We have updated the proposal with the following changes to align with community feedback:
We are hopeful to move to Snapshot on Thursday.
You can find the answers to these questions in our first comment above. Please let us know if any further clarification would be helpful. We further expand on the KPI point in our response to @pedrob below.
All of Entropyâs employees will be required to contribute full-time to our company and thus by extension to the Arbitrum DAO. For the 3 current members, no outside freelance work will be allowed. That said, it is possible we onboard an employee in the future who has an existing part-time commitment to another DAO. As long as it does not conflict or decrease the employeeâs ability to serve the Arbitrum DAO, we view that as ok. For example, if someone sits on the Uniswap accountability committee or a small commitment of that nature before joining the team, as long as they are able to dedicate full-time to Entropyâs workload without conflicts, we would still be ok with considering them for a role. Please do let us know if you disagree with this view.
We would be happy to add a âkey man clauseâ in our agreement with the foundation. This would stipulate that if either Matthew Fiebach or Sam Martin left the team, the Foundation can renegotiate the deal as it sees fit or consider the whole agreement null and void.
Weâve defined some high-level metrics that we think paint a picture of what success after a one-year engagement might look like. These metrics can be found in our earlier comment here. Having said that, we anticipate our work to be highly reactive, and implementing strict KPIs on ourselves at this point might lead to a situation in the future where we are incentivized to prioritize work that helps us meet our KPIs but isnât extremely relevant to the DAOâs needs.
The reason we opted for the foundation as our counterparty is for legal reasons related to exclusivity. With the foundation paying us, they have given us due consideration, which allows them to enforce exclusivity more easily than if we had utilized another structure. This is the only mechanism we can enact to make it legally binding. Regarding OpCo, this statement was added so that if and when OpCo is stood up, we can fall under its purview and oversight. The point here is that when it is stood up, we will fall in line with the DAOâs org structure wishes, and not consider ourselves outside of OpCoâs influence.
We have changed the bonus structure and believe it should now be in-line with your comment.
With the updates and clarifications made, I am in support of this proposal. Although the budget is quite high and Iâm not entirely sold on the 10 employees, Arbitrum DAO has scaled a lot in the past few months so I wouldnât be surprised to see the team scale that fast.
The entropy team has provided a lot of value in the short amount of time and I am excited to see what they do next
This is a good proposal with the experience and expertise of the team. Also clarification on conflict and KPIs makes it good to go.
Thank you @Arb4Ever for the thoughtful comments, many of which concern tightly breaking down future deliverables and developments. These are most certainly valid when it comes to scaling a traditional, early-stage company that works towards objectives defined by its leadership team. These objectives are naturally well-defined and donât change in a short time frame. We have avoided a tight breakdown because our main goal is to serve the DAOâs needs, which are volatile and non-predictable even in the near term. By hammering down the exact outputs and the associated KPIs etc. at this stage on, e.g., a quarter-by-quarter basis, we are more than likely to create a structure that incentivizes us to work on deliverables that arenât relevant to what the DAO requires in the future. The core idea of Entropy is that we are agile and work in the open, meaning that at the end of the day, our exact deliverables and associated success should be decided by the DAO.
When it comes to the core fee structure and salary sizes, we have been actively analyzing the labor market, and to say things are competitive is an understatement. Good talent has options across VCs, research shops, leading CEXs, etc., all of which pay, at minimum, $100-150K and generous equity packages/carried interest. Considering we are and would be exclusive with Arbitrum, this does limit our upside in terms of equity valuation/growth. In addition, we are starting a business in a public setting for the whole world to view our finances. An example scenario for a potential hire: take $125K and an equity allocation at a top-tier research shop, or join Entropy for $125K + equity, exclusively working with one customer in the open at a company with a runway of 1 year and the possibility for the DAO to clawback funds at any moment. This example should put things into perspective, and we expect that we will have to pay accordingly in order to have a chance at these hires. Additionally, as mentioned in our proposal, it costs employers much more to pay people after health benefits, etc., and if you add in office and related expenses employees with extensive experience should be assumed to require at minimum, the amount of capital needed to scale a team expands extremely fast. We do, however, feel that talent is more likely to join us and contribute to Arbitrum full-time because we can offer these benefits and steady fiat-denominated salaries versus purely getting paid in ARB on a contract basis.
