Introducing Octant

[octant]

Hey everyone! On behalf of Golem Foundation, we’d love to introduce Octant and explore positive-sum synergies with Arbitrum ecosystem.

Introducing Octant

Octant, part of Golem Foundation, is a project that facilitates sustainable, community-coordinated impact funding at scale. We’ve demonstrated the power of sustainable funding of impactful projects by staking 100,000 ETH (~$333M as of today) and using much of the yield to fund broad based public goods in the Ethereum ecosystem.

Over the past year, we’ve distributed millions of dollars to hundreds of open-source and impactful projects builders, supporting important projects such as Protocol Guild, Tor Browser, Funding the Commons, L2BEAT, BuidlGuidl, and many others.

Need for Sustainability

Our experience has shown that most impactful, open-source projects / initiatives lack sustainability, often relying on one-time (grant) allocations without a sustainable flywheel.

We aim on solving this by:

• Creating a provably fair, open, and minimally biased funding mechanism
• Leveraging substantial treasury resources and funding streams for maximum impact, powered by the Web3 ecosystems native value generating streams
• Fostering a sustainable ecosystem for open-source, real-world impactful projects development
• Rewarding users for participation in the sustainable impact funding ecosystem
• Coordinating with other web3 ecosystem on funding specific deliverables/initiatives

By staking 100,000 ETH and donating the yield, we’re not just talking about change — we’ve actively started driving it. Our goal is to contribute to a better, more accessible, fair, and open world by making funding impactful projects truly sustainable.

Alignment with Arbitrum DAO

In The Amended Constitution of the Arbitrum DAO, Sustainability is among core Community Values, stating that:

Arbitrum should be built and operated with an eye to the medium to long term. Decisions about technology, economics, and resource allocation should not value short-term optimization over the longer-term health and thriving of the Arbitrum protocol, technology and community.

The Arbitrum ecosystem — from Arbitrum DAO and Arbitrum Foundation to other critical ecosystem participants — has been leading various experiments in sustainability and ecosystem funding mechanisms — from Arbitrum DAO Pluralistic Grants program, Arbitrum Foundation grants, and other grants programs, to ongoing experiments like the Treasury and Sustainability Working Group, $ARB staking discussions, and beyond.

Longer-term progress around growth and sustainability of the ecosystem, as well as funding and allocation mechanisms, plays a critical role in ensuring the success of Arbitrum DAO and the greater Ethereum ecosystem success. With that said, we believe in the great alignment of Arbitrum DAO with the SustainablePGF program, and that together we could create long-lasting, sustainable impact while funding what matters at scale.

Octant V2 Vision

The DeFi space has largely been disconnected from regenerative models (ReFi) and use cases such as impact investing and public goods funding. We need to bridge this gap and align incentives in a way that benefits both individual users and impactful projects.

The image above illustrates Octant V2 flywheel, which brings together diverse ecosystem participants and creates incentives for collaboration. Our goal is to align ecosystem players with varying motivations, fostering cooperation to achieve a balance between individual rewards and funding for impactful projects.

The diagram above illustrates the workflow of a Dragon (project with substantial principal capital) engaging with the system. The protocol allows individual Dragons to join and deposit capital into their own Dragon Vaults, while all Dragons contribute a percentage of their yield to the Sustainability Pool.

You can think about the Sustainability Pool as a Sovereign Wealth Fund that is used to fund public goods and impactful projects across the broader Ethereum ecosystem.

The Dragon Vault deploys that capital into yield-generating strategies. These strategies may include ETH staking protocols, DeFi protocols, etc. The Vault distribution is decided by the Dragon and can be divided between the Dragon Pool, Sustainability Pool, Regen Vault, and other pools/vaults the Dragon wants to utilize.

The community creates funding rounds from the continuously flowing funds into the Dragon Pool. Regens (community members) then vote with the accumulated tokens using an allocation method, and these votes determine how the funds are distributed.

Opportunities and Collaboration

We’re openly inviting Arbitrum DAO to share your feedback and suggestions on this intro forum post. We see this as the beginning of our long-term, positive-sum collaboration that will directly benefit both Arbitrum ecosystem and the larger web2 and web3 spaces.

