Hey everyone, I’m Joe and I’m leading the Plurality Labs team. I started the conversation around building a grants framework with this post discussing the pitfall DAOs have faced so far.
If you have questions or want to discuss a component of this proposal, please reply here or feel free to reach out. I will try to consolidate all my answers in this comment.
Question - Why is the Service Fee what it is?
Thank you for your question!
Answer to why the service fee is what it is
Fairness
The best organizations in the world for allocating funding do so for 10-12% administrative cost. The BEST. These are organizations like the Red Cross which has 100 years of learning. Their staff is administrative, not innovative.
Our first milestone fee annualized is 672k ARB. There were multiple roles we needed but couldn’t afford to hire. The team I poached is passionate, but they had to take cuts from previous roles. We did this in part because we realized we would need to show our value for the DAO to pay what we are worth. We took the bet on ourselves and on Arbitrum delegates to allow us to show our value and right size after milestone 1.
Another consideration is thinking about our intention to execute and leave the DAO. There is no exit built in. We need to find a balance between what a fair payment is and what our margin is. Take a look at any other DAO with a grants program this size and you will see we are WELL below the standard.
The Value We Save & Create
Take the work we have done around STIP which will impact LTIPP and the ongoing program.
- We offered a firestarter to Tnorm to drive the process of getting STIP formed and approved. This made sure the program could happen.
- We funded Open Block Labs for data monitoring services. This provides the data for us to learn for future programs (and potentially shut off misbehavior).
- We funded Open Source Observer to provide data for optimization using github and onchain forensics
- We funded Helika Gaming to index & analyze onchain behaviors and use gaming derived analytic models to identify and define engagement or “stickiness”
- We funded Karma & Thank ARB to incentivize community-led reviews to continually assess the impact of every grant funded
We will likely see over $100 million in incentives given in 2024. If you think our work will have saved even 5% in efficiency through these grants, then our fee has paid for itself.
This is ONLY ONE example of many ways we have and will have created value for Arbitrum.
Volitility Almost Crushed our First Milestone
Our 336k ARB for the first milestone went down from 1.16 to around $0.80 for half of our milestone time. Had we not been delayed by compliance issues, we would have paid out when the price was down. Had that happened, our team would have been out of funds to pay a team of four at the end of December.
What happens if you don’t spend all the funds?
This is an important point, this vote doesn’t send the allocation fund to Plurality Labs team! All the funds are sent to the PL-ARB Grants Safety Multisig which is run by a majority of delegates. Our fee is then sent to our multisig from there. If there is leftover, we will simply roll it forward. There is no way for us to keep it. A good thing about the funds still being controlled by the DAO is that we don’t need to nitpick at how much is being rolled forward because it is all the DAOs funds.
In terms of the fee, we could right size it with the next budget. Say we allocated 80% of the total, we could calculate 20% of our fee and take it out of our third milestone fee. I totally understand that there is a slight incentive for our team to want to allocate everything, even if we do it poorly. That is a legitimate risk, but I’m committing to not doing that.
Our team’s interest in solving this problem without an exit package is that we know solving the problems and bringing success to Arbitrum will open a wide tapestry of lucrative offers in the future. We don’t get that if we aren’t genuine in how we handle disputes and conflict that naturally arises. Hopefully you can understand our position and see how our best interest is aligned with Arbitrum.
Why 30 million ARB?
We stated the goal of massively scaling what the DAO can safely allocate in our first milestone proposal. In an early comment about that statement, we clarified it meant going from 3 million ARB in Milestone 1 to 30 million in Milestone 2 to 100 million in Milestone 3. While these numbers were just randomly pulled out of thin air, there is some logic to it.
Other ecosystems are spending hundreds of millions attracting builders. How much did Optimism drop yesterday? That was the second one this year, correct? How about Polygon’s 200 million? Avalanche? Near? Solana? I think you get the point.
How are we going to keep up???
Also consider that Optimism’s foundation has like 35% of the token supply. Our foundation has 7.5% (and they got dragged for taking that much!) We then collectively forced them to put their funds into a vesting schedule! (I was in support of this at the time, but now I realize it was a mistake.)
We don’t have anyone capable of making big bets for our ecosystem. Let’s free up some funds for Plurality Labs to try and make some big bets as approved by the oversight delegates! We are very willing to work on what checks and balances are in place to ensure quality. (That is literally the job we are being hired to do.)
So will Plurality Labs just pick all the people to hire for workstreams?
NO! We will first design a structure which can be implemented onchain using hats protocol. A process will accompany this structure which may include a council of elected delegates as “approver” role to our “driver” function. Basically, someone has to do the work of creating job descriptions, listing them, tracking applicants, etc. The delegates don’t want to do this. We may find 2-3 different ways to select candidates and compare results. We love to experiment! 
Here is an example of how we might shift responsibilities from Plurality Labs to the DAO over time.
