type of work the ARDC should undertake. We would also like to highlight that many of our team members had prior affiliations with a specific ARDCv1 member, Blockworks Research. When it comes time to vote for the research member of the ARDC, Entropy will abstain from selection.

[Non-Constitutional] Arbitrum Token Swap Pilot Program

While Entropy is very much for exploring how the DAO can take advantage of investment opportunities, we have voted AGAINST the Token Swap Pilot Program. There were several concerns brought up by other delegates, but we’d like to reiterate a few that we share:

  • There are much more attractive and safer ways to diversify the Arbitrum DAO treasury. Swapping ARB for a more volatile, riskier asset makes little sense.
  • There is no clear plan for when the program would end, or how assets would be managed / sold over time. We envision a scenario where if the DAO does conduct a token swap, it will either not have the proper processes in place to actually manage the position and there will likely be negative PR once the DAO begins to exit the position.
  • The low amount of 0.5m ARB and short lock-up period do not help the DAO really guarantee any “alignment” from participating projects.
  • Restricting eligibility requirements to projects that held greater than 50% of the airdrop means that projects approached with a token swap already have exposure to ARB in their own treasury.
  • There is a notable risk that a token swap program would end up deterring new projects from launching on/migrating to Arbitrum since the DAO doing token swaps with a targeted set of protocols could be seen as the DAO picking favorites.

We would like to thank @LuukDAO for the extensive amount of time he has spent researching this idea and bringing it forward as a proposal.

GCP Council Re-Confirmation Vote for Tim Chang

Entropy voted FOR the re-confirmation of Tim Chang, as he brings an impressive background and previous gaming experiences to the council.

GCP Council Re-Confirmation Vote for John Kennedy

Entropy voted FOR the re-confirmation of John Kennedy. Similar to Tim, John’s resume is outstanding, and we were pleased to hear from Dan Peng that John has already provided value to the GCP since recently joining the council.