Wind Down the MSS + Transfer Payment Responsibilities to the Arbitrum Foundation

Proposals
1

Non-constitutional

Abstract

This proposal seeks to get the conversation started regarding the future of the Multisig Support Services (MSS). In collaboration with the Arbitrum Foundation, input from MSS members, and based on conversations with key stakeholders and delegates, we are proposing to move forward by sunsetting the MSS. The multisig administration and payment processing responsibilities would be transferred to the Arbitrum Foundation, which is already deeply involved in the compliance and execution of nearly all MSS activity. MSS Signers will immediately begin the transition if this proposal passes Snapshot, and following the completion of this transition, receive final payments for their work.

Motivation & Rationale

When the MSS was proposed in April 2024, the DAO was managing six active multisig wallets. Entropy accurately predicted that the number and complexity of DAO-affiliated multisigs would grow significantly, and today the MSS is involved with eight active multisigs, including:

  • MSS Payroll + R3gen
  • Delegate Incentive Program
  • Event Horizon
  • ADPC Subsidies
  • Hackathon Continuation Program
  • Stylus Sprint
  • ARDC V2
  • 2025 Events Budget

The original MSS proposal approved 600k ARB to cover the costs for R3gen’s monthly token reports and payments for the 3 chairs and 9 signers connected to the MSS. Despite an ample buffer at the time, market conditions over the last year have placed the MSS in a position where funds will run out before the end of its term, unless ARB suddenly starts performing extremely well.

As a reminder, the MSS was originally structured with 9 signers paid a fixed monthly fee of $1500 in ARB and 3 Chairs paid $2500 per month in ARB, both using the spot price at the time of payment. R3gen charges $6650 per month, paid upfront in ARB on the 1st of the month, also using USD/ARB spot price.

The MSS payroll multisig currently has 131,209.2 ARB (~$52,000, with ARB priced at ~$0.4) remaining, but with currently 2 active chairs and 8 signers, there is a total of $81,300 in commitments remaining. R3gen is owed two more payments for their June and July token reports, while the MSS members have 4 months of payment remaining (May-August) on their current term. At current prices, this would put the MSS on track to be short of funds following the July 1st payment to R3gen.

In April, Entropy, the Arbitrum Foundation, and MSS discussed potential solutions for the shortfall. Transferring the payment processing function to the Foundation was an option discussed and shared with the DAO by MSS chair @cattin. Following confirmation from the Foundation that they have operational bandwidth to take on such responsibilities, a partial transfer was considered by all parties, but it was deemed unfair to reduce MSS member pays due to the sustained level of risk MSS members take on by being signers. Even at $0.4, reducing the overall number of MSS members to 1 chair and 4 signers would still result in a shortfall. Another option is an early renewal and restructuring of the MSS; however, Entropy believes the best path forward is to formally wind down the MSS and recognize that the Arbitrum Foundation is better suited to take on payment responsibilities.

The primary rationale for consolidating the DAO’s multisigs and payment processing under the Arbitrum Foundation instead of approving additional funds or restructuring pertains to the required compliance process and coordination between signers and the Arbitrum Foundation. The compliance requirements create a system that requires the Foundation to approve and review the recipient of nearly every payment.

Over the MSS’ tenure, operational improvements have happened and some of the recognized frictions could likely be further negated by restructuring the MSS to less signers, as the somewhat high threshold of 7/12 or 8/12 has proven to be inherently slow and inefficient. Regardless, given that the Foundation must be involved in every multisig anyway, the contributors of this proposal feel as though it’s sensible for the DAO to formally recognize this reality and consolidate multisig operations under the Foundation’s purview. Additional benefits include not only a reduction in total OpEx spending by the DAO, but also with full-time employees trained in OpSec and internal legal capacities, we believe that the funds will be safest in the hands of the AF. Finally, by marking the clear owner of the payroll function as the AF, responsibility for successes and failures will fall on a single party, giving the DAO greater accountability beyond the committee structure.

Specifications

After inquiry, delegates expressed a preference to honor the agreement with R3gen and have them finish out the planned monthly token reports. To ensure that the MSS Payroll multisig has sufficient ARB to pay out R3gen for the remaining 2 reports, Entropy is proposing that the MSS wind down begins by transitioning the following multisigs to the Arbitrum Foundation with a target completion date of June 15th:

  • Delegate Incentive Program
  • Stylus Sprint
  • Hackathon Continuation Program
  • The DAO’s 2025 Event Budget
  • Event Horizon
  • ADPC Subsidies
  • ARDC V2

Following the completion of this transfer, the Arbitrum Foundation will share the updated addresses for the seven initiatives being transferred in the MSS communication thread. The Arbitrum Foundation has confirmed that funds for these ongoing programs will be separated into unique wallets so that they can continue to be easily tracked. Going forward, the Arbitrum Foundation has also agreed to continue this practice for any new initiatives in order to ensure delegates and the DAO have transparency on the state and flow of funds. Additionally, the Foundation has committed to providing updates when necessary; however, delegates should expect these to be at an informal cadence.

The following multisigs will remain under the control of the MSS:

  • MSS Payroll and R3gen

At the passing of this proposal (June 6th), the MSS will have discretion to pay R3gen upfront for their July token report if the price of ARB is high enough to secure the avoidance of a shortfall.

Once the above-mentioned multisigs have been transferred to the Arbitrum Foundation, the MSS will complete its tenure by sending a final payment to the MSS members for their work in June. With a target completion date of June 15th, MSS members will be paid one-half of their normal monthly compensation for June. If work for the MSS extends beyond June 15th, the members will be paid a pro-rata monthly rate up until June 30th. Following these final payments, the MSS will formally dissolve, returning any remaining ARB to the DAO’s treasury and being absolved of any future payment responsibilities and risk.

