Interesting proposal. But why resort to these expenses if the DAO pays the service providers to cover these expenses. For example for the analysis of this proposal in feasible or not and the risks we can ask some member of the ARDC research team.
I voted FOR this proposal at the temp check stage. Re-sharing my feedback below.
I like this proposal for a couple of reasons:
* It creates an avenue for the DAO to directly use Arbitrum protocols, which I think is a win-win.
* It creates an avenue for the DAO to access stablecoins, which I think is important for DAO ops and treasury diversification.
Some potential concerns to consider:
* The DAO will need to have an alternative source of stables available to pay off the debt per the concern of @GFXlabs. I don’t think the DAO can sell ARB for stables fast enough via governance for this use case.
* Moving DAO ARB into DeFi protcols introduces additional risk to governance. I’d like to have a robust plan for mitigating risk (cap on total ARB deposited, plan for gradually increasing TVL, audits, etc.)
Explain what the purpose of this proposal is?
The goal is to increase the value of the token?
This proposal will not solve this, because the main expenses are on grants paid to the ARB.
The cost of ARB needs to be increased in other ways, but here I see only costs. I don’t see how selling a token is worse than collateral.
This idea was original suggested and asked for by the treasury sustainability group members 6 months ago, and no real progress has been made. We wish to work as closely with ARDC as they are willing to, but it doesnt seem like they have bandwidth for this kind of large project. A full RFQ for actually moving funds, and giving different CDP protocols a chance to apply for TBV funding could be run through ARDC if they want any time.
The ARDC elections were held a month after this post, they also had a delay due to KyC. I see that this post was not brought forward or re-solicited once the ARDC was active. I don’t see why we should rush anyway. I again ask ARDC members (@BlockworksResearch @Delphi-Digital @chaoslabs @krst ) if they can do a risk assessment of this proposal and what would be the best way to implement it, as I think it should be accompanied by good treasury management and I would also evaluate different protocols.
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I see that it has been discussed here. A few days ago.
Can you specify a bit more on why the ARDC chose not to cooperate on this? This seems like a very interesting idea for Arbitrum at least. I have to say I’m also intrigued as to how this could help the DAO diversify, as such I’ve voted for this proposal.
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This idea is very interesting, but again, the cost in our eyes is just too much right now.
Some questions we have that are brought up before but we want to re-echo are:
- What is the general goal of this proposal?
- The budget breakdown is just too steep. Can it be cut down?
- Why can’t ARDC take on this initiative, the reasons now don’t make the most sense to us.
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Voting “for” as the treasury should be allowed more flexibility to adapt based on the current phase of the cycle and include a risk management systems. This would enable the treasury to retain ARB while also supporting new proposals.
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These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.
For the reasons I stated above, I have to unfortunately vote Against this proposals.
I will just quote my previous post for the motivation, and add something as a follow up.
I thank a lot @cupojoseph for the numerous answers. We discussed about a research being important in this topic, re: can we effectively create a vault in which DAO can deposits ARB and borrow against them?
I don’t see anything wrong in the research. I personally think the answer of such a research will, likely, be a big sounding no, but I am happy to be proven wrong. All the risks I stated above I think are here, and what has happened to curve just show that a target will be hit at some point. What I am seeing as a problem here is that the research here is tied to development of such product. And I don’t see why the two should be packaged together.
I would more gladly see something like
- we have a separate, proper research on lending risk for an arbi tailored vault, exclusive property of the DAO
- open dollar can eventually be an advisor in this research (but not the main player: we will go into a trust me bro situation, in which the proponent has all incentive to have a study that reassures the dao without necessarily having a critic eye on the risk per se)
- we analyse the research, and if it’s positive in saying “yes risk can be managed” and the dao wants to move forward, we then build the vault. And then Open Dollar can indeed implement and manage it.
I am pretty sure the whole team has done a lot of work here, as well as I am sure they have no bad intentions, nor they are a malicious actor. Just, I think the risk is too high in general, and one way to derisk is to have first the research and then, if any, the product.
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Thanks for the feedback Jojo, I really appreciate your optimism that we can improve the approach and possibly move forward with the research part of this in the future. I still feel strongly this approach will be crucial to scaling Arbitrum DAO successfully.
I think we’ve had plenty of discussion on your points and reasoning so the last thing I want to add/respond to is:
This project has always been structured as an open source public good that can work with any CDP or lending market, not specific to OD – and we very explicitly do not want to create any winner-take-all scenario or dependence on Open Dollar specifically.
We’re committed to being Open (its right there in the name!) and fair.
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Totally fine with it and let me clarify for the sake of, well, clarity: not saying we fall necessarily in the trust me bro situation, and openess of lending market helps in risk mitigation. But the moment in which the research is done mainly or partially by one of the possible third party who can implement it, there could potentially be a classic conflict of interest.
