The OpCo - Scale, Structure, & Synergy

thanks for getting started on this - super comprehensive in terms of tasks and goal setting that merge decentralization (decision making) nicely with centralization (organization). at the same time, this is probably the easy part, and hard part would be the communication (with DAO, OCL, AF) and coordination to further streamline the scope and priorities.

initially i echoed the concern regarding duplication of OpCo down the line, but i think the OpCo actually helps prevent that by effectively managing stakeholders and consolidating efforts from a bird’s eyeview.

personally feel strongly about the work you’re doing and that it should be the direction that the DAO should go towards, so happy to help out!

I agree with this change in perspective. In response to @0xidm 's concern too - do you worry about the duplication work if the outputs aggregate to ultimately the same shareholders? Having multiple orgs work within the same mandate can instill urgency, competition, and accountability to Arbitrum.

To help @dk3’s vision on an OpCo get started, my experience is such that the DAO can focus on:

  • creating clear swimming lanes between Offchain Labs, the Foundation, and DAO’s OpCo. (being worried about overlap with Plurality Labs can easily be mitigated or time boxed)
  • agreeing on clear KPIs for each Mandate and having talent be held accountable to these at set intervals
  • makes the path to creating the OpCo modular such that any single opposition to the overall plan or specific mandates can be side barred while allows the urgent mandates to be begin right away

Thank you @dk3 for putting them together. We are certain that you and the contributors put so much effort into the proposal.

This reminds us of dYdX Ops subDAO with the similar actors like its Foundation and other sub DAOs. They have specifically focused on executions and as an example, taken on the operational duty of the dYdX chain. While Arbitrum doesn’t have its own chain or technical elements to be managed by the DAO (yet), the management of the future components can be carried out by an organization tied to the DAO, not by the Foundation.

We assume there should be a lot of coordinations with the existing (and newly formed) councils, working groups, OFL, and Foundation and a few coordinators should kick off the initial bootstrapping (e.g. hiring as mentioned) and that will be a critical milestone to be achieved for the success of the initiative.

In any way, at Tané, we would love to support the proposal and be willing to contribute to its further development.

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After some considerable reflection, I do not think the proposal is a good idea and plan to vote against if taken to snapshot. At the present juncture, I believe it is much better suited for a Plurality Labs grant program than being its own standalone entity.

Some reasons;

  1. It’s always scary for delegates to transfer large amounts to a single entity when there hasn’t been a pilot already done. Would inspire more confidence to allocate these large figures if a pilot is first undertaken with PL Bridge proposal !

  2. We should be extremely wary of setting up entities that seek to represent or embody arbitrum dao in any way. I would much rather an equivalent of a super PAC be setup (external to a politician but still advocating for them) than something framing itself as an operating company for the dao (especially when we already have the foundation doing an admirable job).

  3. its unclear if we can have onchain governance for the OpCo. I would rather have the DAO be completely onchain and have different allied structures supporting it than create some legal entity for the dao that would suffer from the same traps of the conventional world.

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Thank you everyone for the comments the past week, I am in token2049 this week and will respond to posts next week.

In terms of timelines, will probably post to snapshot sometime the first week of may, and progress from there as amendments are needed.

Thanks,
DK

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The below response 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.

The discussion on whether we should establish an OpCo entity boils down to the question of whether we want Arbitrum DAO to be reactive or proactive.

As it stands, the DAO is currently mostly reactive in the sense that delegates are called to vote on initiatives that are being developed individually by different contributors and do not necessarily co-exist in a coherent, structured way. A good analogy would be a series of unique puzzle pieces being fitted together, without however an end image to guide the process. Each initiative is working to establish its structure with different processes as there’s a lack of standard practices on that front — and no initiative can create a standard practice without heavily deviating from its original purpose.

This situation creates operational hurdles that burden each proposer separately and also puts a strain on the DAO. From having no standard operational process to distribute money (e.g. we have so many different multi-sigs that each costs money to run) to the inability of the DAO to straight-up hire people to do work, to the lack of standard operational structures and processes, everything points to a need to have an entity responsible for the DAO’s operations.

Simply put, the DAO needs an Operating Company (OpCo).

Even things that have been partially and temporarily resolved, such as the need to procure service providers through the ADPC, or the need to have domain experts review and provide feedback to proposals through the ARDC, would be significantly easier to set up and run under an OpCo.

