Supporting this makes sense because the OpCo, if implemented correctly, could enhance the DAO’s operational efficiency by providing structure and oversigh. However, to protect decentralization, transparency mechanisms must be robust to prevent power consolidation.
Clear roles, reporting systems, and accountable oversight by the Operational Audit Team (OAT) will be essential for maintaining alignment with the DAO’s strategic direction without compromising decentralized principles.
Questions:
1. Oversight and boundaries of authority and responsibility:
- Are the responsibilities of OpCo with the DAO, OAT and the Arbitrum Foundation clearly defined and how can conflicts of authority and responsibility be avoided?
- If OpCo’s proposed implementation program is rejected by DAO, is there a mechanism in place to ensure that subsequent adjustments are made?
2. Is the high initial budget too aggressive?
- Although the OpCo proposal includes a buffer, the high budget may lead to excessive initial expenditure, can more funds be released in stages?
Suggestion to optimize budget transparency: disclose the “buffer” portion of the budget in more detail, including the specific scope of use and the ceiling, to avoid the community’s perception that the allocation of funds is not sufficiently transparent.
We find this proposal to be a comprehensive and well-thought-out framework for establishing an operational entity that could meaningfully enhance Arbitrum’s execution capabilities. The initiative is proficient in addressing current operational inefficiencies while maintaining appropriate governance oversight and control mechanisms.
The proposal shows a thorough understanding of existing limitations, particularly within the Financial Management and Ecosystem Support categories, where the lack of structured operational frameworks and clear ownership has arguably hindered effective execution. The proposed solution thoughtfully balances the need for operational efficiency with the preservation of Arbitrum’s bottom-up, decentralized nature.
One aspect of the proposal that could benefit from further considearation is the 30-month initial term. While it provides operational stability, it may be worth exploring interim performance review mechanisms beyond the suggested bi-annual reports.
The financial framework appears reasonable, with the 34M ARB allocation including appropriate buffers for market volatility. The vesting structure of 1M ARB every 30 days over 24 months, combined with the ability to convert some ARB to stablecoins, provides both operational stability and risk management.
We are in support of this proposal as it represents an important step forward in enhancing the ecosystem’s operational capabilities while maintaining appropriate governance controls and accountability mechanisms.
It is great to see such a high level of engagement and conversation on the OpCo proposal. With it being a little over a week since it was posted, we’d like to just update delegates that our team is working on responses to the questions and suggestions presented. This will be posted in the coming days and we appreciate everyone’s patience.
The proposal mentions that OpCo’s responsibilities cover a wide range of areas such as operational support, program management and resource allocation. So how can OpCo clearly differentiate its functions from other independent organizations within the existing ecosystem (e.g. foundations, existing DAO programs)? How can overlapping responsibilities or inefficiencies be avoided?
Suggestion:
1、For OAT members and the OpCo core team, regular public meetings and reports could be set up to show progress to the community and to receive questions and feedback.
2、 Set up a conflict resolution mechanism: If OpCo disagrees with other entities in the ecosystem (e.g., foundations) on resource allocation or decision-making, is there a need to set up a clear conflict resolution process?
Attached is SimScore Report.
Using tech that underpins data science, the consensus report has 8 clusters each with it’s own priority list.
The highest priority statements are:
“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.” by @Juanrah
“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?” by @duokongcrypto
“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?” by @Argonaut
Main concern is centralization among many others.
Happy to see this type of project gaining steam, as a lot of good points about inefficiencies in the DAO (especially on silo’d efforts with little to no cross-project collaboration). So I hope this type of project can resolve a lot of that.
The post and other comments address a lot of questions I would otherwise have, but I wanted to ask about one item:
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.
It’s good to see projects learning from other projects mistakes, but if we know the cost in USD (or atleast, some of the expected costs) is there a reason to not just sell to USD right away to ensure funding? I say that fully understanding that a) 1m of it will be incentive based, so it makes sense to keep it in ARB and b) some costs aren’t fully know yet… but I think that sitting in ARB brings on market risks to a project that has a long runway. For example, if we know the oversight council will be $25,000 a month, why not just sell the $600,000 USD worth of ARB at the start?
Also, apologies if I missed it but I didn’t see any note on additional ARB going back to the DAO. Can you confirm if that will be the case?
