Proposal for Financial Restitution For ArbitrumDAO Grant Winners

From @Areta’s perspective, we believe that providing “compensation” for ARB token value drops due to market fluctuations is not a good precedent for the DAO to set, simply because when taken to its logical conclusion (i.e., other projects asking for similar compensation), it is not scalable or sustainable for the DAO.

The ask is: “can the DAO continue to compensate future grantees or recipients of ARB allocations for price fluctuations?”. We don’t think the answer to that is yes. To re-echo @Nyx and @thedevanshmehta, the price of crypto tokens are naturally volatile and dealing with this is one of the standard (though unfortunate) experiences for parties that operate within this ecosystem.

Also, if restitution is the goal here, why request for $5,000 in ARB rather than an amount equivalent to what was specifically lost due to the operational delays?

We express our sympathies for the sour experiences, but it doesn’t feel like the right approach to request the DAO to compensate for these. If at all, it seems more reasonable to request for what the grantees would have been entitled to but lost due to program inefficiency?

Overall, we recognise the uniqueness of the situation at hand here and why it seems like this proposal is the only path forward. As a recommendation, you may want to consider reframing this as a grant request directly from the DAO, explaining your peculiar situation, referencing your already successful grant application, and seeking funds directly from the DAO to complete what you were unable to finish due to the run down of events.

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From my experience, the Foundation runs the KYC and as such the process isn’t fully understood by those running the programs. I like the idea of having KYC criteria shared in advance. Since it should be fairly similar project to project I think having a reference sheet which shows what to expect for KYC applicants somewhere on this forum would be a good idea.

My other question seems to have gone unanswered - can you show your work on the $5,000 number? From what I can tell it’s based on the token price in January / February, which IMO wouldn’t be the best timeframe to use because 1) as stated before when paid in ARB you should have some expectation that price will fluctuate from date of services performed to date of payment and 2) if the other groups were paid in May/June that would be a better price to base this off of. I’m not going to explicitly speak for other voters, but truthfully if it’s $5,000 I’m not going to vote for it and I don’t see this having much chance of success for that reason. I think you would get more support if your lost value calculations were anchored in the May / June prices, which was the time the bulk of the other projects got paid.

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It would be great to see KYC education becomes a standard.

I responded to a comment before yours and shared I am collecting detailed payout info amd status updates from the projects that are still able to continue executing on ARB and are responsive in the group. As its been 9 months quite a few of the 32 have dropped off. As I mentioned in a previous comment, I am working on collecting these detailed updates within 72 hours and will be editing the proposal with this info.

Thank you for this feedback. I am editing the proposal now based on the collective feedback that this isnt a restitution request, but a new grant proposal paying the winners the difference in their grant losses. I am collecting this specific data from the parties that are still responsive in our group chat, and are actively able to continue with their project with ARB.

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I’m not able to follow these steps you outlined as I am not familiar with who is on the council. I’m also not pursuing this particular sub-topic within this round as I am focused on the grantees payouts.

If you want to follow your own steps and provide that factual data here with your opinion on it to open the conversation, I think that would be more valuable than asking others to collect that data and what their opinions are.

Ahh, sorry I missed it. But once the new data is out I’ll take a look. Thanks!

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Hello! Just FYI the Arbitrum is currently in an incentives detox period, meaning that no new grants will be grantes. If you frame your proposal this way it is not going to pass.

Now if those peojects are willing to pursue a new grant, maybe there is budget left on Questbook (but I have no clarity on that)

Hi James, thank you for letting me know as I wasn’t aware (I don’t believe the other commenters here were either as it wasn’t mentioned). That 3 month detox looks like it has a lot of valuable strategic plans. I hope the insights I have shared in our grant process will be useful data for the DAO’s analysis.

Questbook has grants running with a community education and hackathon focus, so our projects don’t fit within this category.

The collective sentiments I have gleaned here seem to fall into two camps:

  1. Our grantee experience is part of the standard grants experience where currency devaluations can occur, and timing and mistakes for our payouts aren’t something that can be resolved by the DAO. Even if the grant winnings were received much later than a standard payout timing and disruption to teams and projects incurred as a result.

