[Non-Constitutional] GCP Clawback

Proposals
1

RFC: GCP Clawback

Authors: @NathanVDH, @GFXlabs

Abstract

This proposal seeks to claw back all unutilized and uncommitted funds from the Arbitrum GCP. It authorizes the appointed contributors to initiate winding down functions immediately. The goal of this proposal is to preserve governance funds, restore community trust, and ensure that any future disbursements are strictly performance-driven and accountable.

Motivation

The Gaming Catalyst Program (GCP) was approved during a period of exceptionally optimistic projections that, in hindsight, proved unsustainable. One of its primary backers – Treasure DAO – has already exited Arbitrum, and other key contributors have either stepped down or signaled waning commitment. In addition, the GCP has repeatedly shown a reluctance to adequately document its activities and performance. Instead of embracing transparency, the program has recently sought to increase contributor compensation and lower its own reporting requirements. Given these failures, the risks associated with a lump-sum allocation of funds, and the mounting concerns raised by the community, it is time to cut our losses. We must wind down GCP activities and secure all possible funds in order to safeguard the DAO’s funds and restore investor confidence in the ability of this DAO to allocate capital.

Specification

  1. Immediate Cessation of Non-Essential Expenditures:

Arbitrum governance hereby formally instructs the GCP—its council and all full-time and part-time contributors—to immediately cease any expenditures not necessary for the orderly winding down of GCP activities. This includes halting any discretionary spending until a full review of the fund’s status and obligations is completed.

  1. Mandatory Return of Unallocated Funds:

The GCP is required to immediately return all funds that become available and are not anticipated or legally required to be retained for settling outstanding obligations. This measure is designed to prevent any further dissipation of resources given the program’s underperformance and operational missteps, as evidenced by the prolonged inactivity. Luckily, the funds are still in possession of the Arbitrum DAO.

  1. Authorized Winding Down Expenses:

For clarity, the GCP Council is authorized to approve up to six months of severance compensation for non-Council contributors to facilitate a smooth transition. In addition, they may issue a positive letter of recommendation for these contributors in the name of Arbitrum governance, provided it is consistent with the overall aim of ensuring continuity and respect for past contributions. The goal of this proposal is not to punish GCP employees.

  1. Revocation of Unvested Compensation:

All unvested compensation packages are hereby revoked. Any such funds, along with all other recoverable assets, must be returned to Arbitrum governance. This ensures that no further rewards are disbursed without demonstrated value and accountability, aligning with the broader need to safeguard the DAO’s assets.

Rationale and Context

The GCP’s initial promise of catalyzing the Web3 gaming ecosystem on Arbitrum has had persistent delays in meeting key milestones. Despite a 225 million ARB allocation, the program has struggled to launch even basic operational processes such as transparent reporting and grant issuance. Requests by the program’s own team to relax reporting standards only exacerbate the community’s concerns regarding accountability and increase their own salary.

The departure of major supporters like Treasure DAO and the resignation of key council members have left the program’s leadership in disarray. This instability raises serious questions about GCP’s ability to manage a large fund responsibly and to execute its mission in a timely manner.

In addition to these strategic concerns, the GCP has substantial funds held in a multisig wallet controlled by a small group increasing the risk of security breaches. Transferring these funds back to a more secure DAO treasury system is a necessary step to protect our collective assets.

Other DAO initiatives have demonstrated that phased funding and rigorous oversight are essential. This proposal reflects best practices by ensuring that funds are only deployed based on measurable progress and verified accountability. It responds directly to the community’s call for greater fiscal discipline and transparency.

Conclusion

In light of the significant mismanagement, opaque reporting practices, and management turnover within the GCP, it is in the best interest of the Arbitrum community to cut our losses now. By clawing back the funds and winding down operations in a controlled, accountable manner, we protect our treasury and uphold the principles of transparent, responsible governance.

We urge all delegates to support this proposal as a necessary measure to restore trust and ensure that governance funds are used effectively in the future. We welcome comments and suggestions.

12 Likes
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Treasure DAO was a prominent early backer of the GCP, but it is not synonymous with Web3 gaming on Arbitrum. Its departure reflects a shift in its own roadmap—not the death knell of gaming on the chain.

