Transfer 8,500 ETH from the Treasury to ATMC’s ETH Treasury Strategies

Proposals
1

Non-Constitutional

Summary

  • Entropy proposes transferring 8500 ETH accrued from Sequencer and Timeboost Revenue from the DAO’s treasury to the Arbitrum Treasury Management Council.
  • At the time of writing, the DAO Treasury has ~10.5K ETH unallocated to any treasury strategies. This capital is currently sitting stagnant, and could be much more valuable and functional for the ecosystem within the ATMC, generating yield and increasing the DAO’s ETH holdings
  • An added benefit of activating ETH from the treasury is the potential to support liquidity in venues within the Arbitrum ecosystem to supplement increased activity from DRIP, while not receiving or diluting any of the incentives (the DAO’s allocations would be excluded from ARB rewards).
  • The ATMC has generated just over 43 ETH to date (beginning May 2025) by activating idle ETH from the treasury, with a 30D lookback APY of 2.43% on ETH-denominated strategies at the time of writing.
    • At current 30-day-average annualized rates (note: proposed treasury deployments will not necessarily be in identical allocations), an additional tranche of 8500 ETH allocated to comparable-yield strategies could make the DAO an extra 204 ETH over the next year, or ~$891k at current prices.
  • The DAO treasury value is still highly concentrated in ARB tokens, and all efforts to diversify and increase the quantity of non-ARB tokens in the treasury that also support broader ecosystem growth should be considered.
  • Although the prospective increase in ETH is very marginal against the treasury concentration of ARB, these initiatives help grow non-ARB assets without requiring spot sales of ARB, continuing a long-term path to prudent diversification.
  • Deploying a portion of this idle capital to the ATMC is aligned with treasury management best practices: principal preservation, yield generation, and ecosystem support.

Motivation / Rationale

Opportunity Cost and Past Performance

At present, over 10,000 ETH sits idle in the treasury, generating no yield and contributing minimally to the growth of the ecosystem. Allocating a portion of this to yield-generating strategies is in line with treasury management best practices.

Since May, the ATMC ETH-denominated strategies have generated 43.4 ETH, utilizing AAVE, Fluid, Camelot, and Lido. Performance and a detailed breakdown of the ETH allocations, as well as other treasury strategies, can be seen here.

Assuming a prospective allocation of 8500 ETH and a conservative ETH-denominated yield of ~2.4% (illustrative figure based on the 30-day average annualized yield for existing ATMC strategies), the DAO is foregoing approximately 204 ETH annually, which is $891k at current market prices. Even at the lowest 30-day average annualized yield rate of 2.04% (recorded July 15th), the projected opportunity cost of letting this ETH sit unallocated is 173 ETH, or $756k 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 deployments that would be appropriate to allocate it to, including but not limited to native staking, restaking, DEX liquidity provision, and lending market supply.

DeFi Ecosystem Support

This proposal is in direct strategic alignment with the current DRIP campaign, fulfilling treasury management’s dual mandate of:

  1. Generating yield and growing/diversifying the treasury
  2. Supporting growth in the Arbitrum ecosystem, particularly within DeFi

A major goal of the Arbitrum DRIP program is to spur activity within the broader Arbitrum DeFi ecosystem, initially focusing on boosting leveraged looping strategies within DeFi utilizing yield-bearing collateral. Decisions regarding these funds will prioritize supporting these initiatives where possible, deploying productive capital across various venues, though this will not take absolute precedent over existing considerations regarding risk, liquidity, partnership opportunities, sustainable yields, etc.

Some indicative examples of DRIP-aligned treasury strategies would be supplying unstaked ETH to lending markets, or staking ETH with LST/LRT providers, and exploring adding DEX liquidity across native ETH and LST/LRTs pools. With some of these strategies, we can ensure that users who are looking to participate in DRIP have ample liquidity, and we can even make an impact by stabilizing lending market utilization rates, reducing borrowing costs or slippage.

As with prior deployments, we intend to communicate with prospective partner protocols to negotiate terms beneficial to the DAO or reduced costs on any deployments when possible or appropriate.

