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.

If rejected, then Entropy will consider that delegates prefer to keep utilizing the MSS and will work to bring forward a proposal that restructures the MSS and a solution for the shortfall of funds.

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 providing a top up of funds and beginning conversations on a restructured 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 in the interim until OpCo is stood up, at which point the conversation shifts to moving the payment function to this entity.

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 for the time being.

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. Whether under OpCo or the AF, consolidating the payment function under one accountable entity with the capabilities to conduct KYC/KYB is the most effective long-term solution.

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 Arbitrum Foundation until OpCo possesses similar capabilities. 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.

If this proposal is rejected, then delegates would be signalling a preference to keep utilizing the MSS until OpCo’s formation, at which point the conversation can be restarted on moving the payment function to that entity. If this is the prevailing decision, a top up would almost certainly be necessary to allow time for the full onchain proposal process & any possible follow-up procedures. In this scenario, Entropy will work to create a proposal that restructures the MSS, taking into account learnings and the opinions of relevant parties.

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

  1. For (Wind Down the MSS): In support of winding down the MSS and transferring ownership of the payment vertical to the Arbitrum Foundation in the interim.
  2. Against (Continue with the MSS): Entropy begins working on a solution to the shortfall and creating a revised proposal that addresses the future structure of the payment vertical.
  3. Abstain
1 Like
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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.

2 Likes
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.

2 Likes
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.

2 Likes
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.

8

We appreciate the start to the discussion and would like to cross-post our reply to the MSS communication thread.

2 Likes
9

Thanks for identifying the problem and voicing it, however I have many doubts

Lately, Entropy has been advocating for trading decentralization for efficiency. Of course, direct control is always more efficient than decentralized processes — but I see several major downsides to this proposal:

  1. It represents a shift away from decentralization and DAO governance toward centralization under the Arbitrum Foundation
    If we continue down this path in every case, we’ll eventually reduce the DAO to a symbolic role — picking Twitter banner images while the real decisions are made elsewhere

  2. Ending a program prematurely, despite it functioning well and fulfilling its responsibilities, sets a bad precedent
    It suggests the Foundation is an unreliable partner — willing to cancel initiatives arbitrarily.
    The financial issues cited here aren’t related to the MCC itself, but rather to the decision to convert funds to USDS right before payments were due — a decision made by the Foundation, which now seems unwilling to take responsibility for the consequences.

  3. The proposal offers no real alternatives
    If this is the path you want to take, fine — but don’t present it as the only option. There’s a real issue here that needs solving, so present multiple solutions.
    Some obvious alternatives — which weren’t discussed — include:

    • Additional funding (as was done to extend the Hackathon initiative)
    • Reduced payments to signers, if the majority of them support that
    • Funding from OpCo, since this work will eventually be transitioned to them, and the budget is already allocated. Let OpCo cover MCC costs in the meantime, since it’s ultimately their responsibility

In case of receiving AGAINST the proposal it will lead to the fact that we will spend more time than we could have spent if we had different alternative solutions

2 Likes
10

In my experience at Event Horizon the Foundation is heavily involved with essentially every interaction we have with the MSS so this feels like a formalization of the processes already in place, but with the added benefit of reducing costs and overhead at the DAO.

I will echo a growing concern expressed elsewhere that the Foundation is taking on increasing responsibilities at the DAO. It’s unclear what the end state will be but the direction towards centralization is clear. This initiative, which I do support, will not the be straw that breaks the camel’s back, but it does slightly raise concerns about the overall direction that the DAO is headed.

1 Like
11

We support the winding down of the MSS and the sunset of the current governing council. Having engaged with both directly, we found the communications with the entity inifficient, primarily due to the lack of accountability and clear elected leaders for the councils, perhaps not as much a reflection of the individuals’ composition.

We’d like to see some delegated authority to OpCo here to oversee these. We believe there is a clear path for OpCo to oversee the appointment and operational management of the multisig while still allowing the AF to provide a financial/legal wrapper for KYB/KYC purposes.

2 Likes
12

This is Brook @rooktc from TiD Research. We appreciate Entropy’s effort to address the MSS’s challenges, but I believe framing this as a binary yes/no choice somewhat oversimplifies a multifaceted issue.

The DAO needs more information and options to make an informed decision, and I urge the community to consider the following points that lead to the problem here to ensure a balanced approach.

