OpCo – A DAO-adjacent Entity for Strategy Execution

Non-Constitutional

Abstract

This proposal builds on the ideas and concepts introduced by @dk3 in the initial Operation Company (OpCo) proposal. The OpCo is a legal entity that delegates and key stakeholders can leverage to achieve DAO-defined goals, principally by forming an operational mesh layer and assigning internal employees or negotiating and entering into agreements with service providers and individual contributors to facilitate initiatives within a targeted selection of the DAO’s current focus categories. OpCo’s mission is to negate identified frictions affecting the DAO’s strategy execution, such as allowing for the establishment of more operational roles for the DAO, facilitating efficient and competitive contributor and service provider negotiations and information flow between these parties, creating clear responsibilities for carrying out initiatives, and helping ensure the continuation of programs the DAO depends upon.

As it currently stands, the Arbitrum DAO is generally unable to move swiftly when it requires specialized contributors to execute a strategy, for which there isn’t a straightforward and low-friction approach, with these processes typically requiring a vast amount of effort from the supply side instead of being driven by the demand side. Moreover, many initiatives, especially more complex and wider-reaching ones, lack clear owners in charge of ensuring a holistic approach to execution and initiatives’ continuation, meaning that in the unfortunate case that a service provider decides/is forced to disengage from its duties, there aren’t always accountable individuals or entities that would push the initiatives forward. OpCo’s goal is to function as the entity the DAO can leverage to remedy these limitations and move forward in areas that require a more structured approach.

To cover OpCo’s operating expenses over the first 30 months, including full-time staff appointed internally, setup and other admin costs, as well as the DAO-adjacent entity’s oversight committee, this proposal suggests earmarking 34M ARB for the initiative:

  • 10M ARB released upfront
  • 24M ARB vested over 24 months. Once OpCo has officially been established and operationalized, 1M ARB will vest every 30 days

The 34M ARB includes a significant buffer and we do not anticipate that all ARB will be liquidated. Having said that, some capital might be converted into stablecoins before being put in a vesting contract to ensure that OpCo can operate in case of large market downturns.

If there is consensus among delegates, an additional 1M ARB bonus would be earmarked to OpCo’s oversight committee over its first two terms. We expect each term would be allocated 500K ARB, subject to a vesting schedule with a 24-month cliff following an oversight committee term’s end. A further explanation of the vesting structure as well as an in-depth breakdown of how the aforementioned figures have been derived are presented in the OpCo Financials and Costs section of this post.

Motivation

Presently, most DAO programs operate in silos, leading to, among other things, redundant efforts and non-existing cross-initiative resources. The DAO also generally depends on a single initiative leader for the continuation of a successful program, while some initiatives don’t even have clear owners, which adds significant friction to strategy execution. DAOs are also inherently disadvantaged when evaluating and swiftly engaging individual contributors or service providers, and Arbitrum is no exception.

This proposal aims to provide the DAO with the capabilities to nullify the abovementioned frictions by creating a DAO-adjacent legal entity—OpCo—functioning as a facilitator for strategies formed through a decentralized system.

Among other things, the DAO may choose to leverage OpCo to manage:

  • Operational support & project planning,
  • Project management of DAO initiatives,
  • Negotiations with service providers,
  • Allocation of resources across contributors & DAO-approved projects.

OpCo will grant the Arbitrum DAO better capabilities to bootstrap initiatives and secure the continuation and execution of them, while also expanding the total addressable contributor and service provider base as certain sensitive negotiations and deal terms don’t necessarily have to be disclosed publicly. Moreover, the DAO-adjacent entity will function as the operational mesh layer for individual contributors and service providers, streamlining communications and knowledge sharing across engaged entities and individuals.

Overall, the DAO’s past, current, and likely upcoming initiatives can be divided into 5 high-level categories: Governance Frameworks, Financial Management, Investments, Ecosystem Support, and Grants. The initiatives, their respective owners, and into which of the 5 categories they fall are visualized below.

It is of utmost importance that Arbitrum DAO maintains a decentralized and bottoms-up system for bootstrapping new projects, DAO contributors, and setting strategies, including creating and steering the DAO’s vision, mission, and purpose, as well as approaches to achieve the goals and decision-making. As such, these areas will fall outside of the OpCo’s central mandate. Instead, it will focus on increasing the efficiency of strategy execution through operational optimization and, in particular, activating and recruiting the optimal stakeholders, contributors, and service providers. For the avoidance of doubt, the DAO would always have ultimate authority over OpCo, with the entity purely being a helpful resource focused on streamlining wider-reaching and complex initiatives that require a more structured execution framework. We want to stress the importance of ensuring that one of Arbitrum DAO’s key differentiators—enabling new participants to join the ecosystem and make an impact, growing into well-established contributors—is conserved. This has historically been facilitated through distributed and grassroots grants processes, which would also fall outside OpCo’s mandate. Without Arbitrum DAO empowering its contributors and delegates, the DAO might sacrifice one of its core strengths, and we believe that entities such as SEEDGov, Entropy Advisors, Tally, etc., are present within the ecosystem exactly because of this empowerment.

Arbitrum has one of the most active and engaged DAOs within the industry, combined with help from the Arbitrum Foundation and robust programs for bootstrapping and fostering growth within the ecosystem. Although there is always room for improvement, these factors have enabled the DAO to allocate grants with positive results, sustaining a vibrant and welcoming ecosystem. When it comes to investments from treasury funds, the GCP has been established to facilitate capital allocation into the gaming sector, while the AVI is currently working on setting up a structure allowing the DAO to make venture bets across other verticals. As alluded to earlier, we also feel as though it’s crucial that the facilitation and implementation of governance frameworks continue being driven by decentralized actors, but these could be overseen by OpCo (e.g., OpCo could be the entity enforcing the code of conduct).

With that said, certain inefficiencies have been identified with respect to the Financial Management and Ecosystem Support categories. This is likely due to the operational frameworks enabling execution for these categories still being somewhat underexplored areas. As such, there is a lack of ownership, and the DAO has no structured way to frictionlessly operationalize contributors to push complex challenges forward within these verticals, often requiring a vast amount of Arbitrum DAO-specific knowledge and even lobbying efforts from the supply side instead of the demand side. Due to the current structure, active governance participants are generally purely incentivized to prioritize strategies that they are fit to solve. This has left certain critical domains unattended and reflects the need for an entity that could be mandated to help define the root causes of execution obstacles and provide solutions to remedy them.

The aforementioned inefficiencies are naturally amplified by the fact that the number of potential contributors is often restricted due to many initiatives requiring deep specialization. Finding the facilitators capable of managing initiatives end-to-end within these categories can be difficult. Oftentimes, the contributor and owner roles for initiatives are separated or there is not a clear owner at all, meaning that no one party is responsible for the continuation of these initiatives. For initiatives where the contributor and owner roles are the same or there is a clearly defined owner, the DAO generally relies on a single party for the continuation of the initiative. If the service provider or contributor, for any reason, decides or is forced to exit the ecosystem, there is not a well-defined framework for the initiative to be moved to a new owner.

OpCo’s main mandate is to enable the execution of DAO-defined strategies within the Financial Management and Ecosystem Support categories when requested by delegates. Typically, the current protocol for the execution of strategies and new initiatives within the DAO’s two aforementioned focus areas is as follows: (i) either the proposer defines the strategic approach and goals for the initiative or a working group is created that aims to outline these specifics such that a proposal can be created, with the working group also sometimes facilitating some or all of the work required for the execution of the strategy; (ii) if not done by the working group, the proposer or proposer-connected party is contracted to facilitate the strategy or the DAO runs some type of a procurement/election process to decide the service providers or contributors; (iii) once the work has been performed and the facilitators’ term ends, a continuation proposal is created if the initiative has a clear owner. Otherwise, individual DAO contributors are required to take charge of the initiative and push it forward.

