Thank you to everyone who contributed invaluable input on this proposal and for your patience during our extended response process. The timing with Devcon was somewhat unfortunate, but the team is now caught up with everything and eager to move this proposal forward. Let’s dive in!
Firstly, there’s one important open question we’re seeking to get community feedback on:
Many have expressed willingness to liquidate ARB into cash equivalents in advance to cover OpCo’s budget and provide the entity with financial stability even during market downturns. On the other hand, we’ve also recently seen some delegates being concerned over the DAO liquidating too much ARB in a short period of time. Our opinion is that it would be important to secure OpCo’s financial stability and the conditions to do so have now become more favorable with the recent market upswing. As such, contingent on community feedback, we’ll make the following further edits to the proposal:
- Allocate 25M ARB to the initiative (subject to change in either direction if market conditions change notably between Snapshot and Tally vote)
- Set aside 4M ARB to a bonus pool for internal employees and the OAT (3M reserved for internal employees and 1M reserved for the OAT)
- Liquidate ARB into $12M worth of cash-equivalent assets (at ARB’s current price of 0.80$, this would require 15M ARB) over a time period of up to 6 months following the proposal having passed Tally at the discretion of the liquidating party with a mandate to minimize price impact
- After subtracting the bonus allocation and the liquidation is complete, the remaining ARB will be immediately transferred back to the DAO treasury
If the feedback towards the above solution is negative, we’ll maintain the ask of 35M ARB to account for price and market volatility.
The following edits have been made to the proposal itself on November 27th, 2024:
- The vesting structure has been changed as follows:
- Each OAT member’s monthly base salary has been increased to $7.5K and the 1M ARB vesting bonus allocation has been added to the proposal.
- Added text about internal employees’ bonus payments having to be made in ARB, be performance based, and must include a vesting structure.
- Added text to clarify that delegates can expand OpCo’s mandate into additional initiative categories with the exception of investments through a Snapshot vote.
- Added text to clarify that OAT’s mandate includes creating KPIs for OpCo once the entity is at a point where this can be sufficiently done, as well as designing and producing quarterly updates to the community (such as how OpCo is progressing towards its KPIs, any operational developments, etc.)
- Added text to clarify that internal full-time employees are strictly prohibited from having engagements with other DAOs, organizations, entities, or comparable affiliations.
- To combat OpCo having to take on half-baked, overly ambitious, or “lazy” proposals, or running out of capacity, we’ve added the following text to the proposal:
- We’ve included text to clearly indicate that residual ARB (as well as capital in other denominations) will be sent back to the DAO treasury at the end of OpCo’s first term if the initiative isn’t renewed. Moreover, a clarification that ARB associated with this initiative cannot be used in governance and must be delegated to the Exclude Address where feasible was added.
- We included the following clause to the proposal to limit the risk of OpCo influencing governance:
Now, to address some questions:
It’s possible that real-time financial/oversight dashboards and other onchain tooling are introduced in the future. The DAO can always instruct OpCo to explore the feasibility and benefits of adding such solutions through governance in the future. However, at this point, we feel as though this proposal is already getting quite detailed and we can’t capture everything at once, while there also are some operational structures and processes that need to be set in place before it’s feasible for real-time dashboards and other onchain tooling to be implemented.
We don’t expect OpCo to provide extensive monthly oversight reports as such updates are a time-intensive endeavor and would likely cause some friction for the entity’s operations. For OpCo to be successful, the community has to elect people to the OAT who are highly skilled and can be trusted to oversee the entity’s usage of funds and hiring processes. The OAT’s mandate already includes conducting oversight calls for OpCo, where community members can acquire relevant information about the entity’s developments. Following community feedback, we’ve expanded this mandate to include quarterly updates to the community as well as designing relevant KPIs for the entity once it is at a point where this can be sufficiently done. We’ve also changed the vesting mechanism, which has been replaced by an upfront capital commitment and includes something akin to a “capital call” structure.
