FINAL DRAFT EDITS
- Added language to make clear The Coalition is a malleable entity and domains and members are not set in stone. At the end of the 12 month trial period, prior to future funding, the domains, The Advocate, and the members included in The Coalition should be reevaluated.
- Changed compensation structure to allow the DAO to more easily and hastily replace or terminate a Coalition member or The Advocate with just an offchain vote.
- Expanded conflict of interest policy.
- Added language around service provider onboarding framework to make more clear that the framework is a tool the DAO can use for future onboarding of service providers. The process outlined will be open to all service providers in any domain, with entities chosen solely at Arbitrum DAO’s discretion.
- Added framework allowing members of the coalition to exit if desired, providing a 2 week lead time while offering a list of viable replacements.
TLDR: This proposal funds a coalition led by Blockworks Research, Gauntlet, and Trail of Bits in order to aid in turning Arbitrum DAO members’ ideas into reality for a term of 12 months.
The Arbitrum Coalition is an organization initially made up of Blockworks Research, Gauntlet, and Trail of Bits. The Coalition aims to execute turnkey R&D work on behalf of the Arbitrum DAO. The Coalition’s mandate is to help steer the path from ideation in the forum to the optimal, efficient, and safe execution of proposals. In other words, being a steward in making the DAO’s visions a reality. The coalition will provide the necessary resources so that the DAO can make informed decisions.
The Arbitrum forum includes many worthwhile suggestions, but often lacks the required research, coordination, design, and risk assessment to move forward optimally. For example, iterating on proposals, drumming up delegate awareness, and finding the necessary partners to execute an idea are often difficult tasks. The Arbitrum Coalition’s mandate is to help distill information and accelerate governance decision-making so DAO participants can make informed decisions.
The Coalition has best-in-class experience/specialized expertise and personnel to execute on this venture and are all already notable contributors to the DAO. Areas of expertise include but are not limited to research, framework creation, risk assessment, secure code reviews, threat modeling, and testing enhancements.The Coalition will take the necessary steps to ensure the Arbitrum DAO has the resources it needs to accomplish its goals.
As a case study demonstrating the need for the Coalition, there was a lot of discussion around returning tokens accidentally sent to the airdrop address back to the recipients. However, there was no one to call on to look at the landscape of how other protocols deal with this issue, design and implement a mechanism, or take it through the governance process. Likewise, the DAO has seen multiple grant programs suggested but has not been able to assess what has worked or not worked for similar programs in the past from an objective perspective. A multitude of such cases can be seen over Arbitrum DAO’s short tenure. These are the exact roles the coalition will undertake for ideas that gain traction among DAO stakeholders.
Had the coalition existed during the time of the STIP proposal, it would have played a pivotal role in alleviating many of the inefficiencies and challenges delegates faced in the process. Blockworks Research and Gauntlet would have been prepared to develop comprehensive resources in support of the program end-to-end. From simplifying the evaluation of proposals with concise explanations and quantitative analysis to simplifying the voting process for delegates, and ultimately eliminating the need for a second process aimed at finding a service provider to monitor and analyze the program once live, by doing it ourselves. While we did make modest contributions in this regard , our commitment would have been backed by substantially greater resources. In addition, the Coalition would (and will, should this proposal pass) do its own analysis of how this STIP program performed (after the fact) and provide feedback and recommendations on how to improve it in the future. The Coalition would have advocated for streamlined voting methods in place of 105 separate votes and created efficient voting dashboards, reducing the reliance on last-minute community-funded solutions. While it’s a missed opportunity, it highlights the potential for future value.
Additionally, complex mechanism designs like creating a permissionless validator set (BOLD) and sequencer design (timeboost) can be made more easily understandable for ARB delegates with support from the Coalition and researched impartially versus other potential solutions when proposals of this nature inevitably go on the forum.
The Coalition will help community stakeholders make the best possible decisions when it comes to AIPs. For example, Trail of Bits will aim to review each onchain proposal’s source code to ensure it achieves what is stated. This code review ability is a feat many delegates cannot achieve on their own and will be extremely useful to enable competent voting. Blockworks Research will distill the competitive landscape and underlying technology and Gauntlet will be able assess potential risks to the Arbitrum ecosystem.