With that said, here’re some collaboration opportunities:

1. Community Activations
   creative community activations (incl. events), Streamed Quadratic Funding (SQF) for ecosystem projects, participating in / co-leading Octant Accelerator focused on achieving sustainability for builders & their projects, co-running other builder/creator initiatives, and more!
2. Sustainable Impact Funding
   Allocating a % of the ARB treasury to generate yield in the Protocol, and streaming a portion of those rewards to the Sustainability Pool
3. Integrations with the ecosystem
   Powerful integrations synergies, such as Arbitrum native DeFi protocols / strategies.
4. Governance Contribution
   Engage in shaping the future of Impact Funding via collaborative governance.

It’s time for sustainable evolution

Our industry desperately needs bold experiments in sustainable funding for what truly matters. While experimental approaches may not always succeed, our efforts since Octant launched in summer ‘23 have already shown tangible results and meaningful impact.

We believe that co-creating and nurturing impact funding flywheel will lead to the evolution of how impactful projects and initiatives are funded, laying the groundwork for a sustainable future across the entire ecosystem.

We look forward to hearing your feedback. Thank you!

[thedevanshmehta]

Really great to see Octant in the Arbitrum forums! I’ve been a fan of your project since it began, as one of the few to programmatically use Eth Staking for public goods funding.

My favorite thing about Octant is that it also creates utility for your native token (GLM) since they have to be locked in order to accumulate voting power.

My questions are;

1. would the sustainability pool contributed into by arbitrum only fund projects in the ARB ecosystem or be part of the general pool of projects?

2. Would the $ARB token be locked up in order to vote in the epochs?

3. How would you determine eligibility of the projects that can compete to earn the staking rewards?

4. How is this not falling prey to the dynamics of popularity contest or those that can discipline a crowd best get rewarded the most?

5. What is the minimum viable amount needed to experiment with the Octant setup for Arbitrum to fund its own public goods using yield earned from the sequencer?

Also tagging @Entropy , @LlamaRisk & @WintermuteGovernance as it fits into their role on the growth management committee (pending approval on snapshot). I overall like the idea of putting in some Eth for octant staking and letting whoever locks ARB vote on the allocation of the yield to either themselves or to competing projects.

Some details to be worked out but i like the thought of a sink for $ARB, since we need to create utility for it. its been impressive seeing 15% of the GLM supply get locked into octant, if we can achieve similar numbers for ARB that would be quite an achievement.

[TempeTechie]

Hey Team Octant I really enjoyed your presentation about Degens & Dragons at ETH Warsaw, and I’m glad to see you here on the Arbitrum forum!

The cooperation between Octand and Arbitrum DAO would be really good, both are dragons and both are thinking how to best deploy its “gold” (aka capital). For example, there’s this discussion about treasury management and one of the things mentioned is how to invest ETH from the treasury to earn yield. This is something that Octant is already doing and your experience in this area could be very valuable for the Arbitrum DAO.

Perhaps you could jump into the next governance call and present yourself there?

[octant]

Thank you for your questions and feedback, Devansh! We’re glad to have you among Octant power users.

Let’s dive into your questions:

1. Would the sustainability pool contributed into by Arbitrum only fund projects in the ARB ecosystem or be part of the general pool of projects?

We envision many Dragons (value-aligned ecosystem projects with substantial resources) contributing to the Sustainability Pool to fund larger Ethereum public goods. The first such Dragon is the Golem Foundation itself — we’ll allocate a large part of the yield from 100k staked ETH into the Sustainability Pool. Note: we’d like to have a 10% mandatory contribution (of the generated yield) to the Sustainability Pool, while the rest of the yield a given Dragon (i.e., Arbitrum) will flexibly decide on how exactly they’d like to allocate (from ecosystem projects to covering some DAO ops costs).

2. Would the $ARB token be locked up in order to vote in the epochs?

In Octant v2 protocol, yes! Users will be able to lock $ARB in order to claim individual rewards and (optionally) donate to public goods. We’re creating a sustainable degen <> regen flywheel, increasing impact funding while tapping into people’s interest in financial upside. Additionally, the locked $ARB may also earn extra yield while being locked up.

3. How would you determine eligibility of the projects that can compete to earn the staking rewards?

It’ll be a community-governed decision-making process. Just like with Octant’s GLM-specific instance, $ARB holders would vote to choose the projects that will distribute staking rewards, and token holders are also (optionally) donating their yield, which is matched with a larger funding pool from staking rewards, ultimately driving the end result. We’re also open to hearing any governance and decision-making related design feedback.

4. How is this not falling prey to the dynamics of popularity contest or those that can discipline a crowd best get rewarded the most?

