Proposal: Return 700M $ARB to the DAO Treasury

[thiccythot]

Everyone cares about the longterm health and growth of the ecosystem.

The only way to do that is to make sure the Foundation is properly funded with adequate resources to build, hire, market, and incentivize the ecosystem.

Since all of their resources are in native token, making sure the foundation has adequate resources to succeed relies on the sustained price of the token in the open markets.

This is why restoring the value of the governance token by returning the 700M ARB that should undeniably in the DAO treasury right now as well as rectifying clear violations in ethics around open market operations is necessary in the long term health of the ecosystem.

The value of the token doesn’t depend 100% on the action of the founders and the Foundation.

The value of the token is a large part influenced by what the utility of the token can do in influencing decisions of the project.

I can understand that in the short term, this will add weeks of delay to giving the Foundation the funding that it needs

However, I believe this is a necessary course of action for all future token buyers

For those of you with voting power that did not buy a majority of your voting power on the open markets, I would urge you ask your constituency of delegates what their opinions are.

As an open market buyer myself, I personally would not comfortable buying any more tokens long term, and I know many other investors who feel the same.

Please consider the long term health and trust in the token into your decisions

[thiccythot]

The team moving funds into the foundation and selling tokens subverted the autonomy of the DAO because they assumed AIP-1 will pass before even holding a vote, clearly cucking governance holders

The team not moving the funds back into the DAO wallet is yet again subverting the autonomy of the DAO because they assume AIP 1.1 and 1.2 will pass before even holding a vote, yet again cucking governance holders

Are they going to keep the funds hostage if AIP 1.1 and 1.2 don’t pass and keep trying until they get what they want?

The continued faith in governance is crucial to the long term price of the token which has the end goal of sustaining the long term health of the ecosystem

I urge you to consider the importance of moving these funds back to the DAO wallet

Please do not underestimate the value of trust and responsibility for all current and future token buyers

[lay2000lbs]

tl;dr this proposal is both invalid and bad governance.

This proposal does not have valid governance parameters and therefore cannot be executed. It also fails to follow the basic standards of governance outlined (i.e has not been posted for 3 days before voting starts among other failures).

ARB token has no control over private parties – it controls software. A token vote cannot compel a private party to disclose terms of a deal. Sure, anyone can create a vote that says anything, I can submit a vote that says “Make Vitalik buy ARB tokens” but the vote is meaningless.

The parameters the ARB token does control are listed in the constitution.

Conceivable, if this proposal was reformatted to follow proper governance procedures, it could fall into the “informational” category. But as it stands, this proposal is default invalid because it doesn’t even follow the basic formatting and process standards. It should be removed from snapshot like any other invalid proposal.

[gauntlet]

Gauntlet will vote against AIP 1.05.

Gauntlet abstained from AIP-1 and agreed with other delegates who either abstained or voted against that more information/clarity was needed. We appreciated the quick response to the community’s concerns and the time and effort that went into producing AIP-1.1 and AIP-1.2. Gauntlet believes these AIPs represent an optimal path forward for everyone involved in the Arbitrum ecosystem.

As other delegates have pointed out, AIP 1.05 does not follow the basic standards of outlined governance. Additionally, AIP 1.05 will result in delays formalizing governance, establishing the full scope of the Arbitrum Foundation, and ultimately hurt the progress Arbitrum has made as a whole. Furthermore, we disagree with the demand for disclosure with regard to the terms of the Wintermute deal. We see no standard precedent for this and believe it will hurt Arbitrum’s ability to attract other vendors in the future.

[thiccythot]

I’m confused, why wouldn’t this fall under a non-constitutional AIP?

It falls under funding, because it is proposing how to spend or allocate funds from the DAO treasury held by the Arbitrum Foundation.

Also does anyone else see the irony in rejecting this proposal solely on the grounds of a technicality on standards of governance after what happened with AIP-1?

These funds should have been returned to the DAO immediately after AIP-1 failed.

Comparing “make vitalik buy arb tokens” to “disclose the terms of the wintermute deal” is a straw man, the foundation has a clear ability to disclose the deal.