Our team is generally pleased with the overall design of Opco. While we recognize that it introduces some centralization risk for the DAO, we believe the resulting improvements in execution and efficiency will bring benefits that outweigh the risk. We’re also glad to see that the model preserves a decentralized, bottoms-up approach to working group creation, continuing to empower individuals.
There are, however, several important areas that need further clarification. For instance, the legal entity structure, as raised by @Immutablelawyer and @Pablo, and clearer detail around all checks and balances. We’re also interested in understanding why there are no term limits for the OAT, as raised by @DisruptionJoe.
Most importantly, we would like more insight into Opco’s recruitment strategy, particularly regarding the selection of the two-person executive team (Chief of Coins and Chief Chaos Coordinator) and the 10 internal employees. Given the centralization risks posed by Opco, it’s essential that the executive team not only has strong operational expertise but is also well-versed in DAOs. Since this skill set is unique, we’re curious about the specific approach to recruiting such candidates.
Furthermore, what happens if the DAO cannot secure the ideal candidates? Specifically, for the executive roles, will the Opco’s initiation be delayed, or will the OAT step in to manage executive responsibilities temporarily if these positions are unfilled?
Regarding the 10 employees mentioned in the sample budget, we’re wondering if this setup resembles a “bench” model, similar to consulting firms, where the DAO would have access to resources on demand for various initiatives. If that’s the case, we’re concerned about potential underutilization, a common challenge in consulting and agency models, where resources are hired without clear expectations around the scope or duration of their projects.
Will the Chief of Chaos oversee existing working groups that fall under the Opco’s mandate (Ecosystem Support & Financial Management). What exactly will their role be? Will it be to improve processes or something else?
Additionally, what checks and balances, if any, will be created for the Chief of Coins and Chief Chaos Coordinator? For example, will the DAO be able to veto initiatives proposed by these individuals?
Lastly, the proposal states, “The OpCo is a legal entity that delegates and key stakeholders can leverage to achieve DAO-defined goals.” Is it correct to assume that these goals have not been started yet but will be worked on in phase 1, as per the the mission, vision, and purpose post?
This is a well structured proposal. That being said, I’m seriously concerned that it comes without a previous reflection on Arbitrum’s strategy and organisation design.
Yhis is a VERY impactful decision that will lead to vested interest from all kind of actors in preserving the specific design that is picked. Change management is pure pain, and the only reason organisations do it is because having the wrong design for a strategy makes it almost impossible to succeed. Let me try to illustrate the point:
let’s assume the functional-division is implemented, and we have grants on one Unit, investments on the Unit, and operations all housed under different Units. If say we wanted to coordinate a strategy that focuses on REWA (or CollabTech or DePin, or whichever) we would then need to coordinate changes to the work across 4 different Units, each with different priorities, mandates, and KPIs. It would likely take months to coordinate and launch a cohesive REWA strategy. On the other hand, an organisation design that is focused on customer-segments as the key success driver would create Units around each customer segment (like the Gaming Catalyst), and each Unit would then structure ecosystem support, investments, grants, etc as needed for that specific vertical. If Arbiturm wanted to tackle a new vertical (e.g. REWA, DePin, dAI, etc.) it would be more effective to give agency to a group that can define the right mix of strategies for said segment than try to coordinate 3-4 Units that operate across multiple segments to prioritise the new initiative. Low speed of coordination is what makes corporations unable to do innovation and leads to their demise.
So I invite the DAO to explore a bit deeper whether a functional-division design is the right one before putting this proposal to a vote. A couple of weeks here could save months or even years of pure pain and operational ineffectiveness for Arbitrum.
Copying the functional-division structure suggested in the OpCo proposal for reference:
Hi Arbitrum DAO,
I am Valentin, currently director and team lead of the dYdX Operations subDAO - a similar entity within the dYdX DAO. I have been leading the operational setup of the Ops subDAO, the reorganization of the legal structure, and getting the entities operational (Bank account, admin infrastructure, and initial SOPs).
This is a very well-structured and interesting proposal. Many of the issues raised resonate with me, and I can confirm that such an entity if structured, set up, and operated correctly, can significantly alleviate these.
Additionally, I want to tip my hat at the great feedback the proposal has gotten most of my concerns or comments have already been made hence, I want to second the important ones and share my thoughts on them specifically:
In my opinion, the most important aspect of establishing a DAO is not to relinquish control completely but to delegate responsibility while retaining veto power.