This responsibility falls within the OAT’s mandate. One of the benefits that OpCo introduces is that it enables delegates to focus on actual strategy creation instead of having to spend resources on all minor details related to execution. Requiring delegates to monitor all of the actions taken by OpCo would, in our mind, be inefficient and remove some of the benefits that OpCo would bring about. With the combination of oversight from the OAT and bi-annual transparency and financial reports as well as quarterly updates, delegates ought to be able to trust that the entity is delivering value and that resources are not wasted while having the ability to shut the entity down if it isn’t performing.
Arbitrum DAO has historically not utilized notable capital to develop its operations, which could be argued to be the main reason why certain inefficiencies still exist within the system. The fact of the matter is that setting up and running operations in a high-quality manner isn’t free, and we (as well as many other delegates who served as inspiration for this proposal’s creation) feel as though this is a necessary and important area to invest in. Naturally, the entity’s costs scale only when its mandate is expanded through governance—the idea behind the budget structure is to enable OpCo to grow with the DAO’s needs. We also find it important to note that ROI probably isn’t the correct metric to look at here since, among other things, it omits intangibles and other secondary value additions that derive from enabling the DAO to perform strategy execution more seamlessly and efficiently.
We expect that an organizational structure will be set in place by executive-equivalent internal employees together with the OAT. This has to be done as things develop in our opinion, such that OpCo isn’t locked in a certain, pre-defined structure that isn’t optimal for the DAO’s needs as they arise. We’d also like to re-emphasize that the budget is exemplary, meaning that the team size and each employee’s salary will almost certainly be different as the entity actually begins hiring people. The purpose of the exemplary budget is to show that the ask isn’t arbitrary and what assumptions it is based on.
When it comes to predefined salary ranges, if there is a strong demand for this from delegates, we could do this. However, we think that there is a high likelihood that this would again restrict OpCo’s ability to operate since 1) it’s extremely difficult, if not impossible, to exactly predict what all of the roles will be during OpCo’s first term that it needs to hire for and 2) if OpCo finds a perfect candidate for a certain role but we’ve defined the salary range too low or too high, the entity will be disadvantaged, have to hire another candidate, or might even struggle to fill the role. As the OAT will be greenlighting OpCo’s hiring decisions, the most important aspect to focus on is attracting the correct individuals to the committee.
Thank you for the great call out. We’ve added language to make it abundantly clear that this would be possible.
When it comes to the relationship between OpCo and service providers, the entity’s main value-add is its ability to function as an information-sharing layer and ensure that service providers are working in a synergistic way in the correct direction. A good theoretical example would be related to incentives. Let’s say OpCo is tasked to oversee such an initiative, and so contracts a data provider and a risk researcher to facilitate this. OpCo then acts as a project manager, receiving regular updates from the SPs while guiding and coordinating across them.
The OAT’s role isn’t directly to oversee or project manage every initiative facilitated through OpCo. This responsibility would instead fall to the entity’s internal employees. To give a high-level example, say the DAO wants OpCo to facilitate Developer Relations. The entity could then hire a person for a leadership role to oversee the initiative and act as a project manager for service providers and individual contributors contracted to enable the execution of the initiative. In contrast, the OAT’s responsibilities are more connected to holding internal employees accountable by, e.g., ensuring that OpCo isn’t overstepping its mandate or that over-hiring isn’t taking place.
With the exception of initial core positions (Chief Chaos Coordinator, Chief of Coins, OAT, and likely a full-time legal counsel), we feel as though tightly defining specific roles beforehand is risky and could cause more harm than good since we expect that emergent needs will arise as OpCo’s role within the DAO develops. Again, what is instead of great importance is that the OAT is resourced with highly skilled and trustworthy individuals since the committee is responsible for preventing the risks you mention and reporting all relevant aspects back to the DAO.
