gmgm
I would like to provide some final feedback, as I understand the proposal will go to Snapshot today. I’m beginning to feel concerned about the trend where absolutely all DAO proposals are denominated in USD rather than ARB.
I understand that the main reason for this shift is to ensure payment to various external service providers who are not immediately connected to the DAO, so they can be properly compensated for their services.
Although it’s debatable whether the DAO is currently in a position to guarantee such payments (it still doesn’t generate—will it ever?—enough USD-denominated revenue, and there hasn’t been a debate on what to do with the $ETH accumulated from chain revenue), I believe it could be justified for certain external service providers.
However, what is less clear to me is the justification for other programs, which I would categorize as governance and operations management of the DAO by its own governance participants.
In the initial token distribution, the DAO was allocated approximately 35% of the supply, which represents both an opportunity to significantly increase the circulating supply to cover DAO expenses, and a significant responsibility to maintain the token’s value, first for security and second for the interests of users and investors.
I believe that denominating payments in USD for governance participants creates a disincentive to protect the value of ARB, since the value received by those benefiting from the programs will remain the same regardless of whether the decisions made benefit the DAO and its long-term sustainability.
I understand that a significant part of ARB’s price action since the TGE is related to the token unlocks. (ty @karpatkey for the awesome report which I continue checking. when v2 btw):
However, at this point, we are all fully aware of this situation, and no one should be surprised by this distribution scheme or the strong likelihood that those with unlocked tokens may decide to profit from it.
As a DAO, rather than shielding ourselves from a situation we already know exists and guaranteeing short-term benefits for participants, I believe we should focus on aligning incentives to strengthen the token and, in turn, the DAO’s security.
I think that denominating payments in USD works against that goal, as it misaligns incentives. On the other hand, denominating payments in ARB reinforces active participation in governance and the long-term stability of the token, as recipients are economically incentivized to ensure this happens.
Specifically, the delegate incentives program creates an economic incentive that stems directly from the dollar valuation of the reward. Today, I can acquire the ARB needed to participate in the program for around 27K USD, while the program offers up to 7K USD per month in rewards for 12 months (or 9, if you require 3 extra months for qualifying). Do the math. The fact that these 7K USD per month are guaranteed by the program results in a clear economic incentive to meet only the minimum requirements to qualify for the payments, which undermines the program’s intended purpose of professionalizing delegates.
This misalignment encourages delegates to meet the minimum thresholds necessary to receive payments, rather than striving for high-quality contributions that truly benefit the DAO in the long run. If the goal is to professionalize delegates, the incentive structure should promote excellence. USD-denominated payments undermine that goal.
One of the guiding principles of the Arbitrum DAO is sustainability:
Denominating payments in ARB rather than USD would better align with the DAO’s core principle of sustainability. By doing so, we can ensure that both governance participants and the broader ecosystem work towards the long-term health and value appreciation of the ARB token, which is crucial for the DAO’s future security and success.
I am very much in favor of this proposal. I only ask that the denomination of payments in USD be reconsidered.