If OpCo were to be created, it would primarily be leveraged to assume responsibility for phases (ii) and (iii). I.e., the DAO defines strategies or simply strategic goals. If a clear executor to reach the key objectives exists within the DAO, they could be chosen as a facilitator and would be contracted by the OpCo. If not, OpCo could be mandated to execute these strategies by either assigning existing internal employees, hiring new internal resources, or contracting outside service providers/individual contributors to perform the required undertakings. OpCo would have full discretion over hiring internal employees, while anyone interested in facilitating a DAO initiative could propose themselves (or another party) for that. Such a proposal must include a capital allocation to cover the facilitator’s expenses since OpCo’s budget only covers internal employees’ salaries. If approved through governance, the facilitator would then be contracted by OpCo as a service provider for the DAO. Depending on what is viewed as the most efficient approach, OpCo will have the ability to negotiate and run procurement processes both privately and publicly, which will further strengthen the Arbitrum DAO’s ability to attract and retain top talent, with all information that can be shared with the wider DAO being made available through oversight and financial reports.

If a DAO-ratified strategy or strategic goal that the OpCo is mandated to facilitate doesn’t have a specific end date, the DAO-adjacent entity would continue executing until the entity feels as though the associated goals have been reached or the DAO instructs the entity to stop executing by passing a Snapshot vote (simple majority with at least 3% of all votable tokens voting either “For” or “Abstain”). If the work is expected to be long-term in nature, OpCo would be responsible for ensuring that it can be continued by accounting for associated costs in its budget extension request.

For example, delegates could define a high-level events strategy by deciding the number of events the Arbitrum DAO should be represented at in 2025, whether the strategy facilitator is the proposer, a proposer-related party, an OpCo internal employee, or someone who is chosen through a procurement process, and approving the strategy’s costs that are not covered by OpCo’s budget (i.e., salaries if the facilitators are not full-time staff appointed internally, booking event venues, catering, etc.) through the typical governance process, after which OpCo plans the exact events to participate in, contracts the required service providers or operationalizes internal employees, and manages all involved stakeholders and other related aspects throughout the process.

Service providers and individual contributors that are currently contracted, or will likely be in the near future, with the Arbitrum Foundation and fall within the Financial Management and Ecosystem Support categories, such as SEEDGov in its role as the Delegate Incentive Program Manager, MSS members, firms forming the ADPC, Entropy Advisors, etc., should collaborate closely with OpCo once its operations are fully established and stabilized. Once fully operational, OpCo will have the capacity to project manage and oversee these initiatives according to its complete mandate. The long-term vision for this process is as follows:

  1. OpCo’s core team is hired, and operations begin;
  2. OpCo demonstrates product-market fit (i.e., the DAO is satisfied with the entity’s output) and that it has adequate processes, capabilities, and any other relevant functions to execute according to its complete mandate;
  3. OpCo is prepared to oversee full-time DAO operations, assuming existing contributor contracts through novation and managing new initiatives on behalf of the DAO (e.g., by ensuring that appropriate KYC measures and documentation are implemented).

In the case that an integral facilitator within the Ecosystem Support and Financial Management categories exits the ecosystem for any reason and an initiative is left without an owner, the DAO could likewise mandate OpCo to find a replacement solution.

It’s important to note that OpCo will not have the authority to enter into contracts with service providers or individual contributors for strategies not approved by the DAO through governance. OpCo internal employees cannot be contributors to DAO initiatives as individuals (they need to do so through OpCo), whilst contractors that facilitate a specific vertical and are signed to OpCo can be involved in other DAO initiatives. Full-time OpCo staff can only be appointed internally. However, as mentioned earlier, the DAO can roll any service provider or individual contributor into OpCo by passing an onchain vote. This vote has to request for capital to cover the facilitators’ expenses since when it comes to salaries, OpCo’s budget only covers internal full-time staff. OpCo is expected to work closely with Offchain Labs as well as the Arbitrum Foundation to ensure that scopes of work do not overlap.

Individual contributors, service providers, and other analogous entities are naturally free to go directly to the DAO to propose they facilitate a workstream and get paid for it without facilitation by the OpCo. However, if the proposed scope of work falls within OpCo’s mandate, it is expected that delegates vote against such a proposal if it can be better executed via OpCo’s involvement. Proposers will be encouraged to engage with OpCo before posting a proposal to the forum to align with the DAO-adjacent entity’s internal employees. OpCo’s internal employees will also proactively communicate with proposal authors and facilitators outside of OpCo such that there is no overlap between deliverables and the future plans for all initiatives are clear.

Finally, it’s crucial to mention that the introduction of a DAO-adjacent legal entity carries risks and burdens that shouldn’t be ignored. Among other things, it requires some trust in a select group of facilitators as they are responsible for hiring and procuring the correct contributors as well as operationalizing and managing the DAO-adjacent entity, OpCo’s setup and fixed costs are quite notable, and some amount of administrative work is required that otherwise wouldn’t have arisen.

Specifications

OpCo Operational Process

We expect the general workflow for OpCo to be as follows:

  • A forum discussion is initiated, with the owner of that discussion having communicated with the OpCo and defined whether the covered subject falls within the OpCo’s mandate, i.e., the Financial Management or Ecosystem Support verticals.
  • For verticals that are included in OpCo’s mandate, a discussion could broadly take one of the following forms:
    • A new key objective is introduced, but the roadmap to achieve that objective is unclear: Delegates have the option to create a Snapshot proposal to direct OpCo to produce an onchain proposal that defines the strategy to achieve the key objective(s), whether the entity would procure a facilitator or hire/operationalize an internal employee, as well as any funds needed to cover the strategy’s expenses, excluding OpCo’s internal employee costs. If approved, OpCo would begin facilitating the proposal created by itself.
      • Example: The DAO wants to run an incentive program to expand the ecosystem, but the incentive program’s structure and size are unclear. A proposal is passed for OpCo to operationalize internal employees and create the exact strategy. OpCo then defines, e.g., the amount of incentives to be distributed, what the application process to receive incentives looks like, how success will be measured, etc. A proposal to ratify the strategy, the incentives to be distributed, and the required workforce is then created. If passed, OpCo will activate the needed facilitators (program manager, data team, etc.) and strategy execution begins.
    • A new key objective is introduced and the roadmap to achieve that objective is clear: Delegates approve an onchain proposal that defines the strategy, whether the facilitator is the proposer, proposer-related party, an internal OpCo employee, or someone the OpCo procures, and the related expenses excluding facilitator fees for internal OpCo employees, after which strategy execution begins.
      • Example: The DAO wants to run an incentive program to expand the ecosystem, and the structure and size are clear. An onchain proposal to ratify the strategy, the facilitators, and the capital needed is then created. If passed, the required facilitators (program manager, data team, etc.) are contracted by OpCo, or OpCo operationalizes/hires internal employees, depending on the DAO’s decision, and the strategy is activated.

It’s important to reiterate that proposals and their execution can still be DAO-led end-to-end and outside of OpCo if delegates vote in this regard. OpCo is a tool for the DAO to leverage if needed. The DAO-adjacent entity is also expected to be proactive, meaning that internal employees are encouraged to actively give feedback in the forums and participate in opinionated discussions. Furthermore, if OpCo has bandwidth and recognizes an area within its mandated verticals that isn’t currently addressed, there is no clear owner for that area, and addressing that area would be beneficial for the DAO, OpCo can create a proposal that defines the strategy to address the targeted area, allocates funds to cover expenses excluding costs for OpCo’s internal employees, and authorizes the DAO-adjacent entity to operationalize facilitators to execute the strategy.

OpCo’s initial ARB allocation is meant to cover the entity’s setup costs and operating expenses, including full-time internal staff salaries, recurring administrative costs, and OpCo’s oversight committee. After OpCo’s core team has been hired, the entity has demonstrated product-market fit and readiness to execute according to its complete mandate, OpCo could be leveraged to help develop a DAO-wide budget, in which case the DAO-adjacent entity could hold the budgeted capital for at least the Ecosystem Support and Financial Management categories. In this case, when proposals related to these verticals are passed, no capital would have to be moved from the treasury as OpCo would be able to cover all expenses from its holdings.

Establishing OpCo

Exploratory work on OpCo’s legal structure has already been initiated, but further effort and consultation with key stakeholders, delegates, and the Arbitrum Foundation are needed to hammer down the exact structure. Any costs incurred by the Foundation for setting up the legal structure would be reimbursed from capital allocated to this initiative if this proposal were to pass.