We have been contributing to Arbitrum full-time under the Entropy Advisors brand since late April, and weâve constantly been in a situation where there is more demand than we currently have the capacity to service. As such, we have hiring needs that we would need to begin fulfilling today to fully meet that demand. However, based on our experience in recruiting personnel, we know that this will take time since finding the right fit, especially for the positions we are recruiting for, is a time-intensive process. We are putting our reputation on the line here, and hiring for the sake of hiring is not an option. The cost structure of $100K per month until we scale to 7 FTEs is based on delegate feedback, and the idea is to create a clear ceiling on our costs while we continue showcasing our value and gradually increase FTEs. Weâve also added quarterly transparency reports to the proposal through which it will be easy to infer if we are utilizing funds with bad intent.
One of Entropyâs strengths is that our team has vast experience in operations and scaling teams, both in a DAO setting as well as connected to more traditional companies. Blockworks Research has become a leading research brand in the crypto space, with Sam as the first employee and Matt as his first hire. Sam hired/scaled the team to over 10 people, managed day-to-day operations, and worked with the engineering team for the MVP SaaS-based product launch back in 2022. (Here are multiple testaments from the Blockworks co-founders, Mike and Jason). Matt, on the other hand, took the initiative to launch and lead the governance services arm at Blockworks Research, which actually led to the establishment of the ARDC that the DAO leverages on a daily basis. Pruitt, Entropyâs first hire, co-founded 404 DAO while in college, which displays ambition much higher than even an above-average college grad. Brick, Entropyâs most recent hire, in addition to having worked as a research/governance analyst leading Blockwork Researchâs governance efforts within Arbitrum as well as the ARDC engagement, has several years of experience in TradFi within investment banking and venture capital, having specialized in corporate and financial structures.
As shown by our work within the Arbitrum ecosystem, we are acting as a mesh layer that operates in the open, which is something we will continue to do moving forwardâfunctioning as an extension of the DAO. In no way are we forcing ourselves into a central position that creates dependencies that would prevent the DAO from functioning as it has until now if we were removed. To be clear, we are not striving to implement ourselves in, e.g., any roles comparable to back-office functions in TradFi. At any point in the future, the DAO has the ability to terminate our contract and clawback funds. Although we recognize that this isnât a frictionless process, Entropy is always working in the open and under the direct supervision of another party, be that the DAO or possibly the OpCo in the future, meaning that itâll be clear if our services arenât providing value. Naturally, if we are doing a good job there will be some dependency as is the case with any service provider that is performing well. In a hypothetical scenario where Entropyâs contract is terminated even while being a value-add to the DAO, operational efficiency would decrease. You also brought up transition/unwind terms. To our knowledge, these havenât been utilized in any prior engagements between a service provider and the DAO. We actually think it might make sense to begin incorporating these across all relevant engagements and are happy to amend our proposal accordingly if delegates find it sensible.
For the rest of the points you brought up, we feel as though these are covered by the changes we recently made to the proposal:
I second Bobbay. My personal reserve is still not on the 10 employee (i prefer to have a budget that is a bit higher compared to what is effectively reached, we donât want to hinder growth), but on the bonus. This is not due to the number per se but cause of the good ol kpis. BUTâŚ
I want to also add: after meeting them at ETHcc, i definitely think they are currently filling a leadership gap that we objectively have in our DAO. This would already be a reason to be in general in favour; if we add to this the quality of the work they have so far provided, I can just say that they have my full support.
And, for people questioning about salary, please take in account that whoever works in entropy works in an environment that is crypto (so, quite risky in term of stability), with a service provider working exclusively on a single customer which is our dao (so concentration risk), with a mandate for just 1 year (quite of a short time horizon), with the ability of funds being clawed back by the dao (imagine that the day before you get your salary, treasury is gone). So, yes, whoever will work in entropy will ask for a premium compared to market rate, and rightfully so. I would for example.
Bullish on Matt, Sam, Pruitt, Brick, and whoever is gonna join this team.
This amount strikes us as high, and not in line with comparables, especially when including a possible 1.5m ARB bonus.
For instance, the MakerDAO GovAlpha core unit, which is recognized as best-in-class, ran on a budget of less than 1m DAI until its dissolution in the current MakerDAO restructuring. You can find their final budget proposal here.
Their replacements - two facilitators and their support staff - likewise cost just over 1m DAI + 288 MKR annually. You can find this here.
The cost of governance administration and support staff at Optimism is not publicly disclosed because it is paid for by the Foundation, but is likely much less than at Maker, since it includes a smaller headcount.
Weâre not aware of many other comparable positions at DAOs the size and scale of Arbitrum. The Uniswap Foundation has an operating budget of comparable size to this request, but also covers other duties like like administration of a significant and ongoing grants program.
