Here are some of my loose thoughts on ArbitrumDAOs Mission, Vision and Goals. Before I begin, I’d like to start with a disclaimer that these are my personal thoughts and not L2BEATs. Even though of course I’ve spent a fair amount of time discussing these topics with @Sinkas and other team members they don’t necessarily have to share my views.
TL;DR:
- the time is running up, we need to mature as a DAO and prove that token governance can effectively manage the ecosystem
- we need to figure out a strategy to bring value to the token, the security of the ecosystem depends on that
- the road to future success is through 10x growth and expanding outside of the current crypto markets, we need to prioritize our efforts on that front
- in order to get there we need to bring the O to the DAO
- we need to align and coordinate our different initatives to create synergies and make our spending more ROI effective
Most of the things I’m describing here apply to all general-purpose chains (especially L2s), not exclusively to Arbitrum. Most chains have similar goals and should, in my opinion, focus on similar priorities, adjusting specific strategies to the particular strengths of a given chain.
How do I think about the debate on strategic directions
Before we begin, it’s important to address the issue of the DAOs ability to set goals and strategic directions. There have been many initiatives so far that tried to distill one common direction by gathering feedback from a broad range of delegates and other stakeholders (OCL, AF, builders, etc.). All of them eventually struggled with coming to conclusions - ending up either with a set of goals that did not have enough support or with goals so broad and open-ended that literally any initiative could be argued as fulfilling those goals.
I believe this is not necessarily the fault of those trying to distill those goals from the DAO; rather, the issue is in the DAO itself. What if the DAO is so decentralized and made up of so many individuals and entities with so many different, sometimes competing, goals that there is no one overarching set of priorities that suits everybody?
Worse still, what if the people asked to give their views on these objectives have yet to think it all through well enough to have an informed opinion? And what if when they are asked for input, they hallucinate like LLMs, giving answers that sound good and seem reasonable but aren’t backed up by substantial data and/or experience in a given field? I, for one, admit to being guilty of doing this, always in good faith, but still providing “strong opinions, loosely held.” I fear that this is more common than not.
Therefore, while I value all opinions in the DAO, I do not weight them equally. I give more credit to the people who are fully committed to Arbitrum (OCL, Arbitrum Foundation) and those with enough skin in the game (biggest protocols, big investors/token holders, big partners). I don’t mean that these parties are necessarily more correct than the others or that they can’t have ulterior motives or even change their alignment (like TreasureDAO). But they are simply the ones who have spent the most time thinking about the success of Arbitrum in the long term, and they have the most resources to implement their vision of the future, so it is harder and riskier to go against that vision, even if in my opinion it could be suboptimal.
To be clear, I’m not saying I’m one of those whose opinions should be taken more seriously. On the contrary, even though I represent the largest delegate at the time of writing, I would only push for a particular direction or approach if it had the support of people more directly involved in the ecosystem than myself. As a delegate I’m here to help and support them, not to tell them what to do.
Some assumptions
First, to set the stage, let’s start with some assumptions that drive my thinking here.
I strongly believe that in the near-ish future, most financial activity will take place on some sort of crypto rails (actually, the scope is much broader than just financial activity, but let’s simplify for now). Long story short - this belief stems from the fact that the adoption of a mix of public/private blockchain crypto rails will allow companies to significantly reduce the cost of both development and future maintenance as well as offload the risk. I think this belief is quite broadly shared across the industry, justifying the high valuation of infrastructure projects, Arbitrum included.
The vision, mission, and goals all combined
With this in mind, Arbitrum’s goal in general, and ArbitrumDAO in particular, should be to work towards putting Arbitrum in a position that, in the future, where most financial activity is happening on some crypto rails, Arbitrum can capture as big a share of this activity as possible - in terms of daily activity, total value locked, and the variety of use cases covered.
However, it is essential to note that the current crypto market is tiny compared to this projected future. This means that for Arbitrum (or any other chain) to be successful in the long term and secure a significant piece of this future pie, it needs to grow many times over in every aspect - number of builders, number of projects, number of users, number of service providers and (especially for Arbitrum) also in terms of token market cap. Most of this growth needs to come from outside the current crypto industry, and I believe that one of the most crucial factors for the chain’s success will be its ability to grow outside the existing market.
One aspect of this growth requires a separate take - token market cap. Arbitrum’s ecosystem is controlled almost entirely by the ARB token, either directly via onchain votes or indirectly by controlling entities like Arbitrum Foundation or GCP Foundation and driving elections for internal bodies, especially the Security Council. Therefore, the ecosystem growth is, to some extent, limited by the growth of the token market cap. The reason for that is that if the value of the ecosystem (including, but not limited to, the value locked in the bridge) significantly outweighs the value of the token, it incentivizes governance attacks - both direct, like stealing the funds from the bridge, but also indirect, like securing enough voting power to either cripple decision making or tilt it to one’s advantage (e.g., Compound’s Humpy proposal).
So right now, in my opinion:
Arbitrum’s goal should be to secure as large a slice of the future financial activity pie as possible through growing adoption of its ecosystem, while keeping the token price at a level that provides sufficient security for the growing system.
