GCP Fund Security Review & Oversight

DAO Programs & Initiatives Gaming Catalyst Program (GCP)
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GCP Fund Security Review & Oversight

Summary

This proposal moves 220,000,000 ARB from the Gaming Catalyst Program (GCP) multisig to the Arbitrum DAO treasury. This will leave 3,650,000 ARB for the GCP to continue operations until needing to seek a transfer of more funds from governance. It is unconscionable to continue to allow a 3/5 multisig hold $120M in ARB when they have failed to meet their agreed on oversight obligations.

Motivation

  1. It is less safe to leave such large amounts of funding in a multisig than in the DAO treasury. There is no demonstrable need for more than $120,000,000 of funding to be immediately available and controlled by a 3-of-5 multisig, which also puts those signers at risk of phishing or physical danger.

  2. It was a lot of work by a lot of people to pass GCP. So it’s a shame its council has not fulfilled its duties thus far and been tardy on meeting multiple of its oversight and transparency commitments that were ratified in the original proposal.

  3. This provides a path for GCP to continue with its full operating funds and an opportunity to prove the viability of its investment thesis, while removing the security risks associated with the multisig and the governance risks of limited oversight.

Gaming Catalyst Progress

Since GCP was passed on June 10 (Now more than 4 months ago) it has spent 1,699,998 ARB.

In August Co-Auther of GCP, Karel, stepped down as Treasure has abandoned Arbitrum. GCP was passed with the understanding that Karel would be helping to lead it.

Then in September, GCP Working Group nominated council member Andrew Green stepped down as well.

The GCP is already significantly behind schedule, and the DAO deserves more guarantees that it can get on track. Grants applications and RFPs were supposed to open up by July, as seen in the original proposal, but none have been according to the update thread. More relevant to this proposal, however, is late delivery or nondelivery of transparency and oversight items promised in the GCP structure:

The two council members appointed by the working group were supposed to be reconfirmed in September. In a June meeting summary pre-dating that communication, this reconfirmation was stated as being end of the year. Regardless of which communication was intended to be accurate, in the ratified proposal, Phase 2: Program Development (2-4 months) directs this reconfirmation no later than 4 months, which would be October 10, 2024. No confirmations have taken place, but the working group did appoint a new council member to replace a retiring member on October 3.

The required quarterly transparency report has not been published. September 10, 2024 was one quarter since the approval of GCP.
EDIT: It has been pointed out that the original GCP post proposed the first transparency report would be posted 4-6 months on, which we’re currently in. I dont agree with this approach but you could interpret this as they have more time to complete the first one.

The most recent official update came about a month ago, and is limited to announcing the resignation of Andrew Green. Council meetings were to be held every two weeks in the ratified proposal. It is unclear if there are meetings without summary reports or if the cadence of meetings has changed - no notes have been shared if so. Only three meeting summaries have been provided, with two of them in June before permanent council members were elected.

These were the agreed on outcomes for 2-4 months, which we are now past:

screenshot of original GCP proposal work that should be completed by now.
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After spending ~$800k in operation we have no RFP live, no Open Grants for game devs, and no published onboarding process for funded projects.

GCP is not on track and not meeting its obligations to the DAO. $120M USD is far too massive of an investment for the GCP council to be this far behind.

EDIT: GCP councilmembers have said The GCP council will be coming to the DAO in the coming days to formalize a start date for the program. I’m looking forward to it and will not pursue the rest of the actions here if we can quickly get back on track and post these updates publicly. Without any public updates posted in the update thread, I have no other official source of information to go on about how close they are to hitting the 4-month goals.

Proposal Summary

To help governance enforce compliance with GCP’s approved transparency and oversight responsibilities, moving the bulk of the funding back to the treasury will ensure the GCP cannot go dark or quietly forget its reporting obligations while still having access to more than $100m in funds. It will also ensure governance is aware of the cadence of spending and offer the opportunity to ask questions prior to any outsized funding requests being approved.