Itâs not intuitive what would occupy so many full time personnel as are budgeted under this proposal, even with its open-ended nature. The average pay per person is not necessarily off-market if they are attracting super-senior professionals with experience in governance or supporting expertise like law or software development, but that assumes all hires will be at the top end of experience and have enough productive work to occupy them.
To conjure some counter factual comparisons, would this budget be too much to hire the L2Beat team, who (along with others) seem to already do at least some of the work envisioned?
What about StableLab?
Or GFX Labs?
Or Immutable Axis?
Or TreasureDAO?
Or GMXâs team?
Or SeedLatam?
Or Plurality Labs?
Or any other contributor that has shepherded initiatives, opined on strategy, engaged developers and financial institutions, or otherwise promoted Arbitrum. Even if the answer is âYes, we would pay one of them that,â then there could be an open RFP to ensure the DAO has as many choices and competitive pricing as possible.
We recommend scaling back this proposal to fewer positions, and forgoing exclusivity in exchange for a lower cost, since itâs not clear exclusivity is particularly valuable to either side of the proposed relationship, and shortening the engagement to less than a year to provide an opportunity to understand if the budget was correctly sized and if more concrete KPIs could be identified
IF we can find an agreement , base on the concerns raised by @GFXlabs and the need for a more focused, cost-effective approach,
Team Structure:
Duration:
Key Objectives:
a) Increase on-chain volume by 25% within 6 months
b) Attract 100,000 new active users to Arbitrum ecosystem
c) Facilitate onboarding of at least 5 high-impact projects to Arbitrum
d) Improve governance efficiency by reducing proposal processing time by 30%
Deliverables:
Performance-Based Compensation:
Transparency and Accountability:
Non-Exclusivity:
Pilot Program:
Integration with DAO Structure:
- Clear delineation of responsibilities to avoid overlap with existing or planned DAO functions
- Regular coordination with other DAO entities (e.g., OpCo, if implemented)
This revised proposal addresses the main concerns by:
Significantly reducing the budget
Focusing on a smaller, more specialized team
Implementing clear, measurable KPIs tied to ecosystem growth
Introducing a performance-based compensation structure
Ensuring transparency and accountability
Allowing for a trial period before long-term commitment
Removing exclusivity to reduce costs and increase flexibility
This structure provides a balanced approach that allows Entropy to demonstrate value while addressing the DAOâs concerns about resource allocation and accountability. I m in favor for @Entropy.
More capital can be deploy later when goals are reach.
Appreciate the thoughtful reply, @Entropy.
I would note that what was proposed balanced the rigidity of KPIs against the dynamic needs of the ArbDAO while also helping improve transparency of spend and DAO alignment. This could be done by asking for an additional implementation budget per management domain once it becomes clear what is to be done, a per project or per domain budget. For example, when working on operational process design. A project would be scoped, requirements set, and entropy selects a contractor they would manage.
This path is not mutually exclusive to retaining Entropy as a management team as per this proposal. Rather, it would enhance Entropy and provide the DAO leverage on the management team spend. Please do consider such a structure as you look to design an implementation structure. This proposed path delivers on spend, benchmarks, and transparency. It is good for Entropy and good for Arb â win win.
Also @GFXlabs is charitable in their analysis and suggesting you under-promise and over-deliver. As written, reads vice versa. @yoan has gone ahead and done solid work for you in structuring a fair deal that is risk-mitigated.
Thanks for the detailed comment!
You brought up some comparables. Looking at the MakerDAO GovAlpha core unit, for example, it seems that our salary budget matches quite closely with the facilitator pay matrix provided by them, where a full-time experienced contributor is priced at 189K DAI. This doesnât seem to include expenses such as benefits, taxes, and other assorted costs, meaning that our salary budget is actually lower than the comparable. The difference in total budget is also mostly driven by the core unitâs smaller size and employment of part-time employees (the proposal mentions a historical 3.75-4.25 FTEs, which would maybe increase with the ~900K budget). Our contingency is exactly in line with the core unitâs. Itâs also worth noting that the DAO can decide to distribute no bonus at all at the end of our 1-year term, so this is in no way baked into the expense structure.
The idea behind our budgeting for up to ten employees is to allow us to scale into the DAOâs needs, maintaining the ability to add more capacity where needed. As mentioned in our earlier comment, with three full-time employees and more recently four, weâve constantly been in a situation where weâre seeing more demand than we currently have the capacity to service. Hiring for the sake of hiring wouldnât benefit us in any way since if we arenât producing value relative to our costs, we would either not be able to renew our contract with Arbitrum or our contract would be outright terminated, meaning that we would then have to scale our team down immediately and our reputation would also be damaged.