OpCo’s initial term will tentatively be 30 months (around 6 months for setup and 24 months for operations from the entity’s official initiation date). The initial term’s length has been chosen to allow ample time for any unforeseen delays in establishing the legal entity, ramping up and stabilizing its operations, and will enable OpCo to focus on more complex and long-term strategies and internalize top talent as a longer initial term provides predictability/job security for employees. Once the first term is coming to an end, the executive-equivalent internal personnel together with OpCo’s oversight committee—the Oversight and Transparency Committee (OAT), introduced below—are required to collaborate to create the continuation proposal for the DAO-adjacent entity. This is expected to cover, among other things, the second OpCo term’s length, the required budget, and any changes or improvements that should be made. It should be noted that if OpCo is required to internalize a vast amount of facilitator roles before a DAO-wide budget is put in place, OpCo might have to create a proposal that would allocate additional funds as its initial exemplary budget has been constructed to cover up to 12 internal full-time employees at different salaries.

To enable OpCo to successfully fulfill its mandate, the entity should, among other things, have the following initial operational capabilities, internal employees, and resources:

  • Internal Finances, Financial Rails, and Controls
    • Appoint an external accounting and audit firm to maintain financial records and create yearly audits of financial statements and internal controls.
    • Capital conversion capabilities to be able to liquidate ARB into stablecoins. We expect the groundwork for this solution to be facilitated by the Treasury Management Committee.
    • Banking capabilities to be able to convert stablecoins into fiat currency and pay service providers not accepting tokens.
  • Legal
    • Hire a full-time, in-house legal counsel.
    • Obtain the required insurances that cover the DAO-adjacent entity as well as internal employees and the OAT.
  • Business-Critical Software
    • Acquire any needed collaboration and communication tools, accounting and financial management software, human resources management systems, etc.
  • Internal Executive-Equivalent Employees
    • Chief Chaos Coordinator
      • Ensures that OpCo has the required internal resources, employees, and contracted service providers such that the DAO-adjacent entity can operate properly and execute strategies mandated by the DAO.
      • Responsible for building and advancing the entity’s operational structure and managing workflows as initiatives are rolled into the organization and new focus areas within the Ecosystem Support and Financial Management verticals are introduced.
      • Similarly to other executive-equivalent personnel, accountable for adequate record keeping and internal controls.
      • Collaborates with any other executive-equivalent personnel and the OAT to produce bi-annual oversight and financial reports.
      • Together with executive-equivalent personnel and the OAT, in charge of creating the continuation proposal for OpCo’s next term.
    • Chief of Coins
      • Works with the relevant parties to produce a detailed, actual budget for OpCo, ratified by the OAT and the DAO. In the future, we expect the Chief of Coins to help facilitate a DAO-wide budget together with the relevant parties.
      • Before a DAO-wide budget is created, responsible for requesting additional funds to ensure the entity’s operations if ARB allocated for OpCo’s OpEx is close to being depleted.
      • Verifies that allocated funds are custodied in a secure manner and utilized as intended.
      • Makes sure that the OAT and the DAO have required visibility into ongoing expenses, how financials are expected to develop, and any other relevant considerations.
      • Monitors Arbitrum’s financial performance and makes new recommendations based on this information.
      • Closely collaborates with entities and individuals responsible for treasury management-related tasks, enabling the creation of a unified asset allocation and risk diversification strategy in line with the DAO’s vision, mission, and purpose.
      • Manages accounting, payroll, and payment infrastructure.

OpCo KPIs

We are looking for community feedback on this front, but some potential, apparent KPIs for OpCo (h/t @dk3 for most of these) include:

  • Talent Acquisition, Service Provider Selection, and Program Management
    • Decrease in time-to-hire, compared to the DAO’s previous structure
    • Employee engagement and satisfaction
    • Retention rate
    • Share of service providers meeting or exceeding performance metrics
    • Cost savings or added value generated
    • Diversity of service providers engaged
  • Ecosystem Coordination
    • Time to solve open questions and other ambiguities
    • Number of initiatives facilitated and their success
    • Level of community engagement and stakeholder satisfaction
    • Agility in adapting objectives
    • Share of OpCo-initiated strategies accepted by the DAO
  • Performance Tracking and Transparency
    • Timeliness of oversight and financial reports
    • Share of data and metrics made publicly available
    • Community engagement with reports

OpCo Accountability – The Oversight and Transparency Committee (OAT)

The OAT is a group of five individuals with the primary mandate to oversee OpCo’s operations, ensure the DAO maintains transparency into the DAO-adjacent entity, function as the coordinator between the DAO and OpCo, and establish clear communication channels with the other committees overseeing the separate DAO-adjacent entities such as the GCP and possibly the CapCo in the future should the DAO vote accordingly. More specifically, the OAT’s responsibilities include but are not limited to:

  • Accountability: Ensures that OpCo is not overstepping its mandate, over-hiring doesn’t take place, and execution is constrained solely to strategies approved by the DAO. Holds the executive-equivalent personnel accountable, helps produce and approves bi-annual oversight and financial reports, gives other relevant updates to the community when appropriate, reviews all relevant internal materials, and monitors that funds held in OpCo-related wallets are used correctly.
  • Operational Support: Provides assistance in the entity’s legal setup process, gives guidance on OpCo’s operational development, assists the executive-equivalent personnel in producing a continuation proposal for OpCo, and continuously guides OpCo-related contributors to align with the DAO’s will.
  • Hiring, Termination, & Authorization: The OAT, in collaboration with the Arbitrum Foundation, would hire the executive-equivalent personnel to the OpCo (the Chief Chaos Coordinator, the Chief of Coins, and any other positions of equivalent responsibility that may be introduced in the future) once the legal entity is established. The OAT will help onboard the executive-equivalent personnel and assist in the creation of a standardized onboarding process for future internal employees such that new hires’ expectations are managed properly. Once the first internal employees are hired, the OAT would act as the approving authority when OpCo enters into contracts with service providers or individual contributors, as well as greenlight salaries, larger spends, expenses, and budgets, having the authority to challenge decisions made within OpCo that may have a material, negative impact. Moreover, the OAT would be empowered to terminate service provider/individual contributor/etc. contracts as well as fire OpCo’s internal staff. If the OAT decides to take such an action, the concerned party will be suspended from their duties, and payments will be halted in accordance with applicable laws and regulations. Removal of OAT Members: OAT Members may be removed for a variety of reasons, including, but not limited to, a violation of a conflict of interest or other OpCo policies. In the event of a violation: (A) an OAT Member may call up an internal vote for removal with a memo detailing the alleged violation; (B) for a vote to remove an OAT Member to pass, it must have at least 4 out of the 5 OAT Members voting in favor; and (C) the ArbitrumDAO may also call for a vote to remove OAT Members at any time pursuant to a Temperature Check vote in accordance with the quorum and voting threshold requirements of a Temperature Check. The OpCo Team has the ability to call for a Temperature Check vote to remove an OAT Member as voted upon by the ArbitrumDAO. (i) The OpCo Team member may flag to another OpCo Team member that an election to remove an OAT Member via a Temperature Check vote is warranted; (ii) If such other OpCo Team member considers the request for removal to be warranted, then the OpCo Team member who originally made the flag may call for a removal election (subject to a 3 day feedback period, followed by a 7 day voting period) as a Temperature Check vote; (iii) In the event that a call to remove fails, the OpCo Team member who called for such Temperature Check vote cannot call another vote for removal for a period of 3 months. The process for electing a replacement for a removed OAT member will be equivalent to how the removed member was elected. I.e., if the removed member was elected through a DAO vote, the replacement member will be elected through a DAO vote. If the removed member was elected by the OAT, the OAT will elect the replacement member. A removed OAT member cannot be reappointed to the OAT. Further details on the OAT election process are given below.
  • Coordination: Actively engage with Offchain Labs and the Arbitrum Foundation to align on deliverables and serve as the liaison between delegates, key stakeholders, the wider DAO, and other DAO-adjacent entities’ oversight committees. The OAT will also initiate an OpCo oversight call for community members to get updates on the most recent developments and for them to have the opportunity to make inquiries. A separate forum section will be created for OpCo.