The full-time, in-house legal counsel is included under the legal services line item. We arrived at this number and a full-time, in-house legal counsel following consultations with the Arbitrum Foundation as well as a few independent legal firms. As you point out, the figure also includes a buffer for any unanticipated incidents, and as such, we don’t expect the actual legal-related expenses to be as extensive. We’ve also been advised that some legal deliverables can quickly become quite notable based on immediate demands, such as drafting new contracts, ensuring compliance, and consultations on emergent matters (e.g., see legal-related comments within this thread to get a sense of some of the aspects that require focus). It’s crucial that OpCo has a budget to cover such activities without having to take shortcuts. Another notable legal-related deliverable is creating OpCo’s Bylaws and other legal documents. Underbudgeting on this front would be a major mistake in our minds. When this deliverable is done correctly, it will also address the concern raised here:
Thank you @Pablo for the extensive comments on the legal design front! We’ll make sure that all of these points are taken into consideration by the relevant parties that are facilitating this process on the legal front.
As discussed async, this is not the case. OAT applicants would be the first individuals to get involved in this initiative. The OAT’s mandate includes providing assistance in the entity’s legal setup process, meaning that they wouldn’t blindly apply to a legal entity without knowing its structure and geographical location. When it comes time to hire the first executive-equivalent personnel, the entity’s structure and location will already be known. Having said that, based on preliminary conversations, the most likely legal structure that would be utilized for OpCo is the Cayman Islands Foundation Company.
The idea is that the DAO and OpCo converge on the most efficient solution. The idea is not for OpCo to internalize everything, especially in situations where existing service providers are already performing to a high standard. Using the ARDC as an example, we envision that if the DAO is satisfied with version 2, these service providers are eventually contracted into OpCo once it has been operationalized and has adequate processes, capabilities, internal controls, and any other relevant functions in place for it to perform according to its complete mandate (or ARDC-related SPs could alternatively be whitelisted by OpCo and utilized when needed). The benefit of doing so is that the relevant internal OpCo employees can then coordinate across service providers and the DAO, so no operational roles have to be filled for such an initiative, and in the case that one service provider drops out, OpCo can ensure continuation by swiftly finding a replacement solution.
In our mind, this will come down to electing highly skilled individuals into the OAT and the executive-equivalent roles within OpCo such that the entity will be able to operate with a wide mandate. One important difference between ARDC v1 and OpCo is that the latter is required to be proactive (we’ve added clearer language around this for the updated proposal), meaning that if delegates aren’t actively engaging the entity, it’ll have the ability to push the ecosystem forward by itself, given that the initiatives that come out of OpCo are accepted by the DAO. Similar concerns were raised in connection to Entropy’s proposal to enter into an exclusive deal with the DAO as the scope is somewhat wide, but we feel as though we’ve been able to produce quite a lot of value-add initiatives proactively (although, we might naturally be biased here).
The idea is not to add a layer of control but instead a layer of information sharing and coordination which also secures the continuation of programs. Naturally, as mentioned in the proposal, some amount of administrative work which otherwise wouldn’t have arisen will emerge. However, the way we see it, this is something that all organizations require and only roles and areas that aren’t currently covered or aren’t done so to a satisfying degree would be internalized by OpCo if it is seen as the most effective solution by the DAO. For example, the CFO-type role—the Chief of Coins—would be spearheading financial management by, among other things, bringing together STEP and possibly the treasury management initiatives that just passed Snapshot to a cohesive strategy, facilitating the creation of a DAO-wide budget, and continuously monitoring Arbitrum’s financial performance and making recommendations to the DAO based on this. This is just one example of where the entity could be extremely useful by filling an operational gap the DAO currently faces.
As mentioned in the proposal:
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There are several reasons why the 30-month initial term was chosen:
- The sunk costs of setting up OpCo should not be disregarded, and we believe that the entity should be given enough time to properly mature before the OAT together with executive-equivalent personnel are required to post a continuation proposal.
