Entropy Advisors: Exclusively Working with the Arbitrum DAO, Y2-Y3

Proposals
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Changes on 7/7/25:

Revised 15M ARB Alignment Structure

  • The original 15M ARB vesting allocation is now split into:
    • 5M ARB for Entropy Advisors (1-year cliff, 3-year vest)
    • 10M ARB reserved for the OAT to negotiate milestone-based incentives (KPIs), equity investment, time-based bonuses, or other short/medium/long-term alignment mechanisms.

OpCo as Entropy’s Counterparty

  • Detailed that upon sufficient operationalization, OpCo will serve as our counterparty/client as a proxy representing the DAO.

Other Minor Changes

  • Unclaimed Year 1 funds (~$423k) and the nullified 1.5M ARB bonus will be applied to Year 2-3 payments, at the Foundation’s discretion, to help minimize ARB sales.
  • Clarified termination terms: all unearned ARB of the 10M ARB would return to the DAO treasury if the DAO terminates its relationship with Entropy.
  • Added language to the transparency reporting to make clear that the Arbitrum Foundation can request transparency reports.

Entropy Advisors: Exclusively Working with the Arbitrum DAO, Year 2 and Year 3

Non-Constitutional

Abstract

Entropy Advisors was started by Matt Fiebach and Sam Martin with the vision of turning DAOs into sustainable and efficient organizations, and was bootstrapped via an Arbitrum Foundation grant. As the first two employees at Blockworks Research, we felt the vision of what DAOs could deliver versus what they actually resembled in reality warranted more dedicated attention from a team passionate about the potential impact DAOs could have on an ecosystem. It has now been 14 months since Entropy Advisors was incorporated, and while we have accomplished a lot, there is a vast amount of work that remains.

As this term comes to a close on August 31st, we want to take the opportunity to say thank you to those in the Arbitrum community who have supported our team and given us a path to make an impact on such a large stage by funding us through our first DAO proposal. Without the Arbitrum DAO, Entropy Advisors would not have been possible.

This proposal is to extend our partnership with the DAO for two additional years. If passed, our second official engagement would go into effect on September 1, 2025, immediately following the conclusion of our first mandate. Entropy Advisors’ exclusive focus over the next two years is transforming Arbitrum into the most effective capital allocating DAO in crypto, leveraging treasury strategy, incentives design, data, and special projects to drive compounding, sustainable ecosystem growth

Motivation and Rationale

Year 1 Retrospective

We invite everyone to review our initial proposal and reflect on our successes and failures, and to provide candid feedback to our team as we begin the process towards a second term.

Full-time Arbitrum DAO: We grew the team from just Sam and Matt to 8 full-time and 1 intern, and we remain laser-focused on attracting the highest quality talent in the space to commit themselves exclusively to Arbitrum. While we believe that we have formed a very strong team thus far, the composition of our team will always be a top priority to ensure we have the tools at our disposal to serve the ecosystem with high-quality execution. In the coming year, we would like to continue growing as needs arise: more data analytics help, applied researchers, TradFi converts, and those with early-stage experience are at the top of mind, with a goal of scaling beyond 10 members on our team.

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Beyond Proposals: Over the past year, Entropy has evolved beyond just a proposals shop and become a recognizable, consistent face of the Arbitrum DAO in the broader crypto community. From press to partnerships, conferences to committees, we’ve built a strong reputation for professionalism, reliability, and alignment. Our ability to foster trust across stakeholders from Offchain Labs and the Foundation to top investors, asset managers, and builders has been one of our most important assets, and something we intend to amplify in years 2 and 3. We recognize that this is where we have produced the most value throughout our first year and aim to continue to grow into our strengths. On countless occasions, we have joined Offchain Labs and Arbitrum Foundation’s partnerships teams in helping outline strategy and closing deals. With some blue-chip ecosystem partners, Entropy works as their main point of contact in Arbitrum. We have grown into a trusted tool augmenting existing AAEs.

Syncing Stakeholders: We are happy with our output over the past ~year in regards to the first two deliverables we outlined (see above). We hosted three (a fourth is planned for EthCC) “Delegate Days” in Brussels, Bangkok, and Denver over the past year, where we gathered large delegates, members from Offchain Labs and the Arbitrum Foundation, and other stakeholders to align on key objectives over the subsequent quarter(s). We also hosted key stakeholder calls with the same groups once per month in an effort to align on high-importance topics that require attention in the near term. Entropy has also been speaking with OCL, the AF, and key delegates and ecosystem contributors every two weeks to streamline communications across the ecosystem. These efforts are quite time-consuming, but have proven to lead to some of our most impactful work over the past year.

Strategic Proposals: We successfully passed a plethora of proposals authored internally, as well as assisted third parties in drafting proposals to the DAO or submitting applications to DAO-led programs. Some examples here include Govhack Brussels, the MSS, The Ethereum Attackathon Sponsorship, leading the ARB staking working group and bolstering the quality of contributors to the research (bringing in Vending Machine and ASXN to assist), the Delegate Code of Conduct, establishing an events budget, getting treasury management moving forward after a long stagnation through the v1.2 proposal, leading the STEP II committee, moving forward with the MVP exercise to align stakeholders, our DRIP proposal to reignite incentives/support for builders and users, the Stylus Sprint, assisting Max Lomu with his chain abstraction proposal, etc. We can’t touch on all of them here, but please refer to our forum profile for more information.

Importantly, in many cases, we evaluated whether supporting external contributors/committees or internalizing portions of execution made the most sense for the DAO. In some instances, we chose to execute internally, not because we wanted less external contribution, but because we deemed it the most efficient, high-context, and cost-effective way to get things done. Our north star has always been to make DAO execution smoother, more strategic, and resource-efficient. Sometimes that meant helping third parties structure their ideas, but other times it meant owning the process ourselves to ensure tighter execution, lower overhead, and greater accountability.

OpCo Groundwork: We also laid the groundwork for a more expedited proposal process by helping mold the new direction for the Arbitrum DAO, which was recently posted by the AF, and we also created the OpCo proposal that should make working with the DAO a much smoother process from the perspective of service providers.

We expect OpCo to pick up the portion of the aforementioned work that relates to key stakeholder alignment and coordination once it is fully operational. Aligning all the largest stakeholders in the ecosystem in order to allow for more effective operations was a massive undertaking and took a large amount of our bandwidth over the course of our first year. Despite the large investment of time and resources, we believe the groundwork has been laid for a more fruitful future for the Arbitrum DAO.

Learning from Mistakes: While we feel as though we did a great job on setting the DAO’s future, more efficient path, we certainly fell short on numerous occasions. For example, there were some instances in which we poorly communicated with certain ecosystem participants during application processes. As members of the GMC, many protocols that have sunk significant resources into the ecosystem felt overlooked and undercommunicated with. Our team has since shifted focus to improving our relationships with Arbitrum builders and to being more mindful in providing feedback to applicants by overcommunicating. We also realize that our scope of work was extremely wide in our first proposal, and our deliverables have evolved quite a lot since our engagement started, which might have led to some confusion in the wider community around what Entropy’s role actually is. Our wins have taught us a lot, but our mistakes even more, and we are committed to making corrections based on our learnings throughout our first year in our second engagement.

Arbitrum Analytics: In terms of data and brand building, we are very happy with our output over our first ~year. Our data team has created the go-to Dune catalog for those looking for greater insight into the Arbitrum ecosystem. It is worth noting that our data team did not begin work until around the end of December, so we have accomplished a lot here in very little time. We have had numerous investors not currently involved in the Arbitrum ecosystem reach out in admiration, which we believe will have a positive downstream impact that is not easily quantifiable. We have also seen our charts shared across dozens of large accounts on X, featured in blogs and news articles, and referred to during big moments for the ecosystem, such as the rollout of Timeboost. We have created a DAO financials dashboard to give delegates better insight into how the DAO spends/earns money, a dashboard that enables delegates to dissect various proposals at a granular level, an RWA case study, a DAO treasury dashboard showing all the assets it owns, and more.

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Data as a Growth Support Mechanism: We also learned that data transparency can serve as a great tool for both increasing our reach across various crypto communities as well as improving relationships on the BD front with builders. This complements the goal stated in the previous section of helping to onboard 3rd parties into the ecosystem. For example, we created the most comprehensive data overview of Ethena, which caught the team’s attention. Members of Entropy then worked with OCL to coordinate a trip to the UK at the end of 2024 to meet the Ethena team as they were deciding which tech stack to deploy Converge on. In April 2025, we saw these efforts pay off with Ethena and Securitize choosing the Arbitrum stack.

We have ambitions to aid more builders within the Arbitrum ecosystem as a support mechanism, and to continue building resources that serve as both marketing material and a BD tool. Where we fell short on brand relative to our original proposal was podcast content/weekly newsletters. While we view this content as valuable, we simply did not have the bandwidth to prioritize these types of initiatives when considering the high-importance items we needed to facilitate. Additionally, we see room for growth as we expand our content outside of solely Arbitrum core and into the Arbitrum ecosystem. Over the next 2 years, we will create more dashboards that cover apps and infra that are well-positioned to support the expansion of the Arbitrum tech stack, with the goal of encouraging more partners to consider an Arbitrum deployment/support.

Recognition by News Outlets: We regularly post threads on X and LinkedIn that highlight important initiatives that are ongoing in the Arbitrum DAO, but we do know that we need to expand our reach to maximize our impact. Members of the Entropy team have been quoted in The Block, Blockworks, CoinDesk, Unchained, and Yahoo Finance about our work in Arbitrum on numerous occasions. Additionally, we have represented Arbitrum on a few podcasts. at multiple conferences, and even in an official Arbitrum marketing video. Although we have plenty of room to keep improving our public brand, we are happy with the growth in the first year.

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Acknowledgment by Investors: Large ARB token holders have evidently taken notice of our ability to push forward initiatives, be more critical of each individual spending request, and our focus on ecosystem growth, long-term sustainability, and revenue diversification, which has manifested through our rise in voting power. Our ascension to the top of the ARB delegates by voting power is a responsibility we do not take lightly, and is something we are really proud of. In our opinion, this signals to us that we are prioritizing the right things and are in the early stages of helping steward the DAO’s path forward.

Specifications

Vision for Years 2 and 3

Now that it’s increasingly likely that the DAO’s operational structure will include officially recognized AAEs, the path has been paved for Entropy Advisors to shift our focus more fully toward growth, sustainability, and strategic execution. While the OpCo comes to fruition, Entropy will continue to support operations- and oversight-focused initiatives that require continuity. Topics like administering the ARB Staking Working Group, supporting ARDC v2, leading programs like Watchdog and MSS, and maintaining the Delegate Code of Conduct will likely transition over to OpCo, and we will be here to ensure a smooth handoff. We expect this transition to be ongoing throughout the entirety of 2025, with the operations-related workload easing on Entropy’s end by the beginning of 2026.

Entropy Advisors’ singular focus over the next two years is to help the Arbitrum DAO mature into a disciplined capital allocator. We will spearhead building an organization that drives compounding, sustainable ecosystem growth.