This should and can be facilitated by tying the OpCo’s mandate and certain decisions within its legal entity to the Arbitrum DAO Governance decisions in the legal entity’s founding documents. @immutablelawyer, please correct me if I am wrong. This is possible in most practical legal entities.
If this is the case the question of which projects or initiatives are included in the mandate (which needs to be well-defined and approved by governance) is answered more quickly and as stated in the proposal initiatives outside of the mandate would require additional governance approvals.
The structuring of the OAT Council also makes a lot of sense, and I can report from experience that capable individuals with specialized knowledge in the mentioned areas are of the utmost importance, particularly in the setup period. This is especially true if, as I understand, the OAT will be operating without additional staff for most of the initial six-month setup period.
After the initial setup, the OAT will need to transition into establishing transparency and creating a reporting culture while enforcing a high standard of both, requiring full-time staff to deliver recurring reports and updates on operations and finances.
Considering this, I second the opinion that the proposed compensation of the OAT is below industry standard, considering the expected responsibility, seniority, opportunity cost, time commitment as well as the availability of talent.
The call for clear KPIs in this thread is completely understandable considering the amount of money proposed to be deployed. As mentioned above a crucial part of the OAT initial setup deliverables is to develop meaningful KPIs under which the OpCo will be held accountable. As this is a new initiative and the exact activities are dependent on a lot of different, still developing factors, developing KPIs in the proposal stage is not practical in my opinion.
Happy to share more of my experience within the dYdX subDAO, hopefully enabling the OpCo to avoid some of the mistakes and delays we had to deal with.
Gmgm!
The following reflects our current thoughts on this proposal (which I hope will not be going to Snapshot prior to replied-to comments and sufficient time for contributors to evaluate replies).
Firstly, thanks for preparing this detailed proposal, there’s some great work here! Will be posting our reflections hereunder based on our experience running identical structures in a private capacity for our clients on our legal & corporate service-lines, and in our public capacity at the dYdX Operations subDAO together w/ @backbone:
Firstly, we’re happy with the fact the OpCo proposal helps address the challenge relating to continuity. This mirrors practices in the public sector, where continuity is maintained by involving multiple individuals in processes and ensuring seamless transitions through comprehensive documentation. In our opinion, and based on the current proposal structure, OpCo is well-positioned to facilitate this. Additionally, it has the potential to conduct post-mortems for programs, enabling the DAO to systematically analyze both successes and failures.
The structure underlying the Oversight and Transparency Committee (OAT) is well thought out and naturally an integral part of this OpCo proposal. While some members have identified that the monthly contribution for these members is on the low side, we feel that is in part addressed by the bonus being proposed. We generally are in favour of this as it helps to align incentives and ensure long-term commitment and accountability. In this regard however, you should establish parameters of what factors would lead to these bonus payments being triggered in detail so that expectations are fully set.
As for the general election to be held for the three OAT members, will a single Snapshot be held or will there be three snapshot in order to ensure that complementary applicants are attracted? Given the OAT’s critical role in ensuring OpCo is run effectively, attracting a diverse and skilled team is essential.
While bi-annual oversight and financial reports are mentioned, the significant funding involved warrants more frequent reporting calls, such as on a monthly basis or a dashboard updated in real-time. These could include, projections and any deviations (e.g., budget overruns, missed deadlines), explanations for variances and remedial actions being undertaken, among several others. Ideally the reports are published on a quarterly basis in our opinion to ensure that the DAO has sufficient oversight over financial standings (especially since a part of the funds may be off boarded and thus are off-chain w/the DAO not having the ability to track these). With the current proposed budget (which in our opinion is too high in and of itself, bi-annual reporting definitely does not cut it).
The proposal includes hiring a full-time, in-house legal counsel. If this is to count as one of the 10 employees, what do the Year 2 legal costs entail? Moreover, we feel that a retainer model for legal counsel might be more cost-effective and prevent under-utilisation in this regard. In the immediate, OpCo will definitely not need a full-time legal counsel and this would be something that’d be more ideal in Y2 when we have initiatives potentially plugging into OpCo (although the ‘Why?’ of Why should initiatives even plug-in to OpCo is still very much up in the air).
Reference is made towards the budget provided:
Has any rationale been included regarding the decision to release 10M ARB upfront? Given that this was included at an average price of $0.54/ARB and this has now increased to c. $0.7/ARB, is the plan to still release 10M ARB upfront, even if the price of ARB increases further?
