We are fully supportive of this proposal as written. We believe that reaching some solution for the backfunding issue is critical to the Arbitrum ecosystem and believe this particular proposal has done excellent work in balancing what is essential and what is practical to put forth a workable solution.
Savvy DAO has done an exceptional job putting this together We have been involved in this process and cannot adequately express the amount of work and thought put into this proposal. Savvy has spoken to every stakeholder and considered all arguments with an open mind. I believe they have sincerely tried to be unbiased and taken precautions only to accept arguments supported by compelling analysis. I believe the process alone is an example of well-intentioned and thoughtful DAO governance.
Arbitrum lives by the strength of its small teams. The Arbitrum delegates were impressed with and supportive of the teams that passed the initial round with a quorum but were excluded due to the 50M cutoff and small print that explained how that cutoff would exclude teams with fewer votes.
There are many reasons to backfund these ~30 projects:
- These are primarily the smaller and Arbitrum native teams that governance wants to support. I believe the proposal above has given substantial evidence around this point.
- An untested voting process meant that political relationships were a decisive factor in the initial STIP vote. We should expect this type of political imperfection in a young DAO. However, we should not let an imperfect political process lead us to a self-inflicted wound
- We should be happy the program was such an unmitigated success. I have not seen the Arbitrum governance and community so alive in a long time.
Backfunding the STIP is cheap. It’s entirely normal for companies and ecosystems to spend to strengthen network effects. Arbitrum is worth $10B FDV — Spotify, Uber, Twitter, Netflix, and Amazon were all spending significantly over $1B per year when they were at $10B.
In this proposal, we are spending a marginal $25M to repair a situation that is disproportionately hurting small, hardworking teams that are the lifeblood of Arbitrum’s ecosystem and network effect. Please do not underestimate how hard it is for a small team to compete with a larger project that has a large amount of incentives. As one example, we estimate that GMX’s $12M of ARB incentives will lead to between $15B and $25B of incremental volumes. How can a small team compete for those volumes if they don’t have incentives because we are waiting to see the data from the first round?
What matters for Arbitrum is the demand story. Investors want Arbitrum to bring on more teams, community members, investors, and customers. Investors want to see Arbitrum grow transactions and volumes. They want to see Arbitrum’s network effect strengthened. They want Arbitrum to regain and retain its title as the undisputed leader of defi built by small, decentralized teams.
Instead, if ~30 small Arbitrum teams feel disenfranchised by the political process (and a few of these teams shut down because they can’t compete with large teams that have a few million of ARB to spend) then Arbitrum will become a less interesting place to invest.
Arbitrum has a golden opportunity to regain its position as the undisputed leader in defi after falling a bit behind Optimism (in large part due to intelligent allocation of OP incentives). It can do this as market volumes and volatility are coming back, which is lucky. We should be focused on giving this our best shot at a reasonable price. It doesn’t really matter if Arbitrum spends 25, 50, or 75bps of FDV (e.g. 25M ARB is 25bps of Arbitrum FDV). What matters is that the program works to attract teams and users that can drive innovation and strengthen Arbitrum’s network effects.
Theia is highly aligned with the Arbitrum ecosystem. We have investments in Arbitrum, GMX, GNS, GMD and Trader Joe. After meeting with a lot of the teams that stand to be left out in the cold by this proposal, we also have an emotional investment in the outcome of this vote.