Arbitrum is now positioned to act more like a sovereign wealth fund: managing a composable treasury, deploying capital with strategic intent, and aligning incentives to deepen protocol adoption and ecosystem loyalty. Entropy’s work across treasury design and management, incentive architecture, data transparency, and ecosystem relationships will operate in tandem to realize this vision.

The strategy boils down to:

  • Build a high-quality treasury of productive, composable assets (LSTs, T-bills, etc.)
  • Deploy a large share of holdings across DeFi as protocol-owned liquidity to generate yield, support aligned builders, and establish Arbitrum leverage. This function will also help onboard new partners, as the DAO will act as an initial source of demand
  • Layer in structured, app-agnostic incentives (DRIP) to attract usage and reinforce protocol alignment
  • Use analytics and reporting to increase visibility, optimize decision-making, and build external trust
  • Leverage relationships and special projects to scale adoption, reinforce values, and extend reach

In short, we stop throwing darts at the wall and start designing growth: capital-efficient, data-informed, and strategically aligned.

Our high-level objectives to achieve the above strategy are as follows, with more details in each deliverable section below:

  • Smooth handover to OpCo of DAO operations- and communications-related tasks, while filling the gaps in the interim as needed.
  • Maximize the number of dapps and RWAs that “call Arbitrum Home” by designing treasury management and incentive programs that support BD efforts. Bolster this through data analytics support as a white glove services offering.
  • Formalize the DAO’s financial processes, optimize and introduce revenue streams, ensure AEP licensing fees are paid and idle non-native assets are put to work in DeFi in accordance with portfolio management policies, and continually monitor key protocol revenue drivers like Timeboost and the transaction fee mechanism.
  • Professionalize and iterate on various areas within the Arbitrum DAO, such as the early-stage support funnel or data transparency, by altering their structures and implementing custom front ends.

Ultimately, our primary goal through 2027 is to make Arbitrum the leading tech stack for builders, institutions, innovators, and users alike; powered by a sustainable flywheel of compounding growth leading to value generation.

Financial Planning, Analysis, and Guiding Capital Deployment

Entropy will work closely with AAEs, vendors, and ecosystem teams to build out the DAO’s core financial infrastructure. We believe that the long-term viability of the Arbitrum DAO hinges on prudent asset management, disciplined budgeting, and strategic cash flow deployment to generate additional income, compound growth, and deepen our ecosystem’s liquidity while supporting integral builders. It’s worth emphasizing that while we work on financially sound structures, growth will always be at the forefront of our work in the ecosystem.

Our responsibilities here will include:

  • Tracking and consolidating key financial figures, including revenue sources (AEP Licensing Fees, Timeboost, Transaction Fees, Treasury Management activity, and others that may arise), the DAO’s assets/liabilities, as well as realized expenses to set up and maintain in-depth financial statements.
  • Building models to project DAO financials and scenario-plan various budget configurations.
  • Providing recommendations for capital allocation, including ecosystem-growth targeting activities, income-generating initiatives, cost-cutting opportunities, and diversified treasury strategies.
  • Procuring service providers and conducting outreach to protocols for initiatives classified under the Arbitrum Treasury Management Council (GMC, TMC, STEP)
  • Supporting the DAO with real-time, bespoke financial dashboards, posting quarterly DAO financial reports to the forum, and ensuring the proper risk analysis measures are in place. This reporting will take place across all of the DAO’s financial and asset-allocation activity, including the assets that currently fall under STEP, TMC, GMC, and other future initiatives.
  • Working cross-functionally with all of the AAEs to create aligned, sustainable cross-functional capital deployment plans across the DAO’s initiatives.

Ultimately, our goal is to provide the DAO with the tools, data, and guidance necessary to fund innovation responsibly, while positioning Arbitrum to be financially self-sustaining over the coming years.

Incentives

We believe incentives will play a major role in Arbitrum’s next phase of growth, especially given the increased attention on dapp performance and ecosystem competitiveness. Our team will build upon the groundwork laid in the DRIP proposal to establish a long-term incentives strategy.

Key areas of focus:

  • Continue leading incentive design frameworks, being the main party responsible for the success of approved programs
  • Draft and refine incentive programs, ensuring data-driven optimization throughout the programs’ lifecycle and that low-return programs are swiftly discontinued
  • Work with ecosystem teams (dApps, infra, new deployments) to scope incentive programs that accelerate high-growth opportunities sustainably.
  • Facilitate real-time data for the DAO to follow the progress of incentive programs, analyze the effectiveness of implemented programs, and deliver actionable feedback loops to improve upon them.
  • Interface with Offchain Labs and the Arbitrum Foundation to ensure growth programs run by the aforementioned entities and the DAO are synergistic.

Entropy’s goal is to bring structure and discipline to a chaotic incentives landscape. We see ourselves as the party relentlessly focused on continuous iteration, eliminating inefficiencies, and driving outcomes.

Ecosystem Data

We plan to double down on our ecosystem data work, expanding the scope and sophistication of our analytics to support every aspect of DAO decision making, while also serving as a protocol support mechanism that endorses native builders and attracts new builders, with the added benefit of increasing the ecosystem’s social presence. Both of the prior-listed roles around treasury management and incentives include analytics, but the data team will have an expanded scope outside of these 2 already time-intensive categories.

Key priorities:

  • Continue building world-class dashboards and reports for delegates, investors, and DAO programs across all verticals.
  • Expand to more dapp-specific dashboards that showcase usage, traction, and ecosystem synergies in an effort to attract new protocols to Arbitrum while also supporting existing ones. These same efforts will apply to significant Orbit chain deployments.
  • Assist partners like OCL, the AF, and OpCo with analytics that track protocol upgrades, monitor the health of the network, and/or help track operational metrics. OCL, the AF, and other key stakeholders have already regularly reached out to Entropy for help with custom analytics, and we would love to continue this work.
  • Provide Entropy’s data infrastructure as a core asset for both internal DAO operations and external ecosystem engagement. Ideally, this will have its own custom Arbitrum-branded front-end rather than simply living on Dune.
  • Support institutions (e.g., TradFi managers) with data services (e.g., analytics for managers’ tokenized RWAs live on Arbitrum One) to strengthen the DAO’s relationship with them and to help establish Arbitrum One as the prioritized destination for institutions’ future initiatives.
  • Analytics around incentives and treasury management, outlined in prior sections of this proposal.
  • Handle ad hoc data needs as they arise. A concrete example of this includes our Security Council dashboard, which was created quickly to support the election process.

Based on our experience, utilizing data services as a BD and support tool is an extremely powerful way to attract and entrench new protocols into the Arbitrum ecosystem. Providing these types of services is a valuable opportunity for Arbitrum to expand its brand reach and, as we’ve observed, having the ability to offer white glove treatment increases the likelihood of capturing interest from top-tier institutions and builders. Having said that, these white glow services are highly time-consuming on average, and under no circumstances do we want to divert our teams’ capacity away from facilitating initiatives that directly benefit the DAO without the certainty of conversion. Given these circumstances, there may be certain projects that are complementary to Arbitrum and are deemed as high potential for the ecosystem. In these cases, it may make sense to ramp up project-specific capacity and thus support the ecosystem both directly through ecosystem-focused efforts and indirectly through BD-related data services. In these scenarios, the Arbitrum Foundation will have the ability to waive Entropy’s exclusivity on a case-by-case basis.

Entropy Data will be the connective tissue that powers smarter treasury decisions, sharper incentives, and more compelling narratives, while serving as a support mechanism for builders, institutions, and partners entering the Arbitrum ecosystem.

Special Projects

Entropy Advisors will continue to act as a neutral strategic arm and flexible generalist operator for the DAO, identifying high-impact and ad hoc initiatives that fall outside traditional workstreams or require a novel approach. These are the thorny, under-owned, cross-functional, and/or politically sensitive deliverables that the DAO may struggle to tackle without a coordinated, trusted group stepping in. In many cases, the OpCo will be best suited to pick up some of this work with regard to occasional operational requirements, but given Entropy’s team composition, we may be best positioned for certain tasks based on our existing skillsets and relationships.

Examples of special projects include:

  • Represent the Arbitrum DAO, when deemed appropriate by OCL or the AF, when dealing with external protocols that are considering deployments on the Arbitrum tech stack (similar to our involvement in the Ethena X Securitize deal to launch Converge on Orbit). Note that we’ve acted in a similar role several times throughout our initial term.
  • Help educate traditional financial institutions, typically those who reach out with interest in STEP, on the shortcomings of current tokenized RWA designs and opportunities when it comes to ecosystem integrations, and offer our time and DeFi-nativity to inform upcoming product launches in the Arbitrum ecosystem.
  • Work with relevant partners to enable DAO-owned products that can diversify the DAO’s revenue streams in tandem with improving the user experience on Arbitrum.
  • Attend high-profile conferences and take on speaking opportunities to spread the Arbitrum brand. We will also continue to host “delegate days” in an effort to align key stakeholders.
  • Iterate on Arbitrum DAO’s early-stage support structure by bringing in talent and making it a more professional and cohesive experience that affords the DAO upside in the projects it helps get off the ground.
  • Miscellaneous projects as opportunities arise.

We will remain flexible in this vertical, focusing on initiatives that drive high strategic value but may lack an existing home within the DAO’s organizational structure. It may be necessary to approve ideas that Entropy will take on via a DAO vote if these initiatives require excess budgets beyond what Entropy itself can afford.

Termination Clause and Transparency Pledge

The DAO naturally retains the option to terminate this agreement through a standard forum → Snapshot process, requiring 3% of the votable token supply to vote in favor of the termination. Quarterly transparency reports will be directly shared with the Arbitrum Foundation at their request, which will have the ability to move a forum post forward with the same structure for termination. If the Snapshot proposal passes, the DAO can terminate the agreement with Entropy Advisors, effective on the last day of the month in which the Snapshot passes, effectively stopping any future payment from accruing at that moment. In this scenario, all funds earmarked (but unearned) for Entropy Advisors’ future base payments and the remaining funds of the 10M ARB set aside for incentive alignment will be returned to the DAO by the Foundation.

Once the OpCo has been sufficiently operationalized, Entropy Advisors will operate under the assumption that OpCo will be Entropy’s counterparty that will represent the DAO and act as its proxy. Moreover, we will continue sharing monthly updates with the DAO.

Overall Costs

Budget

After reaching out to some larger delegates and key stakeholders to get feedback on how Entropy Advisors should proceed forward, it has become clear that a 2-year term mandate is desired to ensure alignment over a sufficient period of time in order to accomplish the aforementioned goals. Therefore, we are proposing to work with the Arbitrum DAO for 2 years from September 1st 2025 through August 31st 2027. We propose a base pay of $3M per year, a ~$500k per year increase versus our first term, as we have ambitions to grow the team to internalize key functions related to data, incentives, and treasury management.

