[Non-Constitutional] GCP Clawback

Proposals
21

@usamaro
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.).

The 2024 State of web3 gaming report by Game7 is one reference in regards to Arbitrum being a key hub for gaming. This tweet summarizes the report. Some quotes from the report: “Immutable and Arbitrum ecosystems grew the most over the past 12 months. Arbitrum achieved a 68% YoY growth to 119 titles” and “Immutable, Arbitrum and Avalanche Welcomed Most Migrating Games”.

In terms of the comparison to avalanche, there are 2 key differences in my opinion.

  • Firstly, our strategy has been less focused on AAA gaming, we believe that the more casual type of gamer (instead of a hardcore gamer) is likely more open to new models such as NFTs/Tokens etc. We also see that mobile gaming (synonymous with casual gamers) captures 48% of all gaming revenue (source). The time to market and funding requirements of AAA games is also much longer, making it arguably less of a fit for the fast paced landscape of the crypto world (for now). That’s not to say we are ignoring the AAA sector, but we put less of an emphasis on it than others. An example of where this strategy paid off has been with Proof of Play’s Orbit chain consuming more mGas/sec than any other rollup for most of 2024 according to www.rollup.wtf.
  • Secondly, Avalanche has had a $200m gaming fund (2.3x larger than the current GCP budget) since Q4 2021 (Arbitrum One just went to mainnet at this time for reference). I’m biased, but i believe the community ownership of the fund and eventual return of any profits going to the DAO is a better setup, though i’ll admit it’s the harder path, as we see herein :laughing:.

Regarding the 25 gaming chains, this ecosystem has been building up since the first Orbit chain launch in January 2024. For reference, the GCP received it’s first funding this month after completion of entity and bylaw setup. Two of the GCP’s deals in final stages have chains in their plans so I expect this to accelerate and i’m excited about the potential.

6 Likes
22

This seems like a very strong action/reaction, but I’m unsure there is a strong basis. If possible it would be nice to see links or other sources backing up each part of this statement, to make it easier to follow.

By my understanding the enumerated failures are just 4:

  1. Treasure DAO – has already exited Arbitrum
    I am not entirely sure it is fair to lay this at the feet of GCP, but perhaps there is context that would make it so.

  2. other key contributors have either stepped down or signaled waning commitment
    Who were the key contributors? Did they state a reason?

  3. the GCP has repeatedly shown a reluctance to adequately document its activities and performance
    Sourcing would be helpful to judge the merits of this failing.

  4. the program has recently sought to increase contributor compensation and lower its own reporting requirements
    Supported by the link OP provided, but this in itself does not seem a strong reason to close up shop.

I’m sure the proposing parties have good reasons for making this proposal, but in reading it I feel like the case is not sufficiently made. Perhaps there are further unstated failures, and/or with context the stated failures become more severe, but if that’s the case I think we need that additional context.

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23

Hey Argonaut,

In our opinion, just because others are doing it doesn’t mean we should follow without evaluating the downsides

I’m fully aligned here regarding not just following suit. There are many examples of Arbitrum going against the grain in a positive manner. I think a token holder owned entity of the DAO with the vision to grow the ecosystem through investments rather than relying 100% on grants (or not and falling behind the competition) is a great example of DAO innovation.

Regarding the GameFi stats that you mentioned, i suspect that the failure rate is partly due to too many teams receiving funding in an overly loose macro period. Taking equity (in addition to tokens) in the studios plus going exceptionally deep on DD is a mitigation of this, and i see the GCP (with input from the GCP council, Offchain Labs and Arbitrum Foundation) having a high bar. If I were to guess, these stats that you shared wouldn’t differ too much between verticals like NFTs, DeFi, RWAs etc if we are looking historically. Though i suspect we are on the cusp of real adoption due to friendlier regulations, so i’m cautiously optimistic that the industry has tailwinds.

Do you think the amount invested, and more importantly, the valuation at the time of investment

The current valuation of the fund is around $85m, much smaller than competing ecosystem gaming funds (e.g. Avalanche Blizzard $200m). The valuation at the time of the tally proposal is likely not relevant as the tokens are distributed to GCP through vesting over 3 years.