This proposal would leave the GCP with almost $2m in funds to continue operations until it demonstrates a need to deploy more funding.

Specification

Transfer 220,000,000 ARB from 0xAe8cBcef7DE8664C3fF5BfC58536c183FfA60B51 back to the DAO Treasury at 0xF3FC178157fb3c87548bAA86F9d24BA38E649B58. This does not change the total authorized budget for GCP or alter any other portion of the proposal.

If the proper reports are not made immediately to the DAO then I will next propose to fully claw back the funds for the DAO and remove the authorized budget.

Feedback

Please respond with feedback. I want to make sure every voice is heard on this as its a huge sum of capital and deploying it transparently is important to inspiring confidence in Arbitrum. We feel this strikes a valuable compromise that will satisfy GCP supporters because it does not affect GCP’s mandate or authorized budget, but will also soothe the fears of critics who see the early nondelivery of transparency items as proof GCP is not professionalized enough to handle this level of funding.

It’s darkest before the dawn.

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This proposal does affect gcp mandate or authorized budget because

this sentence implies that in future for whatever expense, cost, investment that the fund will have, GCP will have to go back and ask money to the dao through a vote. And so will have to go through something, with unknown outcome, compared to current situation in which they have access to the funds.

Please confirm if I understood it correctly or not.

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My understanding of the said reading–@cupojoseph please correct me if I am wrong

  1. GCP will still have enough budget to set up the operational entities, legal, compliance and investment frameworks- even if we clawback the capital that is earmarked purely for investments. After the clawback GCP will still have approximately $2 million to complete these milestones, and hence it wouldn’t affect any capabilities to deliver these milestones.

  2. Once these milestones are completed, then the GCP could potentially execute a ‘capital call’ proposal from the DAO for the rest of investment funds.

Even in traditional VC funds, an LP doesn’t deploy the entire capital upfront. GPs issue a capital call to contracted LPs to release the remaining of “committed capital” as and when opportunities arise. Refusal to deploy capital to a legitimate GP ‘capital call’ would come with financial penalties for the LPs.

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AFAIK, the Funds are in a mutisig with AF and OCL members, so the notion that are in total control of GCP members is not right, IMO.

We should remember that structure was put in place before the creation of the MSS.

So, regarding the motivation:

  1. It is fair. Maybe it is something to consider to move the funds to the MSS. (That would also help to save 180k in 3 years per Tally proposal description)
  2. I agree that we should ask (and GCP members/council) for timely upgrades. That is non-negociable.
  3. If it goes to the MSS, 3 is not an issue anymore.

In short, if this really an issue (I don’t feel so), we could use the existent structure (the MSS) put in place for situations like this. The access to the funds would remain in the same fashion as the previous GCP proposal, with added security and cost reduction.

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Except that the AF is not in the business of checking GCP’s work. They just hold the funds, like a custodian.

This is obvious when we consider that 1m ARB was still disbursed to the GCP despite lack of required items like reports and elections that are highlighted in @cupojoseph’s proposal. We can’t just assume AF is going to be watching the GCP. That’s not their job and we shouldn’t expect them to do that

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I was highlighting a fact. And I did not imply that it was AF job to check GCP’s work.

As I want to highlight the fact that there is no provision in the GCP proposal that any funds should be withheld by lack of reports.

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Astute point. Perhaps that could be added to this proposal

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This is indeed a very important issue worth discussing, as it involves a significant amount of money. However, I’m not sure if GCP could continue if all the funds were returned to the Arbitrum DAO Treasury. Does this mean that GCP has completely failed? If GCP has indeed failed, then we need to consider more than just the issue of fund management—we should also think about the future direction of this program. Should we elect new managers for this program, or reconsider the rationale behind GCP?

