Abstract
The Arbitrum DAO recently passed a proposal to deploy 7,500 ETH from its treasury with a two-fold goal: generating low-risk yield on otherwise idle ETH, and to spur ecosystem growth. The Growth Management Committee (GMC) is tasked with delivering a recommendation as to which solution(s) will bring the DAO the most value to the broader ecosystem with limited complexity or risk. The socialization of this RFP marks the start of this process. The DAO explicitly seeks applications from protocols in the LST, borrowing/lending, or bridging sectors, but is open to other applicants as long as they support ETH and ETH-pegged asset strategies. We also encourage joint applications between two protocols e.g., an LST and borrowing/lending protocol.
The GMC members include Entropy Advisors, Llama Risk, and Callen from Wintermute.
Applicants will have until February 3, 2025, to submit proposals to be considered for the first round of reviews barring unforeseen extensions.
Motivation
A relatively open-ended RFP process was chosen as the best path forward in selecting how to deploy a portion of the DAO’s idle ETH holdings, which is open to any protocol that wishes to attract capital and strengthen its alliance with the Arbitrum DAO. The Arbitrum DAO grows its treasury through AEP licensing fees, chain profit (often referred to as sequencer revenue), investment activity, and soon Timeboost which will derive revenue from MEV-related activity. With the DAO’s income streams set to grow over the coming years, it is important to develop a strategy around deploying these assets. The opportunity cost of this capital for the DAO is increasing both in a direct financial sense and from the perspective of ecosystem growth. We mention this so that interested applicants understand that this program has the potential to grow significantly over time beyond the initial 7,500 ETH tranche if the Arbitrum DAO so chooses.
We share this RFP publicly in an effort to attract the largest number of application submissions, thus providing the GMC, and ultimately the Arbitrum DAO, with the most diverse/competitive set of options to choose from. Please note that any applicant’s strategy should only involve ETH or ETH pegged assets, as the DAO is not looking to derisk its ETH exposure. Instead, it wishes to earn additional ETH on its original holdings. Note that specific pieces of information can be left confidential prior to making information available to the wider DAO. Information can be kept confidential which must be specified within the submission, but applicants should consider that it will be more difficult to get proposals passed by the DAO unless they have insight into the deal’s structure in its entirety.
Application Template
Applicants should copy and paste the following template section into a separate document to be populated, and send the completed application via Google Drive link to sam@entropyadvisors.com, callenvde@gmail.com, and hi.river0x@gmail.com. Please identify any confidential information that cannot be shared with the wider Arbitrum DAO.
Contact Details
This section should provide a clear point of contact for the GMC to communicate with. Please provide the name, email, telegram handle, and job title of the POC here.
Protocol Information
This section should serve as a quick explainer of how the protocol works, the service it facilitates, the amount of time it has been live on a mainnet environment, the amount of TVL the protocol secures alongside other relevant protocol KPIs, information about the founding team, and any other helpful context the GMC members should have when evaluating the application.
Strategy Overview
This section should include information regarding the proposed strategy. This will include the amount of ETH requested or the minimum allocation that is acceptable based on the proposed terms, expected returns alongside performance benchmarks, other benefits the strategy would bring the Arbitrum ecosystem in terms of growth, the liquidity profile of the proposed strategy (AUM and secondary market liquidity), concessions made by the applicant e.g., revenue share, token allocation, fee discounts, etc. with the Arbitrum DAO, the chain on which the assets would be deployed, and any other relevant information that would be helpful for the GMC.
Please note that more than 1 strategy can be proposed in a single application. Please clearly delineate between strategies if more than one is chosen, and address each of the sections within the application template for each strategy respectively.
Risks / Monitoring
This section should focus on risk factors associated with the proposal. This should include, but is not limited to, price stability of the underlying asset, the number of audits the protocol has undergone and by whom (please include the audit reports, specifically for the smart contract(s) the Arbitrum DAO’s assets would be secured by) alongside ongoing bug bounty programs, legal/regulatory concerns, the jurisdiction from which your team (e.g. Labs entity) is applying from, custodial/non-custodial nature of the strategy, the process/amount of time to withdraw from the strategy in the case of unforeseen circumstances, any points of centralization that the proposed strategy would be subject to, the specific smart contract(s) that the DAO would be exposed to, oracles that will be relied upon, how risk would best be monitored, whether or not broader market conditions will affect the underlying strategy, etc.
Implementation Timeline
This section should include information about the expected time of asset deployment, assuming the strategy gets approved by the DAO. Depending on the complexity of the submission, a proposal may contain a stepwise approach, so please clarify the targeted timeline here.
