November Voting Updates
Vote: Fund the Coalition
Going forward, large DAOs need to begin hiring professional research and development contractors to equip voters with the information to make informed decisions. Expecting token holders & delegates to over a long period of time and remain consistently up-to-date about proposals is idealistic. Mitigating issues like groupthink is quite difficult and becomes increasingly prominent with technically complex or cumbersome proposals, like the STIP process. Funding well-known groups like Blockworks and Gauntlet to provide data-driven summaries and recommendations is a step towards alleviating voter fatigue/apathy along with groupthink.
The proposal is formatted in a manner that can reasonably prevent concentration of power amongst a small group of service providers. For example, the Advocate will act as the intermediary between the coalition and the DAO, hopefully creating proper checks and balances. We trust that the members that we are electing will act in an unbiased manner and not directionally influence voting decisions. Our previous interactions with the Blockworks and Gauntlet teams is why we can make such a statement.
One of our main concerns, however, is how turnover will be handled between service providers. If a certain SP decides to leave the coalition and they have remaining work to complete, that can become an issue. The departure of an SP that’s had a long tenure is also a friction point. Each new SP will have to go through a slight learning curve to provide services on par with the quality of the previous SP. A good example of this issue can be seen in Aave DAO, in particular with the departure of Llama.
Vote (Ranked Choice Voting):
1. Do not fund staking
2. Fund staking with 100M ARB
3. Fund staking with 125M ARB
4. Fund staking with 150M ARB
5. Fund staking with 175M ARB
Although the premise of this proposal is that it will create long-term ARB token holders, this activity is entirely incentivized by inflation and should therefore be discounted significantly–this is simply how all incentive programs should be viewed, especially this staking initiative. What makes an ecosystem thrive is the quality of the dapps. That’s why we were in favor of the STIP proposal. Driving users to use dapps is a more effective way to distribute treasury funds, as opposed to just paying token holders. Even though the hope is that a handful of the new ARB holders become long-term investors and/or Arbitrum ecosystem participants, stickiness is very difficult to measure. Instead, more sticky demographics should be rewarded, like builders and devoted community members, which is currently being done via the grant and STIP distributions.
Investors should, however, at some point be compensated–but a pure inflation play, without recognizable ARB utility, isn’t the best way to facilitate that goal. Sharing decentralized sequencer revenue with $ARB stakers is much better utility and can be implemented when the time is right. Incentivizing sequencer stakers is real utility, and that’s an example of where the DAO should designate its future incentive allocations.
Plus, the $ARB token will suffer in other ways because of the alluring staking APRs. Who would want to lend $ARB or be a liquidity provider if you can just stake for a better return? If this proposal passes, the DAO should consider ways to prevent an $ARB drain from dapps. This can be addressed, for example, via protocol owned liquidity provision for particular Uniswap pools. As representatives of the Uniswap DAO and delegates in the Arbitrum DAO, we would like to explore this option.
We are concerned about the proposed funding mechanism. We share similar opinions as @pedrob as allocating 2 million dollars to a single auditor could create a monopoly situation, diminishing the incentive for high service standards due to reduced competition and possibly leading to overcharged service fees due to the large subsidy available.
Additionally, the approach suggested concentrates decision-making power, presenting a risk of centralization in the distribution of funds. This could be counterproductive to the decentralized ethos of the ecosystem and crate a lack of checks and balances within this security system.
Possibly, an alternative funding approach suggested in the forums that we’d like to consider more is direct subsidies to protocols that need auditing before deployment on Arbitrum, rather than to a service provider. This would allow for a more equitable and decentralized allocation of funds, ensuring a wide range of protocols can access audit services from a variety of reputable auditors, avoiding the centralization of power and potential service quality issuess.
Overall, we’re happy to see the discussion for the “Consolidate Security Proposals into a RFP Process” arise from this and believe this sets a good standard for votes to come.
This proposal aims to create a structured and transparent approach to selecting auditors and security service providers. This move seeks to replace the current piecemeal method, where individual auditors make separate budget requests, with a comprehensive framework that ensures the community’s due diligence and financial responsibility.
The importance of smart contract security in the Arbitrum ecosystem cannot be overstated, and the proposed RFP structure is intended to attract and fairly compensate top-notch security professionals. This process would be open to all security engineers, researchers, and organizations, ensuring that the selection of service providers is based on merit and qualifications, as well as most importantly, cost-effectiveness.
The criteria for selection would include the experience and qualifications of security professionals, their audit methodology, and competitive pricing. A committee appointed by the Arbitrum DAO would oversee this selection process, reviewing submissions and choosing the most qualified candidates based on these criteria. We are heavily in favor.
Distributing 50M worth of rewards for STIP round one was really based on arbitrary consensus by the DAO. Since nothing of this magnitude has previously been conducted across any DAO, it was difficult to decide how much capital should be allotted to this type of program. We, along with many others, were surprised by the number of proposals. One can argue that the 50M allotment was anticipated for a smaller number of participants, and now, back funding is our way to compensate for the unprecedented number of successful applications.
Another consideration is recognizing that the most well known protocols attracted the most voting power. This is in part due to heuristic voting–people just vote for entities that they’re familiar with. Another factor is network–larger protocols typically have more sway over the decision-making of delegates. Since not all delegates made it a priority to help fund up-and-coming protocols, back funding those smaller projects seems reasonable.
Plus, it’s too soon to conduct a round two of STIPs. The next best step would be to observe and analyze the efficacy of the current STIP round. We don’t want to go through another round of voting so soon for the protocols who didn’t make the cut. Back funding is the less operationally intensive alternative.
Vote: Do Not Fund
We voted against this proposal because general incentive programs initiated by individual protocols are not favorable for the DAO from an organizational perspective. It makes operations more messy. If an individual protocol has a unique contribution to propose–something that goes beyond mere user acquisition via incentive programs–then such a proposal would be intriguing. The reason the STIPs were created was to collectively enable the DAO to choose which protocols should be involved in a large-scale incentive program. Therefore, Rage Trade should have applied for the first round of STIPs. Plus, it’s probably best to ask for incentives when Rage is out of its closed beta phase. Waiting for round 2 of STIPs would therefore be best to re-propose this rebate program.
We also feel that this proposal would be better received if it were created by a collection of perp platforms, not just Rage. This would make it more of a community initiative as opposed to just a Rage Trade initiative (yes, we understand that it’s ideally meant to benefit Arbitrum as a whole, but that means other perp protocols should also be involved in the conversation). It may be wise to talk to the teams at MUX & GMX, for example, and try to co-author such an initiative. Without an inclusive ecosystem buy-in, we feel that this proposal is not as appealing as it could be.
In line with our prior approval, this subsequent next step is in line with our expectations.
This proposed AIP for Arbitrum introduces significant improvements, aligning with the Ethereum Virtual Machine (EVM) Shanghai upgrade and introducing the PUSH0 opcode. This upgrade ensures compatibility with Ethereum’s latest developments, potentially enhancing the efficiency and capabilities of smart contracts on the Arbitrum network. Additionally, the proposal includes miscellaneous bug fixes and technical enhancements, signaling a move towards a more stable and reliable platform. These changes are crucial for maintaining a modern and efficient blockchain infrastructure.
A notable aspect of the proposal is the refinement of fee structures, particularly regarding retryable transactions. The distinction between the network fee account and the infrastructure fee account suggests a more nuanced approach to fee management, which could lead to fairer and more efficient transaction processing. Furthermore, improvements in precompile methods, like preventing certain methods from consuming all gas upon reverting, create better resource management and efficiency. These adjustments are important for both developers and users, as they contribute to a more user-friendly and cost-effective environment.