An example that demonstrates the value the Coalition will provide relates to support decision-making for the Arbitrum Plutus DAO proposal to Activate ARB Staking. Adding an inflation rate to the token poses concerns around risks to the token, new independently created staking contracts would need to be audited, and it would be helpful if delegates had access to quantitative research surrounding how inflation has impacted other tokens in the past. The Coalition can work together to provide objective analysis, quantitative research, and, if desired by the community, audits and execution for this proposal and others like it.
The Arbitrum Coalition will help the DAO reduce friction and operate effectively. Having three of the most experienced service providers in crypto best positioned and resourced to act at the behest of the DAO will be a tremendous value add.
One key difference between Arbitrum and many other protocols is the immense power given to the DAO at token generation, which makes the DAO fully responsible for the coordination and growth of the protocol.
Arbitrum’s impressive decentralization demonstrates that the DAO can’t rely on single entities such as Offchain Labs or the Arbitrum Foundation. Any steps taken to help create a robust decentralized ecosystem of service providers so that the DAO is not dependent on any single entity is a step in the right direction. This way if any one organization falls, is negatively regulated, or otherwise encumbered, the protocol continues to march forward. The Arbitrum Coalition is the first initiative toward this overarching goal.
Additionally, the Coalition will aid in bringing more service providers subservient to the DAO. For example, it can be a steward in creating a methodology for other budgeted entities to come into existence.
Other DAOs have a diverse ecosystem of service providers who help the DAO operate efficiently. The Coalition will be the first entity working towards this overarching structure such that over time the DAO will have an ecosystem of service providers executing on key roles like grants, development, growth, risk, legal, and more. This is a necessity in maintaining a truly decentralized and efficiently operating DAO.
Two additional benefits to funding the coalition will be the professionalization of DAO undertakings and growth for Arbitrum. All representatives of the coalition are professional and will bring competent and effective work and communication into the DAO that should help proposals move along with less friction. Additionally, the entities involved have a combined audience of far over 500,000 and will be sure to produce public content on the work we do for the DAO to hopefully drive more users and developers into the ecosystem.
The Coalition’s purpose is not to replace delegates, but rather to support, serve, and empower both them and the community as a whole with tools and deep insights to streamline effective decision making.
Introduction to The Coalition
Trail of Bits: Since 2012, Trail of Bits has helped secure some of the world’s most targeted organizations and devices. They combine high-end security research with a real-world attacker mentality to reduce risk and fortify code. They have worked extensively with Offchain Labs and performed over 1,800 hours of security review of Arbitrum through four focused engagements, including Nitro and Arbitrum V2. Many firms in DeFi, including Optimism, Balancer, Uniswap, and Compound trust Trail of Bits expertise to help secure their code, and you can find many more in their Publications repository. They’ve succeeded in finding vulnerabilities in highly verified systems and providing the best solutions regardless of whether they invented them. They are relentless about raising the baseline in the communities they work, and have developed and made freely available some of the most-used security tools, reference guides, and security research in the industry.
Gauntlet: Gauntlet’s quantitative optimization solutions drive rapid and sustainable growth for DeFi’s top protocols, DAOs, and ecosystems through research, reports, products, and bespoke engagements. Gauntlet has the longest track record in DeFi risk management, with a managed peak at $40+B for DeFi protocols such as Aave and Compound.
Blockworks Research: Blockworks Research is a team of analysts that delivers institutional-grade data-driven research and analysis for L1s, L2s, DeFi, and gaming/consumer applications. Our team is well-known in the industry for producing high-quality, actionable research reports and data dashboards covering various topics, including L2s, dApps, tokenomics, technical upgrades, emerging trends, governance, MEV, and market analysis. The team is divided into protocol-specific coverage so that our analysts are experts in their respective niches. Blockworks Research is a branch of Blockworks, a media company hosting conferences, podcasts, and an editorial site.
The Arbitrum Coalition (“the Coalition”): A group initially made up of Blockworks Research, Gauntlet, and Trail of Bits whose mandate is to empower delegates with resources for making the most informed decisions possible.