In addition to our base pay, and in an effort to achieve long-term alignment with the Arbitrum ecosystem, we propose a 5M ARB allocation to Entropy Advisors that will be locked in a vesting contract with a 1-year cliff and 3-year vest. In addition to the 5M ARB allocation, 10M ARB will be set aside for the OAT to negotiate directly with Entropy Advisors on establishing short, medium, and long-term incentive mechanisms. These mechanisms may include, but not be limited to, milestone-based payments, an equity investment into Entropy Advisors, bonuses related to Entropy exceeding expectations, etc. The Arbitrum Foundation will custody this 10M ARB, and must adhere to any agreement made between the OAT and Entropy Advisors. It is also worth noting that any terms related to an equity investment may fall under NDA. Our goal is to ensure the entire Entropy Advisors team has a large incentive to see Arbitrum win, and to ensure we remain committed to Arbitrum significantly into the future. It is also our goal to ensure the Arbitrum DAO can hedge its exposure to Entropy Advisors and enjoy the benefits of its future growth.

In total, we are requesting the transfer of $6M in ARB (covering 2 years) + a 100% buffer + 15M ARB to the Arbitrum Foundation. $6M worth of ARB will be liquidated immediately upon the passing of this proposal on Tally. 5M ARB will be put into a vesting contract by the Arbitrum Foundation in accordance with the vest above and 10M ARB to remain in custody of the Foundation for the OAT / Entropy alignment mechanisms. The remainder of the funds will be returned to the DAO treasury immediately thereafter. The vesting contract cliff will begin on September 1, 2025, regardless of the timing the actual vesting contract is launched (backdated if needed).

The Entropy Team will be eligible to claim regular monthly payments of $250,000 from the Arbitrum Foundation throughout the 24-month term. Payments that have accrued can be claimed at any time. If the DAO passes a Snapshot to end its engagement with Entropy Advisors, it will be considered binding on the final day of the same month it passes, and Entropy will be ineligible to accrue any further payments.

We are nullifying the terms in our Year 1 engagement proposal that stipulate the DAO will vote on a bonus for the first year of our services, and instead replace it with this structure. The ARB allocated as a potential bonus that is in the AF’s possession related to our first engagement should be repurposed at the Foundation’s discretion to cover this engagement proposal, or be returned to the DAO treasury if not required to do so. It is also important to note that Entropy Advisors did not claim the full $205,834 monthly allotments from the first engagement proposal for the first 4 months of service, so the Arbitrum Foundation should have ~$423,336 of additional funds slated to be returned to the DAO. However, we propose allowing the Arbitrum Foundation to use these additional funds to cover a portion of Entropy’s next 2 year engagement (assuming this proposal passes) to minimize ARB sales if it wishes to do so.

Entropy will be abstaining from voting on this proposal due to a clear COI. We look forward to the opportunity of continuing our work in the Arbitrum DAO over the coming years. Entropy Advisors is all-in on Arbitrum, and we look forward to winning together.

Targeted Timeline

  • Forum Discussion: 2 weeks
  • Snapshot Period: 1 week
  • Pre-Tally Discussion: 1 week
  • Tally: ~3 weeks
  • If passed, 2nd mandate initiated: September 1, 2025
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TL;DR

  • We support the strategic intent. Entropy’s vision to make Arbitrum the leading capital-allocating DAO is valuable.
  • We concern about concentration of power. A single, exclusive provider risks dependency and stifles competition.
  • We see a need for hard, measurable outputs. Clear KPIs and quarterly reporting gates are missing.
  • Budget transparency is thin. $6M cash + 15M ARB equity requires granular cost-breakdown and milestone-based vesting.
  • The Term is too long, and safeguards are too soft. Two-year lock-in should be converted to one-year renewals with pass/fail checkpoints.

Introduction

We appreciate the comprehensive proposal and the dedication Entropy Advisors has shown to the Arbitrum DAO over the past year. The ambition to transform Arbitrum into the most effective capital allocator in crypto is compelling, and the focus on neutral proposal facilitation and strategic advisory is well aligned with the DAO’s needs.
That said, several points call for deeper clarification before we can give full support:

Exclusivity and accountability

Entrusting pivotal functions such as proposal incubation, treasury design, and incentive architecture to a single provider can streamline operations, yet it risks creating lock-in and suppressing healthy competition. How will Entropy ensure that its exclusive mandate does not crowd out alternative contributors or foster dependency if priorities shift or performance falters? Please outline review gates or competitive checkpoints that allow the DAO to reassess exclusivity at regular intervals.

Concrete outputs and measurable outcomes

Arbitrum already coordinates Offchain Labs, the Foundation, and the emerging OpCo, so overlapping mandates can easily turn into a bureaucratic cost center without contributing to the actual project’s progress. We therefore ask for a detailed list of deliverables and its outcomes, each paired with clear KPIs or some other measurable things, and expected ecosystem impact. Publishing these metrics up front will let the community evaluate progress without ambiguity. We are aware that some tasks or responsibilities are outlined like the one quoted below from “Financial Planning, Analysis, and Guiding Capital Deployment” section, but we’d like to have impact of Entropy itself measurable.

Cost justification

The proposal requests $6M in ARB for payroll plus a 15M ARB vested allocation, more than doubling the cash component of the first term. A granular cost breakdown—headcount by role, salary bands, data-infrastructure spending, travel, and contingency—will help delegates judge whether the budget matches market rates and expected value delivered.

Term length and safeguards

A two-year mandate brings welcome continuity, yet it may also reduce flexibility. Why is a single two-year tranche preferable to a one-year renewal structure tied to performance milestones? Detailing how the extended term improves execution, and why a shorter checkpoint would materially hinder the work, would strengthen the case.

Although some rationale for this is explained in the proposal, we do not believe that is sufficient enough to justify this length, considering the amount of budget.

We recommend adding mid-term reporting cycles with pass-fail criteria, milestone-based vesting for the 15M ARB allocation, and the option to reduce or halt monthly payments if agreed KPIs slip. Clear escalation paths protect both the DAO and Entropy from misaligned expectations.

By addressing these points—exclusivity guardrails, deliverable-level KPIs, transparent budgeting, explicit term rationale, and robust performance safeguards—Entropy can reinforce community trust and demonstrate that this sizeable investment directly accelerates Arbitrum’s long-term growth.

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Chris, from Sherlock, here. I’ll refrain from opining on the structure or other details of this proposal, but I do want to chime in here with my opinion and experience with Entropy. This team has been terrific to work with, is a genuinely positive force for the DAO, and seems to focus heavily on building goodwill the right way - by being a truly aligned stakeholder and trying to do what’s best for the DAO as a whole. And a specific shout-out to Pruitt from the Entropy team, who has been responsive, thoughtful, and creative in how he thinks about the DAOs future.

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Thanks for the proposal, was about time.

First, a small premise.
I have had the pleasure to work with Entropy in different degrees through different initiatives, either with an official role like in the Stylus program, or in a non official role/capacity as a delegate that just tries to chime into initiatives that I deem important. I specifically worked with Pruitt (even before in LTIPP), i have always found in Brick a counterparty willing to explain his vision, even when very different than mine and during weekends. I have spoke extensively with both Sam and Matt. And also clashed, privately, with Matt, more than I would like to admit cause we both have a certain personality, but is the type of clashes that comes from having strong opinions driven by a vision. Is the good type of clashes.
I have also grown appreciating the work of the Data team (Tom, Ali) that have always been open to suggestions.
All to say: i have confidence in my judgments, which are both related to Entropy, the entity, and the people working in Entropy. And that is why I see myself supporting them in this renewal.

I want to loosely comment on a few things. I am going to focus on what might be deemed by some controversial, and analyze past initiatives that might have not created the outcome the DAO wanted, and show why these imho have no material weight in the renewal.

2 years mandate

I think this is quite logical. In the program I run, the D.A.O. grant program, I moved the terms from 6 months to 1 year. I think initiatives that have a broad consensus and are perceived as important need to extend over time the time term because is the easiest way to allow the team to operate focusing on the mission, and not on the fact that in 12 months they will have to go all over this again.
Managing an initiative that moved from 6 months to 1 year, the above explains why having a longer term would be preferred. I also don’t see this as a deal breaker: either we renew entropy or we don’t, and them running for 1 or 2 years is less important than the DAO accepting them.

Budget: $2.5M to $3M per year

This is a bump on base cost of 20%. 1 year ago, in Bruxelles, the team was made by Matt, Sam, Pruitt, and if I recall Brick was recently onboarded or soon to be. Unsure if Tom was already there.
We now have double the personnel and a clear stated goals of hiring more people, accordingly to the infochart with one that is basically here and another 5 that are planned and might come.
Knowing how consultancy work, and even more how it works in crypto, I think the budget is extremely lean, even underpriced. But is partially compensated by the vesting bonus (see below). I won’t for sure push Entropy to ask for more capital, but I think they could have easily asked for $3.5M seeing how they are scaling.

Budget: 15M ARB bonus

I have never been a fun of the DAO voting on bonuses on people (not only on entropy). Yes, the DAO can evaluate if someone did the work it was supposed to do up to some degree. But voting on assigning/non assigning a bonus is tricky because it becomes an issue about quality of the job, if the people involved pushed into the last mile and more vs doing just the homework etc. I don’t think the DAO is well equipped to do this because is extremely difficult to be able to see the outcome as a function of the work behind, just like for an iceberg is easy to see the tip but you can only imagine the size of the submerged part. All of this to say: I think is fair to move to a bonus that is vested.
On the amount. This is quite difficult for me to asses. As it is today, the bonus corresponds to around $4.5M so 1.5 times the yearly budget. But this will be all available in 4 years, and in 2 years from now the amount of unlocked supply of arb should be 50% more than what it is now excluding DAO spending, with around 30M arb unlocked per month. It’s a fool’s game to try and project the notional dollar value. But let’s assume we have 15 people in entropy: it would basically mean an average of 1M bonus each after 4 years; of this, 333k would be unlocked in 2 years.
Comparing the numbers to OpCo, and knowing that Entropy has still a private nature so it can justify a premium to have them around exclusively for further 2 years, I don’t think the number is unreasonable. I will also let other speak on this number.

GMC/TMC proposal

This is explicitely mentioned by Entropy itself in the list of things from which there are mistakes from which they can learn from. Of the last proposals we have had, one of the biggest critique has been around the lack of flexibility and allocation in these proposals, and how protocols could have benefit from a broader framework.
I have been the first one expressing loudly this point. Was there margin for a better execution? Yes. Could Entropy have had this broader vision at day one and be put in the condition of executing this vision right away? Yes and no. The main problem was tied to not only a conservative vision (which is not necessarily a problem honestly, more like a different angle), but mostly on the outreach terms for protocol. If protocols have to take the time to create proposals, explain their strategy and then they get rejected, there is inevitably a bitter feeling as a consequence which also increases the negative sentiments. Entropy would have benefit from better communication with stakeholders like OCL that could have suggested (and I am not sure if this happened or not) allocations that were more oriented toward growth; they would have also benefit from the contributions of very entrenched, defi native people able to contribute to their team and program. All of this is likely solvable in the next iterations: we do have a lot of ETH to spend and this was the first programmatic initiative that weaponized our treasury and opened the path to several other in future. Expecting the first iteration to be already perfected and tailored to our collective needs is a bit unrealistic; plus, the other side of the coin is that our DAO has been live for 2 years (with the chain been live for 3.5 years) and there has been no other party trying to spin up an initiative such as this one.
TLDR: can we have objective critiques on the expectation vs actual outcome of the GMC proposal? Yes. At the same time, we should recognize how this initiative would have not even existed in the first place, how is a first 6 months iteration, and how it made us learn a lot on what we can do and in what areas we can improve.

