TMC’s Proposed Allocations

[Avantgarde]

We’d likewise wish to extend an extra thank you to Pablo from the TMC for his time and allowing us to shed some more light on the ARB strategy.

As a final response, we’d like to address the latest feedback and some of the misconceptions that seem to persist:

@threesigmaxyz

Risk and Transparency

While both teams have made significant efforts, the operational details for the ARB strategies, such as liquidity for options, counterparty arrangements, and daily/weekly execution, remain unclear. Given the large ARB allocation, this uncertainty makes us cautious.

• re “…Liquidity for options”: We would like to reiterate that we have already validated liquidity for at least $5M ARB, with the potential for even more. This has been communicated both in our submitted proposal as well as in this forum thread (see for example here). The assumption that liquidity constraints hinder execution does not accurately reflect the actual conditions of the ARB only strategy.

• re “…counterparty arrangements”: It is in our own interest to seek the highest possible yields, as a higher premium directly results in a higher performance fee. At the same time, we carefully select strikes and expiries to minimize conversion risk, ensuring the ability to roll over positions and generate sustainable fees over a longer period rather than a one-off outcome (as previously detailed at the bottom of this reply).

• re “…daily/weekly execution”: As outlined both in our proposal and previous posts in the forum (here), we have provided specific, backtested parameterizations that optimize for yield, low conversion risk, and maximum liquidity. Our latest recommendation—23 days to expiry and a 128% strike—has been clearly stated and explained (again, here). The notion that execution remains unclear does not accurately reflect the comprehensive details we have provided.

@threesigmaxyz

Yield versus Complexity

The proposed yields for ARB strategies vary widely, ranging from near zero (for example, simple lending) to around 30% (for example, covered calls). However, the higher-yield strategies depend on liquidity or counterparties that may not be scalable, and the lower-yield approaches (for example, 0.16% on Aave) do not justify the additional complexity and risk.

• re “…Liquidity and scalability concerns”: We want to highlight once more that the assumption that high-yield strategies depend on liquidity or counterparties that may not be scalable is incorrect. As stated multiple times (e.g. here), liquidity for covered calls has been validated up to at least $5M ARB, potentially more.

@threesigmaxyz

Asset Manager Selection Considerations

It’s important to note that selecting an asset manager for alpha generation typically requires a multi-year to decade-long track record across multiple market regimes, a challenging standard, even in traditional finance. Therefore, if the core ARB strategy cannot stand on its own merits, claims of expertise should not serve as the primary selection criteria.

• re “…Supporting ARB’s on-chain usage”: Rather than dismissing viable strategies outright, we believe it is important to actively foster the usage of ARB in a way that aligns with the original RFP request—to generate ARB yield on-chain and activating idle treasury assets. Given Arbitrum’s role as a central hub for DeFi, we think actively deploying ARB rather than dismissing on-chain yield strategies would send a more positive signal, especially when these strategies are settled natively on Arbitrum.

@threesigmaxyz

Prudent Governance

Our mandate is to protect the DAO’s treasury. Rather than forcing a strategy with an uncertain risk and reward profile, we prefer to hold ARB until more robust proposals/strategies emerge. This is a postponement rather than a permanent refusal, and we remain open to future improvements.

• re “…empowering informed decision-making”: While we respect the TMC’s cautious approach, we believe that prudent governance should empower the community to make informed decisions rather than preemptively exclude viable strategies. The DAO has the flexibility to allocate funds incrementally, monitor performance, and optimize parameters over time instead of defaulting to inaction.

• A more proactive alternative: Instead of fully postponing this decision, a more constructive approach could be to allow a smaller test allocation of ARB. This would provide an opportunity to work with new yield sources, collect real-world experience, and scale up or scale down the strategy gradually, rather than rejecting it outright before testing its practical viability.