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

The DAO has empowered the council with detailed oversight of the individual deals and budget. If the investments don’t look likely to be providing a return on capital, then i’d expect this to be raised to the DAO. With that said, equity and token investments in companies take time to mature, often reflecting a prolonged J-curve, so we won’t know right away, but i can say for sure now is not the time to make judgement on that given the initial vested funds were only transferred to the GCP. Let’s remember that the alternative is a grants program with arguably a 0% direct financial return rate.

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?

Upcoming transparency reports will be detailed in that the investment portfolio projects will be documented. This provides an opportunity for the DAO to assess the strength of the portfolio in real-time. However, similarly to my answer above, investments will require time to mature. Prior to maturity, the council’s judgement will provide the best protection here, and we have a strong cohort on the council to make this judgement early.

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24

I will be 100% honest although I may not be the best person/delegate to comment on this, because I didn’t follow up with all the details around the GCP:

  1. The complexity of the GCP proposal is unknown atm, which lead to uncertainty and to contributors questioning it. It also appears to be pretty slow, which may not be bad, being slower may better than spending funds fast. We always have this problem in web3, people that allocate capital rush to allocate to justify more capital to be spent.

  2. For a proposal of it’s size, reporting is either not done professionally or is too unfrequent, as an example when the Thankarb started and I ran a couple of programs, we had more thorough and frequent reporting than the GCP has at the moment, but most delegates didn’t care to verify and the DAO didn’t have any mechanism to audit/track progress.

  3. The fact that this proposal being posted has led to more updates in the GPC chat than in the previous 3 months may look a little peculiar to those that do not join the Arbitrum update calls.

  4. Even if the proposal doesn’t pass, it has already helped the DAO :blue_heart:

Appreciate @NathanVDH and @GFXlabs for the boldness.

5 Likes
25

As much as I understand the motivation behind this clawback proposal, I believe we might have jumped the gun here. The desire to protect DAO funds and ensure transparency is valid, but immediately resorting to a complete clawback seems overly harsh and potentially counterproductive. Instead, let’s take a moment to reconsider the issue more constructively, with empathy for the challenges the GCP has been facing.

I suggest the following:

Implement Phased Clawbacks Instead of Immediate Full Clawback: Rather than reclaiming all the unallocated funds at once, a phased approach would offer GCP a realistic opportunity to adjust. For example, we could establish clear milestones with incremental clawbacks only if those milestones aren’t met. This provides both accountability and motivation without completely halting their efforts.

Flexible and Realistic Reporting Standards: It’s clear that the reporting requirements have become somewhat burdensome. Let’s simplify and streamline reporting:

  • Shift from exhaustive written reports toward shorter, structured updates, perhaps via monthly community calls or concise status updates on Telegram.
  • Focus reporting on key performance indicators directly linked to gaming ecosystem growth, such as the number of active game projects onboarded, player engagement metrics, and meaningful ecosystem collaborations.
  • Replace rigid quarterly reporting with a flexible framework that allows for more spontaneous, real-time community interaction.

Clear, Supportive, and Collaborative Oversight: Instead of stringent oversight, we should consider assigning a dedicated governance liaison who works collaboratively with the GCP. Their role would not be punitive but supportive, helping the GCP troubleshoot challenges, clarify goals, and adapt their strategy proactively.

Gradual Adjustment of Compensation Packages: Instead of immediately revoking all unvested compensation, introduce performance-based vesting schedules that clearly reward demonstrable progress. This adjustment provides both motivation for contributors and reassurance to governance that funds are used responsibly.

Finally, our goal should be to empower GCP to succeed, not penalize prematurely. A careful revision of this proposal, incorporating phased funding adjustments, streamlined reporting, supportive oversight, and flexible compensation structures, could strike the right balance between accountability and reorganization.

26

Where can we see how many funds have already been spent and what results they’ve achieved?

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We fully support this proposal. This is exactly the kind of accountability mechanism we need to protect the DAO’s resources.