In response to Gauntlet’s comment, there is a clear precedent of other projects disclosing the terms of their market making deals in the public.

This has been done before:

Introducing the DAO Deal Tracker™

[ChainLinkGod]

ChainLinkGod will vote against AIP-1.05.

This proposal looks to be a pure optics play and does more harm than good, introducing risk for both the DAO and the Foundation. I acknowledge that the initial communications around AIP-1 and the Administrative Budget Wallet were poor, leading to much confusion in the community (including myself). However, I believe this has been largely rectified through the publishing of the Transparency Report and the AIP-1.1 / AIP-1.2 proposals.

I have some specific points on each of the asks here.

@thiccythot

Return 700M $ARB from the Foundation to the DAO as a symbolic gesture that the governance token holders hold ultimate power and authority over the resources that were granted to the DAO

This seems to only serve as a power play, adding an additional unnecessary step before ultimately just transferring funds back and into a vesting smart contract, delaying the ability of the Foundation to support the growth of the Arbitrum ecosystem. The level of control the DAO has over the Foundation is already unprecedented, with the ability to change the Foundation directors, the mandates of the Foundation, and with AIP-1.1, the rate at which the Foundation can receive vested funds.

@thiccythot

Buyback $ARB via Wintermute with whatever fiat is left from the $10M OTC sale

I am not a lawyer, and therefore do not know the full extent of the legal consequences or challenges this would introduce, but this seems like a highly risky move to make given the current regulatory environment, especially without input from a formal legal counsel first.

Speaking practically, this would also be an expensive and impractical move generally. The Foundation would have to incur three consequence instances of slippage/price impact, considering the ARB will simply need to be sold again later to cover Foundation costs: (1) initial sale, (2) buyback, and (3) follow up sale. Any volatility these purchases and sales could create (from both the actual sales and market reaction) would also be of little to no benefit to anymore.

It’s also likely that a portion of the fiat obtained from the ARB sale have already been spent or generally the amount of fiat held by the Foundation may not be enough to repurchase the full 10M ARB back, meaning the resulting optics play would still be fairly weak (can’t say the full amount was repurchased). Engaging with a market maker for these additional purchases/sales may also introduce additional costs that otherwise would not have occurred.

@thiccythot

Disclose terms of the market making deal with Wintermute

Expanding on what @gauntlet has stated, it’s not clear how a DAO vote would be able to enforce disclosure of an agreement that’s already been mutually agreed upon and signed and may have confidentiality clauses in it. Even if Wintermute were to agree, it may result in a poor relationship experience, and can create a poor precedent for when the Foundation engages with future vendors.

In general, I see this proposal bringing little to no benefit in the best case, and introducing unnecessary risk and costs to the DAO and the Foundation in the worst case. I believe the best action to take is to move forward, align on how the funds should and can be used going forward (AIP-1.1), rather than engaging in a power play move over past actions.

[ChainLinkGod]

There also appears to be an additional ask in the snapshot proposal that is not listed in this forum proposal? Based on my rational above, I am also against pausing AIP-1.1 and AIP-1.2. I’m also not entirely sure what this ask means exactly or how it would be enforced. The AIP-1.05 vote won’t finalize before AIP-1.1 and AIP-1.2 are put up for snapshot. The forum posts for AIP-1.1 and AIP-1.2 went up before this AIP-1.05 forum post and the timeline for the AIP-1.1/AIP-1.2 vote were known at the time of publishing AIP-1.05.

[web3magnetic]

Agree with the concerns raised that including third party vendors like market makers within the scope of the proposal is detrimental and possibly not enforceable.

The market making contract may even include non-disclosure terms agreed by the market maker with the Foundation, which the DAO cannot seek to overturn and could lead to a breach of contract and damage claims by the market maker.

In such a situation, the proposal will be moot.

[thiccythot]

Though I am in support of AIP1.1, what if it fails? Does the foundation plan on holding the tokens hostage until they launch an AIP that passes? The tokens should rightfully be placed in the DAO until AFTER there is an acceptable allocation that the DAO has agreed upon, NOT before.

