Non-Constitutional
Changes Made on March 31, 2026:
- 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.
- Edited projected opportunity cost metrics and portfolio weight to reflect new quantity of ETH
- Edited proposal title to reflect new quantity of ETH
Summary
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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.
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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.
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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)
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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)
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Active performance and positioning can be seen at arbdata.com
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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%
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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.
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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
- Forum Period (March 23 - April 2): Requesting comments and time to edit the proposal with delegate/broader community suggestions.
- Snapshot Period (April 2 - April 9)
- Onchain Voting Period (April 16 - April ~30): Assuming the Snapshot vote is approved and no additional major comments/objections arise.
- Following a successful Onchain Vote: Begin deploying capital once OAT greenlights allocations.