Treasure DAO leaving is an opportunity to redefine Arbitrum’s gaming strategy—not abandon it. Leadership is about setting direction, not reacting to who stays or goes.

A resilient DAO invests in systems that outlast individual contributors. Perhaps an effort to fix what’s broken should be considered—without forfeiting the mission.

4 Likes
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I don’t think its about leaving an opportunity its more like restructuring things.
The GCP has several times failed to deliver simple reports, be transparent about transactions and more.
The DAO should step in now and secure what is there and then think about a good and meaningful way of going forward. But for this to happen there has to be a status quo first.

TreasureDAO leaving Arbitrum was a huge loss, anyone saying different is wrong. They were probably the biggest supporter and catalyst but left the DAO pretty quick.

So yes I am supportive of getting back all the funds and then find a good and sustainable way with way less funding to start with. Especially with the OpCo proposal and the OAT there can be a way to keep things transparent and DAO aligned. Because right now its a total blackbox for everyone expect the GCP member (at least I hope they know more than we do).

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I fully agree with this clawback. I think we can restructure something in the future that doesn’t have a significant amount of the $arb supply involved. After Treasure DAO left it hasn’t made much since to invest this alarming amount into gaming. For the amount allocated what has it gotten us? Arbitrum gaming will grow but this amount of $arb was always outrageous when DeFi is what has gotten this L2 where it is.

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Hello!

Thanks for the proposal. I have a few comments/questions:

I would like to see evidence of the following claims, as it is part of the motivation for the proposal.

Regarding updates/reports:

While I do agree that the reporting/communication front is lacking A LOT, there was an update literally yesterday:

I’m not against having best security practices regarding reporting/funds distribution, but I want to add extra information here and also invite the author(s) to provide evidence backing their claims, so the delegates/interested parties can find everything in one place.

Can you clarify/add which KPIs were not met? This is their last report.

Can you clarify what does this mean?

Thanks in advance!

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Hi @NathanVDH, thanks for opening this conversation. Many of us have had these thoughts in mind.

From my perspective, GCP has been a slow, unprofessional, and costly effort to increase gaming activity on Arbitrum. However, I currently do not have hard data to support this view, so additional data should be provided to clarify whether this perception is factual or simply subjective. That being said, I believe we should preserve the original motivation behind GCP but restructure it into a leaner initiative that can scale progressively. I’m inclined to vote in favor of discontinuing GCP, provided we, as delegates, collectively find an alternative approach to achieve our goals.

My suggestion would be to bring in a new, more professional team to manage this initiative with a leaner structure, allowing for larger capital calls only when truly necessary.

On a final note, venture or early investing is tricky and typically takes a long time to deliver measurable results. This is because venture investments rely on only a small number of successes to provide returns for the entire fund. Additionally, this asset class has faced significant challenges over the past few years.

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It would be nice if there was more transparency in the cohort funding process. Who are the 66 applicants, while no teams have been funded it would be valuable to understand what the due diligence process is? What is the application process like? Where can information related to this be found?

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My questions for @NathanVDH and @GFXlabs are:

  • have you contacted, privately, the council members regarding the info you requested prior to post this proposal?
  • since you hinted at this proposal for months, and waited such a long time, why didn’t you wait to at least a few further days to get the update that was announced yesterday for this week to understand if it was worth effectively pushing the proposal?
  • do you see this proposal compatible not only with the effort done so far by the DAO and delegates, but also the heavy support that, so far, both OCL and AF have provided to the GCP, both privately and publicly, of which we have had another demonstration literally last week at GDC?
  • have you thought about the impact on the reputation of Arbitrum DAO, in term of attracting people and service providers, when whoever wants to do business with us will see how we claimed back hundred of millions from an initiative that was voted, supported by lab and foundation, and didn’t even have a chance to put up the results in a time that is compatible with the nature of a fund?

Hope to see an answer on each of these points.

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Answering only for GFX:

Yes.

Waiting a few further days was what had been going on for a long time. At some point you no longer want to wait a few further days.

We do not believe the DAO and delegates support continuing GCP in its existing form. Our focus is on future opportunity cost, and we do not think a sunk cost fallacy is a defense of continuing GCP.