The GCP situation highlights precisely why we need better controls on proposals and why we have been actively voting against high spending proposals without clear deliverables. GCP received a massive 225 million ARB allocation, and what do we have to show for it? Almost nothing tangible, key members abandoning ship (including Treasure DAO completely exiting Arbitrum), attempts to reduce their own reporting requirements while increasing their compensation, and a general lack of transparency about how funds are being used. This seems to be normal for many in the DAO, and isn’t unique to GCP, but this is a terrible situation to be in and we don’t understand why delegates continue to defend this kind of thing.

The clawback sets a crucial precedent that the DAO won’t tolerate ineffective use of its treasury. The proposal isn’t punitive toward regular contributors (allowing for severance packages), but is firm on stopping the bleeding and recovering uncommitted funds.

Looking at both this GCP situation and many other proposals that come to the DAO, it’s clear we need a consistent approach to accountability across all DAO spending. We’ve said many times that DAO spends obscene amounts of money for seemingly no positive outcomes and it is a sad state of affairs to continue.

The recovered funds could be redirected toward initiatives with clearer metrics and accountability, like the proposed airdrop or other programs that demonstrate measurable impact for the ecosystem. Or simply returning to the treasury until we have high-confidence opportunities.

Bottom line: supporting this clawback sends the right message about responsible treasury management. We can’t approve large lump sums without ongoing performance requirements, and when programs fail to deliver, we need to act decisively rather than throwing good money after bad.

1 Like
28

Thank you for putting this up, @NathanVDH.

We stated our disagreement with funding this initiative a couple of times in the past [1] [2]. However, this does not naturally translate to us supporting a proposal to claw back GCP funds.

This RFC proposes a promising approach to GCP, but it lacks clarity on whether other alternatives have been considered and a proper assessment of the program’s current state.

This needs more thought around it. Let’s take setting up the legal entity as an instance. Have you considered the fact that setting up an entity for GCP of this kind requires as much time as it took? The legal structure outlined in the GCP’s M&A document involves multiple layers of compliance, detailed due diligence, and iterative legal reviews that span across various jurisdictions and regulatory bodies. If other specific key milestones were persistently delayed, it would be great if you could mention/list them.

Did you also consider meeting with the interim transparency committee on this subject? Yes, the council is already set up, but we believe meeting them would have painted a clearer picture, as they have a good understanding of things.

The suggestion to claw back funds negates this comment here. You are not suggesting that funds should be deployed based only on measurable progress but all remaining unallocated funds should be returned and the program wound down.

@Jojo also asked a question along the lines of impact assessment. What are the potential consequences of terminating the GCP on Arbitrum’s ecosystem, particularly in the gaming sector? Understanding these impacts can help in evaluating whether the benefits of clawing back funds outweigh the possible setbacks.

While the proposal raises valid concerns about the GCP’s performance and accountability, a more comprehensive assessment of the program’s current state and potential alternatives could provide a balanced approach that safeguards the DAO’s interests while considering the broader implications for the Arbitrum ecosystem and delegates.

29

Just to comment on time to set up a legal entity, the GCP Foundation was formed in early July 2024. The articles of organization you link to are dated Feb 19, 2025. That’s a substantial period of time for what is supposed to be one of the formation tasks, and not typical.

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We were referring to the documentation in its entirety (from drafting to receiving delegates’ feedback) and not necessarily just the GCP Foundation setup.

31

Hello @Djinn, thanks for the detailed and civil response.
I appreciate the direction you’re taking there. I wouldn’t be as adamant in asking for accountability if the DAO was already seeing positive outcomes from the GCP. I understand that things take time, and you’re trying to do them the right way - thank you for acknowledging the weakness so far on the communication side.
I’ll be waiting to see the promised updates, and the list of rituals described above would fit what I would expect to see from the DAO’s largest expenditure yet. Based on that, I think the DAO will have a much better picture of whether the GCP is on the right track.

2 Likes
33

Hi @GFXlabs - to clarify, the GCP Foundation initially adopted plain vanilla bylaws upon its incorporation on July 5, 2024. As you know, before the GCP Council was elected, the Initial Transparency Committee was appointed, with one of its main objectives being to define DAO oversight in greater detail, working alongside the GCP Team and the Arbitrum Foundation.