The tokens belong to the DAO and are allocated to the Foundation. Taking the tokens, passing off a meaningless vote, and keeping them anyways until something passes, sends a horrible message to any future buyer looking to participate in governance and spend their resources funding the ecosystem.

Moving tokens from their rightful place in presupposition of an AIP passing is exactly what got us in this mess in the first place, I hope we can learn from the mistakes that were made with AIP-1

This may just look like silly optics to you, but from a perspective of an outsider all of these actions and lack of proper procedures taken by the DAO has been incredibly concerning to the integrity of the governance process.

Selling tokens on the open market on launch day without any disclosures to retail buyers. People who spend their fiat on tokens is a major source of funding for the ecosystem. I hope you can consider ethical standards and the violations thereof around disclosing an accurate prospectus. It is on the Foundation to rectify those issues to regain the trust in the community, as it was clearly a mistake to go about those open market operations.

I would rather let the Foundation itself tell us about the terms of the market maker deal and any non-disclosure agreements signed with Wintermute than speculate on “what-ifs” and “legal ramifications” of such.

As I said earlier, there are PLENTY of protocols that have made their market making deals transparent to their DAO. The database of all of them is included in the link

There are 40MM free tokens allocated to an actor with under incredibly opaque terms and free reign to sell on the open market that was delegated by a Foundation that does not even exist yet.

I hope you can consider how worrisome this is to any outsider looking in especially given the poor reputation of massive market making deals and their incentives to dump more tokens then necessary.

tldr

Though I feel strongly about all elements of the proposal, moving the tokens back into the DAO is just undeniably the right thing to do and is the portion of the proposal that I feel most strongly about.

@chainlinkgod and @gauntlet, would you be open to passing a proposal that only included the moving of the tokens back? I respect your opinions both deeply as delegates and want to have you in support of whatever is passed, while keeping the perspectives of future token buyers in mind.

[ChainLinkGod]

My aim as a delegate is to support the long term growth and success of the Arbitrum ecosystem, which involves gauging if the expected benefits of an AIP proposal are worth the potential risks. My perspective on any particular AIP is not driven on whether the AIP will make the ARB token seem more attractive to a potential token buyer (though the comms mistakes of before should be definitely avoided going forward). The growth of the ecosystem is ultimately the value creation driver over the long term.

I appreciate your view on the integrity of the governance process, but I believe these concerns have been adequately addressed via Transparency Report, AIP-1.1, and AIP-1.2. There are no more meaningless retroactive votes to be made with 1.1/1.2, only future actions to take. I simply do not see AIP-1.05 supporting any long-term growth initiative of the Arbitrum ecosystem and serves only to signal a power move that incurs potential legal risk and introduces unneeded costs and time delays.

Given the 700M ARB will not be touched until there’s an agreement via a vote on how to handle the funds (e.g. AIP-1.1 or otherwise), there is no practical difference at this stage at where funds reside (beyond short term optics). It’s also important to note that the Foundation does indeed exist, per the Transparency Report, it’s the reason the DAO exists now.

On your point about market maker deals, the public deals you mention were agreed to be made public before the deal was signed, “Each deal in our dataset was discussed on governance forums and reviewed by off-chain Snapshot voting or an on-chain vote.” In this instance, the deal was already signed by the Foundation before there was any agreement to make the specifics of the deal public.

At this stage, I would still vote no even if the proposal was solely scoped to just the transfer of 700M ARB to DAO just to be sent back out.

[hiringdevs.eth]

I appreciate the author bringing up this line of discussion, as it helps ensure the full faith of the governance process. That being said, I am ultimately against this proposal.

The implications of this proposal are fairly minimal, except for posturing.

If we accept that…
An Arbitrum Foundation is needed
The foundation will need an operating budget

Then this proposal will result in 1-2 month delay in getting the Foundation running and result in a market event where a whale (the foundation) will need buyback and then sell again a large block $ARB.

This result has the potential to lose money for the DAO (frontrunning the ARB<>USD trade) and will definitely waste time.

Currently, we are seeing an explosion of activity among L2s. ZKsync launched Era and is rumored to be launching their token in the next year, Optimism just partnered with Coinbase, Polygon has a long list of major partners, and Scroll and other zk roll-ups are around the corner. We need to prioritize initiatives for the Arbitrum ecosystem that will drive value and growth.