- The DAO will always have the ability to shut the entity down at any moment, and as long as the OAT is staffed with highly skilled and Arbitrum-aligned personnel, delegates will have proper visibility into when this action should be taken.
- Given the DAO could shut down the entity at any moment, it’ll already be difficult enough to hire highly skilled executive-equivalent personnel (although this will also incentivize them to perform well), but adding a short initial term where these individuals might not even have enough time to properly prove themselves since the setup process will inevitably take some time would add an enormous amount of friction to the hiring process.
- Before posting this proposal to the forum, we gathered a notable amount of feedback from delegates and key stakeholders, converging on the 30-month initial term based on this information.
- To our knowledge, there are no comparables within the industry for an entity such as OpCo, which has a wider scope than, e.g., the dYdX Operations subDAO or Lido’s Alliance Program. In our mind, the aforementioned also supports OpCo having a longer initial term—it’ll likely take more work to operationalize OpCo before it can perform according to its complete mandate compared to other DAO-adjacent entities. The GCP’s initial term is 3 years and we consider that initiative to be similar in magnitude to OpCo.
This is exactly what the two bonus allocation pools are for. When it comes to the OAT, we’ve increased each member’s monthly base salary to $7.5K and included the 1M ARB subject to a vesting schedule in the proposal. Since the OAT will be so community-facing, we feel as though the eligibility structure and vesting schedule that are currently in place are sufficient as it’ll be clear to delegates if the OAT isn’t performing on a high level. For OpCo’s executive-equivalent employees, we think it’s more suitable for the OAT to structure each position’s bonus payment as they will have direct visibility into how the aforementioned employees will be performing and what areas they should be focusing on. In terms of OpCo’s other internal employees, we envision the bonus structure being drafted by the executive-equivalent employees together with the OAT. We’ve added text that clearly conveys that the bonus payments have to be made in ARB and with a vesting structure.
Although undeniably similar, we’ve defined grants as initiatives where the recipient is receiving capital directly in exchange for building out technology solutions as well as one-off, retroactive capital allocations to recipients for strengthening and protecting the community, while the ecosystem support category comprises structured programs that are more operational in nature. We made this distinction since in our opinion, it’s of utmost importance that the DAO maintains a decentralized and bottoms-up system for bootstrapping new projects and DAO contributors. Having said that, based on community feedback, we’ve included text that conveys that OpCo can expand into focus categories outside of its core areas (excluding investments) if the DAO so wishes.
This is great feedback—thank you! We think that one of the benefits that OpCo would offer is that it could seamlessly be instructed to perform a strategy that the DAO wants to see implemented. If a key objective is introduced but the roadmap to achieve that objective is unclear, i.e., the actual execution strategy is undefined, the DAO must first instruct OpCo to define the strategy and any additional funds that are required to potentially hire service providers. However, we completely agree with your concern about OpCo reaching its operational capacity. As such, we’ve added language that the OAT together with OpCo will be responsible for keeping the DAO informed of how much bandwidth the entity has and when current projects are expected to end such that if there suddenly is a spike of new proposals, delegates will be able to prioritize and vote on the ones they find the most important. Additionally, if a proposal introduces a new key objective with a clear roadmap but that roadmap is ambitious, the OAT together with OpCo should signal how feasible it is for the entity to execute the proposal. If it’s determined that such a roadmap is feasible, the OAT together with OpCo would also communicate whether or not the entity needs more internal resources to do so. Lastly, we anticipate that if a proposal is posted that is too high-level or ambitious for the entity, such as simply stating that OpCo must onboard 10 million new developers within 12 months, delegates would vote against such a proposal, which is why governance will continue being a highly important part of the ecosystem.
This part of the text deals with a slightly different angle. Instead of this being about OpCo/the OAT signaling to a proposer how feasible a proposed initiative is, it’s supposed to convey that OpCo will be required to be proactive when it has the bandwidth to do so and notices an area that should be addressed, creating a proposal itself that defines the strategy through which the identified problems can be addressed.
