I love the move to diversify the treasury, and Karpatkey has done a great job for many DAOs that I engage with, however, for things like this, the DAO needs to have a competitive processes so we get the best offers competing against each other, just like what we did for the RWA
This is just the way to do these things. STEP is a perfect example of a nice competitive system that was created to diversify the treasury before, and Karpatkey has seen that process first hand, so Iâm sure that if this doesnât pass they can make a competitive proposal in the future STEP proposal⊠Coming soon: STEP II Steering Committee
I believe very, very strongly the DAO needing to have some type of Treasury Management going forward. So Iâm very much aligned with this proposal. I also trust the team that is proposing this to do a great job and would have my support.
However, I have to agree with others that given the size and importance of something like this, it needs to go through some type of RFP. Which Iâd urge to start soon as I think this has already been delayed for too long to begin with.
Due to the RFP issue, I will be voting âNoâ however I strongly caveat that with for the broad concept Iâm an absolute âForâ this being put into place in some capacity going forward.
Weâre voting AGAINST this proposal. While treasury diversification is crucial, the lack of a competitive selection process and performance-based fee structure raises concerns. A more flexible approach with multiple options for capital allocation and fee structures would better serve the DAOâs interests. Future proposals should incorporate community feedback and align incentives more closely with the DAOâs goals.
The following reflects the views of L2BEATâs governance team, composed of @krst and @Sinkas, and itâs 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 Karpatkeyâs 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, weâre not voting against this proposal because of its merit but instead because weâre 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, itâs 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 itâs true that ARB in the treasury doesnât generate yield, itâs also true that itâs 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 âlostâ 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, weâre 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 itsâ 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 wonât matter much if we have $100M in stables in treasury - we will have a much bigger issue defending the protocol itself.
We believe itâs 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.
As a temp-check, we are in support of the general direction that the DAO should take for the treasury management. We are grateful of the extensive involvement from Karpatkey and Gauntlet. We donât necessarily agree with the requirement that the DAO needs to set up a RFP for multiple service providers to apply for; With the reasonable proposal to kick start the important functions of the DAO, the DAO should practically choose the currently available and best options.
The proposal includes the Oversight Committee and reporting requirements, which should work for the DAO to diligently monitor what the initiative will have been doing. Giving too much concerns before kickstarting things off would lead to huge opportunity costs.
We would only ask clearer responsibilities that the initiative will take on while having a relatively high management fee (1% vs. 0.5% on the other protocol) before the onchain voting and a possible adjustment to the size of the fund to be managed based on the current market.
DAOplomats voted against this proposal on Snapshot.
Treasury management is an important discussion, and we believe the DAO should implement it in some way. However, just as we have done in the past, we would love to see a sort of RFP process baked into these kinds of proposals.
Looking forward to voting in favor of an RFP along these lines in the future.
We believe that this proposal is not only necessary but also overdue, so we appreciate its submission. The current state of Arbitrumâs price highlights the need for sustainable solutions, and this proposal offers a promising approach. Additionally, itâs clear that diversifying assets is essential.
However, like some other delegates, we would prefer to see more competition for the control and use of such a large amount, as this would ultimately benefit the community. While @karpatkey has an excellent track record, we believe having multiple options and allowing different proposals to compete would lead to the most optimal outcome. Even in such a scenario, itâs evident that @karpatkey would remain one of the top candidates. Additionally, although we agree with the need for such a large-scale initiative, the amount proposed is indeed substantial, leading to notably high fees.
In summary, while we agree that this proposal touches on crucial aspects for the DAO, we voted âagainstâ at this stage to allow time for refining the solutions and ensuring we select the best option. Nonetheless, we strongly believe that this issue needs to be addressed urgently, without further delay in the process.
ââA proposal such as this should have taken place prior to others that pulled significant funds from the treasury, like the gaming catalyst initiative. It doesnât make much sense to issue such a large quantity of ARB to such a risky program. This proposal, however, is for the sake of âdiversifyingâ the treasury into more stable assets, which is important when it comes to funding various DAO-related initiatives. In order to cover the DAOâs runway, we should be pulling at least some of the funds from a reserve of stable assets, instead of fully issuing ARB tokens. And that leads to another important pointâwe are issuing ARB tokens here, not really pulling from a massive balance sheet. We might as well discount or write down most of the treasury. With a âdiversificationâ proposal, we actually begin bolstering the balance sheet. Itâs already clear that the revenue that the dao makes today has been earmarked for initiatives like bootstrapping BOLD, which means operating revenue isnât simply enough to cover expenses. We have to therefore rely on issuing native tokens.
The real issue here has been a lack of proper procedure laid out months ago by the DAO for approving large investment programs. One of the unsatisfactory precedents has been the first-come-first-serve model. For many programs, an entity proposing a large program has self-selected themselves into managing that program. This is the primary reason why we are abstaining from this proposal. There should be an RFP process for all of these large treasury management and investment proposals. Itâs a reckless argument to suggest thatâeveryoneâs been self-electing themselves, so weâll do the same.
Since the directionality of this proposal is well-founded, we arenât voting against this proposal. The main contention that we hold is the process by which the counterparties in the proposal are self-elected. We hold a great deal of respect for Karpatkey and Gauntlet, and they may very well be the managers selected for this type of proposal. But an RFP matters.
Voted FOR on Snapshot. I agree that we could consider other proposals or vendors but the group here is professional, and the proposal is well done.
This may be worth doing a bit more discovery given the feedback from the DAO, but this is clearly needed. What format, how much, and who does it is a major question we should resolve.