After consideration, Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal.
Vote: FOR
The ARC is firmly in support of Entropy Advisors, believing them to be a top-tier team that has a vital role to play in the DAOs future success. This is aligned with my personal perspective shared previously:
Despite the calibre of the Entropy Team, we have some reservations about the commercial structure and incentive alignment.
- Under the current structure, $1.96 million is allocated for salaries.
- If the full salary budget is not utilized (e.g. if Entropy hires six people at a total cost of $1.5 million), the remaining $460,000 becomes profit for Entropy.
- This commercial structure puts the DAO at risk of paying for resources which are never utilized
- Consider a scenario where:
- Entropy is in the ninth month of the contract.
- The contract seems unlikely to be renewed.
- Salary costs are running under budget.
- In this scenario, if I were a business owner, I would likely:
- Avoid hiring an additional person in the later months of the contract.
- Keep the salary budget as profit to keep my business costs low and shore up my firm’s financials for the future.
Our recommendation is to adjust the commercials as follows:
- Tie staff costs directly to actual spending.
- At the end of the contract, Entropy required to:
- Produce financial statements showing actual staff expenditures.
- Return 75% of the unused funds to the DAO.
- Keep the remaining 25% as a bonus for prudent financial management.
- This approach aligns incentives by ensuring:
- The DAO spends money only on actual resources hired.
- Entropy does not benefit too greatly from staffing underspend, but it does provide incentives for prudent financial management.
- The dynamic then shifts from:
- Current: 100% of unused salary budget going to Entropy as profit, 0% returned to the DAO, to
- Proposed: 25% of unused salary budget going to Entropy as profit, 75% returned to the DAO.
- This mechanism would:
- Increased flexibility for Entropy and the DAO, resulting in a more equitable commercial agreement between our two organizations.
Despite these reservations, we acknowledge Entropy’s crucial leadership role within this DAO and support advancing this proposal beyond Snapshot; and we hope the Entropy team considers these recommendations before the Tally vote.
The DAO needs them, and we want a future where Entropy is embedded and able to drive meaningful change within Arbitrum.