Once the ITC’s term ended, the team focused on:
a. Onboarding the GCP Council members (August - September 2024)
b. Onboarding the initial employees (October 2024)
c. Drafting the investment thesis for the GCP Foundation (November-December 2024) all while setting up the operational foundation of the entire company i.e. obtaining insurance, onboarding with different custodians, service providers, setting up bank accounts etc.

Please note that all this time GCP Foundation operated with minimum operational funding and NO investment/grant funds.

The bylaws were officially finalized in February 2025 since the main objectives of GCP were to first operationalize the company and set out a clear vision for it. Once the bylaws were fully fledged and the DAO oversight was baked in that’s also when GCP Foundation started to receive grant/investment funds.

Additionally, please see the latest update which outlines our approach to GCP’s DAO communications strategy. Looking forward to building stronger relationships across the delegate base and ecosystem in the future. We’ll share our monthly update at the end of this week which we believe will set us on a new path as well.

Thanks,

GCP Team

3 Likes
34

When we are collaborating, we don’t expect perfection from others but continuous optimization - that’s how I believe relations can flourish. From what I heard on the governance call and in the delegate chat, the GCP has been focusing on work and didnt had the need to spend time on accountability. Do the work - it’s actually the most crucial part. Accountability is crucial in our space aswell; sometimes you try your best and things don’t work out and accountability is what will make both parties agree on what was the problem and continue to grow. I see this post as a tight leash that gives GCP an opportunity to share clear metrics and improve their transparency moving forward.

1 Like
35

I know @raam answered this last night, but it is still worth posting here. Admins and moderators are generally based in Europe and Asia. As such, it was Saturday morning by the time we were back online and saw the proposal pop up. It should be expected that proposals may be delayed for approval over the weekend. In this case, given the magnitude of this proposal’s request, it was best to wait until Monday when the community was back online and to allow everyone to have a break over the weekend.

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36

Appreciate the intent behind this, but the current proposal feels hasty—more opinion than evidence.

If we’re going to make such a strong claim that the GCP team has failed, I’d expect a detailed breakdown:
• What were the actual KPIs?
• How many reports were expected, and how many were missed?
• When and how did the team show reluctance to report?
• What was communicated privately vs publicly?

We should hold teams accountable—but with facts, not assumptions. If transparency and council compensation are the real concerns, let’s fix that directly. Clawing back a major program without a structured analysis risks setting a dangerous precedent.

1 Like
37

The addition of @CastleCapital to the GCP to serve as a liaison to the DAO is a positive development. In the spirit of providing actionable, constructive criticism, here is a summary of suggestions we sent to @Atomist to tackle:

  • Provide disclosure of expenses to date. These do not need to be line items, but overall spending categories like legal, personnel, etc underneath an aggregate spend so far. There should also be a schedule for an external audit, preferably annually. The more complex the financial structures needed to invest, the more important it is to have an audit.

  • Quarterly updates should include both more numbers and more specific comms from those in charge to explain what happened and what guidance they give for the upcoming quarters. Think shareholder letter or letter to LPs. Arbitrum governance is the sole investor in GCP and needs to not only understand what has been spent/invested, but also needs to understand how the business is going – what are the near-term challenges and opportunities, what specifically is being done about those? There are many investor letters out in the wild you can draw from for inspiration. As complexity grows, so should the depth of the quarterly reports.

  • Explanation of how the finances will be run. Lay out ahead of time accounting treatment for investments - how will they be carried on the books. There are multiple legitimate methods but which is going to be adopted should be clearly communicated ahead of time to avoid shenanigans. Changing accounting methods in a year or two should come as major “stop, look, listen” point because it indicates something is wrong internally (like having a poor plan for financial management) or external forces have shifted significantly (like tax law) and may require discussion to understand if the change is appropriate.