Having the ability to drive initiatives forward without having to worry about the operational burden of execution will empower contributors to expend all their efforts towards the success of their initiative, and not towards trivial (to their cause) things such as setting up a multisig or figuring out how they should be reporting their progress.

On top of assisting with the operations of ongoing initiatives, through an OpCo, the DAO would have the ability to tackle needs as they arise by hiring the right people and assigning them the appropriate tasks. For example, if there’s a need for an oversight committee to oversee different initiatives that have been funded by the DAO, the OpCo could hire people and set up a team to carry out that work.

Having said that, while there might be details around the proposed OpCo that still need to be defined, the overall concept of establishing an Operating Company is something that we’re supportive of and believe is very much needed.

We’d like to help push the OpCo proposal forward in a way that inspires confidence among delegates and with the appropriate checks and balances to ensure that it’s the DAO that ultimately remains in control, without however suffocating the OpCo’s ability to operate.

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I recognise the problems this proposal seeks to address (big issues!), but despite trying to keep quite and focus in other things, I can’t help but have concerns too.

Mostly, I’m thinking, how do you see the role for non-employees and other service providers and contributors moving forward?

For context, my biggest concern with the OpCo is that by providing a traditional approach to address many of the painpoints, it results in centralised top-down management of ArbitrumDAO. Now, I’m not demonising centralisation (I see value in coordination and speed, and centralisation offers some of that). My concern is the risk the OpCo poses to disincentivise bottom-up contributions through information and power asymmetry.

For example:
Jane (community member) sees a gap in the DAO for a knowledge hub. She assembles a team and works for weeks to develop a proposal. They’re not paid for this work and do it at risk, hoping a proposal will be approved. In the meantime, the OpCo directors hire someone and Jane loses all her time. Alternatively, Jane could have checked with the OpCo directors before doing any work, but before everyone else is trying to get time from the OpCO directors too and they’re overwhelmed. The OpCo directors find community members unreliable and so give them limited time, instead preferring to hire people they can control. Others hear of Jane’s story and soon the OpCo is the only entity contributing to ArbitrumDAO.

Now, the above example doesn’t need to be how things play out. I’m just pointing out that it’s a major risk.

A few ideas to mitigate bottleneck and contribution desincentivisation risks:
(ideally, a few strategies are combined)

    1. The OpCo has a narrower mandate on a functional area (marketing, treasury, partnership, etc.), so that other entities can lead other areas, thus enabling plurality and reducing the risk of information bottlenecks.
    1. The OpCo actively focuses on being a platform instead of a direct executor. So OpCo resources (funds, staff, etc) are dedicated to addressing the bottlenecks that proposers suffer from. I.e. the OpCo actively refrains from executing on areas like marketing, grant programs, etc.
    1. Along the same lines as above, The OpCo uses RFPs and other crowd-sourcing mechanisms to get most of the work done, thus still providing opportunities for a broader community to contribute to Arbitrum.
    1. The OpCo experiments with decentralisation itself, for example, using a Strategy Assembly (inspired by citizen assemblies) to define priorities (instead of a closed-door process).
    1. any other idea that enables and empowers the community through funds distribution, outside-in innovation opportunities, transparency, and agency to shape strategy and policies.

I’m curious if you resonate with the risk assessment (and if so with any of the proposed strategies to mitigate said risk).

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Likewise.
I just wanted to add that there is no evidence that management through OpCo will be more effective than through existing tools.

Solving the problems of a new space with old methods can be a dead-end solution.

The big advantage of a centralised decision making body is that internal communications is “cheap” resulting in faster decisions. The downside is the lack of contestability, how do you know the decision is the “best” given the available information at that time? BigCo sits at the bottom right of the legal structures post I had at top … sure you can have a bidding run-off but that doesn’t address he issue of all eggs in one basket (hypothetically speaking).

An alternative is to move more towards left, open up a token-curated registry (timelocked) for say 10 mini-OpCo wih the requirement of a % being common use facility and a blind-trust commitment to sell down in the future so if individual mini-OpCo do well, they’d buy back more of the initial capital investment as it’d be profitable for them. having 10 or so mini-OpCo allows sufficient diversification to address less explored parts of the ecosystem giving more surface area to possible blue-ocean opportunities.

If you head northwards (legal structure-wise), it’ll be something akin to public-private partnership which has different dynamics.