Similar to the upfront payment of R3gen’s work and if necessary due to extreme changes in market conditions, MSS members will have the discretion to send payments related to June work at an earlier date to avoid a shortfall.

Going forward, the payment vertical and its structure will be left up to the Arbitrum Foundation. In the event of resource constraints, Entropy recommends to the AF that they onboard a limited number of community members to assist with multisigs for smaller programs; however, this is something that will be up to the discretion of the Foundation. If the AF chooses to do so, they will have the mandate to structure the involvement of community contributions in the payroll function as they wish.

Once the OpCo has been operationalized and possesses similar payroll capabilities as the Arbitrum Foundation, we believe that responsibilities for the DAO’s multisigs should be transferred to that entity. When that time comes, Entropy recommends for the Arbitrum Foundation and future head of OpCo to update the DAO with a joint statement.

Timeline

May 22nd: Forum Post
May 29th - June 5th: Snapshot vote
June 6th: If approved, transfer of the previous MSS multisigs to the Foundation will begin.
June 15th: MSS’ term comes to an end

Voting Options

Basic voting with FOR, AGAINST, ABSTAIN choices.

FOR: In support of winding down the MSS and transferring ownership of the payment vertical to the Arbitrum Foundation

AGAINST: Entropy will work with the MSS to bring a revised proposal that addresses the shortfall and future structure of the payment vertical

ABSTAIN

2

you mean, if approved with a participation bigger than the non-constitutional 3% quorum, correct?

also, since the original MSS was approved with both an offchain and an onchain non-constitutional vote, I think we should, as a good governance practice, have the requirements to cancel an initiative, be the same as the ones that were needed to approve it in the first place.

So in this case, I think we should do an offchain vote to determine what is the sentiment of the community regarding this, even with the several options outlined in the proposal, and then a non-constitutional onchain vote to ratify the decision that came out of the offchain vote.

1 Like
3

I’m not sure if this will be the case, but the number of Snapshot votes requiring quorum has already become significant enough to warrant requesting the platform to enable quorum requirements to be set on a per-vote basis, rather than applying a general setting across the entire space.
If this isn’t possible, we may need to consider switching to another platform.

1 Like
4

We want to drop our thoughts on the MSS issue including in relation to this post:
https://forum.arbitrum.foundation/t/mss-for-arbitrum-communication-thread-arbitrum-multisig-support-service/26508/28?u=arbitrum

We believe the multisig service operations will be absorbed into OpCo’s mandate and OpCo will eventually take over this service. The question facing the DAO is what to do in regards to managing the treasury for proposals passed by the DAO until the OpCo is ready to take on this role.

There are two outcomes:

  1. Continue with the MSS,
  2. Hand over the function to the Arbitrum Foundation.

In order for the DAO to continue with the MSS, a new funding proposal would be required to pay the signers until the OpCo is ready to take over. To help with this decision, the DAO should evaluate the overall cost of funding the MSS relative to the funds under their custody and the quantity of transactions signed per month. If MSS continues, we’d strongly recommend keeping the 9/12 setup and avoid reducing the number of signers. This is to help combat the increasing rise of digital and real-world threats that signers may face. Additionally, the DAO needs to decide whether a new set of elections should take place as the original proposal mentions that elections should occur every 12 months.

MSS is paid $234k per year and $19.5k per month. They are holding approximately 24,545,271 ARB and $3,290,031 across multiple multisigs as outlined in Entropy’s post. Note, the current payment is slightly less at $17k per month, as Alex L stood down as Chair and Frisson is no longer taking payment.

The Arbitrum Foundation is already involved in the MSS. We perform compliance (KYC/KYB) on the recipient and inform all signers when compliance is completed. We provide each signer with the name of the recipient alongside the wallet address for each project. It is then up to the MSS chair to coordinate the payment with the signers, communicate with the recipient, and keep the DAO abreast on updates in regards to the MSS.

We are happy to take on the additional role until the OpCo is ready to take it on. If we do take it on, our strong preference will be to set up our own multisigs and rely on our existing processes for handling the payments. This is to avoid any additional complexities that can lead to delays or other issues.

We see any change as temporary solutions until the OpCo is set up. We are willing to help to support that transition, but ultimately, it will be up to the DAO to decide on what to do.

5

A thoughtful and well-structured proposa.

Big props to everyone involved. Consolidating MSS functions under the Arbitrum Foundation seems like a natural evolution, especially given their existing oversight role and compliance infrastructure. Curious to hear from others: does this shift strengthen operational efficiency, or do we risk losing decentralized touchpoints in the DAO’s payment process?

6

I agree with this proposal as the separation between the MSS and AF caused further delays for us with the Hackathon Continuation Program (HCP).

However, I think is key that the AF provides a framework for how this will be handled. We need to ensure they count with the setup/resources to execute efficiently.

Then, for discussion purposes:
Why shouldn’t this be transferred to OpCo? I can see a reason for efficiency in the compliance-payments liaison (the issue we had with HCP was because of this). But then I’m curious how this plays out for other initiatives. If OpCo can’t oversee compliance/payments for DAO initiatives… doesn’t that handicaps OpCo?
I see that AF suggests this could move to OpCo eventually, but then we need OpCo to do compliance for the DAO (KYC/KYB)? :upside_down_face:

7

This feels like a relatively straightforward function to insource — especially since multisig is not a strategic task but rather operational/executional.

It should also be fairly easy to transition, as the Arbitrum Foundation is already involved in the compliance and execution of DAO payments. Consolidating this under one accountable entity makes sense. MSS helped fill a gap at the time, but now the added complexity and cost of outsourcing seem unnecessary.

I’m supporting this proposal.