Transfer 6,000 ETH and Idle Stablecoins from the Treasury to the Treasury Management Portfolio

Proposals
1

Non-Constitutional

Changes Made on March 31, 2026:

  1. Changed quantity of proposed ETH moved to the Treasury Management Portfolio from 5,000 ETH to 6,000 ETH, reflecting forum feedback of not leaving a large idle buffer.
  2. Edited projected opportunity cost metrics and portfolio weight to reflect new quantity of ETH
  3. Edited proposal title to reflect new quantity of ETH

Summary

  • Entropy proposes transferring 6,000 ETH accrued in revenue generated from the Arbitrum network and ~$150K of idle USDC from the DAO’s treasury to the Treasury Management Portfolio.

    • The idle stablecoin balance has accrued from multiple DAO initiatives, comprising returned capital from the DAO Events Budget, ADPC v2, D.A.O. Grants Program, and Arbitrum Hackathon Builder Continuation Program-related wallets.

  • At the time of writing, the L2 Treasury Timelock holds ~6,017 ETH (3,630 ETH + 2,387 WETH) unallocated to any treasury strategies. This capital is currently sitting idle, generating no yield or strategic value, and could be significantly more productive within the TM Portfolio.

  • Since the beginning of the year, the ATMC has more than doubled the 30-day average annualized ETH yield, from 2.16% on January 1st to 4.81% at time of writing (March 17th). This improvement reflects significant portfolio turnover, including the initiation of new strategies as well as reallocation from historically underperforming allocations.

    • At current 30-day-average annualized rates, an additional 6,000 ETH allocated to comparable-yield strategies could generate an extra ~288.6 ETH over the next year, or ~$635k assuming an ETH price of $2,200. (Illustratively: new treasury deployments will not necessarily mirror existing allocations or match performance)

  • The ATMC is actively meeting or exceeding benchmark rates across all portfolio sectors. At time of writing, by sector:

    • ETH/ETH-Correlated: 30D MA APY of 4.81% vs stETH benchmark rate of 2.48% (nearly double the benchmark rate)
    • RWAs: 30D MA APY of 3.51% vs 3.44% 3M US Treasury minus 25bps benchmark rate
    • Stablecoins: 30D MA APY of 2.96% vs 1.59% AAVE V3 USDC benchmark rate (nearly double the benchmark rate, and expected to increase in the short term)

  • Active performance and positioning can be seen at arbdata.com

  • As per the Arbitrum Investment Policy Statement (IPS), the movement of 6,000 ETH to the TM Portfolio would place the ETH and ETH-correlated allocation in the middle of the target allocation band of 30-60%

    • At time of writing, the current portfolio ETH weight is 39.7%. Following the allocation of 6,000 ETH (assuming price of $2,200/ETH), the projected weight would be ~47%

  • Total DAO treasury value is still heavily concentrated in ARB tokens. All efforts to increase the quantity of non-ARB tokens in the treasury, or generate USD/ETH proceeds without requiring outright spot sales of ARB could be considered prudent within a long-term path to diversification.

  • Deploying this idle capital to the TM Portfolio is aligned with treasury management best practices: principal preservation, yield generation, minimization of idle assets, and strategic ecosystem support when possible.

Motivation / Rationale

Opportunity Cost and Past Performance
At present, ~6,017 ETH sits idle in the DAO L2 Treasury Timelock address, not generating any yield nor contributing to the growth of the ecosystem. Allocating a portion of this to yield-generating strategies is in line with treasury management best practices and the best interests of the DAO’s financials, minimizing the size of idle capital accumulated.

Year-to-date, the ETH deployments have generated over $362k in interest. This is over half of all cumulative interest on ETH (~$623k) earned since ETH was first added to the DAO Treasury Management portfolio in May 2025. The current 30D MA APY of 4.81% exceeds the benchmark rate (wstETH) by over 2.3%, and is ~2% higher than the broader ETH portfolio’s average yield rate throughout 2025. Performance figures and a detailed breakdown of the ETH allocations, as well as other asset classes’ treasury strategies, can be seen here.