  1. Functional Overlap and MSS Performance

  • Entropy highlights inefficiencies due to the overlap between the Arbitrum Foundation’s compliance role (KYC/KYB, ARB-to-stablecoin conversion) and MSS’s multisig execution. However, the MSS communication thread suggests delays were primarily due to underperforming signers, not structural overlap.

  • The focus should be on improving MSS internal management—such as stricter performance expectations or more transparent reporting—rather than winding down the program.

  1. Budget Shortfall and Systemic Funding Issues

  • The ~$29,300 shortfall, driven by ARB’s price drop to ~$0.4, reflects a broader challenge of managing token-based budgets in volatile markets. This issue, also discussed in the Top-up for Hackathon Continuation Program and TMC - Stablecoin Withdrawal Process threads, isn’t unique to MSS.

  • Sunsetting MSS solely due to this shortfall risks setting a precedent that fails to address the underlying problem, which could recur in other projects.

  • We propose revisiting our suggestion for all live projects to report monthly budget statuses to the TMC, DAO, and Foundation, providing visibility into potential shortfalls and enabling proactive solutions like additional funding or stablecoin adjustments.

  1. Unclear Transition Schedule & Plan to OpCo

  • Positioning the Foundation as a temporary solution until OpCo assumes multisig duties raises concerns about the timeline and OpCo’s readiness for compliance and payment execution.

  • Without a defined plan, we risk a governance vacuum or over-reliance on the Foundation, with limited transparency into how KYC/KYB and ARB-to-stablecoin conversions are handled, which is also not disclosed in MSS update thread.

  • The DAO needs a clear schedule and a well-defined process for transferring these functions to OpCo, along with a commitment from OpCo to continue disclosing detailed information on these processes to maintain transparency and accountability.

Given the underlying issues, in addition to having Entropy & AF’s support to provide more information, I believe we should also have at least the below option available for the DAO to make better decision.

MSS Budget Top-Up

  • Allocate extra ARB + buffer to sustain MSS through its current term (August 2025).

  • Implement stricter signer performance standards (e.g., 24-hour response times) and weekly performance reports to address delays, retaining the 9/12 signer structure for security, as the Foundation recommends.

  • Use the remaining term to develop a transition plan to OpCo, with the Foundation and MSS proposing a schedule, and OpCo committing to monthly transparency reports on multisig activities.

I believe the DAO can address MSS challenges without shutting it down by focusing on better signer accountability, regular budget updates across projects, and a transparent plan for transitioning to OpCo. A budget top-up paired with stricter standards and a clear timeline would fix inefficiencies, stabilize funding, and uphold governance integrity, giving the DAO the tools to decide thoughtfully.

2 Likes
13

Thank you for raising this issue and suggesting steps forward.

The MSS served a great job as a decentralized operational and execution body and the DAO should be proud of this initiative. As the general future view for payment execution is that the OpCo, as a DAO operational intiative, will overlap functions with MSS, we agree the most sensible decision is the OpCo to take over MSS tasks and learn from all the challenges and optimizations that the MSS has faced.

Regarding shortfall of funds and wallet top up, we think that, as the general sentiment is OpCo will take over MSS, the most effective short-term solution is to transfer the functions to the Arbitrum Foundation as an intermediate operational body until the OpCo finishes its formation. Topping up the MSS again for just a few months of activity would be a waste of delegate effort and mindshare in our opinion.

It is worth exploring, however, how can the DAO prevent these shortfalls of program funds in situations of market downturns. Particularly, we would be supportive of keeping idle program funds subject to limit sell orders, set at a price that always guarantee honouring the program’s dollar value. Therefore, if Arb price falls sharply during the duration of the program, the limit order will trigger and the DAO saves Arb-denominated funds as replenishments are never necessary, while still preserving the upside potential of Arb price increasing.

1 Like
14

We’re for shutting down the MSS and handing payments to the Arbitrum Foundation, and down the road to the OpCo. It cuts out extra steps, save money for everyone, and keeps funds safe and clear with the Foundation’s team taking full responsibility, leveraging its existing operational bandwidth and compliance processes.
However, the proposal lacks a clear fallback plan if ARB’s price drops significantly (e.g., below $0.3), which could exacerbate the shortfall beyond what the proposed measures can handle.

15

The following reflects the views of the Lampros DAO governance team, composed of Chain_L (@Blueweb) and @Euphoria, based on our combined research, analysis, and ideation.

We appreciate the efforts of MSS to date and would like to acknowledge that, despite some challenges with execution and communications, the program was operated efficiently.

Given the current transition plan, we support the temporary transfer of MSS responsibilities to the AF, especially since the OpCo is still in its early stages and the AF has confirmed the resources and capacity to manage this in the interim.