Specifications

Entropy proposes that the new tranche of 8500 ETH be used in a variety of generally lower-risk, ecosystem-supporting protocols, including but not limited to

  • Liquid Staking
  • Liquid Restaking
  • Lending Markets
  • Liquidity Provision on DEXes

The 8500 ETH is not intended to mirror the existing treasury strategy deployments, unless extenuating circumstances indicate these to be undoubtedly the best option to support the ecosystem and generate risk-adjusted returns. The DAO’s wallets will be blacklisted from receiving any possible DRIP incentives.

For this proposal, we will not be conducting an open RFP process for protocols to apply for funding. Entropy will proactively engage with protocols providing services that align with our strategic goals. To have full confidence in the deployment of this capital, evaluations of various strategies will heavily take into account criteria such as protocol maturity, ecosystem impact, yield sustainability, and economic and smart contract risk.

As structured in the ATMC proposal, the elected OAT body will maintain full ability to approve or deny granular selection decisions. No allocation can be made unilaterally by Entropy. Funds will be sent to and custodied by the Arbitrum Foundation. Rebalancing needs will be examined as part of our normal treasury management reporting cadence, considering liquidity constraints, yield conditions, or shifts in ecosystem needs.

Given that the 8500 ETH requested represents a material portion of the non-ARB, unallocated treasury funds, capital preservation and long-term impact remain primary priorities. The following benchmarks guide Entropy’s allocation strategy:

  • ETH: stETH staking APY (currently ~2.56% based on 30D average)
  • RWAs: Avg APY of Largest Onchain U.S. Money Market Funds (currently ~4.11% based on 30d average)
  • Stables: USDC Supply APY (most liquid lending market on Arbitrum and currently ~4.54% 30D average)

Entropy recognizes and agrees with delegates that at certain times a deployment to support ecosystem growth should be prioritized over a pure yield strategy. Our team weighs growth opportunities against foregone yield based on a few factors:

  1. Estimated Value of Growth: Does the estimated dollar-denominated value of the ecosystem opportunity directly outweigh the forgone yield. Elements that influence the estimated dollar-value of the opportunity include growth potential, broader ecosystem synergies, competitive landscape, and potential onchain fee impact.
  2. Pricing the Opportunity Cost: Evaluating the opportunity cost for specific growth allocations based on the established benchmark rates. This involves looking at the expected yield and rewards, required deployment size, and time to deploy/remain allocated.
  3. Comparative Effect on DAO Income: The opportunity cost is scaled based on its influence on the DAO’s total income. As Arbitrum’s total revenue increases, it allows for more opportunity to pursue growth. The percentage of Arbitrum DAO’s top-line revenue foregone for an opportunity is a factor in when a strategic deployment makes sense. An opportunity with more substantive impact as a percentage of total revenue has a higher required perceived value versus cost multiple to be deemed worthwhile.

Timeline

  1. Forum Period September 16th - September 25th: Requesting comments and time to edit the proposal with delegate/broader community suggestions.
  2. Snapshot: September 25th - October 2nd
  3. Tally: October 16th - 30th
  4. Following a successful Tally vote: Begin deploying capital once OAT greenlights a granular allocation list
5 Likes
2

Isn’t this underperforming just passively staking the ETH? Eyeballing yields from May to now, it looks like it’s equal to Rocket Pool and less than Lido, neither of which require active management or movement out of the treasury.

Can we get a breakdown of the costs (inclusive of fees and operating expenses) along with risk profiles to get what appears to be an equal or lower return to just staking the ETH?

4 Likes
3

Agreed, I was wondering the same.

Also wondering why, of the DAO Treasury’s ~10.5K ETH unallocated, this proposal is for just 8500?

2 Likes
4

I support activating the idle ETH, and I believe we could get the most of these ETH if ATMC were to include a DVT (Distributed Validator Technology) allocation that routes stake to home-staker clusters via Obol/SSV. DVT splits validator key duties across multiple operators, improving fault-tolerance and reducing slashing risk, while directly strengthening Ethereum’s decentralization. A practical path is either (a) a small native ATMC DVT vault or (b) using an existing venue like Mellow’s Decentralized Validator Vault with Lido + Obol + SSV, currently showing ~4.8% APR (base stETH yield plus DVT incentives), which compares favorably to the ~2.4% 30-day APY cited for current ETH strategies. This would let Arbitrum earn yield, improve network security, and support home stakers, all aligned with our ecosystem goals.