  • Address the fact that the fund is worth considerably less than it was. There has been little public acknowledgement of this, or how it affects business plans or projected returns, despite it having a material impact on GCP. Going from a $200m fund to a $90m fund will affect whether this is scaled large enough to find winning investments to offset the expected majority of losing investments. How does this impact GCP’s ability to build a portfolio that will result in profits and not losses? If a secure runway for funding longterm commitments is so vital (which is why the entire lump sum was transferred at once) then how does this square with the fund being worth less than half what it was before? What mitigations are being taken against another 50% drop? At what point is scale not viable and need to ask for more or close down? We recommend communicating clearly the number now where GCP must either ask for more funding or wind down.

  • Provide a model for a successful investment’s lifecycle. It has not been explained precisely how this makes money. Suppose a game is successful. Is GCP Foundation getting a % of sales? Equity in an SPV that owns the game’s rights? Is the stake controlling or non-controlling, and can a controlling co-investor block or delay GCP’s profits? Does GCP get a lump sum in exiting somehow? Or is it a revenue stream that rises, peaks, and peters out? What is the payback period from investment to expected outcome? What is expected rate of return after the end of that investment lifecycle? What is the benchmark to beat? We are not gaming experts, but we do have significant experience with finance (and external entities presumably controlled by a DAO managing hundreds of millions of dollars), and presumably the 3 year period for GCP is simply the ramp-up period to invest all funds, and actual payback period is considerably longer as those investments mature and hopefully bear fruit. GCP needs to publicly demonstrate that it does have domain knowledge in gaming financing, and that it’s not simply people who like playing and making games but without a sound financial plan to accompany it. In short, demonstrate that the plan is not simply “invest money > ??? > profit”

  • If it has not already, GCP needs to appoint a CFO who is available to answer questions after each quarterly report. This should also include whomever is heading the day-to-day operations. Never again should such simple questions as “What is the name of the GCP’s legal entity?” require months of back and forth because the GCP Council didn’t know if they were allowed to disclose it.

  • Establish now some specific triggers to reevaluate GCP’s continued existence. The goal here is to make money. If that turns out not to be the case, the incentives for those drawing a salary is to just ride the GCP funds to zero and say they tried their best and are honest people. There should be some “stop, look, listen” triggers that either pause investments or require confirmation from the DAO to continue. These triggers should be for true disaster scenarios (e.g. an investment over n dollars turned out to be in a fraudulent company, 50% of the C-suite leaves within 6 months, GCP goes >18 months without an external audit)

If we had to characterize the overarching theme, it’s that GCP needs to be more professional and present that professional image. This is a lot of money at risk. To someone literate in corporate finance or who invests in private equity ventures, it looks unprofessional and disorganized. GCP is an investment, and an investment is only worth the money you can extract from it over the lifetime of that investment. GCP can restore some measure of credibility if it demonstrates professionalism, competence, and a clear, understandable business plan to make and return money to governance.

4 Likes
38

I can feel the strong energy in this proposal. Many will dislike but this “just f***ing do it” energy is what needed to turn things round.

GCP was launched with big expectations, but like many things in Web3, reality didn’t match the hype. It happens.

Personally, I don’t see Arbitrum as the gaming chain but I might be biased towards DeFi. I think most ppl see it as finance layer.

Gaming isn’t picking up at all and if they do, gaming are launching on specialized chains.

The DAO stepping in now to cut losses and reclaim funds is the right move to prevent further waste.

I’m not sure how bad the transparency and execution issues were, but if there was ever a time for a hard reset, this is it.

This is also a lesson for the DAO, when too many things get approved without solid tracking, things slip.

We didn’t do a great job overseeing this from the start, but now, at least, we need to make sure the fund return process is clean, with no legal mess. Hopefully, this sets a better standard for situation like this.

3 Likes
39

We want to start by reiterating our support for the Gaming Catalyst Program, and we remain committed to seeing it succeed. However, communication and financial transparency has been insufficient, which is unacceptable given the scale, visibility, and unprecedented level of DAO investment involved.

The current reports, outside of the most recent update, read more like brief notes rather than the comprehensive updates expected for an initiative of this scale. Standardizing monthly reports and determining what financial and legal information should/can be shared with the DAO would increase trust and transparency for all parties.