We repeatedly suggested it was bad governance to transfer the lump sum upfront. There would be no clawback if the GCP was reliant upon quarterly or annual transfers from governance. It would lower the stakes and also enforce transparency and reporting requirements.

Overall, it’s worth understanding that 9 months after ratification, GCP’s visible record is:

  • Asking for >250% raise for council members
  • Asking to halve the amount of required reports back to governance
  • Publishing (5-week old) bylaws 7 months after registering the GCP Foundation despite being requested for quite some time
  • 40m ARB being moved to an address for vesting

If GCP has something in its invisible record that acts as a counterweight to the visible record then we encourage them to educate everyone.

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and what was the answer?

I can see your point. I also think waiting a few days to get a more complete picture (or, if no answer, pointing out that it was not happening) would have been the most sensitive and logical thing to do

You are answering a different question. I didn’t ask if delegates support it. I asked what is your thoughts about the proposal being heavily supported by Offchain Labs and Arbitrum Foundation personnel and marketing/strategic plans.

Again, you are answering a different question.
I didn’t ask your thoughts about moving the whole lump sum and if it’s good practice or not.

I asked how you think a proposal like yours, if passing, how would impact the business relationships with existing or future partners, that will now know that despite efforts and despite being voted in favor, they could see the DAO clawing back funds despite having them work, setup the foundations of a new initiative, and even get the support from other entities such as our lab.

Thanks

1 Like
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We are strongly in favor of this proposal. As many delegates predicted, the GCP was a failure. What truly matters for any organization, including DAOs, is the ability to learn from mistakes and pivot. Acknowledging the error and deciding to stop the initiative is probably the hardest part, as it’s easy to fall into the sunk-cost fallacy—the tendency to continue a strategy or course of action simply because significant resources have already been invested, even when it’s clear that moving on would be the better choice.

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As a DAO, learning how to pivot from failed initiatives gives us a competitive edge, which will ultimately benefit ARB holders in the long run through stronger price action.

Regarding the winding down of GCP activities, we believe the proposal has been well detailed, but we’d like to offer the following suggestions:

  1. Add a section in the proposal description requiring the GCP Council to draft a wind-down plan. This should outline costs and any pending items that can’t be immediately processed, helping the DAO stay informed and maintain accountability.
  2. Include a clear plan for migrating multisig funds to a safer location. In our view, these funds should be transferred to the DAO treasury. Adding this detail to the proposal allows governance to formally approve it and saves time later.
  3. You propose a six-month severance package. Please clarify that this will only be paid after the GCP has completed all outstanding tasks related to the wind-down, including delivering a final report detailing the fund status and any remaining obligations.

We want to thank @GFXlabs and @NathanVDH for raising concerns early on and continuing to monitor the project throughout its development.

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Asking for more time/we have to ask the lawyers.

We work for ARB holders. It’s ok to disagree with Offchain Labs and Arbitrum Foundation.

It’s a DAO. DAOs can always reverse a previous decision.

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Certainly agreed, if there is a clear effort from the GCP to more clearly communicate the value that they’re creating and bringing to the Arbitrum DAO and the DAO considers that value to be worth the price, I’m not against the continuation of the GCP.

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  1. Karel Vuong obviously left the GCP. Whether that’s a good or bad thing is certainly debatable. More recently Andrew Green left in August.
  2. The update came two days after I posted this proposal, on Friday. The proposal was accepted by moderators on Monday. I appreciate that update though, things are going in a good direction.
  3. I have indeed seen the report, I consider it is lacking info that LPs in a fund need to make the right decisions about continuation of the GP’s work.
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I’m echoing @GFXlabs 's response, I’d only add that it is the GCP’s job to properly report to the DAO. That’s supposed to be the direction of that particular relationship. And yes I’ve certainly considered the damage that a proposal like this can make, but I think its advantages for $ARB tokenholders are worth having this conversation.
It is not normal for a program funded by the DAO to have such sparse reporting to the DAO. The current setup is not sustainable, and I’d like to see clear efforts from the GCP to fix it.