That said, we believe there are two areas worth reflecting on for future improvement:

While we support the direction, we agree with the observation by @cp0x that the proposal could have provided alternatives or options, such as additional funding, AF takeover, or revised program structures. This would have allowed delegates to actively participate in shaping the outcome, rather than only responding to a pre-decided path of winding down the MSS.

Looking ahead, we also recommend applying ARB-denominated caps for each role in DAO-funded programs, similar to how the DIP uses caps in tier-based compensation. This can help avoid budget shortfalls during market downturns and ensure spending remains predictable and aligned with treasury conditions.

1 Like
16

We support getting rid of the MSS and acknowledge that it caused major inefficiencies because it added extra steps—such as dual approvals and manual coordination between the DAO, the MSS, and the Foundation—but this change also shifts power away from decentralization toward greater control by the Arbitrum Foundation. Decentralization is a trade-off with efficiency; however, this move gives the Foundation too much control over DAO operations, as it will now oversee all spending.

Question: Why isn’t this role given to OpCo instead of the AF?

Overall, we are in favor of the proposal for the added efficiency, but the centralization risk must be carefully considered.

2 Likes
17

Entropy appreciates the feedback and comments from delegates thus far. We will respond to a few comments before moving this proposal forward to Snapshot shortly due to the time sensitive nature of the situation.

A few delegates have suggested alternative options. As stated in the rationale of the proposal, other options such as reducing MSS member pay or reducing the number of signers were already discussed with the relevant parties and were deemed unsuitable solutions due to safety concerns or signer unwillingness to perform the task with reduced pay.

Overall, our team’s stance is perhaps more succinctly captured by @jose_stablelab statement:

However, we are in agreement with the Arbitrum Foundation in that the delegates should consider the following two paths available:

If this proposal is rejected, then it’s clear that the DAO wants to keep utilizing the MSS until it’s time to have the discussion about whether or not to move the function to OpCo. If this is the prevailing decision, a top up would almost certainly be necessary to allow time for the full onchain proposal process & any possible follow-up procedures. In this scenario, Entropy will work to create a proposal that restructures the MSS, taking into account learnings and the opinions of relevant parties.

The voting options and proposal language have been updated to better reflect the two paths.

In regards to delegates concerned about the framework/structure for how this transfer will be handled, the Arbitrum Foundation has affirmed their commitment to keep the program’s funds in separate multisigs to ensure transparency. This aligns with their existing payment processes.

Additionally, a valid concern raised by @mcfly:

Entropy shares this concern and it was the motivator for targeting a June 15th turnover if this proposal passes. Now that we are a bit closer to June 1st, if R3gen and MSS members’ payments are sent at roughly the current price, the risk of an additional shortfall following this proposal becomes much lower. If those payments are sent out at ~$0.4, the breakeven price would then be roughly $0.21 for the MSS work for half of June & R3gen’s July payment. If markets begin turning for the worse, the proposal states that the MSS would be granted the discretion to make the payments early to avoid a shortfall.

Again we thank delegates for their engagement and thoughts. Entropy looks forward to moving this to a Snapshot vote to obtain clarity on next steps.

4 Likes
18

voting Against: Continue with the MSS on the current offchain vote because the DAO should retain the control over releasing funds, not the Arbitrum Foundation.

1 Like
19

LobbyFi’s rationale on the price and making the voting power available for sale for this proposal:

This proposal is rather of an operational nature, and we cannot identify any individual beneficiaries—so the auction will be made available.

The price will be set at 0.1% of our VP’s worth in ETH terms—2.5 ETH.

20

Camelot supports this proposal to transfer multisig operations to the Arbitrum Foundation and, later if deemed necessary, to OpCo when it becomes operationalized. While there is value in involving the DAO in various functions, multisig management represents the typical task where efficiency and security are the most important features. For this reason, placing these responsibilities in the hands of Arbitrum-aligned entities makes considerable sense: the Foundation’s, having the role of compliance member and having full-time employees that are better trained in OpSec compared to DAO members, and the internal legal capacities, makes them the most suitable interim custodian of these functions.

We also have a general preference for the transactions related to the DAO programs being timely executed. For whoever operated multisigs, is easy to recognize how the current 7/12 or 8/12 threshold is slow and inefficient; but we also can’t realistically go below this threshold in DAO operated multisigs. We realistically see as the only path forward consolidating the functions under Foundation first, and OpCo later.

1 Like