Are there any plans to further scope out the mandate of OpCo? As is, the entity seems to be a catch-all of sorts aimed at taking up grass-roots initiatives within the Ecosystem. Naturally, we do see the element of centralisation that this could cause and also the chance of eliminating grass-roots initiatives and deterring smaller contributors w/various initiatives. Legal decentralisation is welcome, yet it could easily lead to progressive centralisation if the entities that are being spun up are not scoped out well. In this regard, reference is made to the recent Lido Alliance OpCo which was set up recently that was scoped out well by the proposers Organize the Lido Alliance Program as a Lido-DAO-Adjacent BORG - Proposals - Lido Governance
Since employees will be employed on a full-time basis can we assume that none of these employees will have any involvement in other DAOs? Also, will these be employees or just full time independent contractors? Best to delineate to (1) set expectations and (2) avoid employment reclassification risk (Employees = OpsCo would need to register as an employer and also offer employee-equivalent benefits such as paid leave, maternity leave etc.)
Re. the request for community feedback on KPIs some additional metrics that could be considered include (i) budget variance i.e. deviation between projected and actual expenditures, (ii) % of funds returned to the DAO (iii) runway project accuracy (iv) attrition rate analysis i.e. reasons for internal employees hired or service provider departing… Moreover, KPIs could be reviewed and adjusted periodically (ex: every 6 months) based on feedback from the DAO to ensure alignment with evolving priorities.
One last point from our end re. the Term is that we are of the opinion that this is too long for such a new initiative. If it doesn’t work, we want to avoid creating the bad optics of having to put up a proposal to wind it down following Y1 for example. Hence, same with industry precedents that have been set, we are of the opinion that the term should be that of 12 months, to be extensible by a 24-month period thereafter if it produces the corresponding benefit. Naturally, should the term be reduced (which we are of the strong opinion that it should, the budget requested should be reflective of this).
That’s all for now, great job on getting this proposal together and happy to chat on some of the above points a-sync!
Kind regards,
Immutablelawyer
Axis Advisory
I’m stepping into the conversation just now, but I’d like to share my thoughts on this before it moves on to Snapshot. First, I’m really excited about this proposal. I think it can really make a difference in defining an efficient strategy, allowing the DAO to make efforts in the right direction.
I echo some concerns that have already been mentioned by other delegates by highlighting the potential consequences linked to the deployment of the funds in terms of price fluctuations.
Apart from this, I feel like the major debate is around defining a perimeter in which the OpCo can act. IMO, it’s always hard to find a balance between giving flexibility and autonomy and still keeping everything decentralized. I think that clear boundaries have to be defined - I don’t know if prior to moving to the following steps or during the process according to the specific context. Giving autonomy is a good thing just at one condition: if transparency is guaranteed. I personally think that the balance can be found by working hand-in-hand towards the common goal. If flexibility is given, transparency reports have to be constant in order for the DAO to keep track of its performances and activities. Plus, as a general norm, feedbacks should be integrated into the workflow, and veto power should always be an option if the OpCo risks moving too far from the DAO’s interest. I honestly think that on an ‘institutional’ point of view, the existence of the OAT can exactly provide this balance between autonomy and overview. But on the practical side of things, I believe that we still have to define some boundaries.
Thanks @Entropy for the robust proposal.
As someone who runs a team at a foundation that facilitates the execution of DAO-approved proposals, I fully agree that an entity like OpCo is a valuable resource to the DAO.
The feedback thread is substantive so I’ll keep my builds brief.
In essence, I would encourage the following risk areas to be addressed:
Concentration of power:
Reduced incentive for well-thought proposals:
Clarity of scope & operations:
Hope these thoughts are helpful! Looking forward to seeing this proposal evolve and progress!
Hey, We took the liberty to run a SimScore report on the Opco Discussion Thread above. (Nov 19). The purpose of the report is to point out the highest ranking replies from the Forum Discussion. There were 224 opinions expressed in the forum.
For Brevity, we will limit our reply to the top 5 ranked comments.
: "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.”
: "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?”
"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?”
"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.”
"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.”
Today, the Devcon Recap includes this statement.