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humm… @moderators why was this proposal only accepted today, instead of last Friday? is this normal?

because if this is true, then the real timeline of events was:

  1. @NathanVDH posted this proposal on Friday, and the proposal is waiting on moderators to review it, to get it approved and for it to become public.
  2. This update is posted on Sunday, yesterday, here: GCP Update Thread - #15 by Djinn
  3. The GCP website gets updated with the corporate entity docs on Sunday, yesterday, according to this: GCP Update Thread - #18 by Djinn
  4. This proposal gets approved today, and it becomes public.
  5. Chaos ensues on Twitter, on the delegates chat, and in this forum thread.
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Thanks for sharing your concerns about the Gaming Catalyst Program. Some of the rationale for this proposal is a bit confusing, but we hear you on the request for additional transparency.

The GCP has been working intensely with our stakeholders to create a robust program that fits within a unified Arbitrum Gaming organization and narrative. Establishing an investment focused program with a goal of also generating value for the Arbitrum DAO as opposed to only dispersing grants, was and remains a unique undertaking; establishing both foundation and operational level policies, procedures including oversight of the diligence and decision making process, takes time.

Much of this work so far has been accomplished with GCP Council members and the Arbitrum Foundation observer empowered by the DAO to hold trusted information not shareable publicly.

In addition, there has been heavy involvement from other GCP stakeholders, including Offchain Labs and the Arbitrum Foundation to establish a unified Arbitrum Gaming presence. If the GCP was not holding to its responsibilities and progressing, our stakeholders would have taken action to ensure accountability and proper adjustment.

Governance/entity documentation has already been made publicly available, encompassing Bylaws and M&A:

Here’s what has been communicated to follow this week:

Although our pending quarterly update is coming this week, but we wanted to drop this here as a preview:

  • We have two pending offers to potential candidates, with a robust plan for hiring a GM and additional team members
  • A co-investment framework with three major publishers/ecosystems is in the final phases of review and negotiation
  • We have processed over 50 investment opportunities (went past initial screening, data room etc shared), with final terms and capital deployment as the next steps for the applications that have moved past our robust DD process
  • The first cohort of grants is being processed, with a top native builder, innovative loyalty platform, entertainment focused chain, and esports / ecommerce platform being among the first cohort
  • The AF and GCP have agreed to a vesting structure that has only been unlocked recently as operations and setup have reached a maturity level to start receiving funding

More will be coming the next week in higher fidelity, but we thought it was prudent to share the above in response to questions about progress.

As Arbitrum Gaming, we will continue to host conversations to connect game builders with the broader DAO and help educate folks on the immense opportunity gaming brings to Arbitrum. We can also promise to continue moving in a direction that helps frame both gaming and the Gaming Catalyst Program as an opportunity everyone should be optimistic about.

This will be a continuing conversation, but we also want to hear from delegates and contributors about what type of content, cadence, and transparency you would like to see. We are already committing to the following rituals:

  • GRC monthly call updates (Most recent update here)
  • Regular updates on the Arbitrum forums
  • Regular transparency reports w/ in-depth review of hiring, operations, grants, investments, and other aspects)

Suggestions for additional transparency we have heard:

  • Newsletters w/ updates on GCP and perspectives on gaming
  • Gaming roundtables where builders and other contributors can discuss painpoints, strategic topics, funding, etc

We are open to all suggestions, as long as we can support them with our limited resources.

While we have always been available to delegates including GFX Labs, we still acknowledge we could have done better to prioritize sharing of governance documents and other asks, hopefully the actions taken over the last few weeks and months show the commitment to better address this. We have presented an in-depth progress report to key delegates at Arbitrum Delegate day during Eth Denver for example, and have committed to deeper updates at monthly GRC calls.

Thank you for all the patience and collaboration. Excited to continue serving as a part of why Arbitrum Gaming, and Arbitrum more broadly will win.

6 Likes
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Hi @NathanVDH,

I’m David Bolger, a member of the GCP council. I am also Head of Gaming & Consumer Partnerships at Offchain Labs. I am replying here from my POV purely in my capacity as a council member on why I think this proposal is detrimental to the growth of Arbitrum.

I’d like to highlight some key context that I think is not accounted for in this proposal.