3 Likes
5

in general in favour. With one caveat. We need to set expectation properly for this round.

Last time, plenty of builders reached out proposing their infra, vaults and product to put the assets at work. Most of them didn’t make it, and was later explained how the proposal goals was mostly to produce yield in a very safe and would say passive way from the DAO. I will just assume that this process won’t happen again, and we will rely on the consideration and decision of the committee.

I would personally prefer an allocation skewed toward ecosystem growth.
Arbitrum is not only lending: is dexes, is automated vaults, is perps, and we we should be mindful of every aspect of it and of the key players of our chain, albeit I do understand how lending market are often time a very good primitive to start enhancing the capital available.

2 Likes
6

We are supportive of this proposal to transfer the ETH accrued from Sequencer fees and Timeboost into ATMC’s treasury strategies. Right now, these assets are sitting idle, and we believe they could be put to much better use. By moving them into active management, the DAO can strengthen its long-term financial sustainability while also creating opportunities to support ecosystem growth, particularly within Arbitrum’s DeFi.

In fact, we would encourage the DAO to make this a recurring practice rather than a one-off transfer. Regularly channelling the ETH generated from Sequencer fees and Timeboost into ATMC would ensure that capital doesn’t accumulate unused and instead becomes part of a structured treasury management approach. Over time, this could both improve the DAO’s yield and align our treasury strategy more closely with ecosystem development goals.

The key consideration will be ensuring that any chosen strategies are transparent in their risk profile and cost structure so the DAO can make informed decisions. Overall, we think this is a positive step forward and strongly support it.

3 Likes
7

IMO, the core idea makes complete sense: put idle assets to work. I’d like to share a few options and suggestions for consideration, some of which I already mentioned in my comment on the DRIP recap post.

  • Consider solutions like Balancer boosted pools (LPs deposited into Aave), which enhance the impact of assets within the ecosystem.
  • Expanding beyond lending/DEXes could set the stage for future DRIP seasons. If liquidity in these verticals is already reinforced, it becomes easier to accommodate new demand. Additionally, if funds from lending/looping are redirected to other verticals, liquidity becomes stickier.
  • Reserve a small percentage (up to 20%) of the current requested amount to support new protocols and/or other verticals. This would demonstrate stronger alignment with item 2 of the mandate (“Supporting growth in the Arbitrum ecosystem, particularly within DeFi”). It seems that there is no strong reason to postpone it (this item is related to my previous comment in the DRIP post).
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Performance attribution can best be explained and seen by looking at the current ETH-denominated allocations here (pictured below) and by looking at the monthly updates. All yields displayed and referenced in both are net yields, with the exception of gas and bridging costs, which at this scale are considered de minimis and excluded.

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We acknowledge that the current positions’ blended performance figures are below the staking return rate of simply holding wstETH. However, as detailed in the governance post defining the goals and justification for those allocations, simply staking all of our ETH and not providing or bootstrapping any liquidity to native or migrating blue-chip protocols to spur ecosystem economic growth was at odds with the intent of the deployment.

It’s also worth noting that although some of the allocations are providing lower yield than a simple staked ETH LST strategy, this was not an unintended consequence of past allocation decisions, but expected. In the governance post regarding the deployment of these funds, we anticipated that the Fluid ETH deployment would provide “1-2% native ETH yield,” and so far, performance is in line with expectations. Fluid’s growth on Arbitrum has been impressive, and this is a key example of return on investment that is slightly less tangible when looking at treasury return figures, but highly beneficial for the broader Arbitrum DeFi ecosystem.

To answer some of the general questions raised by @Jonezee @JoJo @karpatkey @jameskbh

  • We are not requesting the entirety of the ETH accumulated in the treasury to be transferred over as we believe it is responsible to leave a “buffer quantity” of ETH for any unexpected DAO needs or any future treasury management proposals with differing goals from this one.
  • As mentioned in the proposal, no open RFP process will occur for this tranche so expectations are properly managed regarding goals and intent of the deployed capital. The committee will primarily focus on and account for factors such as yield sustainability, protocol and economic risk, ecosystem impact, liquidity, etc. when evaluating allocations.
  • The proposed high-level strategy and goal enables the committee to deploy ETH outside of just lending/DEX LP opportunities. We agree all viable strategies should be considered and our list of potential categories was not collectively exhaustive.
3 Likes
9

We agree with @karpatkey that these transactions should become a recurring practice. We suggest the DAO establish a threshold for the amount of capital needed on hand (stored in the treasury) and any excess funds are automatically transferred to the ATMC. ATMC funds should be divided into tranches based on risk and liquidity, allowing the DAO to access certain capital for discretionary spending.