OAT Election Process

If this proposal were to pass Snapshot, the formation of the Oversight and Transparency Committee would commence. The DAO would elect 3 individuals to the OAT, with these individuals then promptly appointing 2 additional members with specialized skill sets to ensure all Arbitrum stakeholders’ interests are represented and the OAT’s proficiencies are varied and complete. Additionally, the Arbitrum Foundation will be given an observing and non-voting sixth seat on the OAT similar to the GCP. OAT members are expected to be able to contribute at least 10 hours per week to OAT-related tasks.

OAT applicants are required to apply as individuals to increase accountability. Applicants are required to disclose any current or possible future conflicts of interest in their applications, including but not limited to financial, personal, and professional. Applicants are also required to disclose all active contributor roles and payment streams related to the Arbitrum DAO that they, and entities that they have a professional or financial relationship with, have and are receiving. The application process for the 3 DAO-elected members would be initiated soon after the OpCo proposal passes an offchain vote and would run for ~3 weeks. Note that the application period can be extended if the size of the applicant pool is limited. A shutterized, weighted voting system will be utilized on Snapshot, and the 3 applicants with the most votes will be chosen as members of the OAT. The DAO-elected members should then prioritize appointing 2 additional members (required to be individuals as well). The 2 additional members don’t have to be appointed at the same time. The additional members will be added to the OAT optimistically, with the DAO having the ability to reject either/both of the additional members through a Snapshot vote (simple majority with at least 3% of all votable tokens voting either “For” or “Abstain”). All members will serve until the end of the first OAT term unless removed or they resign.

While the same internal OpCo employees as well as contracted service providers and individual contributors will continue in their roles across OpCo’s terms if the DAO-adjacent entity is extended in the future, the OAT’s term is 12 months, with a re-election process initiated when the OAT’s term has around 3 months left. The DAO would again choose 3 members who then appoint 2 additional members. If the new cohort is different from the previous one, the previous OAT members are expected to help onboard the new members when the term is coming to an end. There are no consecutive term limits for OAT members. As the OAT is mandated to assist in OpCo’s setup process, the first OAT term will be slightly longer than subsequent ones since it will include the period from when the initial OAT members are selected to the establishment of the entity, plus 12 months from the entity’s official start date.

Any individual may apply to the OAT. However, all appointed individuals that have a non-observing seat, as well as any companies with which these appointees maintain a professional or financial relationship, are required to relinquish any and all contributor roles within the Arbitrum DAO that were obtained through an official election or ratification process conducted via Snapshot or Tally. As long as an individual has a non-obseving seat on the OAT, they and their affiliates as defined above are prohibited from becoming an internal employee for OpCo, entering into service provider contracts with the entity, and applying to a contributor role related to the Arbitrum DAO that requires an official election or ratification process through Snapshot or Tally. Due to legal constraints, an OAT member and their affiliates as defined above cannot be members of another initiative’s or DAO-adjacent entity’s oversight committee. If an appointed individual or their affiliate as defined above sits on another oversight committee(s), they are required to resign from any such position(s) to be able to join the OAT.

OAT Applicant Requirements

Applicants must be individuals, not entities, and should possess familiarity with the Arbitrum DAO, governance processes, multisig operations, and a strong industry reputation. Additionally, candidates should demonstrate substantial experience and expertise in one or more of the following fields:

  1. Corporate Finance & Financial Management

    • Treasury Management
    • Finance / Accounting / Budgeting
  2. Operations & Strategy

    • (DAO) Operations / Business Development / Growth / Strategy
    • Procurement / HR / People
    • Crypto Law / Compliance

When applying to become an OAT member, applicants should specify the primary domain(s) from the list above in which they have the most experience and describe the nature of that experience. More details about candidates’ desired skill sets and professional experience, as well as an application template, will be posted by Entropy Advisors once the Snapshot to signal approval/disapproval of OpCo is underway and if the vote passes.

OAT Compensation Structure

OAT members must be properly compensated, highly incentivized to commit their full attention to the outlined responsibilities, and aligned with Arbitrum DAO’s long-term success. OAT members’ base monthly payment is $5K. We believe an additional ARB-denominated, vesting bonus payment should be allocated to OAT members to ensure long-term alignment and fair compensation. Subject to community feedback on this forum post, a bonus of 1M ARB designated for OAT members (excluding the Arbitrum Foundation in its role as an observer) will be included in the Snapshot vote for OpCo. At the end of the first OAT term, 50% of this ARB would be sent to a vesting contract that would release the funds after a 24-month cliff following the first OAT term’s end. Each individual who is an active member when the OAT term ends and was appointed as part of the dedicated election process would be allocated an equal share of the funds (100K ARB). If an OAT member steps down or is removed, they become ineligible for the bonus, in which case that ARB would be allocated pro rata to the replacing member. For example, if the initial OAT term’s length is 14 months and a replacement member is appointed with 7 months remaining in the initial term, they would be eligible to receive a bonus of 50K ARB subject to the same vesting terms as outlined above. The other 500K ARB would be allocated in a similar manner as described above for the second OAT term.

Governance and Compliance Requirements for OpCo’s Internal Employees and the OAT

The non-exhaustive list of governance and compliance obligations for OpCo’s internal employees and OAT members comprises:

  • Bound to be aligned with the community values listed in The Amended Constitution of the Arbitrum DAO, be committed to prioritizing the Arbitrum DAO’s needs, and act in absolute good faith and utmost honesty to fulfill their duties to the best of their abilities.
  • Required to maintain a public record of all actual and potential conflicts of interest.
  • Have to go through a KYC process and enter into an Agreement with the OpCo legal entity. The Agreement will cover, including but not limited to, appointment, conflict of interest, mandate, confidentiality, record-keeping, duty of impartiality, recusal, self-dealing prohibition, and ethical trading standards.
  • Required to sign any relevant non-disclosure agreements with respect to confidential information they might gain access to as part of their duties.
  • Bound to follow the Code of Conduct for delegates if the DAO votes to ratify it.

OpCo Financials and Costs

OpCo’s budget is intended to fund its initial 30-month term, with funds covering the entity’s legal setup, any outsourced professional services that are required for operations such as legal counsel and accounting/auditing services, other incurred operating expenses such as business-critical software and insurance, internal full-time employee salaries, and the OAT’s salaries.

This proposal would earmark 35M ARB (34M if the DAO doesn’t support the 1M bonus allocated to the OAT) to cover OpCo’s initial term, with an exemplary budget breakdown shown below. This is not an official budget, meaning that capital may be budgeted and allocated differently once the entity is stood up. For example, Employee #4 doesn’t have to be hired at a yearly salary of ~$130K. The exemplary budget’s purpose is instead to showcase that the 35/34M ARB figure isn’t arbitrary, and how the figure has been derived.

It’s also important to note that several line items, such as entity setup and legal services are notably larger than what the actual expenses are expected to be. This was done to account for any unforeseen events or worst-case scenarios which could require notable capital commitments. Moreover, several buffers have been applied to the 35/34M ARB figure to account for the risk of a decreasing ARB price, with the purpose of securing OpCo’s continuous operations even if notable market downturns materialize.

Funds will be transferred to an Arbitrum Foundation-controlled address and 10M ARB will be liquid immediately. Once OpCo’s legal setup and related aspects are finalized, 24M ARB will begin vesting to an OpCo-connected multisig(s), with 1M ARB vested every 30 days over 24 months. Some of the ARB connected to the vesting structure might be converted into stablecoins before being put in a vesting contract to ensure that OpCo can operate in case of large market downturns. The Chief of Coins, together with relevant parties, will be responsible for maintaining an adequate runway for covering USD-denominated expenses while accounting for market volatility, as well as establishing a low-risk management strategy for idle capital to enhance the impact of the allocated funds.

The DAO will have the capability to clawback OpCo’s funding and the OAT’s bonus payment, if allocated, at any time. Defunding OpCo entirely by the DAO requires a forum post outlining the rationale behind the request for change, allowing for a reasonable time for discussion, and a subsequent Temperature Check vote (simple majority with at least 3% of all votable tokens voting either “For” or “Abstain”). If a Snapshot vote to defund OpCo is passed, payments will immediately be halted and all earmarked funds returned to the DAO Treasury, with OpCo ceasing operations.