The size of the budget also derives from the fact that we would be working exclusively with Arbitrum and we need to be able to attract talent. While our growth upside is consequently limited, this puts us in a unique position that not many other service providers want to/can be in, and ensures that our number one priority is always the Arbiturm ecosystem. We do realize that not everyone within the community sees value in having exclusivity. At the end of the day, this is also a subjective question that doesnât have one correct answer, depending on the extent to which the community prioritizes enhancing efficiency and the commitment they want from service providers. The feedback weâve gotten from many delegates is that an exclusive structure is preferred, which is why this proposal was created in the first place. We see a ton of value in us already having bootstrapped full-time and Arbitrum-exclusive employees and began facilitating some of the deliverables mentioned in our proposal while lacking conflicts and being able to credibly act in the DAOâs best interest. Despite the high-quality nature of all the companies you listed, our understanding is that none would be willing to accommodate this feature and benefit.
Based on feedback sent to us in private, we have made two updates to our proposal. First, we have further defined our short-term goals and current initiatives:
Additionally before going to Tally, we are committed to creating a structured format to enable the DAO to directly and openly provide input into the work we are facilitating. This will allow the DAO to practically help drive our direction and objectives through timely feedback.
Well, the facilitator is the manager. As we said, your per-person compensation budget is about right, for the most senior contributors. Like a facilitator.
Taxes, benefits, and other assorted costs were the responsibility of the contributors. So the amount you see is the âall in costâ and not just take-home salaries.
Itâs not that exclusivity has zero value. Itâs that removing this is an easy way to bring down costs substantially.
I voted FOR this proposal at the temp check stage for the reasons outlined here.
For the reasons above, and all the reasons i posted previously, I am voting âforâ on this proposal.
I can see why some, like @GFXlabs, can really focus on the overall cost, and tries to cut it through a shorter mandate + wave of exclusivity. It can make sense, from their point of view, and I am glad we also have in the debate voices that can bring a different opinion on the table.
But personally, in this vote, I am focusing on the cost we will face as a DAO of not having a leadership role, even if temporary, in a pivotal moment for our ecosystem in which we are moving toward even more important initiative.
In the last few months, and at EthCC, entropy has shown how they can effectively cover that leadership role. It doesnât mean that they will have to do it always and in perpetuity; I actually hope they will be the enabled who gives us the tool to have other entities able to lead (some) initiatives.
But again, not having them, here and now, not having them help in the next few months, will likely cost us way more than the amount they are asking here to give a 1y exclusivity deal to our DAO.
While we are not familiar with Entropy Advisors, its members and have not engaged with them in a direct or indirect capacity, we cannot opine on the quality of the team and their ability to deliver, we can chime in on the recurring discussion theme pertaining to the proposed budget.
It is understandable why individuals or teams that are not closely entrenched and do not have extensive exposure to growth, strategy and operations-related roles and engagements may be taken aback by the proposed budget at first.
Some of the bonus contingencies put forward by the members of the discussion were clearly defined by individuals unfamiliar with the industryâs norms, standards and conduct. An example of this would be a 25% performance bonus of $100,000 for an acquisition target of 100,000 users. That effectively translates to $0.25 per user, which is unheard of in this space, prolific for its tremendously high $ value per user (e.g., the lowest seen over 3+ years has been $2 per user).
Given our exposure to the space spanning across various ecosystems and initiatives for more than 3+ years and having provided similar services to other ecosystems, we can confidently say that the proposed budget is reasonable and below to in line with the current industry standards.
Growth, strategy and operations are essential components of any crypto-related venture. This is especially true in the early stages, where ensuring success across the aforementioned verticals is vital and demands a committed, devoted and proactive approach that is simply incomparable with other industry standards pertaining to oneâs allocation of time, energy and resources. This space is extremely nuanced, technical, sensitive, highly contextual and often requires extremely fast, yet thought-through responses and decisions to mitigate potentially value-destructive events.
These types of high-level growth, strategic and operational roles and services are typically provided and retained in a private capacity. Hence, it can be difficult to find public, relevant data and accurate comparables without direct knowledge and involvement. That being said, these engagements typically unfold in a âretainer + % of supplyâ or â% of supplyâ capacity, which is often reflected by the projectâs tokenomics. The reason for this conduct is that it effectively aligns incentives with the service provider(s) and the projectâs / ecosystemâs long-term prospects, success and well-being. Understandably, the remuneration is then highly dependent on the size and success of the project.