This part of the text is supposed to convey that even after OpCo has operationalized, it’ll likely take some time to set up the proper checks and balances as well as internal capabilities to enter into service provider contracts and act as a counterparty to service providers. We indeed envision that OpCo would act as a PM for service providers that are rolled into OpCo, but this doesn’t mean that these roles would be internalized unless the DAO chooses so. Instead, in this case, OpCo’s role would be acting as an information layer between SPs, ensuring, among other things, that no redundant work is being performed and SPs across different initiatives are synergistic. In other words, the idea is exactly what you wrote here, although instead of supervising we hope it would be more about information sharing and potentially guiding:
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We agree with this and that is why we introduced a structure where the DAO would choose 3 members through a single Snapshot vote, with the elected members then choosing 2 additional members that would be accepted optimistically by the DAO to ensure a well-diversified committee. Entropy will be posting a more detailed application template once the Snapshot to signal approval/disapproval of OpCo is underway and if the vote passes.
Having said that, we don’t have a strong opinion on whether one or three separate Snapshot votes should be held, and are more than happy to change the structure based on community feedback.
The proficiency and expertise levels should be similar to those expected of C-suite executives at major international companies. The skill sets should naturally be such that these executive-equivalent employees can fulfill and exceed expectations in the duties listed in the description given in the proposal. We’ve already identified a few potential candidates for the executive-equivalent positions and will be working closely with the OAT and the Foundation to facilitate the process. Ultimately, the OAT and the Foundation would be the decision-makers when it comes to setting up the official recruitment process as well as choosing the ideal candidates.
When it comes to the executive-equivalent employees’ salaries, it’s important to reiterate that the laid-out budget is exemplary, meaning that, e.g., the Chief Chaos Coordinator’s salary will not necessarily be $75K per month once hired. The purpose of the exemplary budget is to showcase that this proposal’s ask isn’t arbitrary and to show how it has been derived. Nevertheless, assuming the Chaos Coordinator would be hired at $75K per month, the rate would still be on the lower side compared to positions that require a similar skill set and experience. To give an example, the pure cash compensation for Coinbase’s executive officers in 2023 ranged between $730K and $1M, while all officers naturally also have bonus structures in place that are significantly larger than the base salaries. This data can be found here. It’s also important to remember that working for OpCo could be seen as much riskier than for a more traditional company, which should naturally also be reflected in the salaries that employees at OpCo receive.
To us, OpCo should be viewed more akin to a DAO-owned and controlled company. One of the key things DAOs seem to struggle with is hiring high-quality contributors in a frictionless manner. There are several reasons for this but probably most notably because of the process SPs and individual contributors generally have to go through with DAOs, which often isn’t worth it because of the high opportunity cost, as well as because DAOs generally aren’t able to hire full-time contributors. One of the main benefits that OpCo offers is to remedy the aforementioned frictions as well as having the ability to quickly adapt to the DAO’s needs, which is why we believe that we shouldn’t restrict the number of contributors OpCo will have the ability to hire. To prevent the risk of the entity over-hiring for approved initiatives, it’s of great importance that the correct contributors are elected into the OAT. Combining efficient oversight, extremely high-quality executive-equivalent internal employees, and the DAO’s ability to decide which initiatives the entity executes and when it should halt execution on a specific initiative should in our mind cover the rest of the concerns you’ve raised here.
The entity’s main mandate is to facilitate DAO-approved strategies mainly within the ecosystem support and financial management focus areas, but based on most recent edits, we’ve made it clear that the entity can also expand into other focus areas with the exception of investments if the DAO so wishes. OpCo should also be proactive, meaning that if it has the bandwidth and recognizes an area where improvements could be made, the entity will create a proposal containing the strategy through which the improvements will be materialized.