Assuming a prospective allocation of 6,000 ETH and using the current 30-day average annualized yield of ~4.81%, the DAO would be foregoing approximately 288.6 ETH annually, or ~$635k at current market prices. Even utilizing the benchmark rate of 2.48% (wstETH) as an extremely conservative yield assumption, this would still be a projected opportunity cost of ~148.8 ETH, or ~$327k at current market prices.

From a treasury management perspective, maintaining a large passive ETH position without a corresponding yield strategy is suboptimal, especially when there exists a variety of well-tested deployments available, including liquid staking/restaking, lending market supply, call overwriting, and liquidity provision.

ATMC’s Portfolio Management Results and the IPS
The ATMC has demonstrated a disciplined, multi-strategy approach to portfolio management over the last several months. During the governance discussion surrounding the prior 8,500 ETH transferred to the portfolio, one concern raised by delegates was the historical underwhelming yield performance on the DAO’s existing ETH deployments at that time. Entropy acknowledged this criticism but noted that said deployments were made prior to the inception of the ATMC, and that the ATMC had not had sufficient time to fully turn over the legacy portfolio, evaluate underperforming positions, and redeploy capital into better-suited strategies.

Additionally, in response to requests for clarity on an overarching framework for all DAO Treasury asset classes, Entropy published the Arbitrum DAO Treasury’s Investment Policy Statement (IPS) in October. This document established a comprehensive set of principles for how allocation opportunities are evaluated, including clear benchmark rates by sector, allocation targets, strategy goals, and risk criteria. Many of the figures cited within this governance proposal, such as asset-class allocation target weightings and benchmark yield rates, are derived directly from the IPS. The primary goal of this document was to provide the DAO transparency into evaluative processes and methodologies while also enabling efficient and effective allocation decisions to be made in shifting market environments. Entropy believes the ATMC having ample time to turn over the portfolio and put operating principles into place stemming from the IPS has warranted effective results.

The 30-day average annualized yield on ETH has more than doubled YTD, from 2.16% on January 1st to 4.81% as of March 17th, driven primarily by rebalances from positions underperforming benchmark rates. The proceeds from these movements deployed to onchain strategies went into etherfi’s weETH and GMX’s GLV WETH-USDC vault. weETH has consistently performed comparably to the benchmark rate, with ~3500 ETH initially deployed and a 30d MA APY of 2.5%.

The GMX GLV WETH-USDC position is more nuanced when it comes to performance analysis and attribution. GLV is excluded from headline APY figures given a composite return profile and complex benchmarking. Aside from generating trading fee yield, the vault also carries exposure to net trader PnL and automated rebalancing. Upon deployment on December 16, 2025, the deposited ETH was effectively converted to a 50/50 ETH/USDC composition position. Net trader profitability in the vault was elevated in Q1 against historical averages, producing a cumulative performance drag of approximately -$70k at time of writing. However, the conversion of ETH to a 50/50 ETH/USDC composition at entry has served as a meaningful hedge through ETH’s decline from a price at GLV entry of $2,962 to below $2,200 today, with the position currently up over $500k compared to a pure ETH hold throughout the same time period.

All remaining ETH from these rebalances was allocated to the initiation of the call overwriting program, which has produced the highest absolute returns and annualized-equivalent yields of any ETH strategy since the inception of the DAO Treasury. Across all sectors, the ATMC’s deployments are exceeding established IPS benchmark rates, and Entropy believes this track record now more clearly showcases the value in returns generated through the TM portfolio.

Specifications

Entropy proposes that the new tranche of 6,000 ETH and ~$150K USDC be used with strategy flexibility, pursuant to changing market conditions, including but not limited to:

  • Liquid Staking
  • Liquid Restaking
  • Lending
  • Liquidity Provision on DEXes
  • Call Overwriting

The 6,000 ETH and ~$150K USDC are not necessarily intended to perfectly mirror and be proportionally allocated to the existing treasury strategy deployments. As with prior deployments, we intend to communicate with any prospective partner protocols to negotiate terms beneficial to the DAO or reduced costs on any deployments when possible or appropriate.