Snapshot Voting Structure

The Snapshot vote will utilize Basic Voting:

  • FOR: Establish OpCo and initiate the application process for the 3 DAO-elected OAT members.
  • AGAINST: Do not establish OpCo.
  • ABSTAIN

Timeline

  1. ~21 days: OpCo forum period requesting comments and time to edit the proposal with delegate/broader community suggestions.
  2. 7 days: Snapshot to signal approval/disapproval of OpCo.
  3. ~21 days: Application period for the 3 DAO-elected OAT members. Entropy Advisors will handle application template creation and will be ready to post directly after the above Snapshot is complete. It is worth noting that if at least 3 suitably qualified individuals do not apply within the ~3 weeks, this application period may be extended. These are critical contributors to the DAO’s operations, and the process of finding the right candidates should not be rushed.
  4. 7 days: Snapshot to elect the 3 OAT members. Once chosen, the 3 members will KYC with the Foundation, sign any required NDAs, and begin searching for the 2 additional members, who will also go through a similar KYC process and sign the required NDAs (all OAT members will sign a contract with OpCo once the legal entity is finalized). After all OAT members are KYCd and the required NDAs have been signed, they will begin the recruitment process for the Chief Chaos Coordinator and Chief of Coins.
  5. 21 days: Tally proposal to fund OpCo. Capital will be sent to an Arbitrum Foundation-controlled address.
  6. TBD: When the legal entity is finalized and the required internal employees have been contracted, OpCo will begin operationalizing and executing according to its mandate.
8 Likes

The advantage of this proposal is that it could help the Arbitrum DAO to deal more systematically with a number of important long-term projects, while avoiding the current fragmentation problem.OpCo provides a more structured framework for efficiently integrating and managing resources.

However, I personally feel that it is important to note that the creation of such an entity also brings certain administrative costs and risks, such as issues of trust in a small number of managers and whether it can be efficient in the long term, a point that has been echoed previously in the financial proposal 「[Non-Constitutional] Treasury Management v1.2 - #20 by kuiclub

34m ARB is a significant amount of money, it is recommended that OpCo provide a detailed plan for the use of the funds after launch and set up stage by stage KPIs to ensure that the funds are used effectively, the budget includes a larger buffer, although this will allow for market volatility, how can we ensure that there is true transparency in the use of these funds? In addition to semi-annual reporting, is there more frequent reporting on the use of funds, or is real-time financial visualization provided?

Recommendation:

  1. Introduce a stage-by-stage review system: OpCo can be set up to conduct a stage-by-stage review every six months to report back to the community on the progress of the current program and the use of funds, and allow the community to make adjustments based on feedback. This flexible adjustment mechanism will allow OpCo to adjust its direction in a timely manner when it encounters bottlenecks and avoid wasting funds.
  2. It is recommended that a stricter control mechanism be established in terms of governance and cost transparency, and that a more flexible adjustment space and exit plan be provided in order to adapt to future changes. A set of phased exit strategies should be formulated so that if OpCo fails to achieve the expected results, its responsibilities and budget can be gradually downsized, and its functions can eventually be transferred to other more suitable internal mechanisms of DAOs to ensure that funds and resources are not wasted.
1 Like

Hey. Thanks for this great proposal.

I completely agree with the view that ‘as it currently stands, the Arbitrum DAO is generally unable to move swiftly when it requires specialized contributors to execute a strategy, for which there isn’t a straightforward and low-friction approach, with these processes typically requiring a vast amount of effort from the supply side instead of being driven by the demand side.’

I very hope OpCo can address this pain point.

My only concern is that 34M ARB is not a small amount—even unlocking just 10M initially could create significant selling pressure in today’s low-liquidity market. Ethereum Foundation has faced heavy criticism for continuous ETH sales, even in smaller amounts, which have still impacted the market. I believe it’s essential to consider ARB’s liquidity and potential price fluctuations before deploying these funds; otherwise, ARB holders may end up suffering the most.

So my question is, could the budget be reduced appropriately, or is there a contingency plan to prevent a negative impact on ARB’s price?

1 Like

Hey lads,

Still have to read through the proposal - however, I noticed that the term DAO-Adjacent legal entity was used yet no clarity on the entity-type and jurisdiction was provided. Since you mentioned that this is already in process (which to be honest [I’m gonna be pedantic here] I do not like since the proposal first has to pass), can we get some clarity on this?

1 Like

Hi @immutablelawyer - The exploratory work that Entropy conducted with the Arbitrum Foundation is still in its early stages. While the legal entity will provide the DAO with necessary oversight, we believe this is not the core focus of this proposal at this stage. Rather, we believe that it should be on the mission statements and goal of the OpCo, to make sure it realizes the vision of what the DAO needs.

1 Like

Thanks for the proposal. The opCo is a very important topic! While I’m still digesting the concept, I would like to ask:

  • In the Budget we have an estimation of the team size (10 FTE) and their salary range. Is there a proposed internal organizational chart, so we can see the distribution between the areas OpCo will take care of?
1 Like

Gm Entropy. That took a long time to read it all. Only started scratching the surface and likely will go over it again with new observations and questions.

This is one of the key reason why we need the OpCo

Solving ownership is definitely first step. Accountability is right after that, most of the time they match, but if and when they match I can tell that so far we haven’t build any structure (including comp) that would favor proper accountability.

This is definitely the biggest risk of the OpCo: becoming an entity that just sucks everything internally. To me, the biggest work will be not to make it work, but to establish the right boundaries for it to not become the decision maker/executor in place of the DAO.

This will be quite tricky, initially, to evaluate from the DAO standpoint.

Could vote on the proposal just for this tbh


Now a few questions here

While you explain the why of this narrowed choice, i honestly see opco being able to help in other sectors as well. Do you think it would be possible to insert some degree of flexibility for which, if the dao really wants it, OpCo would be able to tap and help/manage specific initiatives outside the 2 categories above?

Does this mean that OpCo will be responsible for the overviewing of this contracted sp/individual? If not I might have missed the main value point of this, beside coordination.

All in all i think the proposal is well thought. I am unsure about the categorization of grants outside of ecosystem growth, would dare to say it could fall into it, but maybe is just semantic.

It poses, tho, the question: if the dao feels like this type of internalization is the way forward, for grants or other operation outside the opco structure, what would be the way forward? Enlarge this structure, or create a parallel one?

As said will come back again to all of this. For now thank you for tackling a topic that is not only needed but also complex to address, in a way that seems reasonable (defining a specific scope of operations).

1 Like

This proposal would be very important for the DAO. It would potentially change its dynamics in a variety of ways, mostly I think for the better. While reading the proposal some things crossed my mind which I believe are important to discuss.

Decentralization

The proposal specifies that the OpCo would only affect operational efficiency, not the strategic goals of the DAO; however, there is a risk of centralizing decision-making if not enough transparency is given. I believe that the OAT role would be key to make this function properly so there would need to be adequate mechanisms for it to be transparent, accountable and with well-defined roles and responsibilities. It should also be subject to checks and balances, with clear guidelines, so that there is no concentration of authority that could potentially undermine the DAO’s decentralization focus. If I understood correctly, the OAT will be responsible for the OpCo to operate with adequate checks on spending, staffing, and project prioritization so it will become a major position within the DAO structure. I am not sure how complex it would be for five persons to oversight every project and maintain a clear boundary between OpCo’s role and the DAO’s mission.

Costs and sustainability

I suggest refining the plan around staffing and with ROI-focused metrics. A clear outline on the number of hires and specific roles, with justifications for each, would help avoid over-hiring risks, maintain cost-efficiency and foster transparency which would reinforce trust and ensure the OpCo team remains accountable to the DAO’s mission.

A structured approach to measuring the ROI on the 34M ARB allocation is fundamental. Tracking detailed KPIs on hiring, employee productivity, project completion rates, and cost savings is a good start, but direct value-driven metrics will be key (ecosystem expansion, contributor retention, efficiency improvements).

On legal guidance, I am unsure of the costs, but 1.2M seems a high number. You mention full-time in-house legal counsel and preparation for unforeseen events or worst-case scenarios, it would be useful to know more about this structure/functionality.