DAO Advocate: A single designated entity that maintains the ability to direct the coalition’s efforts. Functions as a referee between the DAO and the coalition. We suggest L2BEAT fulfill the role of the Advocate as a proven good actor for the Arbitrum DAO given their contributions and status in the DAO. The advocate will receive a stipend of $8,000 per month for their work. The advocate’s main responsibility is ensuring the DAO’s best interests are met by the Coalition.
Coalition Member Termination: Ultimately, and above all, this Coalition will exist to serve the Arbitrum DAO. As such, individual members of the Coalition can be considered for replacement if their service does not meet the standards of this proposal or the DAO’s expectation. In the scenario a Coalition Member is considered for replacement, the DAO will need to examine the list of alternative vendors as well as any new market entrants eligible for consideration and pass a vote through
a Snapshot vote (reaching quorum) to stop the following payments to the vendor and replace said entity with a counterpart. The Coalition member will be considered terminated upon the vote passing. The same process may be executed in order to terminate and stop the stream of funds for the entirety of the Coalition and/or the DAO Advocate.
Coalition Member Exit: As a malleable entity, if a member of the Arbitrum Coalition wishes to exit for any reason, they may do so by providing a two week lead time of departure and offer a list of viable replacements. Payments to the Member will stop 14 days after notice is given.
The advocate will have the ability to call on the coalition for R&D efforts at their discretion and act as the DAO’s representative to ensure that the Coalition is working on the most value-added initiatives and providing beyond satisfactory value. The advocate will solely act on the DAO’s behalf and function as a facilitator. From analysis, to modeling, to payload the Coalition will tackle and streamline workstreams together.
The roles of the Coalition include but are not limited to:
Trail of Bits: Reviewing onchain upgrade proposals to ensure that they align with the design and specification of the proposal through whitebox source code reviews. This role is particularly important given the prevalence of governance attacks, as seen with Tornado Cash. When no proposal requires a code review, Trail of Bits will focus on building content to help review further proposals, including tools (dedicated Slither detectors, fuzzing harness, proposal state diff visualizer, … ) and educational material (tutorial, checklist, code walkthrough, …)
Gauntlet: Will empower the Arbitrum DAO with an understanding of the optimal path for growth through our quantitative work. Decisions in ecosystems, specifically DeFi, benefit from design, research, and modeling to determine how to incentivize usage, maximize economic efficiency, protect systemic health, and plan for the future with rigorously validated insights. Examples of some recent work include Aave Killswitch, Uniswap incentive design, ongoing Arbitrum USDC migration, and Cost of MEV: Quantifying Economic (un)Fairness in the Decentralized World.
Blockworks Research: Will provide objective data-driven research surrounding proposals to help delegates understand the context, competitive environments, and make more informed decisions. These reports may also be used as a tool for those writing proposals to improve their work. Additionally, Blockworks Research will function as the project manager handling logistics such as communication with the DAO and speaking with delegates. BWR is also able to input on mechanism design.
The Advocate is not a part of the coalition and exists purely to facilitate the DAO’s interests and direct the coalition. The Advocate is a representative of the DAO.
We believe it pertinent to get The Coalition stood up with haste and that Blockworks Research, Gauntlet, and Trail of Bits make up ideal initial members. That said, The Coalition is a malleable entity that can change, expand, and contract in domains and members as the DAO wishes. The Advocate as L2BEAT, likewise, should be looked at as a temporary seat that is always open to change. At the end of the 12 month period the domains and members should be reevaluated based on performance, lessons learned, and the adapting needs of the DAO as expected for the following 12 months.
The Arbitrum Coalition aims to provide the following services as a first priority
- Forum Proposal Review [BWR]
- Will provide impartial data-driven research surrounding proposals to help delegates understand the context and competitive environments such that they can make more informed decisions. These reports may also be used as a tool for those writing proposals to improve their work. The Advocate will direct the frequency and research topics of this work.