Of the above mentioned, I think none is material through a renewal that takes in account the following points:

  • first treasury program that directly utilizes the eth we have. While imperfect, it bootstrapped the initiative
  • opco: everybody and their grandma in the dao now is eagerly expecting opco to be operating. This would not have happened without entropy. Worth noticing, them pushing for opco is a testimonial of their neutrality since they even voted against.
  • Converge: while most of us was not aware, Ethena launching on top of our stack is an important milestone. Entropy having a role, with first the data unit and then bd work on the ground is notable
  • Data and dashboard. I honestly haven’t seen this type of dashboard in any other ecosystem at least not at this level of detail and heterogeneity. I will state the obvious: neither the foundation, nor ocl, nor anybody else did create this data for us which is key to properly measure our operations and allows external parties to asses how good our stack and ecosystem is
  • sos proposal (previously: MVP): while this proposal was “immaterial”, I can’t think about anything else beside the detox discussion spearheaded by l2beat that had as much involvement from delegates
  • i could mention a few other stuff: CoC and calendar that allows for smoother operations and some breathing room during december, the stylus program to push for the adoption of the technology (being an insider i can testify that a lot of the passed proposals are key, for OCL, to push the adoption of the tech), the drip program (tbd on that one but we have a different approach and we come from a year with no real practical consensus on how to do incentives).

These are the material results; is a bit subjective and in general hard to understand the immaterial results and second order effect that Entropy manifested in the DAO. Two are worth mentioning:

  1. we have raised the bar in term of professionalization compared to 1 year ago, and this is highly needed if we want the DAO to be a positive component of the Arbitrum ecosystem
  2. Entropy has become a de fact public face of the DAO in a moment in which we didn’t had (and still don’t have) one.

The question becomes: were the $2.5M we paid a good price tag for what we obtained in the last 12 months? My answer as of today is a big yes.

I also don’t want to sound like a cheerleader. Everybody has margin of improvement here and Entropy is not an exception. Specifically, it can benefit by a lot of things. One of the pitfall we likely had, and is quite common in crypto, is a team that is not only extremely motivated, but also quite young. This is not necessarily a bad thing, but the lack of experience can sometimes create shortfalls that could have been easily avoided. This was noticeable, for example, in certain occasion, during communications with the rest of the DAO or some protocols.
As of today, not only Entropy operated for 1 year in crypto (which, like dogs’ years, is equivalent to 7 years of professional life somewhere else), but they will now have a series of other counterparties, either new (opco) or new in term of willing to be more active (ocl), that will make their life probably easier due to their scope being now narrower compared to the initial mandate.
Entropy would also benefit by diversifying a bit their team through hiring people that are “closer to the trenches” to put it bluntly, and the list of future hires does indeed indicate that.
Entropy is growing in the DAO alongside all of us, this is clear to me.



\

Since we are here I want to also give my educated opinion on the above post from @Tane, not because his opinion is wrong but because the approach/angle should be a bit different imho.

OpCo is a good testimonial on how Entropy did facilitate other entities to rise in Arbitrum. They literally voted against because they thought: we, alongside foundation and OCL, can do enough here. And their opinion in this sense was overturned by the overall DAO vote despite them being the biggest delegate.
We also have seen at the same time initiatives still coming out in an horizontal landscape, such as ARDC v2 and D.A.O. Grant Program.
On priorities shift: to me is pretty clear the fact that, as a DAO, we adapt over time. This is both in term of what entropy does, what we decide about what entropy should do, and in general any initiative of the DAO. Think about opco, was devised 1+ year ago, and we are currently voting to change scope. This is the natural and dynamic process of a DAO, that while slowly constantly reasses scope and goals based on new information, through votes and collective decision.

I am a bit puzzled by this point honestly. Having a provider working exclusively for us is something positive, not negative. It means that they will focus 100% of their energy toward our goal, and that we can align the outcomes in an easier way (re: 15M arb bonus for example). Should we for example in 8 months just vote and say “no, entropy should not be exclusive anymore”? I don’t think so. If we come to that point, the question is likely “should entropy still operate for the arbitrum dao”.

Unsure what you mean when you say “Arbitrum coordinates” but will just assume you mean the DAO. The DAO so far has not specifically coordinated OCL; on the contrary, OCL has posted to us their work and we have validated it from time to time. Same with the foundation, up to a lesser degree because the dialague is way more open (and both should improve over time).
OpCo will indeed act as coordation; this coordination has partially being executed by all parties involved. I honestly don’t see the point on this.
On the overlap: it has been clear now that we are really segmenting operations over time. Entropy is posting about treasury, incentives, data just to name three. None of these 3 are verticals that, so far, were managed by the foundation or ocl, nor by the dao independently (except, maybe, incentives with LTIPP and STIP/STIP.b, but the overall consensus in the last year has been to move on from that modus operandi).

The cost breakdown (without going into the single salary numbers) has always been outlined afaik in their quarterly reports here: Entropy Advisors Updates - Arbitrum.
The headcount, is literally in the slides presented above, with 7 full time members, one part time, and further hires ahead. Knowing that the budget has been increased by 20% with a 100% increase of people, is easy to have the granular breakdown because it will be very close to what we have today already.

I personally answered in length on the above. But the point is that to build fundamentally strong initiatives we need to start thinking on the long term.
Arbitrum as a DAO has had 2 years now to figure out his identity. We have tested a lot of things in a lot of ways and I am glad we did, it really helped us understand what worked for us. We are now at a point in which we need to double down on

EDIT rereading i realized my point toward Tane is not clear. More than discussing “guardrails, kpis, etc” which are fine but also details in the grand scheme of things, to me we should instead answer the following questions: did entropy do a good job in the past 12 months? Was the job worth the price tag? if the answers to the previous questions are both positive, is the new proposal something that puts them in condition to do a work that is at least of the same quality if not above?
This is not because KPIs are not important. But they can be a way to make us feel like we are doing proper DD, make us feel “good” about our “data driven” decision, while instead we miss the forest for the tree.
We can discuss a lot if the price tag is correct, if the term is correct, if the bonus is correct, what kpi to add. To me this is secondary to the most important questions highlighted above. And as I showed (fwiw, i am just a single cow delegate), the attached numbers feels correct, but that is also a personal take.

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Disclaimer: I have worked with Entropy as part of the ARDC, I believe they are strong in certain areas and less so in others (Ops & Processes being one of them). Nevertheless the DAO wouldn’t be where it is right now without Entropy and a laser focused, strong driving force is definitely needed.

My 2cents on this proposal:

  • Eventually the DAO is/and has been bootstrapping a Web3 consultancy (currently exclusive to Arbitrum)
  • At the same time since the DAO is funding a company & its growth I believe it would be reasonable to ask in return a stake of said company

The DAO having a stake in Entropy would

  • ensure upside even if in the future Entropy were to engage with other protocols (which I am not opposed to because I believe there is a lot to learn/leverage when working with non-competing protocols)
  • truly be an AAE because it gives the DAO skin in the game
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I want to start by saying that I believe Entropy is a net positive for Arbitrum DAO and is doing amazing work. Period.

And to say that this is a renewal negotiation, so it is expectable that, while understanding the deep level of the partnership (and that the draft for this proposal was circulated around to gather earlier feedback/support), 2 different entities, with their best interest in mind, will work to get what is the best value for it.

I have a particular view of the proposed AAE setup, and that will drive my comment. You can check the full text here, but for the sake of clarity, I will paste a section down below.

Arbitrum DAO, as an entity, outsources certain functions to external partners. There is nothing wrong with that, as we should rely on the best expertise available. But, IMO, the DAO should wear these lenses when evaluating the current proposal.

While on this first pass, I don’t have much to say about the proposed work scope and the base pay related to that, but I believe the extra 15m ARB allocation deserves clear milestones to make sense, and/or should have a similar structure of the first proposal (a separeted Snapshot vote). IMO, it is expected that, as a “contractor” working for a single client, the team’s commitment to deliver the items defined above and the incentive for this sole client to be successful, are part of the base pay (that already has a bonus for the exclusivity/market we are inserted).

While I acknowledge the points raised by @JoJo, it is a common practice to tie extra pay to deliverables not associated with the “regular commitment/tasks”.

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Thanks @JoJo for your detailed follow-ups!

As a general premise, we would like to emphasize that our comments do not indicate opposition; rather, they reflect our consideration on how to make this proposal more agreeable.

Fundamentally, we acknowledge and fully agree that Entropy has made significant contributions to the Arbitrum DAO! We witnessed how Matt and Sam bootstrapped the team, hired a group of high-context and capable members and continued to spearhead the Arbitrum DAO governance.

At the same time, we also recognize the delicate and complex nature of the relationship between service providers and the DAO, and we believe it is necessary to establish sufficient safeguards to properly align with token holders’ interests.

Exclusivity and accountability

When a service provider also controls a large delegate stake, the DAO’s “customer” and “vendor” become the same party. This concentration can create a latent COI: in edge cases, Entropy could benefit more from blocking an external provider than from maximizing DAO value. Entropy itself acknowledged this COI during the OpCo debate. Their earlier opposition to OpCo, even if well-intentioned, shows the theoretical risk: had the rest of the DAO not overruled that vote, a new organization might never have launched. In other words, vendor lock-in can make it harder for the DAO to explore, more effective alternatives.

We therefore believe the question is not whether Entropy currently acts in good faith, which we believe they do, but whether the DAO can still pivot priorities quickly if a future initiative lies outside Entropy’s core strengths and it could potentially cause a loss to Entropy. We recognize that this is an inherently sensitive matter, but we believe the DAO should at least discuss what safeguard options the DAO should have.

We may have phrased our second point imprecisely. What we actually want to solve for is this:

  • How will the DAO decide whether Entropy is meeting, or falling short of, its expected performance?
  • Separately, is it healthy for Entropy to remain the only operative in certain functional domains?

The first question calls for clear, objective measure so that underperformance is recognized early and dealt with fairly. The second question is not about Entropy’s promise to work exclusively for Arbitrum; it is about situations where Entropy, in practice, becomes the exclusive provider for a specific line of work. We should articulate in advance when that de-facto exclusivity is acceptable, when it should trigger competitive sourcing. The termination clause is clearly stated, but our question is about under what circumstances the invocation of this clause should be discussed, and how we should detect whether those circumstances have actually been met.

