The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We voted AGAINST the proposal.
First, we want to express our appreciation for Karpatkey’s time and effort in developing this proposal and for the delegates who interacted with it so far. We want to clarify that, at this time, we’re not voting against this proposal because of its merit but instead because we’re not entirely convinced of the concept of treasury diversification overall.
There are a couple of reasons why we have reservations about any treasury management endeavor:
- The treasury currently boasts 3.17B ARB, valued at ~$1.77B USD at the time of writing. However, it’s important to highlight that the realistic amount we can get is much less, accounting for market depth. Given that, we believe the allocated amount, if any, should be carefully reviewed.
- While it’s true that ARB in the treasury doesn’t generate yield, it’s also true that it’s not circulating in the market. Attempting to diversify the treasury implies selling ARB, either OTC or on the market, adding more fuel to the fire of the existing sell pressure. And if the yield generated is less than the $ value ‘lost’ due to price depreciation, the whole initiative seems less valuable.
- So far, the primary need for stables in the DAO has been so contributors can be paid in stables to avoid price fluctuations and negative price impact from the sale of ARB from contributors to cover expenses. However, if the DAO sells ARB to acquire stables only to then use the stables to pay contributors, we’re essentially making the sale proactively as opposed to letting contributors do it reactively.
- We should be mindful of the fact that ARB token is a governance token that controls the whole Arbitrum ecosystem. Securing the value of the token is critical from the ecosystem security perspective. Increasing the liquidity of the token without a plan for securing its’ value increases the risk of governance attack on the protocol.
As mentioned in the very beginning, we are not voting against this particular proposer or the specific plan outlined in this proposal. We are rather not convinced that treasury diversification just for the sake of treasury diversification should be the priority of the DAO right now. We feel that if our token price takes a significant hit, it won’t matter much if we have $100M in stables in treasury - we will have a much bigger issue defending the protocol itself.
We believe it’s essential to first have a DAO-wide conversation about treasury management, its purpose, and the amount of ARB we should allocate towards it. Only then will we be happy to consider the details of individual proposals and strategies.