As structured in the ATMC proposal, the elected OAT body will maintain full ability to approve or deny allocations. No allocation can be made unilaterally by Entropy, which is solely tasked with providing suggestions to the OAT. Funds will be sent to and custodied by the Arbitrum Foundation. Rebalancing needs will be examined as per the IPS guidelines, considering liquidity constraints, yield conditions, risk-adjusted returns, or shifts in ecosystem needs.

The approach to evaluating growth-oriented/strategic deployments versus yield-focused strategies will continue to follow the framework established in the IPS, and communicated in the prior ETH proposal, weighing the estimated dollar value of ecosystem opportunity against the opportunity cost priced at benchmark rates, scaled against projected impact on the DAO’s overall metrics and income.

Timeline

  1. Forum Period (March 23 - April 2): Requesting comments and time to edit the proposal with delegate/broader community suggestions.
  2. Snapshot Period (April 2 - April 9)
  3. Onchain Voting Period (April 16 - April ~30): Assuming the Snapshot vote is approved and no additional major comments/objections arise.
  4. Following a successful Onchain Vote: Begin deploying capital once OAT greenlights allocations.
2 Likes
Curia Delegate Communication Thread
March 31st, 2026 - Open Discussion of Proposals Governance Call
2

The yield performance data is
compelling doubling ETH yield
YTD from 2.16% to 4.81% is a
strong case for deployment.

One process question: the proposal
mentions OAT body maintains full
approval authority. Are individual
OAT member votes on allocations
published publicly after each
decision…? Vote-level transparency
would further strengthen community
confidence in this structure….

3

Can you provide a bit more detailed breakdown of these idle stablecoins? Afair the DAO Events Budget was $1.5M and I don’t recall reports of significant spending from this budget (apart from ETHDevner last year iirc), so I’m a bit surprised that combined with a couple of other initiatives it’s all under $150k.

  • At the time of writing, [the L2 Treasury Timelock holds ~5,918 ETH (3,586 ETH + 2,332 WETH) unallocated to any treasury strategies.

Similarly, where is this ETH coming from? I guess raw ETH comes from the sequencer revenue but can you confirm it? And where is the idle WETH coming from?

Timelock address would still retain ~1,000 ETH, or over $2M at current prices, leaving a prudent liquidity buffer for unforeseen operational needs or extraordinary circumstances or opportunities that may require timely deployment or usage of unallocated ETH.

Why do we need to keep such a large idle ETH position in the DAO? Especially since, as I understand it, any use of this ETH for anything not covered by ATMC would require a full DAO vote, so such deployment cannot be “timely” anyway (or am I missing something)?`

2 Likes
4

The stablecoin source breakdown and the ETH buffer justification are both important for delegates to have before Snapshot. Hope Entropy addresses these before April 2nd. @krst @Entropy

5

The idle stablecoins in the treasury connected to the Events Budget initiative derive from surplus capital from ARB liquidations. The initiative’s original budget was $1.5M, but ~$1.514M was received from the conversion. The additional funds were transferred to the treasury by the foundation. Roughly $460K of the $1.5M budget was used on events, and the rest was transferred to the ATMC earlier as a result of the Consolidate Idle USDC to the ATMC’s Stablecoin Balance proposal. Similarly, idle stablecoins in the treasury connected to the ADPC v2, D.A.O. Grants Program, and Arbitrum Hackathon Builder Continuation Program are a result of both converted capital exceeding the initial budget and surplus capital having been sent back to the treasury after an initiative’s conclusion.

Confirming the raw ETH comes from blockchain revenue and the WETH comes from Timeboost revenue, where bids are paid in WETH.