For that, we’re going to introduce different funding mechanisms in Octant v2 — so Arbitrum will be able to choose between many allocation mechanisms, besides the QF-powered one. Another solution is having ‘themed’ funding rounds, something that we’re going to introduce in 2025, even with the existing v1 — you can think of themed Epochs as niche-specific funding rounds, ensuring new projects from different fields can also participate. We also use mechanism design to encourage users to make informed, impactful allocation decisions, rather than allocating based on popularity. One of the centerpieces of Octant v2 is a mechanism that mimics an impact prediction market using Impact Bonds. It represents an opportunity for individual allocators to be rewarded for making high quality allocation decisions that create a rising tide for the entire Web3 Ecosystem.

5. What is the minimum viable amount needed to experiment with the Octant setup for Arbitrum to fund its own public goods using yield earned from the sequencer?

From a yield generation perspective, we believe that ~$1M per year is a good experiment to run. Given that the Arbitrum DAO and/or Arbitrum Foundation will have full custody of these funds and ultimate flexibility, generating $1M in yield would be a strong starting point. However, the principal amount will depend on the allocated token and DeFi strategy. If the allocation is in ETH — with the current 3-4% APR on ETH — we would need between 7.5k and 10k ETH staked. If the allocation is in $ARB or stablecoins, the APR could be higher. Therefore, the viable experiment would require a principal allocation of $10M to $33M, depending on the asset.

Let us know if you have more questions — we’re happy to clarify any points.

[octant]

Thank you @TempeTechie — we appreciate your support and we’re glad you liked the presentation! For those interested, you can see the whole Degens & Dragons talk here.

Absolutely! We’re looking forward to taking part in the next governance call and meaningfully contributing to Arbitrum governance.

[thedevanshmehta]

Thanks for the detailed response! some thoughts below

@octant

Note: we’d like to have a 10% mandatory contribution (of the generated yield) to the Sustainability Pool, while the rest of the yield a given Dragon (i.e., Arbitrum) will flexibly decide on how exactly they’d like to allocate (from ecosystem projects to covering some DAO ops costs).

I don’t see this 10% fee being an issue per se, especially since they are routed to public goods. in the case of @EventHorizonDAO , they managed to get a roughly similar amount of 100k ARB or so as payment for integrating their technology.

So we would likely view it as a service provider fee, the main question would be the value addition got by using Octant vs doing the pilot ourself.

@octant

Users will be able to lock $ARB in order to claim individual rewards and (optionally) donate to public goods.

This is the key for value addition - creating utility and a sink for the ARB token is the unique value proposition,.

@octant

It’ll be a community-governed decision-making process. Just like with Octant’s GLM-specific instance, $ARB holders would vote to choose the projects that will distribute staking rewards, and token holders are also (optionally) donating their yield, which is matched with a larger funding pool from staking rewards, ultimately driving the end result.

Probably early to talk about the mechanism but something i would love to see is using the yield to buy impact certificates of proven impact from ARB DAO contributors. Some examples are @BlockworksResearch rescuing LTIPP money from negligent teams, @Entropy saving money for the DAO through MSS, etc. Having these up as impact certificates which can be bought from the yield earned would be an interesting mechanism. That also ties in with your own thinking around impact bonds, could you elaborate more on that point?

@octant

One of the centerpieces of Octant v2 is a mechanism that mimics an impact prediction market using Impact Bonds

@octant

From a yield generation perspective, we believe that ~$1M per year is a good experiment to run. Given that the Arbitrum DAO and/or Arbitrum Foundation will have full custody of these funds and ultimate flexibility, generating $1M in yield would be a strong starting point. However, the principal amount will depend on the allocated token and DeFi strategy. If the allocation is in ETH — with the current 3-4% APR on ETH — we would need between 7.5k and 10k ETH staked.

Now we come to one of the key points - the amount needed. If you suggest a million per year, i think the ETH might be the wrong place given that we have 7.5k in total and there will likely be many providers competing for a share of this pie.

When you are ready, I would in fact suggest making a proposal for utilizing the yield earned from our $30 million RWA purchases for the STEP program, which will be around $1-1.5 million per year.

We are currently letting this accumulate in the treasury, algorithmic allocation of the yield which also creates ARB utility and funds proven impact creators in the ARB ecosystem would be a cool experiment for our endowment.