- Review on chain proposal code updates [Trail of Bits]
- White box security review of source code through a combination of manual and automated review, which may include a review the proposal for design flaws and identifying security and correctness properties
- Reviews do not include proposals that are initiated by Offchain Labs and the Arbitrum foundation. These proposals are already going through security reviews (including by Trail of Bits)
- Just-In-Time Quants [Gauntlet]
- Gauntlet’s Applied Research and Risk teams will deliver quantitative review, research, and modeling or simulation for DAO proposals and initiatives relating to economic risk, design, or optimization.
- Arbitrum Ecosystem Risk Dashboard [Gauntlet]
- A public ecosystem risk dashboard, similar to Aave and Compound, provides users, investors, and voters continuous visibility into market risk throughout the ecosystem. Market risk metrics will include Volatility, CEX/DEX liquidity, and Gauntlet Safety Ratings, to inform ongoing risk-return optimizations. Gauntlet will hold monthly Risk Training sessions on how to use the dashboard from deployment to adoption and beyond.
- Service Provider Onboarding Framework [BWR]
- Establish a framework that the DAO may choose to utilize as a tool for onboarding future service providers.
- The framework will include potential requirements and criteria; solutions for checks and balances; onboarding and offboarding processes for additional service providers including but not limited to legal counsel, operations, engineering, and marketing. All potential service providers can be thoroughly vetted by BWR, if the DAO chooses, ensuring sufficient staffing and resource availability.
- Following the DAO signaling an appetite for such an activity, Blockworks Research can propose and host a service provider onboarding process. The initial proposal will attempt to allocate a budget of ARB that service providers can then apply to receive a portion of through an RFP. The DAO will then vote which service providers to onboard. Recruiting, criteria, the process, budgeting suggestions, and facilitation can be handled by The Coalition. Though BWR is happy to take the proposal through the process, the DAO may opt to use the framework in any capacity it wishes, including ones that exclude BWR from future involvement.
- Project Management [BWR]
- Will handle communication with DAO surrounding coalition activities. Additionally, it will be the point of contact for DAO stakeholders and service providers. Blockworks is responsible for the overall execution of the coalition, documenting its success, escalating issues, and recommending solutions. Blockworks will maintain its own governance process to ensure continuity.
Once the first priority services are met, the Arbitrum Coalition can provide the following. Though these are examples of activities that can be executed on, the DAO, through The Advocate, will have decision making power over the scope of the coalition’s work.
Tooling Creation and Enhancement [Trail of Bits]
- Develop and enhance tooling to enhance the security of the Arbitrum ecosystem and its proposals, including:
- Specific static analysis bug detectors targeting code update.
- Develop fuzzing capabilities to test the validity of the new upgrade states and verify that the state changing will not break any invariant
- Visualize the state of the governance contracts, in particular: the state of previous proposals, current emitted and delegates votes, how the tokens are delegated,
- Visualize and verify correct encoding of values used in the governance contracts and the action contracts.
- Develop and enhance tooling to enhance the security of the Arbitrum ecosystem and its proposals, including:
Educational material [Trail of Bits]
- Provide educational material and guidelines for reviewing upgrades procedures, including: Tutorials, Checklists, Code walkthrough
Research New Mechanisms [BWR]
- Objectively analyze and contribute to the design of new and existing mechanisms such as sequencers, fraud proofs, data availability solutions, and more. All research will be data and evidence driven evidence, where available. Projects to be prioritized by The Advocate.
Delegate Engagement [BWR]
- Will create processes that incentivize delegates to be more active contributors to proposals rather than passive reviewers. For instance, a delegate incentives framework with accompanying requirements. Additionally, host regular cadence calls with delegates and those that authored proposals to work together on iteration.
Growth Initiatives [BWR]
- Will produce content surrounding coalition activities. Blockworks Research’s podcast, 0xResearch, will feature a segment on a weekly basis throughout the coalition’s term that will discuss the latest updates in Arbitrum the protocol or governance. Additionally, Twitter threads and newsletter mentions will be regularly provided in order to attract more developers and users into the Arbitrum ecosystem.