Michigan Blockchain | Jack Verrill | TG @JackVerrill

10

Can you shed some light on how this works in practice? Specifically around:

  • How are we determining where to offer this below-market-rate capital?
  • What metrics are those recipient protocols/below-market-rate positions being evaluated upon?
  • What is success or failure defined as? Preferably this is determined ahead of time so there’s no moving of goal posts.

For example, Fluid Lending on Arbitrum is pretty much up and to the right. Does that mean it’s now graduated from needing this implicit subsidy?

Camelot is the inverse – the TVL and volumes are flat while Uniswap and Fluid (DEX) are growing. Does that mean it’s no longer worth providing the implicit subsidy since there’s no noticeable impact from it beyond the forgone revenue?

In general, we would recommend governance funds avoid these types of positions. It feels unfocused and unproductive without some specific plan from the supported project. We’d much rather see, for example, targeted subsidies for those who move an LP or borrowing position from another chain than generic subsidies that benefit traders/borrowers/protocols that would have just done the same activities they’re already doing.

In short, we’d like to see anything below the “risk free rate” for ETH staking be accompanied by a clear plan to alter behavior of specific users. After all, we don’t need to provide subsidies to users who Arbitrum is already won – it’s the next marginal user that needs to be onboarded who should be targeted.

3 Likes
11

Hi this is Brook from TiD Research, and we are supportive of this proposal.

While the projected yields from deploying 8,500 ETH may appear modest compared to passive staking, we feel the lower return is reasonable given the broader ecosystem benefits — especially in connection with the ongoing DRIP program.

As we highlighted in our earlier comment on DRIP, the lack of sufficient swap liquidity has been the biggest blocker to TVL growth from leveraged yield-bearing stablecoin and ETH LST/LRT loops. Volatile slippage and meaningful price impact (e.g., >2% to unwind $100k positions) discourage larger users and weaken the amplifying effect of efficient capital use. With deeper liquidity, every $1 of inflow could potentially scale into $10 of TVL through loops — but this requires users to move in and out efficiently. Deploying treasury ETH into liquidity-supportive strategies directly addresses this bottleneck.

It’s also worth remembering that, as outlined in the original Treasury Management V1.2 mandate, the treasury was never designed to chase the highest possible yield. The objectives are to (1) generate low-risk yield on otherwise idle ETH and (2) spur ecosystem growth. From that perspective, even modest returns are justified if the deployment helps strengthen market structure and unlock DRIP’s full potential.

We’re glad to see Entropy take into account some of the suggestions we’ve shared both on GRC and in private discussions — particularly around aligning Treasury management with DRIP by providing protocol-owned liquidity. This approach helps achieve sustainable, low-risk yield for the treasury while also improving DEX liquidity on target assets.

Given that DRIP is already underway, we believe ensuring its success is especially important at this stage. It may not be realistic for the DAO to launch another incentive program of this scale in the near future, and the timing now feels critical: both stablecoin and ETH DeFi markets are booming, and Arbitrum has a unique opportunity to capture market share. The yield difference between strategies may only be 2–3%, but the upside in TVL growth and ecosystem stickiness from a successful DRIP could be much more significant.

We believe this is less about giving up yield or losing money, but more about recognizing that sacrificing a few percentage points in yield to support DRIP and lay a solid foundation for ecosystem growth can be the right priority for the DAO. In this sense, the proposal is well-aligned with the treasury’s mandate: it preserves capital, generates sustainable ETH-denominated returns, and, importantly, helps address the liquidity constraint that currently limits DRIP’s impact.

3 Likes
12

Overall, this is a useful initiative, however:

  • At the very least, this proposal should be accompanied by several options for how these funds could be allocated.
    Right now, there are no options provided, and simply moving money from one place to another makes little sense. It only becomes meaningful when there are concrete strategies.

