Title – Proposal: [Non-consitutional] Allow the PL-ARB Grant Safety Multisig to trade ARB for sequencer fee ETH
Abstract - The PL-ARB Grants Safety Multisig is a DAO-owned multisig managed by Plurality Labs. Instead of spending ARB to payout grants, we would like to pay out grants in ETH to avoid price pressure from grant payments.
Motivation - The desire to do what is best for the community. If we could do this prior to the Thank ARB and upcoming Gitcoin rounds going out, it could save the community thousands or even hundreds of thousands of $ value.
It would also be a huge step forward to the ecosystem to begin awarding ARB to those who are likely to use it for governance and pay in ETH to those who will likely exchange it. Another benefit is a potential move to a sustainable model for ecosystem grants coming from revenue.
Rationale - Many communities struggle with the negative effects of grant emmissions on their treasury. We are in the lucky position where sequencer fees provide ETH which is controlled by the DAO. In the long term, we would love to see a continuous supply of ETH being used to pay for builders on the protocol while ARB is awarded for things like meaningful governance contributions, delegate pay, and growth incentives. There is much to be explored!
For now, Plurality Labs can start this trend by using ARB to reward meaningful governance participation via our ThankARB campaign and a retrofunding round further in our milestone 1.
Specifications - A swap would be created to exchange 2.5 million ARB from the PL-ARB Grants Safety Multisig to ETH at current market value when the swap happens. (This would be included on a tally vote only after passing a temp check)
Steps to Implement - Details to be provided upon temp check approval
Timeline - This would be done as soon as a Tally vote could pass
Overall Cost - This would only cost the amount of gas to execute the transaction. (And votes!)
This would likely save the DAO thousands to hundreds of thousands of $ value.
Kudos for including a “temp check” in the proposal—a great practice that engages the community in vital decision-making.
This approach fosters inclusivity, transparency, and democratic principles, ensuring diverse perspectives and feedback enrich decision-making. Well done!
While this is a good way to spend sequencer fees, the DAO will still spend it’s ARB on other initatives which will ultimately put sell pressure. Ideally we should find a long term roadmap for bringing value to the token which may include all or part of the grant distribution via PL be done in vested or time-locked tokens.
Another question here is for the Arb Market Maker, does anyone know how much volume can they absorb?
After speaking with a few more delegates, it seems that the following should be addressed:
There likely isn’t a realistic chance that these grants would impact price.
The excitement of doing this is because it would be great to pay contributions & builders in ETH and reward meaningful community participation in ARB. You could imagine grants being paid in ETH, then a quarterly retrofunding rewarding successful grantees with ARB. That is who we want earning governance.
A bunch of the grants we are planning will be using Hedgey’s Token Grant vesting contracts!
With current liquidity, the price pressure of allocating2.5M ARB is minimal.
Even if all the ARB got dumped there is enough liquidity to absorb it. Spot selling the entire 2.5M ARB allocation in a single trade generates only a 1.5% price impact, which is incredibly small for such a large trade ( cc @jengajojo as they also asked for this info ) :
I understand where the reasoning is coming from, but I think that ARB is a better fit for supporting builders and grantees compared to ETH, as it allows these builders to either sell to cover expenses or participate in the growth of the DAO by voting/delegating on it.
The ETH should be kept to address proposals and issues where using ARB could lead to a death spiral, such as Security Council motions or a ’ war chest’ to recover from a black swan event in the ecosystem.
Another benefit is a potential move to a sustainable model for ecosystem grants coming from revenue.
I enjoy this idea of builders receiving part of the revenue from the projects they have created, but this can be addressed down the line once we see the kind of projects being built /rewarded.
The below response reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking and ideation of the two.
While we do understand the motivation behind the proposal, we are a bit skeptical about touching the ETH generated by the sequencer fees without a holistic, sustainable, long-term plan in mind.
As others have pointed out, even if the entire 2,5M ARB of the grants program was market-sold, the impact it’d have would be so small that we don’t see a reason to attempt to mitigate it by using ETH - especially considering the fact that $2,5M in ETH would be about 45% of the ETH accrued sequencer revenue.
Given that, we believe it would be best for the PL-ARB multisig to remain as is and use ARB for the distribution of grants.
However, we do agree that starting to think and work towards ways we can use the ETH in the treasury to reward builders while allocating ARB to people who are more likely to use it in governance is really important.