To conclude

On a positive manner, I would like to add that this is overall a good proposal as it would make strategy execution more efficient and it would also likely attract enhanced talent to improve contributor quality.

On the other hand, we need to consider the risk of centralization decision-making which could potentially influence strategy rather than just execution.

It would be proper to expand on this assertion to make sure that it is kept that way. This is no easy task. It would need a very well-thought definition of the OpCos boundaries and their restrictions. It would also need frequent, profound reporting and transparent metrics for spending and audits.

Other things to consider and expand upon are the high operational costs, the complexity of the accountability process and the uncertainty of the ROI metrics for this investment.

I would like to add that this proposal is a way of institutionalizing work that is already being done by entities such as Entropy and others. By institutionalizing, could there be a risk of creating a pseudo-centralized structure, undermining Arbitrum’s decentralization?

Also, are we monopolizing operations? Could this limit competitive bidding?

Maybe I’m overanalyzing, or there are just too many things to consider, but these are the things that come to mind.

Cheers to all.

1 Like

Just to add a few comments to @Immutablelawyer on the legal design:

Firstly - this is not legal advice. I’m just a humble, working-class boy from the backstreets of Sydney. You’ve got some sharp lawyers on this, so consider this purely for entertainment value.

Overall Design

  • I’m a big advocate of KISS when it comes to an OpCo. Run it lean—these entities are internal service providers to the DAO.
  • Don’t get caught up in buzzwords. Though I admire our industry’s innovations, “BORG” is just a branding term for any DAO-aligned entity.
  • The “dark magic” in a DAO-aligned entity lies in its Memorandum and Articles of Association and intercompany agreements. Make sure to engage a specialist for drafting; only a handful of lawyers truly understand this space—do your research.
  • The proposal seems light on details about the level of deference to DAO governance (via qualified code deference mechanisms). I’d like to see more depth here.

Economic Substance

  • Whichever structure you choose, you’re likely to face economic substance issues—fortunately, the existing Foundation is a resource you should leverage.
  • A core challenge for DAO-aligned entities is structuring intellectual property ownership, licensing, and payment flows. Done correctly, this enables a streamlined operation; done poorly, you risk excessive on-the-ground overhead and administrative costs in response to local Economic Substance rules. Missteps here could lead to costly de-registration.
  • Intercompany and service agreements with the Foundation and contributors will play an important role on the IP and funding flows and therefore the Economic Substance impact. Make sure you have budgeted for these and they are drafted appropriately.
  • Each jurisdiction has quirks, but I usually stick to the tried and tested. Personally, I avoid Panama (see Sushiswap), Switzerland (see Diem), and any U.S. state (for obvious reasons). More details on this here.

Intellectual Property

  • Beyond economic substance, intellectual property deserves its own focus.
  • This extends beyond code copyright to encompass domain names, trademarks, patents, internal tools, processes, and innovations. All these elements need a permanent home with proper succession planning—thinking with a “what if we get hit by a bus” mindset is essential, especially early on.
  • Consider the full scope of assets, from email templates to password management tools, all of which require clear, long-term ownership and maintenance plans.
  • If you recall the WordPress litigation, you’ll understand the importance of covering all bases. Don’t be WordPress.

Legal Risk Mitigation

  • Arbitrum DAO’s decentralization is beneficial for transparency but not ideal for rapid off-chain legal response.
  • My experience with the Maker DAO patent case has informed my thinking a lot here: without an authorized entity to defend the DAO, it nearly faced a default judgment. Luckily, a colleague on the DAI Foundation board spun up a dedicated SPV at the last moment to handle the litigation.
  • The takeaway? Establish a legal defense and guardian strategy from the outset, and ensure Arbitrum DAO explicitly endorses it so the OpCo can act swiftly.
  • I believe the Arbitrum constitution could be enhanced to authorize the Foundation or OpCo (or both) to act on the DAO’s behalf and clarify the DAO’s role in funding or indemnifying legal action. Launching an OpCo could be an opportune moment to address these gaps and define the OpCo’s role relative to the DAO.
  • DAO contributors and delegates are legally exposed, a risk that exists across most DAOs. To address this, I developed the Legal Defence scope with Layer Zero at Maker DAO to protect ecosystem participants. Even if we can’t extend that level of coverage to Arbitrum DAO participants, consider how similar protections might apply to the OpCo. This goes beyond E&O insurance; it’s about anticipating legal risks for the entire DAO, with a specific focus on the OpCo.

There’s much more to cover under each point, not to mention tax issues better left to specialists—so that’s probably enough for now.

Cue the gigabrains over at Axis and @immutablelawyer to crack open some Zyn and give us the good sauce!

6 Likes

Naturally, agreed w/Paul’s comments above and I think this is a good overview of what to look out for.

In response to @raam 's comment as well I do not agree that legal should not be a main focus here. In this regard, my concern is that we’re falling behind industry-standard when it comes to spinning up DAO-adjacent entities via governance. In most if not all cases where this is done, the proposer (in the proposal) always gives sufficient clarity on the underlying legal structure to be used (Ref. dYdX Ops, MakerDAO, Lido Finance, Cosmos, ZKSync etc. - I can probably name 10+ others).

If we are to expect people to submit themselves for these elections then I think it’s only fair for them to understand the legal nuances so that they may seek legal advice prior to participating (I think this is only fair and ethical). This is not a GCP-like endeavour where I understood the need for non-disclosure, but a pure Ops-Related matters (similar to what the prev. ecosystems i have mentioned have done).

Axis Advisory actually recently drafted and published a summarial playbook on these matters for dYdX re. running DAO-Adjacent entities after helping run dYdX Operations for 1+ years so maybe you’ll also find this of help as well!

Thanks!

2 Likes

This proposal is a good idea, through the creation of a company called OpCo, to solve some of the “stuck points” in the implementation of the DAO, such as the lack of a clear person in charge, the decision-making chain is too long, and it is difficult for external contributors to join in a timely manner, etc. OpCo’s role is to make these processes smoother, so that the DAO can be more efficient in the implementation, negotiation, contracting, etc., to ensure the smooth implementation of the strategy. The role of OpCo is to make these processes smoother, so that DAOs can be more efficient in execution, negotiation, contracting, etc., and ensure the smooth implementation of strategies.
From this, we can see that the proposal is well-intentioned, aiming to improve the operational efficiency of DAOs and enhance their attractiveness and competitiveness. However, in actual operation, if the management of OpCo is not in place or the use of funds is not transparent, resources may be wasted. Seeing the above comments, people are most concerned about the management of OpCo’s funds. The proposal plans to allocate 34 million ARBs to OpCo, of which 10 million ARBs will be released first and the remaining 24 million will be distributed gradually over the next 24 months. While the DAO can oversee OpCo, OpCo has a high degree of autonomy, particularly in recruiting and contracting personnel. This raises concerns as to whether OpCo will be able to use the funds efficiently and transparently. If the market fluctuates, will OpCo be able to operate in a stable manner?
The DAO community needs to keep a watchful eye on OpCo’s operations to ensure that it is delivering the value it is intended to deliver, rather than becoming a “black hole” for funds.
Personally, I have some suggestions to improve the proposal

  1. Regular financial reports, transparency of funds so that everyone can track the use of funds, and budget reports.
  2. OpCo has a high degree of independence, especially in recruitment and contracting, and it will be important for DAO to monitor and audit key positions. Need to have a system of rules
  3. contingency measures need to be put in place to protect resources from being wasted. the structure needs to be very simplified and clear. the DAO should need to have the ability and constraints of a veto, and have contingency plans in place at all times if it doesn’t do a good job.
  4. If the proposal is adopted, there should be regular and periodic evaluation, including but not limited to people, use of funds, budget, etc., which can be in the form of scoring.
  5. no rules, need to have KPi system, clear performance indicators, such as implementation progress, financial efficiency, etc., to facilitate the DAO members to assess the performance of OpCo, to avoid waste of resources, it is recommended that OpCo to achieve a specific goal or KPIs when the gradual release of funds to reduce the risk of funding to ensure that each step meets expectations!

Overall, I agree with the proposal and am inclined to vote in favor. However, I would prefer to see something smaller that can grow over time in terms of responsibilities, budget, and team members. I don’t think starting with such a large setup and expense from the beginning is the best approach.