Historically, Treasury Management Portfolio proposals left buffer ETH in the treasury as a backup option in the case of any other anticipated proposals requesting funding. Upon communication with various key stakeholders, we are not opposed to drawing the treasury funds down, and eliminating remaining opportunity cost to the DAO in foregone yield. The proposal is being modified accordingly to reflect the larger requested ETH balance moved to the Treasury Management Portfolio.

6

Thank you very much for the explanations, all is clear apart of one thing:

I still don’t understand where exactly is that ~$150k coming from. Can’t we just have a breakdown of these funds (to also know what is the exact amount)? Also I would like to understand, how we treat those funds under ATMC supervision. Initially they were mandated for certain purposes (like the events budget), but then they were sent to ATMC to generate yield. Can these funds still be used according to the original mandate or are they considered as DAO Treasury funds now and any further usage that goes beyond generating yield requires the DAO vote?

1 Like
7

A detailed breakdown of the ~150K USDC can be found here.

The original mandate from all 4 of these initiatives is now concluded. To touch on the Events Budget specifically since you mentioned it directly, its mandate was for 2025 only and as part of the Consolidation of Idle USDC proposal last July, Entropy highlighted that following the end of the year, the funds would remain in the ATMC as opposed to being returned to the DAO treasury.

While the ATMC funds are under custody of the Arbitrum Foundation, the DAO would need to conduct an offchain vote to pull funds out of the council’s management entirely and redirect them if it wishes to fund a new initiative with the ATMC budget.

2 Likes
8

Voting FOR. The ATMC has already shown a good performance, so moving this capital into active strategies makes sense.

Zeptimus Delegate Communication Thread
9

Vote: FOR
This is an easy yes. Having 6K ETH sitting idle is silly… I’m a firm believer that our capital should always be working for us. Let the ATMC put this capital to work.

1 Like
10

Entropy is acknowledging its COI as a member of the ATMC. We will be voting FOR the Transfer of 6000 ETH and Idle Stablecoins from the Treasury as we believe it’s important for the DAO to begin deploying idle these funds to earn yield.

11

Voting FOR, deploying capital to generate yield for the DAO is an easy win.

DZack23.eth Delegate Communications thread
12

Layer3 Voting Rationale: Transfer 6,000 ETH and Idle Stablecoins from the Treasury to the Treasury Management Portfolio
Vote: FOR
Deploying 6,000 idle ETH to the Treasury Management Portfolio is straightforward good governance. Leaving productive capital idle when tested strategies exist is an unjustifiable opportunity cost.

13

gm, voting ABSTAIN here.

While I fully support the allocation of idle assets into productive strategies, the performance of stablecoin-related assets has been extremely disappointing so far, with basic strategies and mainstream protocols (Sky, Ethena) vastly outperforming our returns.

I would encourage the ATMC to step up its game.

14

Voting FOR, with a flag on stablecoin yield that I’d like Entropy to address before the on-chain vote.

The ETH deployment is a straightforward yes. 6,000 ETH sitting idle is an unjustifiable opportunity cost, and the ATMC’s ETH performance speaks for itself, meaningfluly outperforming wstETH. The GMX GLV position’s complexity is worth watching, but the hedge value through ETH’s Q1 decline was real.

On the stablecoins: the ~$150K USDC is small relative to the ETH tranche, but it points to a concern with the existing stablecoin portfolio worth putting on the record. The ATMC’s stablecoin 30D MA of ~2.96% is trailing the 3M US Treasury rate (~3.69% as of mid-March). The IPS benchmarks this bucket against AAVE V3 USDC (1.59%), which ATMC is beating, but that feels like a low bar when risk-free alternatives like T-bill-backed RWA strategies (Sky, Ethena, short-duration RWA funds) are available and have been outperforming. I’d want to understand why the stablecoin allocation isn’t being directed toward yield sources that at minimum clear the Fed rate before the on-chain vote on April 16.

15

  • Reverie is voting FOR this proposal.

    • Having 6,017 ETH sitting idle, earning no yield is a huge opportunity cost for the DAO. The ATMC has shown a strong track record this year and it makes sense to allocate this capital to yield generating strategies
16

We appreciate the feedback provided and want to address both of the following comments head-on.

