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.