  2. Grantees shouldn’t bear the losses for the devaluation of currency, particularly to those that waited an extensive timeframe, due to the DAO’s bottlenecks (which it has been shared are working to be resolved now).

As we aren’t able to propose a new grant as proposed by some that weren’t aware it’s not possible, I think it makes sense to keep our current proposal as one for restitution, unless you have other suggestions. I am gathering the data from the projects still wanting to build with ARB, received payouts in May and June, and are wishing to receive their payouts so they can continue.

Thanks!

This is one of the problems I see with grant programs being made in the native token.
We are seeing the ARB tokens price is declining and more and more proposals coming up to fill the gap between their original proposal date and the current date.
If we will fill these gaps all the time, the DAOs runway will be destroyed within a short timeframe.
I have already advocated to take out loans against the ARB token in a safe manner and pay out in stablecoins. Its better for the DAO, better for grantees and helps the ARB token in terms of price movements.

The important questions out of this proposal are imo:

  • What is the total amount of the proposed compensation payments for all affected projects?
  • What measures does ArbitrumDAO plan to implement to prevent such delays in future grant rounds?
  • How will it be ensured that the additional funds are actually used for the originally planned projects?
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Hi there, I am sharing that I received feedback from a commenter that Arbitrum is on a grants incentives detox period, so we will not be able to submit a new grant proposal. I am therefore keeping my proposal as shared above.

Thanks

Hi EzR3al,

Thank you for your comments and questions.

I have been in as close as contact as possible with our grant round winners, and have updated my proposal with the details of those that are reachable, and are still interested in continuing or starting to build with ARB as in our proposals, where we were voted as winners.

We have backtracked our losses abd payout timings ranging from 3-7 months later. PLease note as it might be confusing, you will see some projects were paid out in two separate instances months apart even though it was suppose to be a one time payout. It is unclear why this happened.

A total loss in financial value due to the delays and and drop ARB value for all 32 projects could be estimated around $80,000 USD from the ARB value at the time of our grant. But based on the requests from commenters here we have narrowed this just to those that again are responsive (I messaged the TG group with all of us winners multiple times and sent DMs). We have also added an additional layer of accountability which wasnt required in our JokeRace contest, which is to provide our grant status updates on Karma GAP. We want to be able to contribute and demonstrate value to Arbitrum, and move forward.

Please let me know if you have any additional thoughts or questions!

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Hi Bob,

I have collected the data and status updates on the 5 projects that I was able to reach and want to move forward in continuing or starting their projects as proposed, and were a part of the group that received their payouts in the extremely late category. This has been edited in my proposal above.

Please let me know if you have any thoughts or questions…thanks!

Hi @karakrysthal. I’m looking at the update - it still seems the prices of ARB are being anchored to February values due to that being the period when the contest work was performed / awarded. Is there any documentation from the people running the program when payment was originally expected to be received? I don’t want to dismiss the extra context as it’s very helpful, but I’m still failing to see why if other projects were paid in April / May / June why these 5 specific projects should get compensated for prices in February.

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Hi @Bob-Rossi I can help provide more context as I know it can be difficult to understand and track all the steps in this grant round, so hopefully this will provide more clarity on the grant round timing.

It was an 8 week contest that started in January and ended in March.

The grant round was operated through the JokeRace platform, where we all applied and voting happened. Here you can search ‘arbitrumdao’ in the search box and see that activity each week:

Each week, there were 4 winners that were to be paid a one-time payout of 2500 ARB. The JokeRace founder told us the payouts could have been made immediately to the winners each week right after their week’s round via the JokeRace platform, but that Arbitrum wanted to KYC check everyone. Arbitrum hired Thrive Protocol to manage the grant program marketing, distribution and KYC checks, and all winners were added to a group Telegram chat with their Program Manager. We were then told to submit KYC, and that we would be paid out after each week had submitted their KYC checks.

It was shortly after (and months after) that we realized that wasnt happening, and you can read more of the details in my summary post of that:

This is what Thrive Protocol’s team shared as a comment to my summary in their third point:

“We empathize with this. Five different parties were needed to facilitate a payment. It was the first time ever that something like this had been coordinated, and it was hard to get info from some of those parties. Still, we could have been better. The impact of the slowness, for us, was that we built a bunch of internal systems and capabilities to take in-house every part of the payment capability. As an example, Milestone 1b grantee recipients have generally experienced much faster, smoother payment times because of the learning.”