In summary, we directly agree with some of the concerns regarding stablecoin yield and have been monitoring sustained changes between stablecoin and RWA returns. As a result, the ATMC is already in the process of actioning portfolio reallocations to reflect the changing on-chain yield environment with a narrower opportunity set.

As noted in our March monthly update, the OAT has approved a ~$4.5M stablecoin reallocation from Gauntlet’s USDC Prime Vault on Morpho toward syrupUSDC. The withdrawal from Morpho is being executed in gradual tranches to minimize user impact, but it is in progress, with two tranches already completed. On top of that, the OAT has approved a second strategic allocation into USDai that is projected to perform above the current sUSDe/sUSDS rates by >100bps. Combined, these two rebalances are projected to bring blended stablecoin yields above 4%, roughly 150bps above the current stablecoin portfolio 30D MA APY, and meaningfully above the current benchmark rate for RWAs.

On any question of timing and why reallocations to comparable opportunities were not actioned sooner, stablecoin yields on a portfolio-weighted basis only meaningfully and sustainably fell below the RWA portfolio average yield at the end of February.

APY by Deployment 2026/04/09
APY by Deployment 2026/04/091920Ă—1210 152 KB

Per the IPS rebalancing framework and triggers (Section 6.5.2), the monthly review trigger for position-level rebalancing is 100bps below benchmark, or 100bps vs comparable-risk alternatives. Even comparing existing positions to sUSDS (as an example mentioned in response to the proposal), the Morpho Gauntlet Prime vault did not breach this level until recent weeks, although the ATMC had already initiated the reallocation process based on proactive monitoring of the yield trajectory. Portfolio level exposures can’t be meaningfully shifted on a few days or weeks of data that could quickly revert, but once there was sufficient evidence that yield compression would be stickier rather than just temporary, reallocation proposals were already out to the OAT by the time the rebalance trigger threshold was reached.

Regarding the benchmarking question: at present time, the IPS (Section 6.3.2) benchmarks stablecoin yield against the AAVE V3 USDC supply rate on Arbitrum, which has itself fallen roughly in half YTD from ~3% to ~1.5%. It’s worth noting that outside of the AAVE V3 USDC supply rate, most DeFi yields have compressed by a similar magnitude. The stablecoin portfolio has meaningfully outperformed that benchmark, but we recognize that benchmark outperformance alone may not suffice when realized returns are trailing a risk-free equivalent rate in Treasuries. We think there is merit to the viewpoint that the benchmark rate could be unified between stablecoins and RWAs, allowing for allocating more capital to treasuries when they offer comparable or even superior returns at meaningfully lower risk than most DeFi opportunities. With stablecoins roughly composing just ~10% of total portfolio weight, and RWAs at ~50% of portfolio weight, the composition already does reflect some of this view, but the reallocations in progress further align projected returns for incremental portfolio risk incurred. We will continue evaluating whether a benchmark adjustment unifying the two rates is warranted as part of the next IPS review cycle.

17

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Manugotsuka, and it’s based on their combined research, fact-checking, and ideation.

We voted FOR.

We support the general direction of improving capital efficiency within the DAO’s treasury. Reducing idle balances and generating yield make sense and align with good treasury management practices, especially if they help ensure that the DAO’s assets are used productively.

That said, increasing the allocation to the TMC also increases the DAO’s exposure to active treasury strategies. While recent events (e.g., the Resolv incident) showed that current managers can handle adverse conditions without losses, they also made clear that the treasury operates in complex DeFi environments and is exposed to second-order risks.

Because of this, any further allocation should come with continued (and even increased) scrutiny around risk frameworks, exposure limits, and overall strategy transparency.

Another point is that this proposal doesn’t introduce a clearly defined deployment strategy for the additional funds. Instead, it increases reliance on the ATMC’s discretion within its existing mandate. While this may improve operational efficiency, it also reinforces the importance of clear reporting and accountability as the size of managed assets grows.