The Strategic Importance of Gaming for Arbitrum

The gaming audience is one of the largest consumers of digital assets, with global gaming revenue exceeding $185 billion last year (source). This audience already has a strong appetite for digital ownership, making blockchain technology a natural fit.

Arbitrum has become a key hub for gaming projects, with significant network effects benefiting the broader ecosystem, including DeFi, RWA, and consumer applications. Maintaining a dedicated investment strategy for this sector is essential to sustaining and expanding Arbitrum’s position in the market.

The Reality of Blockchain Partnerships

Having worked in the blockchain partnership space for the past three years, I can confidently say that no chain can remain competitive without allocating financial resources to attract and support builders. The industry is fiercely competitive, with rival chains routinely offering grants ranging from $5M to $100M. In some cases, single deals from competing chains have been rumored to exceed the total GCP allocation (currently valued at $85M).

Arbitrum DAO has consistently taken a more disciplined approach, prioritizing sustainable investment over excessive grant spending. In my view, the GCP is a key pillar of this strategy, and shutting it down would severely limit Arbitrum’s ability to continue to compete for top-tier partnerships.

Balancing Speed and Diligence

While faster execution is always desirable, maintaining oversight is critical to responsible fund allocation. The GCP council, with input from the Arbitrum Foundation as observers, has maintained rigorous oversight over the GCP. This includes direct engagement from at least two council members in candidate evaluations and final interviews.

To date, over 50 deals have been put forward to the GCP, yet fewer than 5% have reached the final stages—demonstrating a clear commitment to due diligence. While this approach has led to some frustration within the ecosystem, it ultimately ensures that treasury funds are allocated effectively, rather than distributed indiscriminately or carelessly.

Treasure Chain

Treasure chain taking a deal with another ecosystem does not define Arbitrum’s gaming strategy. There are currently over 25 gaming-related chains building with Arbitrum’s tech stack—more than any other blockchain framework. Additionally, traditional gaming industry giants such as Ubisoft, Square Enix, and Tap Nation are developing on Arbitrum. I am also extremely excited about the pipeline of projects which the GCP currently has in its final stages. The ecosystem’s growth is robust and diversified and not reliant on any single project.

Final Thoughts

Rather than shutting down a program which has strategic value, we should continue refining and expanding sustainable growth initiatives.

For anyone seeking further insights, I’m happy to discuss this topic in more detail on a call or via text. Please feel free to reach out to me on Telegram (@david_cocora).

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Can we get any metric that supports both these claims (Arbitrum is a key hub for gaming projects + network effects benefiting DeFi/RWAs)? Based on awareness alone, it seems Avalanche is the key crypto gaming hub (i.e., Off the Grid, Shrapnel, Maplestory, Nexus, etc.).

Are the 25 gaming-related chains building on Arbitrum and the game studios mentioned a result of the GCP’s work? If yes, can you expand on what specific actions were taken to onboard them? I may have missed it, but I couldn’t find much information in the GCP Update thread, and the studios mentioned seem to have partnered with Offchain Labs according to media (although I read from the updates that OCL x GCP alignment is developing through a series of collaborative efforts [Business Dev Funnel, DD process, etc.]).

Thanks in advance!

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Thanks for sharing this message. In our opinion, just because others are doing it doesn’t mean we should follow without evaluating the downsides. The gaming sector has struggled on nearly every front when it comes to integrating blockchain. Of course, that doesn’t mean Arbitrum can’t get lucky with a breakout success. But looking at the data:

  1. 93% of GamesFi projects are “dead”.
  2. On average, GameFi projects have dropped 95% from their ATH prices.
  3. GameFi projects last only 4 months on average.
  4. 58% of VCs who invested in GameFi lost between 2.5% and 99%.

Source: State of GameFi 2024

Do you think the amount invested, and more importantly, the valuation at the time of investment, was appropriate for an industry with such a high failure rate and no clear product-market fit yet?

How long will the DAO keep investing in this? Until the GCP runs out of funds, or will more funding be needed after that?

We understand you don’t want to stop the program and Arbitrum miss out on the opportunity to get some market share in the Gaming Industry. But if you were to revise this proposal so the program continues, how would you adjust it to include clear failure metrics that would justify ending the program if they’re met?

Thank you.

2 Likes