[Non-Constitutional] Arbitrum Token Swap Pilot Program

[pedrob]

gm

Thank you very much for the proposal. I have some comments and a few questions. Spoiler alert: I am strongly opposed to the proposal.

@LuukDAO

One of the primary limitations of the initial incentive programs is that they were all one-directional, with Arbitrum treasury allocating ARB to projects and only receiving network transaction revenue in return.

I do not agree with this statement or the conclusion.

The STIP, LTIPP, and B.STIP programs directed incentives to users, not to protocols — even though the protocols served as the distribution mechanism and benefited from it. The objective (though sometimes unclear) of the programs was to drive activity on the chain, grow TVL, and increase volume, which was successfully achieved in all cases with the program launches.

And no, receiving network transaction revenue was not the only thing Arbitrum gained. Various protocols or new features of protocols were bootstrapped, the deployment of protocols on the chain was incentivized — many of them important during the LTIPP —, the DAO signaled that it is willing to incentivize DeFi use cases and the most important, it attracted sticky capital to the chain to consolidate liquidity and generate a network effect that benefits the entire ecosystem (users, developers, and protocols)

@LuukDAO

Moreover, Treasure DAO’s recent move from Arbitrum to ZKsync has shown that bidirectional, long-term alignment is even more critical, especially for protocols that play an essential role in the ArbitrumDAO ecosystem and have received significant ARB incentives.

I also disagree with this reflection on what happened with Treasure DAO. The reasons they gave for the change were purely related to the underlying technology. On the other hand, they were one of the two largest recipients of $ARB during the TGE. How would that decision have been any different if the DAO had held $MAGIC in its treasury?

@LuukDAO

By embedding Token Swaps as a vital element of Arbitrum Ecosystem Development and critical programs such as LTIP, Arbitrum can continue pro-actively incentivizing ecosystem growth while receiving additional upside and leverage in the most promising project’s building in its ecosystem.

This statement confuses me because ‘ecosystem growth’ is not later mentioned as a rationale or one of the program’s objectives. Nor is it justified with data on how a token swap program lasting 1 year + 10 months could create that effect.

Referring to the rationale,

@LuukDAO

Increase bi-directional alignment with top ecosystem projects.

Given that this is the main objective of the program, I would love for you to define what you mean by bi-directional alignment.

Defining alignment is truly complex. A good debate on this topic is currently taking place as the DAO tries to reach a consensus on Arbitrum DAO’s Mission, Vision, and Goals.

If we go by what the Arbitrum Constitution states, the Arbitrum’s community guiding values are: Ethereum aligned, sustainable, secure, socially inclusive, technically inclusive, user-focused, and neutral and open.

What could the DAO demand as alignment from the protocols? That they operate exclusively on Arbitrum? That they don’t join other ecosystems that aren’t aligned with Ethereum? That they must be sustainable or user-focused?

And on the other hand, how could the DAO be aligned (would that be bi-directional?) with the interests or vision of a protocol that has its own objectives?

@LuukDAO

Arbitrum DAO and the third-party DAO will swap tokens with a 1-year lock. After the one-year lock, the tokens will unlock 10% monthly for ten months.

I also don’t understand how a swap with a 1-year lock + 10 months to sell aligns with the long-term effectiveness and sustainability of ecosystem support programs, as mentioned in the Abstract. It seems like a very short time window for a program that aims to have a long-term effect

@LuukDAO

Program KPIs

This pilot’s objective is to better understand the impact and logistics of DAO token swaps as a value-alignment tool for growing Arbitrum DAO’s ecosystem.

Honestly, I don’t think token swaps are a necessary tool for value alignment. The DAO can invest resources to support the protocols it considers aligned or most valuable for the strategic development of the chain without needing to receive part of that protocol’s treasury in return.

I believe the discussion happening in the post about the DAO’s Mission, Vision, and Goals is key, and in that sense, I like what @CastleCapital has proposed

@CastleCapital

The Bigger Picture

In my opinion, the primary focus and destination of resources should be on developing the best technology that aligns with Ethereum’s values. That way, we will ensure that the best Ethereum-aligned and thus, Arbitrum-aligned, protocols are here.

@LuukDAO

Pilot Program Implementation (timeline)

The Token Swap Pilot Council
The initiative will comprise 3 voting members and 1 non-voting facilitating member.

Lastly, if the DAO approves this pilot, I also don’t understand the need for a Council to execute the swap. Since 19 potential applicants have been pre-selected, a window could simply be opened for interested parties to propose the swap, and the DAO could decide through a ranked choice vote. All that would be needed is a program manager

Thank you very much for promoting this discussion. Even though I don’t agree, it’s always positive to have these kinds of debates and explore alternatives for managing the treasury and achieving ecosystem growth, which is ultimately what we all want.