Concrete outputs and measurable outcomes

We agree with the perspective quoted below, but we think the primary issue here might be the relationship with OpCo.

For example, regarding treasury management, we observe substantial overlap between the domains described by Entropy and those covered by OpCo (though OpCo might be interpreted as having a bit more operational focus).
In this context, it remains unclear which entity ultimately holds accountability for the overall treasury strategy of the DAO, to whom responsibility should be assigned in the event of an issue, or to whom this DAO pays for what. While we highlight treasury management as a clear example, similar overlaps might exist in other areas as well.

Cost justification

We are aware that a high-level cost breakdown has been shared, but we do not believe it is sufficient for proper oversight.

To be clear, we are not asking Entropy to open its entire P&L. In a classic output-based model, where each deliverable carries a discrete fee, the DAO could set compensation solely by the value it receives, regardless of Entropy’s internal costs. However, much of Entropy’s mandate sits in higher-level advisory and strategic work, where outputs are less concrete and value attribution is harder. In that context, the DAO must verify that the underlying labour and overhead costs are, in fact, reasonable.

More broadly, we think the DAO should cultivate sharper cost discipline. We agree that Entropy has done good work. Nonetheless, it is our fiduciary duty to keep asking whether the same objectives could be achieved more cheaply or more efficiently. Continual cost-effectiveness checks are simply part of protecting token-holder value.

Term length

We understand the potential advantages of locking the engagement into a single two-year term. What we do not yet see is clear evidence that moving to an annual renewal would impose significant costs or operational friction. If a one-year cadence would meaningfully disrupt execution, then a two-year contract is justified. If not, a one-year term should be adequate. All we ask is a more detailed explanation of what concrete drawbacks the DAO would face under a one-year structure versus the proposed two-year tranche.

Overall

We agree entirely that the key test is whether the DAO receives value commensurate with what it pays, and we also believe Entropy has been a great partner of the Arbitrum DAO. Our point is that this test should rely on more than what major delegates perceive. Wherever results can be measured objectively, they should be. We should also ask in advance how the DAO will protect itself if events deviate from plan. This is a basic responsibility to token-holders and to the DAO’s long-term health. Given the wide range of stakeholders in a DAO, treating this rigorously is even more important than in a conventional startup.

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Overall I agree with the proposal and believe Entropy have been diligent and very positive for the DAO.

A few comments given the significant scale and commitment the proposal requests:

Clearer mandate: great improvement made and continuing to do so would be good

I have called a few times (e.g. here) for AAEs to have more granular mandates to avoid crowding out vendors and other ecosystem partners. I’m glad to see Entropy making significant improvements with this new proposal!
I still think Entropy could do more to socialise their vision and overall strategy. I have found them to be responsive and very willing to answer questions, even from a small delegate like myself, so this is not a critique of them but simply something that can benefit the DAO overall.

Learnings: one more to add

Generally, I have seen a high quality of delivery from Entropy, with one learning opportunity being recognised (the stakeholders’ comms during the GMC) but a second one not: IMO, the facilitation during the SOS was insufficient and I heard similar comments from other stakeholders. The SOS did have significant delegate engagement, but this didn’t seem to have been facilitated by Entropy who was leading the initiative and instead prompted L2Beat to step up and fill some gaps, with the initiative ultimately not (yet?) achieving its goals. Facilitating collective alignment processes between a group that’s part-time, has different weights, and operates across time zones is HARD. However, I believe we could have had a better outcome if Entropy bolstered its facilitation capabilities (or otherwise delegated/contracted some of that work to facilitators more experienced in these types of collective processes).

Arbitrum Alignment: could be improved

I strongly agree with Tamara message here:

My own research in organisation design strongly supports having Arbitrum receive a significant but minority ownership stake in Entropy’s operating company. Without said stake, the DAO risks increasing reliance on consultants who, with every passing year, are in a stronger negotiation position and could be tempted to exploit it. For clarity, this in not a critique of Entropy’s character, but a matter of principled org design and good governance.
Setting up a precedent of the DAO incubating service providers with only time-limited exclusivity is not in the best interest of Arbitrum. While having said ownership provides longterm alignment and sets a wonderful precedent for future AAEs. There’s no reason for this partnership to not continue and for Arbitrum not to benefit from having a DAO operations partner that can become a revenue centre as opposed to a cost centre.
This also removes a duplication of incentives, whereby Arbitrum is giving a very significant success bonus AND also has incubated Entropy from 0 (starting with an AF grant). Ownership in Entropy might lead or not to dividends or even an exit event in the future, but having Arbitrum with a minority stake ensures everyone wins.
Haier is an example of a company that systematically incubates teams and retains partial ownership in them, which has been key to sustaining both entrepreneurial incentives and alignment, allowing Haier to grow into a Fortune 500.

Scope Concerns: early-stage builder support

In the proposal, Entropy mentions

I understand from the above that Entropy plans to lead the DAO efforts in addressing talent attraction and early-stage support for projects in Arbitrum ecosystem - an area we typically call Builder Support. Is this interpretation correct?

If yes, I do wonder if this is an area where Entropy is best positioned to lead compared to the other areas proposed, both from a capability and organizationally. I don’t have a definitive opinion, but I do have some concerns, as the key expertise related are roughly:

  • building (entrepreneurial experience)
  • talent attraction (growth, marketing, high-level HR)
  • investment (angel, pre-seed, CVC)
  • incubation (venture studios, accelerators, incubators)
  • R&D (applied research, commercialising technologies)
  • DevRel (tech support, community building, education programs, hackathons, etc.)

Those are not expertise that the Entropy team has (to the best of my knowledge, please correct me if I’m wrong). I do not question their drive to grow, and they can expand the team, but building these multiple capabilities from 0 or even assessing who has them to recruit is tricky.

Please correct my understanding of what this scope means if I’m misguided!

Overall I thank Entropy for this proposal and they count with my support, I hope after addressing the concerns :slight_smile:

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We appreciate @Entropy commitment to the Arbitrum DAO and acknowledge the breadth of work delivered over the past year. The team has clearly become an integral part of DAO operations and has brought professionalism, energy, and valuable structure to many complex initiatives. As we consider a significant two-year renewal with an increased budget and a long-term ARB token alignment, we would like to raise several areas where the proposal could be strengthened.

As we review this proposal for a multi-year engagement with an expanded scope, we believe there are a few areas where additional clarity would help the DAO make a more informed decision. One of our main areas of feedback relates to the balance between execution and outcomes. While Entropy has helped ship many proposals and workstreams, we would appreciate a better understanding of the tangible results these efforts have produced. For example, the staking working group and STEP were thoughtfully designed, but how have they performed so far? What impact have they had on ecosystem growth, retention, or capital efficiency? What lessons have been learned? Sharing reflections like these would strengthen the proposal and build further trust in Entropy’s approach.

Looking ahead, we also note that DRIP represents a new direction for how the DAO approaches incentive design. While the program has not launched yet, it would be helpful to understand what indicators or metrics Entropy intends to track once it goes live, and what a successful outcome might look like. Planning ahead for evaluation can help ensure that we not only launch good programs but also learn and iterate based on results.

In that spirit, we would appreciate the inclusion of more clearly defined KPIs and reporting structures across Entropy’s scope. These tools would help the DAO assess performance more objectively and provide context around which initiatives have delivered the most value. Even a high-level roadmap or set of milestones for the next two years would help the community understand what success looks like. In addition, it would be valuable to know where Entropy believes its work has saved the DAO time, avoided inefficiencies, or unlocked growth. These kinds of outcomes are worth highlighting and, where possible, quantifying.

Regarding the proposed two-year term, we recognize the point made @JoJo , that longer terms can allow teams to focus more fully on their mission. At the same time, we would appreciate more context on why two years is specifically necessary in this case. Are there particular initiatives that require a full two-year cycle to complete? Is there a long-term strategy that maps to this timeline? Including examples or a roadmap that shows how the work unfolds over time would help make this decision easier for the community.

Additionally, we’d appreciate a clearer explanation of how Entropy’s mission aligns with the broader objectives of the ArbitrumDAO, particularly in relation to the SOS framework proposed by delegates. Could you elaborate on how your proposed workstreams support the key pillars of this framework? Drawing a more direct connection between Entropy’s role and the DAO’s strategic priorities would help contextualize the proposal within the larger ecosystem goals.

We would also like to see more detail on the proposed budget. A simple breakdown of how the three million dollars per year will be allocated, such as staffing, infrastructure, and other operational costs, would provide useful clarity. Similarly, the fifteen million ARB vesting package is substantial. We believe it would help to explain how this will be distributed within the team, whether there are clawback protections, and how the vesting contract will be managed. This ensures that incentives are well aligned with long-term performance.

We also welcome a brief discussion on the topic of exclusivity. We understand the benefits of having a high-context team dedicated to critical DAO functions, and Entropy has clearly served that role well. At the same time, we believe it remains healthy for the DAO to encourage complementary contributors across workstreams such as data, treasury, and incentive design. This supports a resilient contributor ecosystem as Arbitrum continues to evolve.

It would also be helpful to understand how Entropy plans to navigate its role as both a delegate and a service provider. We recognize the value of having context as a delegate and the positive impact that involvement can have, but outlining how potential conflicts are managed would help address recurring questions from the community.

Finally, if this proposal does not move forward, it would be useful to know what happens to the ongoing work. Are there plans to wind things down, transition responsibilities, or maintain certain operations? Clarity here would support better planning and help set expectations across the DAO.

Overall, we want to thank the Entropy team for all of the contributions made so far and for submitting this thoughtful proposal. With a few additional details, especially around outcomes, roadmap, DAO alignment, and transparency, we believe this can serve as a strong foundation for the next phase of your engagement. We look forward to further discussion and continued collaboration.

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Thanks a lot for the thoughtful response I do appreciate :slight_smile: Want to answer one more time and then just leave it there cause I don’t want to monopolize the discussion

I can understand your point of view here. One could argue tho that Entropy’s delegation has been build over the last 12 months as a consequence of their service in the DAO. I personally interprete this as investor trusting this party, and allowing it to become important not only in the services it provides but also in delegation.
I don’t think that after 12 months we are at a lock-in situation, and I am pretty sure that the investors who monitored the dao and our collective activity, if they feel like Entropy is hindering growth, they will revoke their delagation in the same fashion they assigned it.

The first question can be a bit hard to answer for a reason. As far as i can tell entropy operates both at strategic and tactical level, often times being both the executor and the ideator of the initiatives. It could be argued that, using “normal” kpi, would be easy for them (and anibody in their shoes) to set ones that are easy to achieve. At the same time, measuring strategic initiatives can instead be argued because there are first and second order effect that often times are not manifested right away. To make two stupid example, how do you evaluate with a kpi the code of conduct? and how do we evaluate the voting calendar? these are small and superficial example, and definitely not the most important at alls, but can be seen as a piece of a puzzle that is the dao professionalization (and removing friction for other professional parties to be created and operate smoothly) alongside “fancier” initiative like treasury management that could be, indeed, measured in a more robust way.
All to say that I do find hard to apply normale framework in this situation. You would think that you could apply the same logic for a c-suite in a traditional corporation; at the same time, while entropy is the biggest delegate out there, it encompasses 10% of the active votes give or take, does not control the lab unit, does not control the other AAEs. So that framework is also off the table.