BTW thanks for your approach, oriented toward turning criticism into positive feedbacks. I know I have sounded pretty harsh on my judgment, is just my passion on the topic. But I really appreciate your attitude toward it, kudos to you ser.
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I have decided to vote “Abstain” on this proposal.
The proposal is in a pilot phase and has not yet completed risk analyses or security audits.
Therefore, I prefer to be cautious and wait for more information and evaluations before moving forward, ensuring the protection of the DAO’s interests and its community.
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I have voted “Against” this proposal. Based on current feedback and edit by the OP, it looks like there is going to be some research that is being published this upcoming week. I’d like to see that research before this goes further.
As a broad concept, I think this is creating a lot of risk for the DAO in the event of a price spiral. I’d like to see the research on 'Loan sizes based on different market conditions (including worst case scenario), as I’d be curious what this looks like with concrete numbers and formulas.
Also, the DAO sets a limit of how much ARB can be used as collateral for a loan, meaning there will be a mathematically defined price point where our loan will be liquidated. I think this creates a target for bad actors.
I don’t know if the benefits outweigh the negatives. The nature of these types of loans is that in a period of downward price pressure on the collateral, your either going to get liquidated or have to keep throwing already ‘bad’ money trying to keep your collateral afloat. I know it’s going to feel ‘safe’ due to the large treasury, but noting in this space is too big to fail… so this is a big decision to make.
A final note specific to the proposal - I’m not sure if I’m missing something here… and I’m not opposed to funding research projects… and I’m not trying to hurt feelings… but I feel a 250,000 ARB ask is a lot to ask for this type of research. These types of loan protocols have existed for years so I feel the book is pretty much out on these things. I don’t think there is much new information to be gained here.
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First, we would like to thank @cupojoseph for coming up with this initiative. The idea is very interesting; however, after reviewing this proposal, we have decided to vote against it based on the following rationale:
- Using the savior module requires putting ARB as collateral. Given the volatile nature of the crypto market, this exposes the DAO to significant risk. A rapid drop in the ARB price would necessitate adding more ARB as collateral, potentially straining the DAO’s resources.
- While this proposal offers stable funding for grantees, it disproportionately places the risk on the DAO. The grantees benefit from stable funds, but the DAO bears the collateral risk.
- We would like to see a clearer plan on how the debt will be repaid.
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Votes against the proposal in is current form. It is an interesting topic, but IMO we should leverage the current structures/committees that the DAO pays for to do at least part of the research/risk analysis.
gm, I am voting abstain on this one.
I think finding ways to fund projects without applying sell pressure to ARB is valuable.
I don’t think we are in the right position to enable this: the amount we could borrow vs the amount we would have to lock indeterminately and the downside risk doesn’t justify it.
Ideally, we should do that once we have a yield-bearing ARB, where the loan is either self repaid or the percentage of borrowed money is continuously reduced.
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I was hoping to see some other protocols express desire for this research, but I haven’t seen any.
I think this approach can be successful, but I have also seen it go disastrously bad, remember rari fuse pools? ICHI is just one example of this going poorly
That said, I do think it can be done well with smart limits set in place and I would fully support this research if other DAOs stepped forward with interest to use it for their treasury… Until then though, I have to vote no.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting AGAINST the proposal during the temp check.
While we are not opposed to using CDP protocols as a DAO or implementing treasury-backed vaults (TBV) and their safety module, we’re not comfortable with how the proposal is currently structured.
The proposal has intertwined the research, development, and audit of the related smart contracts, without considering the possibility that the research might lead us to the conclusion that we should not proceed or proceed in a different way.
Furthermore, some portion of the analysis - if not all of it - could be carried out through the ARDC, an entity established specifically for this purpose, provided that there is consensus on its desirability from the DAO. We would like first to try using that avenue to get a better understanding of which research directions require further and deeper analysis before allocating additional funds to research. As a DAO Advocate for ARDC we already asked ARDC members to explore ways how they can provide delegates with more information regarding the approach described in this proposal.
Furthermore, we should also first explore how the DAO would go about using a CDP protocol to borrow stablecoins against ARB, from all perspectives, including operational, legal, and risk. Unless there’s an appetite (with significant amounts, justifying spending 250k ARB on R&D) from the DAO to use a CDP protocol in the first place, there’s no need to look into TBV further.
To conclude, while we’re currently voting against the proposal, we respect the authors’ efforts and commitment to driving the initiative forward. We are eager to collaborate with them in a constructive way, exploring the viability of using TBV to safeguard any position the DAO takes in a CDP protocol in the future.
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Thanks again for all the constructive feedback, krst and the rest of the L2beat team! We look forward to working with ARDC more directly to separate the research from the development part of this, and returning to the community with a new proposal that better reflects the needs of the DAO.
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