STEP Report - October 2024

We’re happy to present the first monthly update for Arbitrum’s Stable Treasury Endowment Program. Below please find an October month-end PDF statement and a new Dune dashboard with live data and portfolio analytics. We will continue to add performance data to the PDF statements once enough time has passed to produce useful insights. Please let us know if there’s anything else you’d like to see in these reports or the dashboards, and we’ll do our best to include in the future! A few notes on th…

[thedevanshmehta]

Another open question to think through before Octant v2 launches and you are ready to make a proposal to the DAO

Whether ARB locked in Octant can also be used for delegation in voting (similar to the restaking proposal that @Frisson put forth earlier) or if it should only be used to get allocation power over the yield earned.

[octant]

Thanks for the thoughtful feedback, Devansh! We’re happy to clarify these points.

@thedevanshmehta

I don’t see this 10% fee being an issue per se, especially since they are routed to public goods. in the case of @EventHorizonDAO , they managed to get a roughly similar amount of 100k ARB or so as payment for integrating their technology.

So we would likely view it as a service provider fee, the main question would be the value addition got by using Octant vs doing the pilot ourself.

It’s important to note that a 10% contribution from the generated yield (not the principal amount) isn’t a fee — it’s an allocation (think pledge) to fund larger Ethereum public goods. Moreover, each Dragon contributing to Sustainability Pool will have a say on how the funds will be used to fund impactful projects.

As part of the Golem Foundation, we’re one of such Dragons — even more so, we’re planning to contribute most of our yield returns (70-80% or more vs 10%) to Sustainability Pool, proving our commitment and conviction.

The Arbitrum DAO could choose to create its own pilot, and we’d be still glad to support it in some ways. With that said, we also believe there’s greater power in unity and cross-collaboration, and we’d love to have the Arbitrum DAO co-leading this sustainable impact funding movement together with the rest of Dragons, creating positive-sum externalities and bringing more value back to the Arbitrum ecosystem, as well as the larger Infinite Garden.

@thedevanshmehta

This is the key for value addition - creating utility and a sink for the ARB token is the unique value proposition

Yes! We believe having $ARB at the center of the whole flywheel creates powerful and meaningful utility for all the stakeholders, on top of actually incentivizing positive, impactful outcomes.

@thedevanshmehta

Probably early to talk about the mechanism but something i would love to see is using the yield to buy impact certificates of proven impact from ARB DAO contributors. Some examples are @BlockworksResearch rescuing LTIPP money from negligent teams, @Entropy saving money for the DAO through MSS, etc. Having these up as impact certificates which can be bought from the yield earned would be an interesting mechanism. That also ties in with your own thinking around impact bonds, could you elaborate more on that point?

That is exactly a part of the design. A part of the yield earned deployed by all the dragons into the Sustainability Pool will be used to buyback the bonds that created impact. And the ones who donated to the most impactful projects in the past will be rewarded. The protocol is designed to create sustainable funding - and part of that means enabling “retroactive” funding to reward both projects AND individual allocators who make highly impactful donations.

@thedevanshmehta

Now we come to one of the key points - the amount needed. If you suggest a million per year, i think the ETH might be the wrong place given that we have 7.5k in total and there will likely be many providers competing for a share of this pie.

When you are ready, I would in fact suggest making a proposal for utilizing the yield earned from our $30 million RWA purchases for the STEP program, which will be around $1-1.5 million per year.

We are currently letting this accumulate in the treasury, algorithmic allocation of the yield which also creates ARB utility and funds proven impact creators in the ARB ecosystem would be a cool experiment for our endowment.

This is a great suggestion, Devansh — we’ll explore the STEP program. We’ll make sure to create a temp-check proposal for a meaningful principal or yileld allocation for sustainable impact funding via Octant v2 — and we’d love to get your feedback, as well as the rest of the community. Stay tuned!

@thedevanshmehta

Another open question to think through before Octant v2 launches and you are ready to make a proposal to the DAO

Whether ARB locked in Octant can also be used for delegation in voting (similar to the restaking proposal that @Frisson put forth earlier) or if it should only be used to get allocation power over the yield earned.

Great point! We think there should be a way to both have allocation power over the yield earned and in delegation. We are open to explore different ways to make it work. The staked ARB in Octant can be potentially used to delegate votes, or maybe even accept staked ARB from another protocol that has already delegated the voting power.

We plan on joining and contributing to Arbitrum Governance calls, so we’re looking forward to discussing more this and other exciting initiatives / ideas in more detail. Thank you!