Again, you really make a logic point here ser. Feels like is more of a case by case situation honestly, with the extreme consciousness that everything can change, rapidly, in our dao (check opco mandate 1 year ago vs what we just voted last week).
Thiking about treasury for example, to me it makes totaly sense to have a central decisional body, but service provider for execution; as long as the dao is able to analyse the outcome and be satisfied, I don’t see the necessity of having a second manager.
If instead the outcome is not what we want, then we try to understand if it’s entropy to be liable or the sp that were hired (which would also mean understand this hiring process and if it had any gap), and eventually act on information discovered.
All of this to say that, to me, is a “show and tell” type of situation. The dao always has the ability to revoke a mandate. If we want to vote for a new treasury manager, we can.
I think that as long as Entropy set clear expectations, and we as a dao have logic requests (ie: we can’t ask a 100% return on a treasury that is actively managed while preserving most of it being in arb to name one), we can move toward a result oriented analysis, knowing also that market forces are uncontrollabe for entropy, the dao, vitalik and most of the universe.

So all of the long useless paragraph above to create a practical example on how imho we should approach exclusivity vs avoiding lockin vs evaluating operations vs allowing a paid third party operate for us.

It might be a personal interpretation, but to me seems quite clear that opco is going in a direction that is quite different from what we initially thought. A unit that was mostly financially related and partially growth related seems like is standing up instead as a coordinator of all AAEs and one of the center of the growth of the ecosystem. I do see how you would want clarity in scope; at the same time is maybe difficult to find clarity in a time in which opco still has to find a ceo, and then the operational people. Capability in task X or Y comes after you onboard the right people and we are not there; at the same time we have a gap now in what we need. Realistically opco will be full operational imho not before Q4 and even there it might take a bit of more time.

I won’t specifically spell out why I do think their price tag and model can be right. To me it boils down to a certain amount of people (8, now 9, probably in 6 months 12-15), plus responsabilities (in this case: treasury, drip, and we could reference the past ones as proxy of future ones like creating opco to name one) and understand the cost per employe annualized vs value accrued.
If I do napkin math, it feels the numbers are right. That said, there are infinite models that could be applied, of which a subset can likely accrue value to Entropy in the same amount they are seeking with different ways of doing so I guess. i don’t honestly have an hard opinion on this; but i do like simple stuff when possible, that’s why i don’t mind the current proposal.

Personal take here: when I was a DA of the season 1 and 2, after 3 months out of 6 it was the time of starting to think “ok, I do I renew this initiative in a way that makes sense for the dao for value accrual”.
This is not a bad problem to have. But is indeed something that takes focus away from real operations.

At the same time, I can tell you that now that I operate the D.A.O. grant program on a 1y horizon, I do have the ability to build over time and analyse results as they come in and eventually adapt.

Could I run the program in 6 months like we did in previous seasons? Yes
Could Entropy run on a 1y contract like the previous one? Likely yes
Do both the situations above allow for better project exploration, data analysis and adaptation, as well as potentially gunning for bigger goals due to continuity vs running for half term? Likely yes as well.

Again, my personal opinion drawn from a different but similar initiative.
Would also like to tag @Curia in this final piece of answer since they asked as well the rationality of the 2 years.

As stated above, I want to give to others enough time and space to ask questions and provide their opinions. Still wanted to thank both @Tane and @Curia for offering what I think is an extremely valuable perspectives, in a way that is both constructive and non disruptive, of entities operating in several DAOs and also not only very tied to Arbitrum, but always extremely thoughtful with their contributions in here.

12

Thanks to the Entropy team for this engagment renewal proposal, indicating their willingness to continue serving exclusively to the Arbitrum DAO.

We acknowledge the significant contributions made by Entropy Advisors during their first term and recognize the substantial operational lift they provided across DAO coordination, governance design, proposal execution, and data tooling. The direction outlined for Years 2 and 3 is ambitious and reflects a maturing vision aligned with Arbitrum’s long-term trajectory. That said, we believe several aspects of the proposal would benefit from further clarification and refinement before advancing to a vote.

Strengthen Accountability Around the 15M ARB Vesting Allocation

The proposed 15M ARB long-term alignment incentive is material. We echo the replies from other delegates (@jameskbh, @Tane) seeking to better align these vested allocations with measurable positive outcomes for the DAO. To ensure this aligns with DAO expectations, we suggest:

  • Tying the ARB vesting unlocks to performance milestones, rather than just time. For example: number of dashboards delivered, DRIP program KPIs met, treasury % deployed, etc.
  • Including clawback or partial-vesting clauses in case of early termination or failure to meet key deliverables.

Minimize the risk of internalization killing competition

As Entropy scales its team to over 10 members and internalizes key functions across data, incentives, and treasury strategy, we recognize the goal of improving execution quality and accountability. However, we believe this growth also introduces a latent risk of mission monopolization.

Without clear checks and balances, there is a risk that Entropy, whether consciously or unconsciously, becomes disincentivized to support or mentor initiatives proposed by external service providers, particularly if those initiatives overlap with its own expanding scope. This could lead to:

  • Favoring internal execution over supporting third-party contributors;
  • Reduced diversity of thought and experimentation in DAO service delivery;
  • External teams shifting attention elsewhere, shrinking the contributor ecosystem.

While internalizing key capabilities can improve delivery in the short term, overconsolidation may dampen the DAO’s resilience and long-term efficiency by undermining healthy competition and substitutability.

We recommend introducing guardrails that ensure Entropy continues to support and elevate external contributors wherever possible and the DAO maintains pathways for independent proposals to receive mentorship, feedback, and a fair review, regardless of who executes them.

This could include clearer conflict of interest declarations when declining to support overlapping external proposals, as well as metrics on external proposal support or mentorship provided over the mandate term.

We’re overall encouraged by the level of depth and reflection in this proposal. Entropy’s commitment to learning from Year 1 and adapting accordingly is evident, and we’re aligned with the broader vision of enabling Arbitrum to evolve into a capital-efficient, strategically guided DAO. With a few structural improvements, we believe this proposal can set a new standard for DAO service engagement.

We look forward to continued iteration ahead of the final vote.

13

First, thank you to everyone who has already provided feedback on our second engagement proposal. It is of utmost importance to our team that the entire Arbitrum community is behind us, as unification will yield the best results for Arbitrum over the long-term.

With that being said, we want to address some of the early feedback below.

As an AAE (Arbitrum Aligned Entity), Entropy offers a clear accountability and continuity layer for our work, even when (often) working with other vendors and contributors. The scope we’ve proposed is intentionally designed to be synergistic: treasury management, incentive design, data analytics, and special projects are deeply interconnected. Splitting them across multiple providers risks duplicative work, misaligned incentives, and slower execution. The work as outlined largely requires an Arbitrum aligned entity at the helm, even though we may look to service providers for specific workstreams.

Entropy’s role is not about accumulating power, it’s about consolidating responsibility and being directly accountable for outcomes. The DAO has already seen how fragmented ownership leads to confusion and inertia. We want to help correct that by serving as a coherent, transparent executor for the DAO’s most strategic financial and growth functions while still being subject to community input.

Arbitrum has no shortage of need for high-context, high-quality executors in areas that require dedicated ownership. In the event our scope narrows in one area, we’re confident we can reallocate top talent to emerging priorities. Continuity and context are Entropy’s core strengths, and we’ll remain flexible to where the DAO needs us most.

We believe that our success will be clearly reflected in the success of Arbitrum’s treasury management, incentive design, data infrastructure, and special projects. That said, we’re cautious about rigid KPIs that can unintentionally create perverse incentives or steer us away from the highest-leverage work.

Instead, we’ve outlined clear workstreams and objectives in the proposal, and we’ll report progress transparently across each. Where impact is more qualitative, we’ll ensure visibility into the reasoning and results.

Ultimately, our accountability comes from the clarity of our scope, the transparency of our reporting within each vertical, and our willingness to adjust based on DAO feedback.

The main line item driving the increased base is salaries/related expenses. In Years 2 and 3, we will attract top-tier talent in highly specialized fields such as economic modeling, treasury management, and data analysis; fields where capable contributors are in extremely short supply. As a result, other spending buckets (legal, infrastructure, tooling, travel, etc) will rise modestly as well. In particular, our vision for Entropy Data goes far beyond basic dashboards; delivering a robust, composable data layer for Arbitrum will require significant infrastructure investment well beyond what off-the-shelf tools like Dune can support.

For more granular information related to the spending throughout our first term, we highly recommend checking out our quarterly transparency reports here.

Our team has discussed this idea internally, as well as with some large delegates, the AF, and OCL at various moments in the past. However, the intricacies associated with executing this in practice has made us reluctant to pursue this approach. We think it makes more sense to make a proposal in the future if there is a potential client that approaches us that would require Entropy to break its exclusivity, and to empower the DAO to make this decision at that time. We do not want to create a distraction around our reengagement that would draw attention away from the core content within our proposal, and we believe an equity stake discussion would do exactly that.

Our success is very clearly tied to the success of Arbitrum at this point - everyone in the industry knows Entropy as a team “committed to Arbitrum”. If Arbitrum does not succeed, it is very unlikely that Entropy would be able to win business elsewhere. We view our 2-year commitment and a significant portion of our upside in vesting ARB as sufficient means to guarantee our AAE status.

We are not completely against the idea if the DAO has the structure where a direct counterparty can negotiate this type of arrangement in the future, but we do not think the timing is right at this moment in time.

The ARB portion of the payment isn’t about compensation as much as it is about alignment. Through the admittedly large-scale vesting ARB allocation, Entropy Advisors will always do what we think is best for Arbitrum no matter the scenario. Our goal is to lock in this alignment in a way that makes us immune to other parties’ external interest, and aligns us with one thing, Arbitrum. We think it’s a perfect combination where the DAO can always fire us, but the ARB means we never stop working for Arbitrum. From our perspective, on rare occasions, Arbitrum and large delegates can have different interests.

It’s also about retaining top-tier talent. The best people in the industry are drawn to projects where they have ownership and upside, especially in pre-TGE environments. We want to create that same level of ownership for contributors to Entropy: the freedom to build, the mandate to think long-term, and the ability to share in the success they help create.

When it comes to defining KPIs, please see the response above to Tane’s comment.

We do not aim to take on all of the things mentioned above, we simply want to support Arbitrum builders through thoughtfully designed incentives, treasury management/POL to deepen Arbitrum liquidity, data analytics to improve dapp level transparency, and “special projects” as they arise (the Converge example being the most apt in this context).