The total cost of the coalition for the 1-year term will be based on the 30-day VWAP price of ARB on the day prior to the onchain proposal. One quarter of payment will be paid upfront to each Coalition Member, with a 274 day stream of the following ¾ starting 91 days from the AIP’s execution. The stream of funds will remain in DAO control and can be cut off at any time through an onchain DAO proposal. As of the ARB price on October 25th, this proposal is estimated to cost the DAO approximately 2.2M ARB over the year.
Trail of Bits
- $800,000 USD (payable in ARB) for allocating 8 engineer-weeks per quarter (total of 32 engineer-weeks for the year).
- If 8 engineer weeks are not enough to review all the on-going proposals in a quarter, Trail of Bits will either perform a review of some of the proposals, or a best effort of as many as possible. Trail of Bits will agree with the Arbitrum coalition and its Advocate to determine the priorities.
- $200,000 will be paid upon the AIP passing, with the remaining $600,000 streamed over 274 days to Trail of Bits starting on the 91st day thereafter. The stream will remain in DAO-control.
- $327,000 USD (payable in ARB) for 15 quantitative researcher weeks annually, to be used at any time. Additionally, the Arbitrum Ecosystem Risk Dashboard will be hosted, maintained, and expanded for one year from go-live.
- $81,750 will be paid upon the AIP passing, with the remaining $245,250 streamed over 274 days to Gauntlet starting on the 91st day thereafter. The stream will remain in DAO-control.
- $780,000 (payable in ARB) for a minimum 13 analyst weeks per quarter toward Forum Proposal Reviews, the creation of a Service Provider Onboarding Framework, Coalition Project Management, Mechanism Research, Delegate Engagement, and Growth Initiatives.
$195,000 will be paid upon the AIP passing, with the remaining $585,000 streamed over 274 days to Blockworks Research starting on the 91st day thereafter. The stream will remain in DAO-control.
The Advocate - L2BEAT
- $96,000 (payable in ARB) for being the DAO’s proponent with Coalition and directing the Coalition at their discretion.
- $24,000 will be paid upon the AIP passing, with the remaining $72,000 streamed over 274 days to L2BEAT starting on the 91st day thereafter. The stream will remain in DAO-control.
The COALITION 3/5 multisig is being created. The funds in the multisig belong to the DAO and the signers act as grant managers on behalf of the DAO in coordination with the Arbitrum Foundation. Signers, excluding Gauntlet and Blockworks Research, will receive 1,000 ARB per month for their contribution. Funds held in the multisig are explicitly banned from usage in DAO governance including delegation. The multisig includes:
- Michael Ippolito, Blockworks
- Nick Cannon, Gauntlet
- Frisson, Tally
- David Mihal, Cryptofees.info
- Matt Stein, StableLab
The COALITION multisig includes two features to ensure accountability of signers and grantees:
Streaming of funds to the multisig every second week for the Coalition’s term using Hedgey. The DAO will maintain control over this stream and have the ability to cut it off with an onchain vote.
Clawback capability so the DAO can retrieve funds if the multisig violates the agreement via an offchain vote.
The duration of the engagement will be of 12 months (4 quarters) from the moment the first on-chain proposal is approved. This list is subject to change, based on the DAOs shifting priorities as determined in real time by the Advocate. The Coalition may seek to identify and complete other initiatives for the Arbitrum ecosystem, depending on the changing needs of the ecosystem, at the discretion of the Advocate.
Conflict of Interest Policy
Disclosure: Any conflicts of interest (investment, involvement, or personal relationship with other projects/members of projects) should be disclosed and made public upon joining the Committee and maintained up-to-date in the Committee members database.
Recusal: Members with a conflict of interest involving a project being reviewed by the Committee should recuse themselves from participating in the evaluation and should vote Abstain if a proposal directly related to the Coalition is submitted. Additionally, Coalition members will abstain from commenting or voting on proposals made by any company that can be deemed a direct competitor.**
Self-Dealing: Participants should refrain from voting on sending funds to themselves or organizations where any portion of those funds is expected to flow to them, their other projects, or anyone they have a close personal or economic relationship with.
Ethical Trading: Members are required to follow ethical trading standards in regard to ARB and any other relevant digital assets.
Ecosystem Risk Dashboard Mocks