  • I also agree with @0xDonPepe regarding yield.
    I believe we should not settle for the minimum available return, but aim higher while keeping risks minimal, and in addition to interest, gain equity in other projects. This is, for example, what the Sky Ecosystem does: by investing in different protocols, it secures significant profits from project tokens, and those equity stakes can always be sold later.

1 Like
13

We are supportive of the transfer of 8,500 ETH from the treasury to the ATMC ETH strategies. Echoing @karpatkey, we would like to see transfers of this nature become a recurring activity, rather than a one-off occurence. Perhaps the ATMC could identify a transfer-triggering threshold.

That said, we would like to understand whether the ATMC has internally implemented any guardrails to manage and reduce concentration risk and/or platform/smart contract risk. If not, it may be worth introducing a soft Investment Policy Statement (IPS) to set upper-bound risk parameters for each allocation, especially as more strategies are deployed.

We also see potential for the ATMC to take ownership of decisions related to token airdrops, such as the recently airdropped SYND token. Given that Syndicate operates as an Orbit chain, strategic engagement could be valuable for ecosystem growth. This may include actively staking to participate in governance and generate yield, or pursuing other approaches that strengthen alignment and create value for the DAO.

1 Like
14

We support this proposal. While the projected yields may fall below those of simply staking ETH, we believe this trade-off is rational and aligned with the DAO’s broader objectives. The treasury is not designed to chase the highest numerical return; it is meant to preserve capital while also acting as a catalyst for ecosystem growth. Deploying idle ETH into strategies that deepen liquidity and reduce friction for participation directly strengthens DRIP and the wider Arbitrum DeFi economy in ways that passive staking cannot.

The true value here lies in the structural impact. By directing ETH into protocols that enhance liquidity, stabilize borrowing costs, and improve capital efficiency, we create conditions for long-term resilience and growth across the ecosystem. These outcomes, such as stickier TVL, more accessible leverage, and healthier market infrastructure, represent a form of return that is not captured in APY figures but is essential to Arbitrum’s success.

We also view this proposal as setting a strong precedent for how the DAO manages idle assets going forward. Rather than letting capital sit unproductive or relying solely on passive strategies, we can establish a recurring practice of putting treasury resources to work in ways that balance prudence with strategic impact. Maintaining a buffer for flexibility is sensible, but treating idle ETH as an active lever for ecosystem health ensures that the treasury is continuously delivering value.

In short, we see the modest yield sacrifice as a worthwhile exchange for deeper liquidity, stronger capital efficiency, and a healthier foundation for Arbitrum DeFi over the long term.

15

I’m voting FOR

I’m 100% supportive of putting our assets to work, and using a council makes a lot of sense as it allows flexibility to optimize in real time. Just like how Plasma had $2B on chain at launch, having the funds be strategically utilized to support the DRIP initiative is just smart, and we get yield on top of it. Who would vote against >200 extra ETH per year while making DRIP more accessible?

It’s like we get paid to do our own strategic defi market making.

h/t to @Entropy for another great proposal

2 Likes
16

I’m voting AGAINST

  • No Approved Strategy
    It’s premature to transfer ETH before a concrete and approved plan exists. I believe it’s not the right approach to transfer funds first and only then decide how to use them.
    Why not approve or at least outline the strategies beforehand, and only then move the funds?

  • Yield Is Low, Delay Isn’t Costly
    Expected yield is only ≈2.4% annually. A short delay to approve a strategy won’t materially affect returns but would improve transparency.

  • Transfer Alone Creates No Value
    Moving funds from one wallet to another, without clear execution plans, does not increase efficiency or benefit the ecosystem.

  • DAO Loses Control
    There’s no real role for the DAO in this scheme.
    All decisions are approved solely by the OAT committee.
    I don’t see how the DAO can influence these decisions in any meaningful way, which is why it’s so important to first know which strategies these funds will be allocated to, before transferring them. That’s a governance gap for such a large sum.

4 Likes
17

We voted against.

In our opinion, putting this amount of value at any risk for a meager 2.4% APY - before management expenses - isn’t justified.