We agree with your assessment that taking on all of this work would be overkill, and is not at all what we intended to propose. In other words, we do aim to support builders through our workstreams, but do not believe that solely treasury management, incentives, and data analytics cover the majority of work associated with everything Arbitrum needs in order to support builders. We hope that helps answer your question/clear up any confusion on the builder support front.

We are of course hopeful that our proposal moves forward successfully, but are happy to transition all of our work over to the party (or parties) deemed appropriate by the DAO if our proposal fails. If we were to just drop all of our responsibilities without first helping with the transition, the Entropy Advisors brand/reputation would take a huge hit. We have also invested a significant amount of time and effort into the Arbitrum ecosystem at this point, so we would never want to leave the DAO in a bad spot in the case Entropy were not to be renewed.

Additionally, with the OpCo moving forward at a reasonable pace, we could work with their lead to hand over any necessary roles in a much more streamlined fashion.

In terms of your other feedback, we believe that we have addressed that in the replies above. Please feel free to double down on any questions you think we may have missed here, and we will reply in a timely manner.

We addressed this point above, but want to double down here to provide tangible reasons for why KPI-based vesting doesn’t make the most sense. If we tie our vest to the number of dashboards to be delivered, we are incentivized to launch quantity over quality. OCL asked our data team to create a Timeboost dashboard (which has provided a ton of decision-making value and value on the marketing front on social media / news outlets), but this dashboard took a very extensive amount of resources from our team. If we had a KPI-based milestone attached to the number of dashboards, our incentive would have been to avoid this work, so the DAO may have received less value. If we tied our vest to % of the treasury deployed, we wouldn’t of had a proper incentive to leave 2,500+ ETH in the treasury in the Treasury Management v1.2 proposal for safety reasons related to the BoLD fraud proof protocol in case of an emergency. Another example of a bad incentive would be to liquidate more ARB at a less-than-ideal price simply because of KPIs, rather than optimizing ARB spend/conversion with broader market conditions. DRIP program KPIs, like TVL, sequencer revenue, or any other metric you can come up with, could ultimately become the only thing we would optimize for, as it would be our incentive to do so. Rather than trying to attract sustainable activity or bootstrapping new/promising markets, we would be more likely to optimize for mercenary activity that aligns with our “KPI” rather than doing what is best for Arbitrum over the long haul.

We have put a vast amount of thought into this proposal’s structure, and are certainly open to other ideas, but at the end of the day, we believe that nothing aligns incentives better than long-term ARB exposure.

The checks and balances are, in our view, in place already. The DAO will have the ability to fire us at any point, and each initiative that we spearhead has its own set of checks and balances baked into the proposals the DAO approves. For example, the most recent Treasury Management Consolidation Proposal requires that all of our allocations and associated risk monitoring are baked into recommendations that must be passed by the OAT, and the DAO can always claw back those funds via vote. For DRIP, the DAO can claw back those funds at any time if it believes we are doing a poor job of executing the program and we have Offchain Labs and the Arbitrum Foundation as our counterparts on the committee.

As the responsible “owners” of these verticals, Entropy essentially lays its own sword to fall on. If we spend too little on evaluation and distribution partners for a DRIP season, the DAO isn’t going to blame the service providers we hired to help us execute. Instead, they will look to Entropy to point the blame. We believe the important “checks and balances” to ensure service provider diversity, inclusion, and long-term resilience really come down to defining a responsible party for a program’s success. Our only incentives are to do what is best for Arbitrum long-term (through our vesting ARB allocation), and the success of each program we administer as the responsible party who will get to celebrate the wins, but also bear the burden of any losses.

2 Likes
14

Thank you for putting this up, Entropy.

Just to touch on a couple of things from the proposal.

Compensation and Vesting

The updated ask — $3M/year plus 15M ARB (1-year cliff, 3-year vest) — is a big jump from the first term, which came in at $2.47M plus up to 1.5M ARB in bonuses. We need to make sure this kind of scale-up is backed by clear, tangible results. That starts with full transparency: a breakdown of costs (team roles, salary ranges, travel, etc.) would go a long way in helping the community understand where the money is going and how it ties back to outcomes.

We also note Entropy’s ARB-based incentive is meant to align your interests with ours, which is positive, but a large bonus pool should be tied to concrete milestones.

The community agreed to this segment of the Y1 proposal. However, it is evident that the community cannot directly tie the percentages provided to the work actually done. This is exactly why we feel the 15M ARB allocation needs closer attention.

Time-based vesting assumes consistent value add just by being present, which is risky in DAOs. We totally understand skin in the game but in this space where one year can be considered a lot of time, we would feel more confident if there was accountability built in beyond just time.

On this

We suggest implementing a hybrid milestone model.

This will keep the time-vested structure but layer in high-level outcome gates (not granular counts). For instance:

  • Gate 1 (Year 1 unlock): Launch one new sustainable revenue stream. For example, onboard a non-native asset into yield-generating DeFi.

  • Gate 2 (Year 2 unlock): Show ≥ X% growth in a core financial metric (e.g. treasury income YOY or total TVL) by Q3 2026.

And if any gate fails, add a clawback clause that pauses future vesting until a corrective plan is brought forward and approved by the DAO.

This way, rewards are still time-based but clearly tied to meaningful progress, and we avoid a situation where tokens accumulate just by default.

Ecosystem Impact & Value Delivery

Y1 saw some strong contributions. Your dashboards became go-to resources, and the public Dune catalog has come in pretty handy. You’ve also played a key role in initiatives like OpCo and helped host events that improved delegate alignment and governance. These are wins.

That said, this proposal could do a better job of quantifying the value in certain areas.

Builder Support Scope

This feels like a tangent that could benefit from more clarity.

We suggest you introduce a sort of Builder Map where Entropy produces a one-pager each quarter. This will be a brief report aligning each of the four workstreams (treasury, incentives, data, special projects) to specific builder-support needs.

Then, if a gap appears (e.g. DevRel, accelerators), the DAO can fast-track a separate RFP rather than assume Entropy will cover it, protecting the “early-stage support funnel.”

Overall, it’s clear you’ve put a lot of thought into incentive design and keeping things running smoothly. To address concerns on both sides — yours about KPI bloat, and ours about accountability — we’d suggest a balance: use time-based vesting, but pair it with big-picture goals and a fallback clawback mechanism. Also, let’s define the builder support scope more clearly.

Thanks again for the thoughtful proposal and your openness to feedback.

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15

Unfortunately, this would create some weird dynamics. The equity would, in practice, have to sit with OpCo or AF. It’s already the case that two of the main entities in the Arbitrum ecosystem are in a service provider relationship – it would make conflicts of interest even more pronounced to have one entity own part of the equity of the other.

Good idea, directionally. It just seems too hard to do in this case.

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16

AranaDigital acknowledges Entropy Advisors’ successful Year 1 record, including neutral proposal facilitation, widely used analytics dashboards, and useful stakeholder-alignment work, we praise as helpful for the DAO. The requested two-year renewal, together with a fifteen-million-ARB grant that vests over three years after a one-year cliff and a termination rule that three percent of the votable supply can trigger, provides long-term incentive alignment while keeping community control. However, we agree with @Tane on this point

that the proposed six-million-dollar cash budget and the equity-style token grant more than double last year’s package and are not yet backed by a detailed cost breakdown, milestone-based vesting, or clear performance measures. AranaDigital will vote FOR the proposal if four conditions are met before Snapshot: (i) publication of a detailed budget covering headcount, salary bands, infrastructure, and reserves; (ii) adoption of quarterly key performance indicators that track treasury yield targets, incentive-program retention, integration numbers, and dashboard usage, linked to a binding confidence Snapshot at month twelve with payments and vesting paused if goals are missed; (iii) explicit confirmation that any unvested ARB returns to the treasury if the engagement ends early; and (iv) a clear description of Entropy’s responsibilities relative to the future OpCo to avoid overlap. Finally, we ask Entropy to address @Tamara’s suggestion that the DAO receive a minority equity stake in Entropy as an additional alignment tool.

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17

My Opinion on the Entropy Advisors Renewal Proposal

Acknowledgement of Contributions

I acknowledge that Entropy Advisors has undoubtedly done substantial work for the Arbitrum DAO.
However, as with most delegates, I believe Arbitrum’s top priorities should be ecosystem growth and profitability.
While progress has been made on the growth side, the profitability and growth aspect remains a serious concern.

Financial Concerns

  • Heavy financial burden:
    In the first term, Entropy’s cost amounted to ~$30,000 per month per team member.
  • This proposal requests a further increase of $500K/year, on top of that already large base budget.
  • Moreover, 15M ARB tokens (worth almost $5M at current prices) will vest to Entropy over 3 years.

This level of compensation appears significantly inflated and disproportionate. Even compared to the OpCo budget — which many delegates already questioned due to high salaries — Entropy’s budget is higher.

If we compare Entropy’s compensation with what all active delegates receive combined, Entropy is asking for almost double (based on recent data).
Are these costs truly reasonable and justified?

Overlap With OpCo

Many responsibilities currently handled by Entropy are expected to be transferred to OpCo. In that case, why is there no corresponding reduction in Entropy’s budget?

Without clear budget separation, we are risking duplicate funding for overlapping workstreams.

Centralization Risk

Entropy often highlights their strong working relationships with the Foundation and Offchain Labs as a success. While understandable from an operational perspective, this approach risks replacing decentralized DAO processes with centralized coordination.

Instead of separating roles, Entropy’s increasing involvement risks merging execution and governance, making it increasingly difficult for the DAO to later unwind this dependency.
We may soon find ourselves in a position where Entropy can dictate its own terms due to lock-in and lack of alternatives.

Lack of Alternatives

This proposal does not present any real choice.

I’m confident there are other capable organizations in the market that could offer similar services (possibly at a lower cost, who knows). Yet, no competitive process or open call for applications has been made.
We are being presented with a binary option: “Entropy or nothing”, which undermines healthy DAO governance.
Any proposal of this scale should come with alternative options.

Evaluation of Previous Term

The summary of past results is extremely limited and vague, referring readers to a forum summary rather than offering transparent reporting.

While Entropy contributed to important initiatives such as OpCo formation, these are internal infrastructure projects that do not generate profit for Arbitrum users or the treasury.

Just look at the decline in ARB’s market value over the past year: this is how the market evaluates Arbitrum’s current strategy and future prospects.
I see little from Entropy that directly addresses ecosystem profitability or token value.

Delegate Power Is Not Mass Adoption

Entropy is backed by only 64 delegates, most of whom are “whales”.

This does not reflect widespread community support. In contrast, other top delegates receive broader backing from everyday users.
Voting power alone should not be interpreted as a proxy for grassroots trust.

Conclusion

Entropy’s work has value — but:

  • Results remain mixed and hard to quantify.
  • The budget has increased significantly.
  • With OpCo’s future budget considered, the DAO may be spending the majority of its treasury on two operational entities — without any guaranteed financial return.

The budget must be significantly reduced to reflect realistic compensation and avoid centralization and inefficiency

3 Likes
18

Much appreciate the clarification. The scope around incentives, data, institutional, and treasury makes a lot of sense to me as a cohesive package (with some special projects as needed).