In the context of Arbitrumâs size, position on the market (market cap, TVL, user base, treasury) and overall ecosystem complexity, the proposed budget is warranted and could be considered to be on the lower end of the remuneration spectrum.
Furthermore, in the context of Arbitrumâs other, recent expenditures and their respective size, we find this expenditure in particular to be more than reasonable, given the outcomes and value that it can garner and deliver for the ecosystem.
"A total of 6 million ARB will be sent to the Foundation, for them to monetize at their discretion to secure at least $2,470,000. "
There is no investment team in the proposal. This amount will significantly impact the market if managed poorly. I am not sure why 10 employees are needed for the proposed task.
At times, the DAO should justify taking concentrated bets on teams that have and will deliver. This is 100% one of those times in our opinions. The team is stellar and the ability to lock up their services for this many months is worth it.
A few points and interesting thing we should consider however, is we think with Entropy taking this âstewardingâ role, the DAO should wait before considering other teams for a few months, if not year until this relationship ends. And then almost host some sort of race to renew or pick the next one. Additionally, some of the budget concerns make a lot of sense, and are glad to see the budgets and buffers being reduced.
This is a good proposal, but it would have been better to have some more detailed data and KPIs.
I have voted FOR the proposal as the team can help pluck several low hanging fruits that requires putting their shoulder to the wheel to get done. The consolidation of all the multi-sigs is one example, and I am keen to see others that the team comes up with. Specifically, mattâs expertise in sequencers leads to some hope that over the year we will make progress on either staking the revenue earned or doing something productive. The base fee increase is a step in the right direction.
What I am not seeing in the proposal but would like included, is a plan for eventual offramping. We assume Entropy will not and should not be exclusive to Arbitrum forever. So at the end of the year, some assessment on whether the majority of low hanging fruits are realized in the DAO, or opening up the process to be more competitive, would be preferred. I am content with kicking this can down the road for now, so i have not stopped it from letting me support the proposal.
First of all, we would like to thank the @Entropy team for this proposal.
We will be voting FOR in the Snapshot temperature check instance for the reasons detailed below:
We appreciate the teamâs willingness to receive feedback and take the time to meet with different stakeholders in the Arbitrum ecosystem. This shows that they have an excellent sense of leadership and that this together with the proposals they are taking forward are strong reasons to believe that they are the right people to provide a direction for the DAO, at least in this transition to a more complex management structure.
We are aware that today Arbitrum, despite being a market-leading L2, has serious organizational problems that have led to overlapping functions and inefficient spending of treasury funds. A straightforward example is what happened with the various multi-sigs created for each proposal.
This âlack of controlâ responds to an obvious cause: there is a lack of a âcommon threadâ, something/someone that can somehow organize into a whole the different proposals that exist and will exist, favoring the coordination of efforts and avoiding the waste of resources, both human and economic.
We believe that this proposal goes in that direction, the DAO requires enforcement that allows us to implement even more ambitious solutions such as OpCo. I think most of us here agree that a broad and diverse structure like OpCo is ideal, but in the meantime, someone needs to take the lead and guide us somewhat toward the goal.
We welcome the fact that @Entropy has as one of its priorities the establishment of better mechanisms for the oversight of ongoing initiatives. Today the great diversity of current initiatives complicates the proper monitoring and accountability. In this sense, it seems reasonable to have some sort of general committee to monitor the implementation of initiatives.
As for the budget requested, although itâs somewhat above market value, we have to consider the membersâ seniority and the exclusivity offered, which is not free of charge, of course. All this leads us to consider that although it could perhaps be revised, it doesnât seem to us to impede going ahead with the proposal. Where we agree with @pedrob is that the bonus doesnât sound so optional if itâs a mandatory condition for renewing the agreement.
Despite the latter, we appreciate the modifications made to the bonus, giving the DAO options to pay a lower amount without revoking the possibility of renewal for a further period.
We also agree with @JoJo on this point, given @Entropyâs recent contributions it is likely to be much more costly for us to have no one in that leadership role than the cost of the deal itself.
On balance, we strongly support this proposal, with the caveat that we expect to see Entropy be part of something bigger, a structure that can bring together all Arbitrum DAO verticals and professionalize operations so that Arbitrum not only leads the L2 ecosystem but also sets an example in self-management, efficient spending, and decision making. In this way, we will send a message to all stakeholders: we not only care about growing, but we want to do it in a decentralized, efficient, and orderly manner.