Thanks for the proposal!!

1 Like

Hi! Thank you for the detailed proposal. I like the ambitious plan of an OpCo for project management of the DAO’s initiatives.

I have some initial questions and comments.

At times, it seems the work overlaps with what’s expected of the ADPC and ARDC.

In the case of the ADPC, its focus is on establishing agreements with specific providers through the development of RFPs and budget approvals.

The ARDC has a defined selection of service providers for certain tasks.

What types of service providers are envisioned here if those related to audits (potentially also providers for events and RPC), as well as those for security, risk and research, are already covered by these entities?

Is the idea to absorb these responsibilities, or to wait until their mandate concludes?

I think this is a key issue to address. I’m thrilled with the idea of an organization that coordinates the DAO’s initiatives to promote efficiency in resource management and align initiatives towards consolidating the DAO’s mission, vision, and objectives.

I think this is very well-conceived but challenging to implement in practice. Take, for instance, the lessons from the ARDC by the DAO Advocate role L2BEAT, where they faced difficulties obtaining proactive engagement from the delegates, who where supposed to require work from the ARDC.

What you’re proposing here as a role for the DAO’s operations is even more abstract than what was required of the ARDC, and thus more complex.

I don’t have a clear solution because it is indeed challenging, but I’d like to see ideas on how this would be materialized in practice and how friction could be avoided to prevent paying for a large structure that, in practice, lacks concrete mandates.

This is exactly what I mean: if tasks are only initiated upon request from delegates, you’ll likely encounter friction and a lack of clarity regarding which tasks to execute. Perhaps it would be useful to predefine some tasks to get started.

Especially considering this point. It’s not clear when the OpCo should be involved and when it shouldn’t, leaving it up to the discretion of the delegates. Ideally, this should be more clearly defined, in my opinion, to prevent a repeat of what happened with the ARDC (which led the DAO Advocate to proactively make decisions on resource usage).

I’m still not entirely clear on this structure—I need to digest the proposal a bit more to fully understand the concept. On one hand, I find the idea of an entity dedicated to the project management of the DAO’s initiatives valuable; on the other hand, doesn’t adding another layer of control over ecosystem actors already fulfilling this role (e.g., SEED Gov) somewhat defeat the purpose?

If the idea is for the OpCo to be the PM and facilitator of initiatives, I think it should replace entities like SEED rather than simply oversee them (although SEED, for example, could later be contracted as a service provider to carry out specific tasks within the program).

This is good, but I’d frame it positively and clarify the requirements:

“The OpCo will only enter into legal agreements with service providers for strategies approved by the DAO, provided the following requirements (insert requirements) are met.”

Given the amounts requested, I think the KPIs need to be even more detailed. I’ll work on this over the next few days to try to propose some specific points.

I think incorporating the Oversight Committee is a great idea. My only comment pertains to the following:

I believe we should separate the individuals who will select such important roles as the exclusive-equivalents from those who will execute the oversight.

I propose that a committee be formed solely for the purpose of selecting those roles, which would then be replaced by the Oversight Committee. This way, you can ensure neutrality and independence.

I’m an IP lawyer, so I’m happy to help with any of the issues outlined here if needed.

Also, one area where the OpCO could also contribute is in the active management of the DAO’s IP. I can elaborate further on this point if needed.

Thank you very much for the proposal!

3 Likes

We appreciate this OpCo tool finally being pushed forward since counting on a legal entity is quite valuable for the DAO and something we consider should have been part of the DAO for a while as to prevent us all from legal issues tha may arise. We like to see that the OpCo also intends to fill gaps after proposals are passed and executed, nevertheless we have certain reservations about what it seems to be a centralization of proposals if they fall under an OpCo’s mandate scope (Financial Management and Ecosystem Support). We see some other delegates have also shared this concern and so we line-up with them to manifest our preoccupation about this.

It is true that the structure Arbitrum DAO currently has leads to so much friction and this needs to be addressed, yet we believe that we should avoid centralization when it comes to proposal of this kind. We do recognize the OpCo comes to help and facilitate the solving of these issues, but under the new structure we see a potential centralization that at least every single proposal that has to fall under OpCo’s scope should have OpCo’s members in between the proposer and the proposal itself. That’s why we would like to know if the incorporation of Opco will be mandatory in all the processes mentioned, or if it could be optional?

On the other hand, , should’n we consider some kind of pilot before starting with this program for a total amount of 30 months? We know it’s been stated that 6 months will be for the setup and the next 24 for operations from the entity, but most of what we see here is an oficial launching for something that haven’t been tested yet and considering everything that implies and the funds it requires, Maybe 1 year which is not a long period of time but it is also not a short period as well, and 6 months for setting up while the next 6 for operations and then and only then if the OpCo demonstrates that it is really useful then require for an extension up to 20 more months

Finally, we share @Larva 's concerns about this specific part of the proposal: How do we know that making a movement of this kind will not generate a fluctuation of the ARB token when it occurs?

2 Likes

if i can chim in, likely doesn’t make sense from an operational standpoint.
First, the 6 months to set it up while true are also potentially optimistic. We have becoming good in the dao in setting up legal entities (with the foundation first, gcp kinda replicated that, I assume up to some degree opco will have similar structure); at the same time you need to first find, and then hire, the key personnel. This means it could take more than 6 months, and so spending this much just to create something that might run for only a few months is a waste of money.
Furthermore, i don’t personally see in 6 months we will see the real effect. The new personnel will have to first get acquainted to the dao, ingrain in the mechanism, and then find synergies.

TLDR This is a long term play. I personally support gunning for 30 months right away.

3 Likes

gm, generally in support of the initiative as we try to create a more operational structure.

A couple of comments:

  • would love as a standard practice to have members of the opCo to also be rewarded in ARB based on project related KPIs. Ex: hitting a milestone by a specific date. We should start to reward accountability in everything that we do as a DAO.

  • I think @jojo expressed this already: it’s not clear to me what the difference between ecosystem support and grants is. Ex shouldn’t Questbook fall under ecosystem support.

  • Would also love @SEEDGov feedback as they have been running a similar initiative for the Everclear DAO and I’m sure they learned a lot from it

2 Likes

hey @maxlomu
There is a budget for employee bonus! but its a great idea to have it payed in ARB so they also have skin in the game.

Hello @Entropy! It’s a pleasure to finally see the much-needed proposal for OpCo for Arbitrum DAO. Thank you so much for all the hard work you’ve put into it; we know it hasn’t been easy.

We are slightly concerned that this option might create an incentive for “lazy” proposals that rely on OpCo to fill in the details. Don’t get us wrong—we understand the rationale behind including this option. However, it might be better to establish clearer boundaries on what can be requested from OpCo. To better illustrate our point, let’s take an example:

Suppose the DAO seeks a new long-term incentive program. With OpCo established, a delegate could propose a Snapshot vote stating, “Should OpCo work on a new incentive program for protocols?” without providing any notion of the execution strategy.

  • How can we be confident that OpCo would be able to facilitate such a proposal, with all it entails?
  • What if the DAO passes 20 such Snapshot proposals (i.e., mandating OpCo to facilitate an idea from scratch)? Where is the limit to OpCo’s operational capacity?

While this statement partially addresses the above concern, the point is that OpCo’s assessment of whether an area is beneficial for the DAO may differ from the DAO’s own perspective as expressed through Snapshot.

Does this mean that once fully operational, OpCo will act as the PM for all initiatives, effectively replacing current SPs?

If so, this objective conflicts with what is stated here:

and here:

We agree that there are initiatives without a clear owner and that certain verticals have struggled to attract contributors with the required background. Additionally, even where ownership/SPs are clear, there is no established procedure to continue a program if the SP decides to step down or is forced out.

That said, and while we acknowledge our position may be biased since we are currently Service Providers for the DAO, we believe OpCo should only manage programs when no viable service provider or clear ownership exists and it should supervise those that do.

We believe that roles within the OAT should be more clearly defined to avoid having all members with similar backgrounds, ensuring sufficient diversity to cover all possible verticals (e.g., limiting members by field).

