Non-Constitutional: Stable Treasury Endowment Program 2.0

[thedevanshmehta]

Thanks for the support! Batching together some similar points around the themes of STEP 1 evaluation, expansion to assets beyond tbills and operational concerns

STEP 1 evaluation

@ElGordoTony

However, a part of me says that it is a bit premature if the step reports are just materializing,

@PGov

While the objectives are commendable, expanding the program might be a little premature given the early stage of STEP 1’s implementation

@Tekr0x.eth

Posting a short report every month or every three months is expected

@Juanrah

Regarding other delegates’ comments on a lack of evaluation of STEP’s first iteration, I think the Dune dashboard and the STEP Monthly reports are enough to consider the current STEP iteration as a successful program, achieving mitigation of risk and promoting the growth of the on-chain RWA ecosystem.

As @Juanrah noted, we have had 3 monthly reports already. You can see the latest one here - STEP Report - December 2024

Overall, these are the main metrics to ensure accountability and success for the STEP program;

@thedevanshmehta

Our main quantitative metric is growth of RWA as a percentage of total TVL on arbitrum. And a sub metric is the proportion of that RWA TVL which is owned by ARB DAO vs by others on the chain.

The qualitative metric is number of RWA providers who launch their products on arbitrum

The current numbers for these metrics which @Entropy dug up are overwhelmingly positive, showing its worth taking a risk for a second edition of the program to so we solidify our advantage in the RWA space.

@thedevanshmehta

Currently its around 18% of RWAs are from the DAO, we’ve seen insane growth since the STEP program where RWAs as a portion of our TVL grew from $100k at beginning 2024 to now nearing $85 million.

Expansion to Assets beyond Tbills

@cp0x

will there be something other than RWA?

@PGov

• Also heavy reliance on U.S. Treasury bills (99% of RWA allocation) could expose the DAO to some risks but we think it’s probably good for now → nothing better though that we can think of.
• Maybe expanding the scope of eligible assets in future iterations to include other RWA sectors or high-yield on-chain opportunities, could be a good idea

@Juanrah

I also think expanding beyond US Treasury bills could be a good idea. The program could look into other conservative, yield-generating RWAs such as corporate bonds or similar low-risk instruments

@danielM

While doubling down on U.S. Treasuries makes sense now, could we explore a timeline or benchmarks for expanding into other RWA sectors in 2026?

@0xDonPepe

My only recommendation, as others have noted, is to expand beyond T-Bills by including government bonds from other countries, which, while slightly riskier, could further enhance diversification

@cp0x

• also, will there be something other than RWA? There are many more profitable options for placing funds for stables. I would like to see some analysis of allocating some share of funds in this direction.

@JoJo

On a final note, I hope we will be able to diversify the issuers with the next RFP, obviously always while being compatible with the risk profile the committee will deem necessary. But I would like to see also new issuers, since the growth is one of the target of this program.

So my thinking on this topic is to follow the lead of the market. Currently, 99% of the $150 million RWAs on arbitrum are t-bills. When this situation changes and we see a more competitive market for other instruments, definitely worth doing a similar program for those. Until then, smaller programs for growth of nascent sectors and STEP like programs for mature sectors is what I’d recommend as a balance between treasury risk and ecosystem growth.

Operational Concerns

On OpCo or TMC overlap

@JoJo

this, ideally, should be the last iteration of this program as it is. For the next one we will either have 1) opco up and running 2) treasury initiative going to expiration with a potential renewal if opco is not ready. I would like an handover of the program. To clarify, doesn’t mean it would need a new committee for example (but there could be a merit to reduce it if the current treasury management committee has some experience, to avoid surplus), nor that steakhouse won’t be the PM until the end of the mandate. But if in 6 months we want to add another 40, 50, $100M to the program, it should be done under either opco or currently elected treasury managers.

So I’m definitely in agreement that this should be the last term of the STEP committee, since otherwise we risk entrenching them as the people deciding diversification for Arbitrum dao (and its healthy to rotate the power, similar to how bureaucrats get transferred).

However, I don’t think OpCo or the TMC initiative can by themselves replace the STEP committee for adequate due diligence.

For example, do either of those initiatives have an expert RWA lawyer like @northlakeslegal who can tell whether a service provider is bankruptcy remote? Are there technology leads like @Nethermind who can look into a code base? A well rounded selection committee is needed to uphold the high standards of due diligence that the STEP brand is based on.

So OpCo or TMC can take the lead in putting together such a committee but it needs to be well balanced and not just deciding by themselves, especially at the higher diversification amounts that STEP has.

On operational pay

@JoJo

please potentially reconsider the budget for the 4 committee members. It’s quite likely there should be more applications, and the budget might be on the low end here. An increase of 20-25% to 30-32.5k per member could be ok imho,

Thanks for the feedback! We probably wouldn’t want to change the amounts now since its already up on snapshot. Our thinking was lower end of the ballpark estimates put it near the range of pay received last time, so less contentious to go with what has been approved in the past edition (especially since most parts of the program are based on what happened earlier).

@TempeTechie

hat said, I would like to see monthly expenses as a category in each report.

@steakhouse , worth adding this to the STEP reports if its not there already!

Timelines and Amount

@cp0x

too cautious development. Too low a growth rate of treasuries will not provide significant profit. We conducted testing and it was successful. Based on the results of 9 months, we can understand that this amount should be increased to at least 100,000,000 ARB (or even more)

Thanks for the feedback and strong show of support! Our current thinking is around 1% of treasury every 9-12 months for 5 years.

I think there is merit to dollar cost averaging, in price impact for the market, ecosystem growth that evolves over this timeframe, and getting overall better execution.

@Amira

That said, the timeline feels unnecessarily stretched. With the right focus, we could fast-track implementation and make this process more efficient without compromising its impact. It’s a great initiative; let’s execute it with speed and purpose.

@JoJo

Understanding that continuity here means moving relatively fast (relatively cause is ognna take months according to the timeline)

I would generally say that the timelines fit with holding a STEP program every 9-12 months, so there is no undue need of haste.

I can see scope for shortening by 2 weeks at the most, so committee review begins March 15th, depending on Tally approval.

the revised timeline would be tally approval by early Feb, a one month submission window, one month committee review.