Additionally, there is a notable discrepancy regarding the GCP bylaws being dated February 19th 2025, despite the entity being stated as established in July 2024. While this was recently addressed, more proactive and clear communication is necessary to prevent speculation.

Delays and setbacks are inevitable, but failing to communicate them transparently erodes credibility and leads to negative assumptions. Proactive communication is essential, even when the updates are not all positive.

It is worth highlighting that delegates have consistently voiced the need for more comprehensive updates rather than fewer. Suggestions to improve communication have included newsletters and monthly forum updates.

L2Beat made this clear in May 2024, during the GCP Tally vote, stating:

“However, we know that with this amount of funding, the program is taking on an enormous responsibility for the entire ecosystem, as it will set the standards for proper investment decision-making and future accountability and oversight. We already declare that we will pay close attention to its execution and reporting, ensuring that the DAO remains informed and in control of the overall direction of the program.”

Furthermore, in the December 2024 update, Djinn wrote:

“As per feedback from delegates, we are reviewing supplemental communication methods to keep the community informed, including: monthly newsletters, monthly forum updates, quarterly ‘State of Gaming’ or community-oriented gaming events with GCP updates included, live GCP presentations at major conferences (EthCC, Devcon, etc).”

Lastly, we are pleased to see in the latest update that a DAO liaison has been appointed to address communication issues and that a content strategist will be hired.

Is this arrangement within the scope of Castle’s existing ARDC work or will this be a line item on the GCP budget?

We recommend also bringing on a corporate financial expert, preferably with experience in the gaming or venture industry, to provide the detailed financial reporting the DAO, as an investor, would expect from an initiative of this scale. R3gen Finance could be a possible candidate for this role.

To recap, the DAO needs a more robust, consistent, and transparent reporting cadence moving forward. This includes detailed and professional financial reporting, clear communication about typical delays and setbacks, and tighter feedback loops between the GCP Council and the DAO. This is essential for maintaining trust and ensuring alignment with the broader community.

1 Like
40

This rather salient point basically summarizes the overarching angst surrounding the GCP. In fact, it is precisely the impetus for my suggesting that we truly need someone at the top of the GCP who has the requisite experience in running a well-funded corp that’s parked atop an $85M fund.

More importantly, while significant, that amount of money wouldn’t even fund a AA team, let alone a AAA team. And so, what’s the GCP target for these funds? Disclosing the “66” entities currently in the pipeline will - as you have aptly stated by way of your aforementioned request for clarity and transparency - go a long way to us being aware of what the targets are, what they hope to achieve and the targeted ROI for each.

As I said to Djinn yesterday, the GCP has - in my view - been constantly on the defensive simply because of the lack of transparency in some processes. All that does is provide ammo to dissenters and others who were opposed to this fund in the first place. While a GM and/or a CTO would go a long way towards handling the nuances of disclosures, the fact remains that such persons - if from the same pool of “web3 crypto bros and frens” are likely to simply seek to maintain the status quo while achieving nothing worthy of note let alone merit. To me that means the ARB Foundation needs to hire/appoint an external party to fill in this role, thus freeing up Djinn and Chris to manage other more pressing day to day ops, intake etc.

One last thing that seems to be missing (unless I missed) is that, AFAIK, every person in the GCP is moonlighting. That’s bad in and of itself, though in the case of the council members, it’s acceptable given that they’re not involved in the day to day ops of the GCP. That said, there needs to be clarity into which parties are part-time, full-time, contractors, employees etc. Including third-party pass-through (aka “consultants”) entities.

While there have been quite a bit of behind-the-scenes shenanigans which have hampered the GCP progress - and which the public isn’t privy to - the fact remains that in order for the GCP to succeed, better policies and processes need to be implemented because, guess what? Any level of dysfunction is likely to ultimately spill over into the deal making process and likely lead to deals that may not yield the expected results. This being Web3 and all, this danger and it’s prerequisite premise is always clear and present.

While I would like to see the GCP succeed, the end will never justify the means if the end result is a level of failure which could have very well been mitigated, minimized or otherwise prevented.

2 Likes