Finally, after a long day, we had a brief discussion on execution in the DAO and using OpCo. Basically, how can the DAO make sure it is putting the right people in the right places to execute the objectives the DAO defines? After ~8 hours of high-impact discussion, many were understandably low on energy, but the conversation was fruitful nonetheless. Most delegates want OpCo (1) set up with haste so Entropy will be dedicating increased resources to this initiative. Another point was that (2) OpCo should have a lot of autonomy and agency to operate on its own with its oversight layer, which is feedback that we have taken into account and differs a bit from its current state. Finally, we spoke about what (3) types of people OpCo will need in order to fill current gaps in the ecosystem.
There seems to be a disconnect between the Forum Discussion and the Devcon Recap.
Though Devcon delegates may wish for a hasty set up of Opco, the forum discussion indicates consistent high ranked concerns related to centralization and wasted funds.
Gauntlet provided in-depth feedback on this significant proposal during DevCon. The proposed OpCo presents an opportunity to address critical gaps in Arbitrum DAO governance, including horizontal and vertical organization, financial planning and budgeting, and program management resources to ensure that DAO initiatives are aligned, accountable, and efficient.
However, there are valid concerns regarding the execution of the proposal:
To this point, it would be worth adjusting OpCo’s KPIs for the first few months toward specific critical deliverables rather than broadly aiming to get established and optimize itself for time/agility. Examples include:
Ultimately, Arbitrum is currently on its heels to defend its market position in a quickly growing L2 landscape. There is a time to place big bets, and we appreciate OpCo’s potential to help jumpstart the DAO toward making more definitive and efficient moves. We prefer the DAO to measure twice and cut once if it proceeds with OpCo.
Thank you, @Entropy, for this much-needed initiative. We fully agree that Arbitrum DAO needs to take a more structured approach to operations execution and project management, especially in coordination with third parties like service providers and builders.
We believe the proposal is a great start, but we believe additional clarifications are needed in the following areas:
Thank you @Entropy for pushing forward this very valuable initiative.
I really appreciate your work, but want to provide a few suggestions that hopefully will make OpCo more effective and efficient:
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!
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:
If the feedback towards the above solution is negative, we’ll maintain the ask of 35M ARB to account for price and market volatility.
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:
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.
Ok this is awesome. Let’s first start with the green edits of the initial proposal.
This is a key unlock and the key thing we needed more than anything else. We can go as much into granular details as we want, but the high level goal is this: an entity that can be proactive.
Would it make sense to say “expanded into other verticals such as Grants and Governance Frameworks?”
Two things to me here could be a potential improved area:
So as direct consequences this would be “it can expand OpCo’s mandate to include specific grants intiatives in the future through a Snapshot vote.”
Both makes a lot of sense
Now, on the open question.
I’ll be honest this strategy only make sense if we have a “relative” swift timing. We can see how market is appreciating, and should keep appreciating. Cyclicality suggest that we could have upt to Q3 2025 in this. But here, we are not in the business of forecasting market, while we could indeed take that in account.
With a very gentle and educated guess, i would say that the proposed liquidation, in 6 months, to get $12M worth of cash equivalent, can be effective if we respect the timeline proposed. Which means: if tally is approved, we need to start the process right away. My question is: can we do it, or do we need to wait for the legal entity to be setup? If the former could be done, maybe through AF as custodian, fine, if not, there is a risk in which the plan won’t work as intended. This risk should be relative small, but will indeed exists.
In general, for a project of this size, we shouldn’t be in a situation that we start with the wrong foot (in this case, either we don’t have a good chaos coordinator OR we don’t have the forecasted budget). Understanding that we have an asset that is volatile and that this risk can only be mitigated but not eliminated, I don’t honestly see a mix of the strategy above + using the initial amount (35M) as allocated budget as being bad, knowing that the difference can and will go back to the DAO.
Finally, a smol note. This proposal has been so far gargantuan. Probably one of the most ambitious in a DAO. Kudos for the amount of granularity into incorporating feedbacks, it’s been impressive.
Thank you for the thoughtful update and the work you’ve put into addressing the community’s concerns. We really appreciate the effort you’ve put into refining the proposal to ensure OpCo’s financial stability while balancing the DAO’s broader interests.
Allocating ARB to establish a stable cash position and returning unused tokens to the DAO treasury is a responsible and prudent strategy. We’re supportive of this direction and look forward to seeing how OpCo can drive meaningful contributions to the DAO’s strategic goals.