Miscellaneous
Any other information that the applicant feels the GMC should be aware of should be included in this section. This may include things such as co-marketing campaigns between the protocol applicant and the Arbitrum DAO (this is expected), prioritization of Arbitrum One or the broader Arbitrum tech stack for future protocol upgrades or new feature deployments, nuances related to a specific strategy that do not fit within the application template at hand, or anything else that applicants wish to share.
Evaluation Criteria
First and foremost, applications that do not focus on ETH / ETH-pegged assets, have not undergone a sufficient amount of audits, or do not maintain open-sourced code will not be considered. Additionally, we strongly encourage strategies that enable the Arbitrum Foundation to retain custody of the funds.
Other factors the GMC will heavily weigh throughout the evaluation process include factors related to risk, concessions the applying protocol is willing to make (e.g., revenue share, token allocations, fee discounts, etc.), the less quantifiable factors related to ecosystem growth, and the expected all-in returns of the proposal. Please note that risk will be the most important factor taken into account.
The GMC will also prioritize joint applications. For example, a battle-tested LST protocol and lending protocol submitting a joint application to provide enhanced yield, a dual-token allocation for the Arbitrum DAO, joint marketing efforts, etc. would stand a better chance of winning the business than each protocol applying separately.
Please note that the GMC may work with applicants by requesting more information and providing them feedback to incorporate prior to sending a recommendation to Snapshot.
Approval Process
As per the original Treasury Management proposal passed onchain, the GMC possesses no concrete decision-making authority. The GMC is merely responsible for reviewing applications and making a recommendation to the DAO, but the DAO maintains the ultimate decision-making power. As such, any recommendation made by the GMC must be approved by the DAO via Snapshot and garner 3% of the votable token supply with a simple majority in favor/abstain in order for any strategy to be mobilized. All applications will be posted to the Arbitrum DAO forum by the GMC prior to sending any specific recommendation to Snapshot in order to remain transparent, but information labeled as confidential by applicants will be omitted.
Now that the RFP has officially been socialized, interested applicants have until February 3, 2025, to submit proposals to be considered for the first round of reviews barring unforeseen extensions. In the weeks following, a recommendation will be posted to Snapshot for the DAO to either approve or reject the suggested strategy. The GMC will be posting a rationale on the Arbitrum DAO Forum, which will be linked in the Snapshot proposal, that provides an explanation behind the recommendation. The application will also be included in the text for the Snapshot, so if any details must be omitted, the applicant must specify what exactly needs to be treated as confidential. Please note that the GMC recommends possessing the willingness to make everything public in order to empower the DAO to make an informed decision. Otherwise, a recommendation may be difficult to pass. Each application that is recommended by the GMC will require its own rationale and Snapshot vote (in the case in which numerous applicants receive a portion of the 7,500 ETH).
If a recommendation(s) is approved, the GMC will be making a forum post containing a brief update with information on the amount of ETH remaining to be allocated (if any) and the process for rolling applications, the target date for the first quarterly report, risk monitoring strategy and timeline for publicly available analytics (queries will be open-sourced), and any other relevant information.
FAQ
- Does my solution need to be on Arbitrum to get selected?
Your solution does not need to be on Arbitrum, but significant progress towards network alignment must be documented and highlighted in your proposal. Solutions on Arbitrum will be prioritized, as they will contribute to the growth of the broader ecosystem.
- How long will the ETH be deployed for? May it be withdrawn?
This ETH will be deployed for at least 6 months given the term length of the GMC and need for ongoing risk monitoring, unless the DAO decides to withdraw funds due to unforeseen circumstances, but we expect this to be a longer-term engagement. We want to grow with the winning applicant(s), thus creating a mutually beneficial relationship. The Arbitrum Foundation reserves the right to unilaterally withdraw the ETH at any time, but will not reallocate it without DAO approval.
- Who will be deploying the ETH?
The Arbitrum Foundation will serve as the counterparty.
- Will more ETH be supplied later?
Our intention is for this RFP to lay the groundwork for a more regular allocation of ETH generated by the Arbitrum DAO.
- Where may I ask specific questions about my application?
Please contact Entropy Advisors, Wintermute Governance, or LlamaRisk via the emails provided at the top of this post, with all emails as the primary recipients.
- Can I submit multiple proposals?
You may submit multiple proposals provided each additional proposal brings a sufficiently distinguished offering to merit an entirely different submission. Options within each proposal are preferable unless the proposal changes so much that it requires a new proposal.