What do we have
First of all, in Arbitrum it can only be done by the DAO. The way things are set up right now, there’s no other entity (including Offchain Labs and Arbitrum Foundation) that has enough power and control to make it happen. So, the way I see it, the DAO has to figure it out (sooner rather than later, as time is ticking), or Arbitrum will either fail or, at least, won’t be nearly as successful as it could be).
Now let’s see what tools ArbitrumDAO has to achieve that goal:
- DAO Treasury
- Arbitrum brand
- Control over Arbitrum One and Arbitrum Nova
- Control over entities (Arbitrum Foundation and GCP Foundation), and a tried and tested mechanism for setting up new ones if needed (such as OpCo, CapCo, etc.)
- A network of experienced professional partners with skin in the game that have a vested interest in Arbitrum’s success (Offchain Labs, Tandem, Entropy Partners, GMX, Camelot, Azuki, XAI, Proof of Play, APEChain, Premia, etc.)
- An expanding set of Orbit chains as part of the Arbitrum Expansion Program
- A thriving community of users, builders, protocols, and a DAO with existing processes and structures
However, ArbitrumDAO has lacked the ability to set specific strategic goals and focus on efficient management to coordinate all those resources to achieve those goals. Due to the DAO’s decentralized nature, we ended up with a stream of isolated initiatives that did not support any broader goal or purpose. Furthermore, due to historical, practical, and legal reasons, the Arbitrum Foundation was set up as an isolated entity supporting the DAO and Arbitrum Ecosystem but not interfering with the DAO, executing its own agenda.
All of this is not necessarily bad; the independent and decentralized nature of the DAO spurred innovation and resulted in programs and initiatives that would not be possible otherwise, and therefore it’s crucial to preserve these properties. However, in my opinion, to increase efficiency and alignment across initiatives, we need to add a layer of coordination and oversight with strategic objectives. Simply put, we need to add some centralization to the mix (with decentralized oversight by the DAO) with decision-making power and responsibility for the ecosystem’s performance.
What we should do
Operationalize the DAO
We need to be able to run more focused and dedicated programs as a DAO. Leverage external partners where possible through grants and funded initiatives, but with clearly defined goals and objectives for those partners to meet. Facilitate the creation of dedicated third party teams and initiatives, hiring people directly and building intrinsic organisational value where needed or where it makes more sense. This doesn’t mean that independent initiatives are not possible or welcome; it just means that we shouldn’t rely entirely on independent initiatives to make progress. The long-discussed OpCo proposal is a step in the right direction.
Return value to the token
As I mentioned above, increasing token value is crucial for the security of the growing ecosystem. While I understand and fully recognize that this is a very sensitive and delicate matter, we need a long-term direction and at least some commitment to ensuring that the growing value of the ecosystem is properly reflected in the value of the token. We should start committing to creating mechanisms, processes, and structures that make it possible. I believe that the initiative around ARB staking is a step in the right direction.
Secure more revenue streams
The common expectation across the L2 space is that the sequencer revenue will decline with time. Moreover, it is already clear that there are many other ways through which ecosystems could be profiting besides the sequencer revenue. The DAO is already actively exploring some initiatives (STEP, GCP, AVI Pilot, M&A, GMC&TMC, etc.). I believe there are many more possibilities we haven’t even thought about yet. We can look for inspiration in business models built around Free Software projects that usually explored revenue streams in avenues such as services, consulting, certification, support & maintenance, business licensing, and others.
Outreach program for addressing new markets
As mentioned above, I find it crucial for Arbitrum’s success to be able to grow outside of the current crypto market. That means expanding into new verticals (which, to some extent, was the goal behind GCP and STEP) and getting more adoption for existing projects. Arbitrum is known for its DeFi protocols; we have a strong RWA base, a strong gaming foundation, and many great projects that we should collaborate with to help them gain new users. I believe this to be one of the top priorities for the following year.
But it should not be limited just to what we have right now. We should actively identify areas where we are lacking (an example of that could be a dedicated wallet or smart account solution) and try to address them with targeted initiatives, grants, or investments.
Buidler expansion program
We can only grow if we encourage builders to build new solutions on Arbitrum One and expand with their own chains with Orbit stack. This won’t happen by itself, and it won’t happen just by having the best tech or by just throwing grants left and right either. It will only happen if we commit to making building on Arbitrum as easy and straightforward as possible. We need to actively work with existing and new builders to identify their pain points and address them in a way that makes builders feel cared for.
This means, for example, easy access to infrastructure, easy access to service providers that know the technology and can support with integrating it, access to service providers that can commit to long-term support and maintenance of the stack, and, most importantly, access to the community of users willing to test out new products.
The Subsidy Fund for Security Services and past grant programs were steps in the right direction.
Growth and support program for existing protocols
While I mentioned several times that growth beyond the current crypto market is crucial for long-term success, it will only be possible if we double down and support existing protocols, projects, and partners, strengthening Arbitrum’s position achieved in the past. This support can come in many forms, but it should be clear that the success of Arbitrum is directly correlated with the success of projects building on top of it. I believe that the incentive programs that we’ve been running in the past were steps in the right direction, but they must be improved to fulfill their purpose in the future better.
Many wonderful people have given me feedback on the draft version of this post, I won’t name you all as I take sole responsibility for what I put here, but I want you to know that I am very grateful for all your comments, suggestions and criticism.