Milestone 1b is another ThankARB grant that Thrive Protocol ran and experienced much faster, smoother payout timings due to the learnings that came from our round.

From what we as grantees could glean, there were very long wait times from Arbitrum’s side in responding to the payout times and actually delivering the payouts (Thrive collected those payout dates for us which I added into the summary forum post). As they shared, there were 5 parties needed to facilitate the payment, and the major bottlenecks from what we can see were from Arbitrum’s side (but also because there were so many different parties involved).

We actually anchored the payout timing and valuations to 2 weeks after each weekly round, not all in February. We feel 2 weeks is an equitable range for payout timing, and didnt anchor it to an immediate payout timing as we want to give that cushion timing for KYC checks and currency valuation fluctuations to be fair. I have bolded those dates in the proposal for each grantee so its more clear for you all…thanks for bringing that up.

Please let me know if you have any further thoughts or questions.

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Thank you for all that additional context, that makes things clearer for me and I’m sure everyone else who is reading.

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First of all, we want to express our regret that the Biggest Minigrants Program did not turn out as expected. We understand the frustration and harm caused when the token loses value, as has happened. However, from what we’ve read, there was no fixed time frame for delivering the compensations, which diminishes the relevance of the proposal.

We don’t think it’s appropriate to compensate all the entities that received ARB during that period. Everyone in the crypto industry knows that token prices are volatile and should have taken measures to hedge against price drops, such as shorting the same amount of tokens. We don’t believe participants would have returned part of the grant if the token’s price had increased, so it doesn’t make sense for the DAO to hedge for all participants receiving ARB as payment.

We see that some details about each project have been added, and if our understanding is correct that the projects all fulfilled KYC obligations to the best of their ability and on time we would support making up the difference in this particular circumstance. We want to make clear that this isn’t because the token price changed, but rather the time it took to pay out. While this wasn’t a grant and there were no promised timelines on delivery, @disruptionjoe has noted in the other thread about this issue that this program faced significant delays unlike others and because of that we believe that it warrants some compensation.

We also agree that we need to figure out better processes around KYC and management with multiple entities if issues are common enough that they’re becoming part of the DAO’s brand and even high context delegates like @Bob-Rossi are having problems. Making it well understood which countries may not be able to get paid out seems like an easy start, but we’d also suggest an open survey to understand what other issues there have been from the side of delegates and the wider community. Once we have a set of answers, we can sort through and figure out what’s solvable through operational changes or better communication and what’s just an unfortunate reality of having to deal with legal systems.

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While we appreciate that receiving grants in ARB holds the inherent risk of price fluctuations, we believe this is independent of delays in distributing the grants. Should the grantees have received the funds as planned and sought reimbursement for the ARB depreciation, it would have been a different situation. However, since the DAO delayed the distribution, the DAO should take responsibility and compensate these grantees with the appropriate amounts.

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Thank you for taking the time to share your experience. We genuinely empathize with the challenges you and the other grantees have faced due to the delays and their subsequent impact on your projects.

We understand that the prolonged disbursement of the ARB tokens resulted in a lower USD value than initially anticipated. While we are not for fully compensating based on the initial estimated dollar amount, we would however be in favour of supporting this proposal based on leveling any variance between the value at the time it was received by a project compared to the first distribution on 25th February.

With regards to your personal ask, we would not be in favour of it as you are a part of one of the winning teams.

If the proposal is updated to reflect this, we would be in favour of leveling the rewards received by each, as the distribution is not done fairly, in our opinion. Your feedback has been invaluable, and this will definitely lead to improved processes in the future.

Hi @Vertex_Protocol thank you for your comments.

I have reached out to confirm with the projects listed here that they submitted their KYC in a timely manner, and they all said yes that they did right after their week one. One winner from Africa said his country was on the grey list so he had to submit additional documentation which he wasnt aware of but collected and then passed.

It would definitely be helpful to have countries on grey lists and KYC terms amd steps listed in advance for people to be aware of.

Thank you.

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