Further, we question why the discussion always revolves around non-ARB assets. ARB could just as well be used to supply liquidity in DEXes and money markets to boost Arbitrum’s TVL numbers if this is the primary goal of the proposal.

Lastly, we’re concerned about the increasing reliance on centralized teams - without proper competition in the selection process - to manage the DAO’s assets.

Conclusively, we suggest that the DAO explores a discussion to:

  1. Define the DAO’s priority when it comes to treasury management. Is it about the yield, about the TVL impact, or something else?
  2. Define the risk tolerance in accordance with the defined priority. The protocols that got ETH allocations from the first batch by the ATMC would have been obvious picks by anyone who has experience in DeFi given 2 minutes of thought. We don’t need a - paid - committee for that.
  3. Codify decisions in smart contracts that are executed automatically when funds are transferred. Partnering with high quality developers and auditors to ensure these mechanisms are safe, causes less overhead, less ambiguity, and eliminates risk vectors such as operational risk, human error or embazzlement.

If this finds support, we’re happy to lead the discussion and together with the DAO, explore all options to enshrine decentralization and transparency in the DAO’s financial operations.

4 Likes
18

Gauntlet supports the transfer of ETH to the ATMC, but we’d prefer to see performance benchmarks and/or strategies the DAO intends to utilize. This ETH should be used, but we’d prefer to see the DAO take a less conservative approach toward yield. Entropy appears capable; however, we’d like to see them either propose or work with external parties to propose new strategies to deliver, or at least explore, more sophisticated returns than just staking.

19

Although I agree with the plan of not letting idle ETH sit, this didn’t really share what mechanism we would pursue in terms of yield. Therefore against until we can at least where this will get parked or what strategies we are pursuing.

20

I did vote in favor, but my concerns did grow in the last couple of weeks.

Do we need to allocate the idle assets in the treasury? Of course. But we have to be clear on what the main purpose is.

In the last few days, delegates called for a more comprehensive call to discuss parameters such as yield, risk allocation and overarching goal of this program. The answer that we got, so far, is that previous iteration was more oriented toward growth of the ecosystem, and this one will be more oriented toward pure yield for the DAO.

I wholeheartly disagree with the statement above.

In the last season, allocation was toward AAVE, Lido Eth, Fluid, Camelot.
The one from Camelot was suboptimal as allocation due to the passive nature of the deployer (the foundation) which, talking with the risk committee, would have not been able to manage the position in a more active way.
The allocation in Fluid for sure helped the protocol bootstrap in Arbitrum and the Drip is continuing the job. That said, i hardly see how this could be defined as “oriented toward growth” of the chain" as others framed it.

I don’t want to only point out to semantic. I think we need to be all on the same page of what

  • allocating toward growth really means
  • allocating toward yield really means
  • what are the risk/rewards of both choices.

So far former two points are, in my humble opinion, not properly laid out, the latter point is just not discussed at all.

I won’t campaign against the current season, is not worth it, and it does bring benefits to the DAO. Reaching sustainability with a treasury that is concentrated in mostly one coin (arb) is a good goal.

I would invite Entropy, the Foundation and the delegates to reflect on the following point tho: does moving, for example, from a 2.6% net yield to a 3.2% net yield, bring us anything meaningful beside having on 8500 ETH a further 51 ETH so a further gain of $200,000 for us? In my opinion it does not.

There is a lot of underestimation about the second order effect of making the DAO the first customers of Arbitrum protocols. Any 0.x% more yield we could get on the ethereum we have will greatly be outpaced by any positive mindshare that changes how the ecosystem is perceived by participant; and it will reflect on our treasury because this is one of the multiple reasons why the price action of Arb as a coin has been lackluster compared to any benchmark.
I am perfectly aware i am mentioning a rather complex topic, arb price action, that can’t be reduced to a bullet list or a few sentences; but whoever is out there talking with users, and builders, know that we do have a perception problem in our ecosystem.

With my vote in favour I hope that we do indeed put the idle assets at work to produce yield as we should, but also that we start to properly frame the intent behind our action while having a more thoughtful and omni comprehensive scenarios of the choices at our disposal and what they means not only for us as a DAO but as ecosystem.

In the end, does it matte if we become a self sustainable DAO if no one is left in our chain beside us?

5 Likes