Regarding Budget and Disbursements

  • Despite the bonus, OAT members’ compensation seems low. This is a critical role for both the DAO and OpCo, effectively overseeing all operations and requiring candidates to forgo other jobs/positions for full-time commitment. The opportunity cost for joining the OAT is high, and we worry that a low base compensation might deter potential applicants (who must also have a seniority level commensurate with the role).

  • Indeed, within the provided budget example, the five OAT members would account for only 5.7% of the total excluding the optional bonus (almost 1.5% per member), while the employees they supervise might potentially earn more.

  • Based on this example as a real scenario, monthly expenses per term are around $500,000 (approximately 1M ARB), while the monthly unlocks are 1M ARB (barely enough at current prices). We mention this because it may be worthwhile to review the unlocking rate to avoid situations like the one with AF, where the vesting unlocks were insufficient to cover committed expenses and/or support new initiatives. Our concern is that 1M ARB per month might restrict OpCo’s capacity to expand, creating an operational bottleneck. We understand that part of the initial 10M ARB disbursement could mitigate this situation during the first term and that costs are purposefully overestimated in this example (such as legal expenses, which considers the worst-case scenario), but we wanted to bring this up to avoid OpCo potentially being limited by a vesting scheme.

  • Do you think it is possible to establish predefined salary ranges for the different roles? (beyond the chiefs). We understand that this isn’t easy, as the final salary for each position will depend on a variety of hard-to-predict factors, but it would be valuable for the DAO to have a sense of which roles warrant a $100k salary per year versus those that merit $200k (as an example).

The following reflects the views of the Lampros Labs DAO governance team, composed of Chain_L (@Blueweb), @Euphoria, and Hirangi Pandya (@Nyx), based on our combined research, analysis, and ideation.

This proposal is essential for the DAO, as it presents many possible changes, most of which would likely be beneficial.

But is a mammoth task that is undertaken. Our concern is whether it should be broken down into separate proposals to make it more effective and accountable?

We appreciate the thorough work that went into creating the current structure of Initiatives, which was much needed given the many programs running simultaneously.

While the proposed KPIs include operational metrics, we suggest adding specific outcome-based KPIs that capture the value OpCo brings to the DAO, such as ROI on OpCo-managed initiatives or the speed of implementing strategies compared to previous methods.

On coordination with Offchain Labs and the Arbitrum Foundation, it might be useful to discuss role definitions before finalizing the OpCo committee. Clear role allocation upfront would help prevent overlaps and keep the community informed about the distinct responsibilities of each entity.

For budget allocations, flexibility is key. However, setting clear thresholds for reallocations or maximum variance limits in major categories could strengthen budget accountability.

To determine “product-market fit” for OpCo, establishing a set of measurable criteria could provide consistency in evaluating success. Without clear benchmarks, perspectives may vary widely across stakeholders.

We also found the titles and responsibilities of internal executive-equivalent employees innovative. Are there any specific qualifications or skills listed for these roles, or candidates under consideration who fit the requirements?

Regarding legal needs, is a full-time, in-house legal counsel necessary? Clarifying the specific responsibilities they would cover would help assess the need for a full-time position.

In general, we acknowledge the work done for drafting this proposal and support the direction of this initiative, as it aims to build a more structured and operational approach for the DAO.

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Thanks for all the work put into this… it is a lot! Here are some comments

Initiatives aren’t strategies

We’ve had many initiatives approved, which didn’t belong to an overarching strategy & budget. For example, liquidity incentives with no funding or driving expert able to allocate funds or request work like marketing support and data analysis.

This statement here is the crux of the problem imho:

It’s really about creating a structure which solves the “holistic approach” to delivering outcomes problem. I believe workstreams with repeatable governance processes and a few key governance principles could do this as well as the OpCo. I do think we need an entity though to hire the people in and supporting the neccessary roles.

Facilitators vs Executors

The number of people who can be hired should really be explicit. For example, you could say that a new strategy would require a paid steward, but no more than one without the DAO explicitly voting to add another role.

Only things that the private market won’t provide should be handled by the government. This proposal is officially creating a government entity. What are the functions that our market won’t provide?

I believe it is only “Governance Operations” which requires people dedicated to Arbitrum. This is not just operations, but includes:

  • Facilitating sensemaking to set and reassess priorities
  • Acting as a counterparty or project manager and oversight to workstreams (approved budgets to spend on clearly defined outcomes) and initiatives (approved budgets to be spent on clearly defined scopes of work)
  • Optimizing record keeping and reporting
  • Facilitating fair governance processes like elections
  • maintaining policy documentation and processes for evolving local law
  • Facilitating collaboration between entities using incentives and consequences

I’d much prefer not creating a government entity that is designed to bloat from the start. A good first step is clarifying roles and responsibilities. Then clarifying the processes that can legitimately add more roles, change responibilities, and update legacy processes when the environment changes.

Addressing Known Failure Modes

Something needs to prevent this organization from becoming as effective as the DMV. This isn’t trivial - its a organizational design pattern that has repeated itself every single time forever.

The pattern is:

  1. People call for efficiency because the government entity is spending too much, inefficient, etc
  2. The results of this push are that the government entity needs to prove its efficiency or value by more clearly demonstrating its ability to hit milestones and KPIs.
  3. The government starts hiring more people rather than outsourcing to the community because it is a sure way to be able to hit their milestones and KPIs.
  4. People see bloating government entity and less opportunities in the ecosystem and think this isn’t fair.
  5. People push to defund the government entity and let private entities take over.
  6. The compromise is low salaries and low expectations of the government entities which aren’t very efficient.

I’m here to get rid of most government and replace it with better onchain systems. What impetus will we have to drive DAO towards continued decentralization? How will the CEO of OpCo be more incentivized to ensure that a cartel cannot rug builders than they are to follow the normal path which pressures government entities?

How do you envision that the OpCo will expand the number of ecosystem contributors outside of OpCo? Would you accept people buying ARB to use in governance as a KPI? Maybe a gini co-efficient? Maybe a ratio of ARB spent on government vs the economy?

Sharing a Language

In the Viable Systems Model, OpCo should really stick to facilitating the DAO through processes to accomplish level 4 and conduct most activities at level 3. It should only sign paychecks to level 2 and be the counterparty for continuation if needed at level 1.

This image may not be perfect and we may use different language. Where I’m saying “pillar opportunity” you might say “strategy”, but the connection of the meta-system to the operational system is critical.

What is the mandate?

What is the entity’s mandate? This mandate is referred to a lot here, but I can’t find it clearly stated.

Connection to Code of Conduct

Would this be enforceable by the code of conduct? Could a delegate lose payment based on voting for things they believe are needed?

Why No Term Limits

Why is this design decision being suggested?

Conclusion

Here are the core issues I have with this as it stands.

  1. I believe it could be done a lot more efficiently. 34 million ARB is a lot. Thank ARB got turned down for being able to allocate 30 million ARB to the community for a cost of 3 million in service fees. To date, it has delivered 5 million ARB to over 400 grants gaining well over 300 deployments on Arbitrum with hundreds of thousands of total users. It did this for service fees of just over $500k total.

This government will cost 10 million ARB to setup and 24 million ARB to run for 2 years and doesn’t include any funds going to the builders in the ecosystem.

  1. I’d like to see the exact mandate.

  2. I’d like to know what the limit for growing this government is? What measurement will we use to say “ok, this thing is getting too big”? I’m less concerned about the number, and more interested in seeing that thought has been directed towards this problem.

  3. Questions from above:

  • What impetus will we have to drive DAO towards continued decentralization?
  • How will the CEO of OpCo be more incentivized to ensure that a cartel cannot rug builders than they are to follow the normal path which pressures government entities?
  • How do you envision that the OpCo will expand the number of ecosystem contributors outside of OpCo?
  • Would you accept people buying ARB to use in governance as a KPI?
  • Maybe a gini co-efficient?
  • Maybe a ratio of ARB spent on government vs the economy?
  1. I just read the Ethereum Foundation report and I love this concise values statement at the beginning. What would be the core values of this OpCo?

Overall, thanks for your time. I know my comments may be tough, but they are good hearted. If we can answer those questions, I am supportive. I’m also willing to commit to the success of OpCo if the DAO votes for it, even if I do not.

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