1 Like
18

The following reflects the views of GMX’s Governance Committee, and is based on the combined research, evaluation, consensus, and ideation of various committee members.

We have voted in favour of the proposal

The 6,000 ETH sitting idle in the L2 Treasury Timelock is generating zero yield, representing an avoidable opportunity cost of up to $635k annually. The ATMC has demonstrated clear competence, and with the ETH deployments generating over $362k in interest already this year. Putting the idle funds to work and generate revenue for the DAO is the best course of action.

19

This is a strong and well-argued proposal, particularly in identifying the opportunity cost of idle capital and demonstrating improved ETH yield performance over time. The use of IPS benchmarks and the discussion of portfolio turnover are especially helpful in grounding the rationale.

There are a couple of areas where further clarification would materially strengthen how this can be evaluated from a governance perspective.

Primary Objective of the Allocation

First, it is important to be explicit about the primary objective of this allocation at the DAO level. The proposal is clearly motivated by yield improvement and capital efficiency, but it is less clear how this transfer fits into a broader treasury objective. For example, it’s not clear whether the priority is maximizing yield, improving risk-adjusted returns, increasing diversification, supporting longer-term strategic positioning or something else.

This is important because without a clearly defined primary objective, it becomes difficult to determine whether the chosen deployment strategies, benchmarks, and risk profile are actually aligned with what the DAO is trying to achieve. Without that alignment, performance risks being evaluated in isolation, rather than in relation to the objective the capital is intended to serve.

From what I can see, multiple prior threads have attempted to define the DAO’s strategy, mission, and KPI framework, indicating that a consistent strategic and evaluation layer is still being actively developed. For example:

https://forum.arbitrum.foundation/t/pre-proposal-for-a-strategy-framework-for-arbitrum-dao/20947
https://forum.arbitrum.foundation/t/unifying-arbitrum-s-mission-vision-purpose-mvp/27275
https://forum.arbitrum.foundation/t/sos-submission-max-lomu-strategic-objectives/28902

Given that, it seems important to be explicit about the intended objective of this allocation since it would provide a clear basis for evaluating whether the proposed deployment and performance metrics are aligned with the DAO’s priorities.

Evaluation and Governance

Second, given the degree of flexibility in how this capital may be deployed across multiple strategy types (staking, restaking, lending, LP, and options strategies), it would strengthen the proposal to define more explicitly how this specific tranche will be evaluated and governed over time.

In prior large program allocations, elements like reporting expectations, performance measurement, and oversight structures have evolved after approval, and later governance discussions have raised challenges around transparency, evaluation, and corrective action. For example:

https://forum.arbitrum.foundation/t/gcp-update-thread/24982
https://forum.arbitrum.foundation/t/non-constitutional-gcp-clawback/28809

Given that, it would strengthen the proposal to clarify:

  • Which metrics or benchmarks will be used to evaluate this tranche specifically (beyond historical portfolio performance)

  • Over what timeframe performance should be assessed

  • How performance expectations for this tranche are set independently of past results, particularly given differences in scale and deployment conditions

  • What level of risk is being assumed to achieve the target yield, including any exposure limits, liquidity constraints, or drawdown tolerance

  • Which entity is ultimately accountable for performance and reporting, given the involvement of Entropy, ATMC, OAT, and the Foundation

  • What conditions would trigger re-evaluation, reallocation, or a change in strategy

These points become particularly important given the degree of discretion involved, the range of strategies being deployed, and their differing risk profiles.

The rationale for deploying idle capital is very compelling. Just clarifying these areas would make it a lot easier for delegates to evaluate not just whether capital should be deployed - the proposal is clear there - but whether it is being deployed under clearly defined objectives, with appropriate constraints, and with a structure that allows performance to be properly assessed over time.

20

Confirming the AF address as 0x5CE3C2BDd8fe4D35a20a18CbAFab22447DE68aBe for receiving ETH, and 0xAc20CD734C65Baf48a1476447af7D3E3165DC739 for receiving stablecoins.

1 Like