We have received multiple inquiries on the future of the STEP diversification program. This post drafted by @sid_areta and @thedevanshmehta lays out the next steps for its continuation.
Background
With the successful conclusion of the first edition of the STEP program, we are planning to form a Steering Committee to take this initiative forward and outline Arbitrum’s broader RWA strategy. Our goal is to ensure at least 1% diversification of ArbitrumDAO’s treasury into RWAs every year for 5 years, cementing Arbitrum’s position as the leading RWA chain. The predictability of STEP diversification occurring each year is important for influencing RWA projects to build on Arbitrum.
As a reminder, the Stable Treasury Endowment Program (STEP) diversified $30M worth of ARB into stable, liquid real-world assets (RWAs) to generate yield, diversify our treasury, and grow the RWA ecosystem on Arbitrum. A comprehensive RFP process was undertaken, where the DAO received 33 applications from RWA issuers, of which 16 were shortlisted and 6 were finally selected for allocations: Securitize BUIDL ($9.57 million), Ondo USDY ($5.22 million), Superstate USTB ($5.22 million), Mountain USDM ($3.48 million), OpenEden TBill (3.48 million), and Backed Finance bIB01 ($3.48 million). These allocations help us diversify the treasury into dollar denominated assets, get selected providers onto Arbitrum and are expected to generate yield of roughly $1-1.5 million per year.
Formation of the Steering Committee
The initial leads forming the Steering Committee are Sid from Areta and Devansh from the Treasury and Sustainability (T&S) Working Group. We are also receiving support from RWA expert and former STEP committee member Paper Imperium from @GFXlabs in finding other suitable members for the steering committee. Since RWAs are a nuanced, subject-matter heavy topic that require specific expertise, it is our current working hypothesis that the Steering Committee will require members with the following backgrounds:
- RWA Issuers
- Treasury Managers
- Crypto-Native Funds (i.e., funds that would buy RWAs and deploy them in yield-generating strategies)
- Crypto-Native Financial Advisors
- Legal Firms
- RWA Infrastructure
- CFA, CPA and tradfi knowledge of deep capital markets
In addition to staffing the Steering Committee with members, Arbitrum delegates and stakeholders with an interest in the future of RWAs on Arbitrum can play a role as advisors.
Role of the Steering Committee
Identification of Topics to Research for STEP II & Definition of Broader Arbitrum RWA Strategy
The first and primary aim of the Steering Committee is to (i) incorporate feedback and learnings from the first STEP program and (ii) define future STEP programs and Arbitrum’s wider RWA strategy.
As our working hypothesis, we believe that we will need to work on some of the following topics (not exhaustive) that will feed into the definition of future STEP programs and Arbitrum’s wider RWA strategy:
- ARB liquidation strategy in STEP such as limit orders and price target determination
- Asset types to include as part of diversification and rationale for the same
- Methods of productively deploying purchased STEP assets through identifying use cases for RWAs across DeFi (i.e., making assets productive after investing in them)
- Assess priority of the STEP program for Arbitrum in terms of RWA ecosystem growth vs treasury diversification, yield generation and principal protection
- Define targets for aggregate treasury diversification and yield brought in from RWAs
- Propose split between existing and new allocations to service providers, target number of service providers to select in the program
- Comprehensive proposal for STEP II and future iterations of the program
- Identifying challenges faced by existing protocols on Arbitrum in integrating RWAs and defining a plan to mitigate the challenges.
The Steering Committee will be responsible for identifying the specific topics to tackle from the above list (and beyond) and identifying the appropriate individuals to work on these topics. Based on the findings from the chosen topics, we will deliver the following:
- Comprehensive proposal for STEP II;
- Definition of and (high-level and flexible) plan for future STEP programs;
- Definition of Arbitrum’s RWA Strategy, including both treasury diversification and ecosystem growth initiatives.
Selection of the STEP Committee
In the first iteration of the STEP program, the STEP Committee that selected the STEP fund recipients consisted of the following members: Karpatkey, GFX Labs, Steakhouse Financial, Nethermind, and Northlakes Legal, alongside the T&S Working Group led by Devansh. For the second iteration of STEP, the Steering Committee will be responsible for staffing the STEP Committee.
Please note that the STEP Committee will likely also contain Steering Committee members (i.e., some members of the Steering Committee may also be part of the STEP Committee). Where additional expertise is required for the STEP Committee (e.g., technical expertise, legal expertise), the Steering Committee will be responsible for identifying and procuring that expertise.
Funding
We do not intend to request a budget for the formation and operation of the Steering Committee and, accordingly, the participation as a member or advisor will not be remunerated at this point of time. After identifying the work that needs to be done and members capable of executing the tasks laid out, the Steering Committee will likely put forward a proposal to fund the completion of an identified scope of work.
Community Calls & Engagement
In contrast to the first (centralized) iteration of STEP, this time around we want to include the wider Arbitrum community on the journey and ensure that everyone passionate about the topic is able to join and contribute. As such, similar to the M&A Working Group model run by Areta, we will have bi-weekly meetings where we will keep the community abreast of our progress and incorporate their feedback. These meetings will be added to the Arbitrum governance calendar. Anyone interested in becoming a member should comment under this post with their Telegram handle. They can also join the Steering Committee telegram group: Telegram: Contact @STEPSteeringCommittee
Next Steps
We anticipate the following sequence of events:
- Determine Steering Committee composition
- Within 3-4 weeks of Steering Committee formation, we will
- Decide on topics to work on (e.g. ARB liquidation, use cases for RWAs across DeFi, etc.)
- Determine budget
- Prepare proposal
- Publish proposal
- The further timing is subject to dynamics: We incorporate community feedback, if needed, put the (amended) proposal to vote and finally execute pursuant to the proposal.
Our first meeting will be Tuesday 13th August at 230 pm UTC, held at https://meet.google.com/xkb-aifv-otk . This event will be added to the Arbitrum Governance calendar.
Addendum
Finally, we would like to emphasize that the Steering Committee will not overlap with the scope of the RWA Innovation Grants program (RWAIG). The RWAIG is complementary to STEP and is squarely aimed at exploring and growing RWA areas outside of the STEP program on Arbitrum. The RWAIG aims at enabling ecosystem growth for RWAs on Arbitrum while STEP is aimed at treasury diversification for Arbitrum DAO by means of investment into RWAs.
Once the RWAIG ends, any plans for its extension will be in alignment with the Steering Committee since one of the intended goals of the Steering Committee is to define Arbitrum’s broader RWA strategy.
The Treasury and Sustainability Working Group has got renewed Firestarter funding from Thrivecoin / Plurality Labs. Devansh will be contributing to the Steering Committee in the capacity of a Firestarter grantee.