May I suggest rewording the proposal slightly to make this dummy-proof clear? (The 3 snippets I quoted in my first reply had led me to misunderstand the scope thinking it was geared towards also including the early stage builder support as a domain you’d largely have ownership over)

The argument not to interrupt the work at this critical juncture makes sense. But then, why not do a 6-9 month “bridge” contract, while a more aligned setup can be negotiated?
It’s clear there’s alignment in that your reputation is on the line on Arbitrum succeeding, but I still find the DAO is getting the loosing end of the bargain as it has no long-term alignment even though it’s putting 100% of the money at a competitive rate.

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19

Hello everyone,

As a member of the ARDC Supervisory Council, I’ve had the opportunity to work closely with the Entropy Advisors team over the past several months. I believe Entropy’s strategic vision to professionalize the treasury and incentive structures is the right direction for the DAO. As we transition to the new operational model, we should construct our foundational partnerships with as much accountability possible.

To that end, I think this proposal should not be seen as just a renewal but as an opportunity to define an accountability framework that the new OpCo can use as a blueprint for all AAEs. By making a few constructive amendments, we can ensure this partnership model is built on a foundation of trust, transparency, and clear alignment.

With that in mind, I’d like to make the following suggestions:

1. Tie the 15M ARB Allocation to High-Level, Strategic Milestones.

From my point of view, a purely time-based vesting schedule doesn’t fully align incentives with the DAO’s strategic goals.I understand and appreciate the concern Entropy raised that narrowly defined KPIs can create perverse incentives, like optimizing for quantity over quality. However, accountability to the DAO’s strategic goals is still paramount. These goals include achieving long-term financial sustainability and driving compounding ecosystem growth.

I agree with other delegates that we should link the vesting of the 15M ARB to the successful achievement of key outcomes.

Instead of granular operational metrics, we should tie vesting tranches to the successful achievement of major, DAO-ratified strategic outcomes that arise from Entropy’s new mandates. Examples of this could be a successful DRIP Season Performance or achieving the Treasury Management Targets as well as launching a New Strategic Framework like a DAO-wide annual budget process or a new model for RWA partnerships.

This creates alignment and gives the community a clear measure of success while at the same time giving Entropy the operational flexibility they need.

2. Provide a More Granular Budget.

For the DAO to mature, so must our fiduciary practices. Several delegates have raised valid concerns about the budget, and I believe that asking Entropy to provide a more detailed breakdown is a reasonable request and it will set a positive precedent. I agree that we shouldn’t miss the forest for the trees and that attracting top-tier talent requires competitive compensation. A clear, structured budget will help establish a precedent of financial transparency that eventually the OpCo will need to effectively oversee in the entire ecosystem.

3. Move to a 1-Year Term with a Performance-Based Renewal.

In their own retrospective on the ARDC, Entropy wisely noted that fixed-term research commitments can create pressure to “create work.” That insight is valuable here as well. A one-year term gives the DAO the agility to reassess performance and adapt to changing needs, ensuring long-term relationships are continually earned through merit.

The idea of suggesting these elements is to build a more accountable and resilient DAO and give the OAT and OpCo the tools they need to succeed in their oversight role, which I believe is essential for the health of the ecosystem.

I’m optimistic about what comes next for the DAO and look forward to continue collaborating.

Disclaimer: The views expressed in this post are my own and do not represent the official position of SEEDGov.

3 Likes
20

Hi this is Brook from TiD Research. Entropy’s contributions to the Arbitrum DAO have been meaningful and wide-ranging, and I support the idea of renewing the relationship. That said, I think there’s still room to improve how we structure long-term engagements — especially in terms of flexibility, accountability, and contributor alignment.

Avoiding De Facto Exclusivity

While Entropy’s context-rich involvement is valuable, there’s a legitimate concern that its role across multiple verticals (treasury, incentives, strategy) could create friction for new contributors, even unintentionally. We should ensure the DAO stays open and pluralistic — especially in domains where experimentation and specialization thrive.

Two ideas to help:

  • Use competitive RFPs or working groups for specific programs (e.g., future DRIP versions, analytics tooling) to diversify execution without fragmenting strategy. The design doesn’t have to be complicated or incur significant additional cost. One example maybe we can learn from is the Sui’s RFP system. In case there’s any demand in the DAO arises that requires service providers’ expertise, the DAO can always RFP. In fact, the RFP process can be initiated and managed by Entropy to show that the whole process is still fair, transparent, and competitive.
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  • Hold quarterly “calls for contribution”, where community members can propose initiatives in areas Entropy is leading.

These wouldn’t limit Entropy’s execution ability, but would keep pathways open for others — especially newer or domain-specific teams.

Performance Monitoring Without Micromanagement

Entropy rightly pointed out that hardcoded KPIs could be limiting in a fast-changing ecosystem. Still, from a DAO operations perspective, we can’t rely purely on narrative or vibes. Some interim milestone check-ins are critical for:

  • Mid-course correction if a workstream stalls,
  • Transparency for newer delegates or tokenholders,
  • And general accountability for a $6M+ engagement.

Even high-level quarterly indicators — like dashboards shipped, % of DRIP budget utilized, or DAO financial reports delivered — would go a long way in helping the DAO track progress without boxing Entropy into inflexible deliverables.

Managing the Delegate–Vendor Tension

Entropy currently holds a large ARB voting stake while also being a core service provider. While this has been handled responsibly so far, it creates a concentration of influence that the DAO should proactively account for.

One safeguard might be:

  • A neutral review mechanism, such as a quarterly rotating committee (modeled after GMC or TMC), to provide structured, apolitical feedback on performance.
  • Alternatively, a mid-term assessment checkpoint, possibly conducted by a third-party facilitator.
  • I strongly agree with what @Juanrah is proposing here to move forward first with a 1 year term and with the renewal of the contract pending on performance-based milestones

This separates performance assessment from informal forum commentary and helps ensure any future issues are surfaced objectively.

Proposal: Convert Part of Base Compensation to ARB Options

To directly address the themes above — especially long-term alignment, performance-driven rewards, and mitigating exclusivity — not sure if it’s appropriate but might be worth exploring the option of converting $1M/year of Entropy’s base compensation into ARB options.

Why Options?

  • They tie upside to Arbitrum’s success: If Entropy contributes meaningfully and ARB grows in value, they benefit. If not, rewards are limited.
  • They protect the DAO: If Entropy’s engagement ends early (e.g., performance issues or strategic shift), unvested options are voided.
  • They lower immediate stablecoin draw from the treasury — and reduce the risk of excessive upfront pay for long-term work.
  • They don’t require equity or legal complexity — they simulate “equity-style alignment” in a DAO-native way.

How the Design Works:

Component Details
Monthly Option Grant Each month, Entropy receives ~$83,333 worth of ARB options (equivalent to $1M/year)
Strike Price Based on ARB’s market price at time of issuance (or a 30-day rolling average)
Vesting Each month’s options vest over 12 months (rolling)
Termination Clause If the DAO ends the engagement, all unvested options are cancelled immediately
Lock-up (optional) ARB acquired through exercise can have a 6–12 month lock to prevent early sell-off
Transparency Option grants, strike prices, and vesting can be publicly tracked (e.g., via Dune dashboard)

This structure maintains Entropy’s full $3M/year package, but shifts part of it from guaranteed cash to performance-sensitive equity-style rewards.

I continue to support Entropy’s role and see the renewal as a positive step. These suggestions aren’t meant to challenge their contributions — they’re about maturing how we structure high-trust relationships within the DAO. Open to feedback on the options mechanism — and curious whether others see this as a replicable model for similar future engagements.

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21

Thank you to those who shared feedback on our renewal proposal. We have updated the draft to reflect community input and provide greater alignment with Arbitrum DAO. We plan to move this proposal to Snapshot Thursday.

Changes on 7/7/25:

Revised 15M ARB Alignment Structure

  • The original 15M ARB vesting allocation is now split into:
    • 5M ARB for Entropy Advisors (1-year cliff, 3-year vest)
    • 10M ARB reserved for the OAT to negotiate milestone-based incentives (KPIs), equity investment, time-based bonuses, or other short/medium/long-term alignment mechanisms.

OpCo as Entropy’s Counterparty

  • Detailed that upon sufficient operationalization, OpCo will serve as our counterparty/client as a proxy representing the DAO.

Other Minor Changes

  • Unclaimed Year 1 funds (~$423k) and the nullified 1.5M ARB bonus will be applied to Year 2-3 payments, at the Foundation’s discretion, to help minimize ARB sales.
  • Clarified termination terms: all unearned ARB of the 10M ARB would return to the DAO treasury if the DAO terminates its relationship with Entropy.
  • Added language to the transparency reporting to make clear that the Arbitrum Foundation can request transparency reports.

We believe that Version 2 directly addresses these concerns and really appreciate all the feedback:

  • 10M ARB is now held in reserve by the OAT to negotiate milestone-based rewards / other alignment mechanisms.
  • Any unvested and unallocated ARB of the 10M will return to the DAO if the engagement ends early.

This structure provides the DAO with more flexibility while ensuring KPIs, stronger accountability, and clear levers to ensure Entropy’s work continues to deliver measurable impact.

We have added language that clearly shows OpCo as our counterparty which will further enable us to work effectively with them. Additionally, from our perspective, the OpCo functions as a “Quarterback” in the DAO to ensure AAEs function as a cohesive, effective team rather than necessarily doing a lot of the execution work themselves. That said, we are aware that OpCo’s role could be fluid and changing based on who is appointed to its leadership, and are committed to working closely with them to make sure we continue alignment.

We understand the call for transparency but don’t believe publishing granular budgets or salary bands is the right mechanism. Our focus is on delivering outcomes, not micromanaging inputs. Highly detailed cost disclosures risk shifting the conversation away from measurable results. This level of transparency could also compromise our ability to attract and retain top-tier talent in highly specialized roles (applied research, fund management, etc), where public salary disclosure would undermine competitive hiring negotiations and create poaching risks.

Version 2 addresses alignment and accountability through milestone-based incentives (10M ARB reserved for OAT negotiation), a termination clause that returns unvested ARB, and robust reporting tied to deliverables. This gives the DAO real oversight while allowing us to focus on execution.

We considered this but believe a 2-year mandate is critical for the type of multi-year ecosystem growth initiatives outlined (treasury management, iterative incentive programs, etc). The updated structure with milestone-based rewards via the OAT provides sufficient performance-based accountability while giving Entropy and the DAO the runway needed to execute at scale. Additionally, the DAO always maintains the ability to end the engagement as it sees fit. Overall, we are ok with making this change, but it has been requested by multiple stakeholders at this point to do a minimum of 2-years so we believe this change would need broader support to do so.

We fully support RFPs and broader calls for contributions across the DAO. We appreciate this comment and will always welcome collaboration and remain committed to building frameworks that enable more high-quality contributors to participate effectively in the DAO.

1 Like