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yes, that’s the intention. They can ask when they need access and the DAO can approve the funds. If GCP is meeting the accountability requirements this is not necessary. So until they are we should consider this as an option

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I think we should elect new council members to fill the roles of those who have resigned and abandoned Arbitrum.

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Absolutely. I hope to get more information from the GCP council members too.

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Thanks for brining this up @cupojoseph.
The GCP was in my opinion from the beginning questionable.
It should get some improvements points like
what’s going to happen if timelines aren’t met?
What if member step down?
When has it failed?

Instead of having all funds available at all time I would rather suggest creating a stream from the treasury that gives certain amounts per month/week in control of the multi sig.
Otherwise there needs to be some good justification for why all funds needs to be available at all time.

I would also like to know how the already sold ARB have been used.

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the funds are currently custodied by the arbitrum foundation so this is not even true.

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What is not even true? The funds are currently here 0xAe8cBcef7DE8664C3fF5BfC58536c183FfA60B51.

This is not the Arbitrum foundation to my knowledge but the GCP multisig.

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I think it’s worth pointing out two things:

The required quarterly transparency report has not been published. September 10, 2024 was one quarter since the approval of GCP.
EDIT: It has been pointed out that the original GCP post proposed the first transparency report would be posted 4-6 months on, which we’re currently in. I dont agree with this approach but you could interpret this as they have more time to complete the first one.

  1. The Tally vote explicitly laid this requirement out as 4-6 months. Tally | Arbitrum | Catalyze Gaming Ecosystem Growth on Arbitrum. Having passed June 10th, the window is October 10th - December 10th. I don’t think it’s fair to the GCP to say that is a ‘you could interpret’ situation, there was never an expectation for a transparency report within 3 months of the approval.

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  1. There was a temporary hold on funding any grant programs due to the oversight council member elections. Part of this reasoning was because it felt like the best practice was to not pass any grant programs until a DAO-Elected oversight committee was in place. I am not going to speak for anyone else involved as it is not my right to do so, but I personally agreed with this decision as an Interim Oversight Council member. As I ultimately wasn’t elected into that oversight position at that time and didn’t feel it was fair to make decisions on behalf of the DAO while in that un-elected capacity
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While the concerns around GCP’s oversight are very valid, especially when managing such large sums, it seems like what’s really missing here is operational accountability and transparency. This isn’t just about budget reallocation—it’s about ensuring that projects have a clear path forward and that there’s trust built within the community.

Our team at bmd studio in Phuket is well-positioned to help with this. We specialize in delivering polished results for web3 projects, apps, and games, and have a track record of scaling operations on a tight schedule. We can commit to taking on design and operational tasks to bring this project back on track, ensuring that milestones are met, transparency is maintained, and the community is kept informed.

We have a full team that can efficiently utilize a 20-50k budget per month, and we’re confident we can start with impressive results from the very first month. If the GCP council is open to external help to meet these objectives, we’d be happy to step in and deliver.

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Considering everything that has happened so far since GCP inception and the poor results mentioned by the proposal’s author, we strongly support these funds to be given back to the Arbitrum Dao Treasury, at least until GCP members start acting aligned with what was originally approved.

We will support this proposal, however, we believe it would be better to create a new proposal to cancel the Gaming Catalyst Program due to its poor performance.

@cupojoseph would you consider the posibility to submit a proposal to cancel the Gaming Catalyst Program? We are not that familiar with the reasons to keep this program going on under these circumstances.

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I think this should be the first step

If they continue to fail to meet the expectations laid out in the original proposal then yes. However, I dont think theres enough support among the large delegates for that yet.

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I think this proposal is very important, especially for such a large sum of money, and keeping it transparent and up-to-date is a basic requirement for accountability to the DAO. the GCP’s lackluster performance in terms of oversight and commitment to transparency really needs to be strengthened. Transferring most of the funds back to the DAO treasury is, in my opinion, a good compromise: it guarantees GCP’s operating funds and mitigates governance risks.