We don’t think this should be a hard enforcement. The point of the quoted text is to signify that delegates shouldn’t be afraid of utilizing OpCo as a helpful tool when initiatives that would benefit from being attached to OpCo are being proposed outside of the entity’s scope. However, we think that it’s important that if delegates feel as though an initiative would benefit from being in a standalone structure even when falling within OpCo’s focus areas, they can vote accordingly.
This decision was made based on initial feedback we received from certain key stakeholders and delegates, but we don’t have a strong opinion on this front. The main argument is that the applicant pool for ideal candidates is likely to be quite limited, so excluding individuals after, e.g., one term could create some friction when a new cohort is to be chosen. When it comes to term limits, we consider the Security Council a comparable structure, which similarly doesn’t have term limits in place.
We fully agree with the upfront liquidation approach but decided not to initially go with this structure as many delegates have recently been concerned about large ARB sales taking place. Having said that, given some delegates have responded positively to such a structure, and if the wider community agrees, we’ll change the structure as described at the beginning of this forum response. We’ve also included text to clearly indicate that residual ARB (as well as capital in other denominations) will be sent back to the DAO treasury at the end of OpCo’s first term if the initiative isn’t renewed.
We feel as though it’s of high importance that the executive-equivalent employees are involved in setting up OpCo’s internal processes and operational models given that they are also required to then lead the entity. In the unfortunate case that the ideal candidates cannot be secured swiftly, we think that OpCo’s initiation should be delayed given the entity’s importance, and it doesn’t make sense to rush the process as potential mistakes could compound in the future and have to be fixed later on.
The budget shown is exemplary and its purpose is to show that the ask hasn’t been derived arbitrarily. OpCo would only hire internal employees for initiatives where capacity is needed, not immediately go out and employ, e.g., 10 people because its capital allocation would allow for it. Another way to think about this is that the initial allocation would support up to 10 internal employees (excluding the OAT, executive-equivalent employees, etc.) at the salary levels shown.
The Chief of Chaos Coordinator’s high-level responsibilities are listed in the “Establishing OpCo” section. Whether or not the person would oversee existing working groups that would roll up to OpCo would be up to the Coordinator. We foresee that OpCo hires a project manager for such responsibilities as the Coordinator is already tasked with, e.g., strategic leadership, stakeholder management, operational development, etc., and likely won’t have time to take on further tasks.
The OAT will have the authority to veto decisions made by the executive-equivalent employees. The OAT’s decisions will be guided by the DAO’s will. For example, let’s say the Chaos Coordinator tries to hire a marketing specialist into the entity but the DAO has not approved such an initiative through a vote. In that case, the OAT would intervene and veto the Coordinator’s decision.
Hey Valentin, thank you very much for the insightful feedback! We’ve updated the proposal to clearly indicate that the OAT’s mandate includes developing KPIs for OpCo once the entity is at a point where this can be sufficiently done.
The decision to give OpCo a wide scope was deliberate to enable it to mold into the DAO’s needs as they arise and evolve, as well as allow internal employees to proactively suggest new strategies within areas where they identify inefficiencies. We started by restricting OpCo’s mandate to the ecosystem support and financial management focus areas to prevent the risk of the DAO’s bottoms-up system for bootstrapping new projects, DAO contributors, strategies, etc., eroding, but following delegate feedback, decided to enable the entity to further expand into the other areas (excluding investments) as well if the DAO so chooses. Based on conversations we had at Devcon, most delegates and key stakeholders prefer a structure of intent execution with decentralized decision-making, which this proposal strives to achieve.
As pointed out by @backbone, establishing KPIs at the proposal stage might not be feasible, and there is a risk that the DAO’s priorities will change between now and when the entity is operationalized, meaning that it would be somewhat forced to execute in areas that aren’t as relevant for the DAO anymore. Having said that, most of the points you bring up perfectly encompass the building blocks for a proposal we would consider ideal for the DAO to instruct OpCo to begin executing once the entity is at a point where its foundational components have been established and it’s ready to kick off its operations.