It has come to our attention that the conversation around management of the DAO’s treasury has become highly fragmented. There are numerous entities involved in the conversation at this point, which is made evident by Gauntlet and Karpatkey’s recent proposal to manage a portion of the treasury and Avantgarde’s attempt at establishing a paid treasury oversight council. @Pepperoni_Jo3 and @thedevanshmehta have also been involved in some of these conversations, and Entropy was also contacted by other service providers asking questions on the matter.
In order to align on the optimal path forward, we believe it is critical to start by getting everyone involved on the same page. Therefore, we are suggesting a working group call to take place this week on Thursday September 12th at 1pm ET. Based on conversations that have taken place over the past week (both on the forum and Telegram), Entropy will look to facilitate this process further.
It would also be helpful to have an open telegram group (can even be created during the call) where everyone working on this question can be aware of the others doing so
We have received a lot of inbound interest to join this working group session. In order to ensure the most efficient use of our limited time, we put together an agenda for the call.
Agenda:
3 minutes - Intro from @entropy laying out where we are on the treasury management conversation and how we got here.
5 minutes - @Pepperoni_Jo3 / @r3gen_Finance to discuss the DAO’s high level spend/revenue, ops budget short comings, treasury sensitivity to ARB volatility, ARB’s historical inflation, and general takeaways from Regen’s most recent Token Flow report.
5 minutes - @Bernard from @Areta to discuss their views on overall financial strategy
5 minutes - @tnorm from @gauntlet to briefly discuss the perceived shortcomings of the previous karpatkey proposal, and how they see the best path forward.
5 minutes - Q&A for Gauntlet
5 minutes - @justErik and Mona El Isa from @Avantgarde will walk us through their current proposal on the forum and how they view the best path forward.
5 minutes - Q&A for Avantgarde
Remainder of time allotted for open conversation.
Some key questions Entropy has identified that still need to be answered:
Sizing of active treasury management, and where the sourcing comes from i.e. ARB or ETH?
Many team/investor unlocks, GCP funds overhang, incentive programs, etc. have all led to high monthly ARB inflation versus circulating supply.
Is it important that we diversify infrastructure providers, or is it more beneficial to have all assets in one place for the ease of reporting and transparency/onboarding new managers to a system that is well known within the DAO.
How important is it to the DAO that the infrastructure solution is non-custodial?
What is the mandate/primary goal of active treasury management? Is it growth focused, or is it about generating passive yield? How much should be allocated to each bucket?
Is there any inspiration we can take from the STEP program’s design?
How do we measure risk adjusted returns and hold treasury managers accountable?
Is the DAO budget a prerequisite to treasury management? If so, who will be in charge of this and how much extra time does it add to the process?
This list is non-exhaustive, and we encourage others to come with other key talking points that this group will need to work through over the coming weeks/months.
Thank you in advance for everyone who attended today’s call.
For those who missed the call, a video recording can be found here and the comments made in the google meet chat throughout the call can be found here.
There were a lot of valuable thoughts shared, but it is clear that we will need to host an additional call to ensure actions are being taken that progress this initiative. Given the fact that Token2049 is next week and many folks will be traveling, we are targeting Tuesday, September 25th at 9am ET for the second call. This will be added to the DAO’s open calendar as we draw closer to the aforementioned date.
Entropy Advisors will be working on a proposal based on all of the information gathered thus far, and will be prepared to present our solution during this second call. We will encourage constructive criticism of this v1 draft, and are hopeful we can come to a consensus on a concrete proposal that we can then take to the forum/Snapshot.
Hello everyone - and thank you to those who attended the second working group call on September 25th. The recording is available here, and the presentation that was shared can be found here.
The full proposal will be posted in short order for community review.
Treasury management is a key part of any DAO’s long term survival and success.
As traders and farmers ourselves we’re also well aware that idle capital is opportunity cost. With the size of its treasury holding, as well as the large amount of it in ARB, Arbitrum should be seeking to diversify its treasury and earn yield on its assets as soon as reasonably possible.
*Rationale
Addressing Service Provider Shortfalls
The proposal directly tackles a critical issue – the reliance on dollar-denominated contracts for service providers while the DAO primarily operates with ARB.
Creating a stablecoin reserve will mitigate the impact of ARB volatility on service providers, fostering a more professional and reliable payment system
Unlocking ARB and ETH Utility
The proposal outlines strategies for actively utilizing both ARB and ETH holdings to generate yield and pursue strategic investments.
The TMC’s focus on on-chain ARB strategies can boost ARB utility within the Arbitrum ecosystem,
while the GMC’s ETH-backed strategies can stimulate growth and partnerships
Experienced and Specialized Committees
The proposed TMC and GMC members bring valuable expertise in DeFi, risk management, and deal negotiation
Their skills and experience are crucial for effectively executing the proposed strategies and mitigating potential risks.
Concerns and Potential Improvements
Lack of DAO Budget and Spending Transparency
Multiple community members highlight the absence of a defined DAO budget as a major concern
Implementing these committees without a clear budget could lead to inefficient spending and a disconnect between treasury management and the DAO’s overall objectives.
The committees should prioritize developing a comprehensive budget and provide regular updates on planned budget utilization to enhance transparency and accountability.
ARB Liquidity and Market Impact of Stablecoin Conversion
The proposed 15 million ARB conversion to stablecoins raises valid concerns about potential market volatility and negative price impact, especially given ARB’s low liquidity on centralized exchanges
Exploring OTC options, engaging with market makers, or implementing a longer sales period could mitigate these risks
A detailed plan for the conversion process should be presented to the DAO for approval before execution.
Transparency and Accountability in Committee Selection and Operations
Appointing committee members without an election process raises concerns about transparency and potential bias
Implementing a hybrid approach, where nominees are proposed based on qualifications but require DAO approval through a voting process, can address these concerns
Additionally, establishing clear performance metrics, accountability mechanisms, and a process for removing underperforming members will build trust and ensure effective oversight
Long-Term ARB Value and Ecosystem Impact
Converting a significant portion of ARB to stablecoins requires careful consideration of its potential impact on the perceived value of ARB and community confidence
The committees should actively explore alternative solutions and strategies that promote ARB utility and long-term value growth, such as those suggested in community comments, including using ARB as collateral in lending protocols and expanding its DeFi capabilities