[mykaelHunter]

I support that the 700 million ARB be returned, it was clearly an overreach of power, at least from the treasury we can further vote on a proposal

[thiccythot]

I appreciate your well thought out responses @chainlinkgod and @hiringdevs.eth

I understand your respective perspectives on the tradeoff between the time/effort spent in returning the funds to its rightful place versus having the Foundation up and running to compete on BD versus other chains. It’s valid, rational, and practical, but at the same time… depressing…

It makes me sad that we have to take shortcuts in the governance process in the name of competition.

Its really beginning to feel like the true purpose of decentralizing was not actually to decentralize or allow the token holders to govern, but to use retail fiat to fund the foundation for growth

This would be fine if they were upfront about their communications in the initial prospectus but the whole thing was carried out so… unfairly to those who bought tokens on the open market in the actual amount of governance their tokens had and an accurate view of how many tokens would be circulating in the secondary market on day 1.

And I could be very wrong in saying this but it seems like most of the large voters voting “against” on this proposal have a majority of their tokens delegated to them rather than purchasing their tokens with fiat

I get that many of you have already made up your mind, but for those with large amounts of voting power that haven’t…

Please consider the silent population of retail holders who bought the token on the market (vs received vs airdrop), how critical they are to the long term success of the ecosystem, and how they perceive this entire situation.

In my heart of hearts, I believe the delay will be worth setting up the governance process in the right way, rectifying the actions that were wrongfully taken, and being transparent about all financial dealings involved.

But hey, maybe I’m wrong, retail will forget, and will buy the token again in a few months when a few partnerships are announced.

[DisruptionJoe]

I agree with everything you’ve stated here. I will be voting Against this proposal.

Additionally, there is no way to enforce this onchain and indeed is just for show. There are 0 benefits to doing this. This proposal seems to me to be lacking of an understanding that the powers of the DAO are being granted to the tokenholders as set up in the DAO governor smart contract.

I’d be open to snapshot voting as a signalling device, but this completely unenforcable proposal can only do harm. If it were to pass on Snapshot, there is no way to enforce it on Tally. Sure, the foundation could send the tokens back to the governor treasury, but then we would lose the foundation and break all the deals made which were necessary to make this drop possible.

The foundation made so much space for the DAO to actually have power that is enforceable. This is a bad idea for the future of Arbitrum and a potentially unrealistic proposal. We need the governance of the DAO to pass before any other proposals anyway. imho

[Cornell_Blockchain]

Cornell Blockchain will vote against AIP 1.05.

This proposal doesn’t follow the governance standard and would only result in unnecessary time delays and conflicts. It is essential to recognize that AIP 1.1 and 1.2 have already addressed the major issues with AIP 1, and we should be focusing on moving forward along this path. Our common goal here is to support the long-term growth of the Arbitrum ecosystem, and we believe that the Arbitrum Foundation and the “Administrative Budget Wallet” are critical to fostering this growth in a manner that maximizes speed and efficiency, while maintaining the decentralized aspect that ArbitrumDAO brings.

As a community, we should be working together with a shared vision of long-term growth, rather than engaging in short-term maneuvers that only serve to feed egos. We agree with @ChainLinkGod view that, as long as the 700 million ARB remains untouched until a consensus is reached, there is no practical reason to transfer the funds to different locations, and the placement of the funds should not be a matter of concern. Let us focus on the larger picture and work collaboratively to achieve our common objectives.

[lay2000lbs]

I’m confused, why wouldn’t this fall under a non-constitutional AIP?

First because the proposed action “Disclose terms of the market making deal with Wintermute” does not fall under “funding” or “informational” and is out of scope. Second because it fails to meet the basic formatting and timing requirements.

It falls under funding, because it is proposing how to spend or allocate funds from the DAO treasury held by the Arbitrum Foundation.

The proposal on the whole does not. If you dropped the “Disclose terms of the market making deal with Wintermute”, then arguably it does as the other two prongs relate to treasury usage.

Also does anyone else see the irony in rejecting this proposal solely on the grounds of a technicality on standards of governance after what happened with AIP-1?

Two wrongs don’t make a right. It’s not solely technical grounds… the biggest issue is that it’s proposing a vote on something the token has no control over.

These funds should have been returned to the DAO immediately after AIP-1 failed.

The funds should not have been transferred prior to voting in the first place. I agree with you on that. Returning them would be ideal in principal but could trigger many complications. It seems far more prudent to first vote on the amended plan, if the vote fails, then send back and deal with all the complications that will be incurred by that action.

If this vote was more cleanly just about transferring tokens back, I think you’d find a lot more support. The buy backs coupled with the out of scope attempt to force disclosures muddy it and also simply put it out of scope of a vote.

Comparing “make vitalik buy arb tokens” to “disclose the terms of the wintermute deal” is a straw man, the foundation has a clear ability to disclose the deal.

Vitalik has a clear ability to buy Arb tokens. It’s not about the ability to do something, it’s whether the token has any control to effect it. In both cases, it does not.

[kagniea]

It’s good that @thiccythot has put this proposal and is making others aware of their rights, encouraging its practice. At the same time as Gauntlet and @ChainLinkGod have expressed above, I think the disclosure of Wintermute deal is a bad idea and would hinder relationships with other prospective vendors which might not be the best for the DAO. Same goes for the $ARB buyback point, it’s definitely not a good idea and in my opinion it’s a no-go for this proposal.

Although I know the proposal can no more be edited, a better one would be to return perhaps 350M $ARM and not the total amount. It’d still elevate the faith in the DAO and would not affect the long term health of the DAO.

@thiccythot

What happened with AIP-1 was a clear overreach of the DAO’s power of treasury resources

This is true, AIP-1.1 was an overreach of power, but the same is reflected in this proposal by dragging Wintermute into it and proposing the buyback.

Both proposals seem to be in bad faith, while relatively AIP-1.2 seems fairer.

There could definitely be better ways to exercise the powers, and those could be reflected by supporting strong and underrated projects in the ecosystem. Like how ENS DAO funds continuous development and small grants for apps built around ENS or those integrating Sign-In-With-ETH (SIWE)
edit: AIP1.1

[dk3]

Second this, this imo is a poorly thought-out ask to bend the knee. There are too many unknowns not addressed to vote for in good faith, thus we will be voting against. The solution is more transparency, not dictation on how the foundation should operate. This needs to be an iterative constructive process, and more discussion is needed before trying to mandate an action.

[cattin]

This proposal feels unnecessary and, as others mentioned, very risky - especially considering AIP-1.1 and 1.2, which already addressed the main issues with AIP-1. Clearly, they screwed up with their comms. If they were transparent since Day 1, then we wouldn’t have this discussion going on, but moving forwards with locking the funds in a smart contract with vesting is reasonable, as stated on AIP-1.1. There doesn’t seem to be a reason to transfer those funds back to the DAO, it would only add extra bureaucracy to this whole process.

About this, I think we have to understand that Arbitrum doesn’t exist in a vacuum, the market is competitive, and delaying the whole setup of the DAO simply for a “symbolic gesture” seems a bit silly - we have the responsibility to help Arbitrum’s ecosystem thrive.

@thiccythot

It makes me sad that we have to take shortcuts in the governance process in the name of competition

There are no shortcuts, the Foundation exists because the DAO needs a centralized structure for quick and efficient decision-making, if we keep this beef between DAO and the Foundation going on and expect them to kneel (when they already did) seems counterproductive. In the end, the Foundation is accountable to the DAO - yes, they messed up by not being transparent about the initial allocation to the Foundation + MM deals, but the die is cast, and AIP-1.1 and AIP-1.2 are the proper way to remedy these mishaps and move forwards with the DAO.

I appreciate the effort, but I find it pointless at this stage, we already have the proper checks and balances to prevent this from ever happening again, and we’re already on the right track to remedy what they did pre-DAO.

This is only my opinion, not SEED Latam’s or the rest of our delegation’s

[Larva]

Against. It’s time to stop this farce.