ArbitrumDAO: History, Lessons & New Vision - Patrick McCorry

Transcript

[Music] Uh, can everyone hear me? Okay, awesome. So, basically, I want to give a bit of an overview of the Arbitum Dow again as history, the lessons we've learned, and hopefully we've put this new vision up and how we can better organize. But before I begin, you know, raise your hand if you've ever interacted with a DA before and did you enjoy that experience? Put your hand up if you enjoyed it. Okay, we got some good I want to get I want to see more hands next time I give this talk and that's part of the new vision of how we could achieve that. So let's dive right in.

History of the arbitrum DAO. So I started at the foundation two years ago. That's when the foundation was born and the DAO was obviously born at the same time and internally we decided not to be an active participant in our DAO and the only active as a facilitator and we had two goals two years ago. The first goal was to encourage contributor leadership. you know, could we get people in the DAO to step up, think of a cool idea, go through the DAO system, get their proposal passed, and then go get paid and kick ass. You know, ideally, anyone here could have done that. And people did do that as we're going to see. And the other part of it was could we create

a contributor playground where people felt safe to do this, give the proposal passed, and then we could help them when needed to make sure their proposal was successful. So that was our goal two years ago and two years later well it's very very active to be honest it's too active there's been over 250 proposals on the form we've had over 360 temperature check votes over 40 proposals or over 70 onchain proposals that people voted on the Dow spent 1 billion ARB and there's been over 10 software upgrades and generally speaking there's about four proposals a week on average that people are voting on. And at the Arbitran

Foundation, we have three people in our governance team. So there's no way we're creating four proposals a week for people to vote on. It's hard for us to keep up, never mind the delegates who have to review these proposals and make a decision and vote on it. So there's a lot of activity. It's not a bad problem to have, but we should probably, you know, work out, you know, how can we reduce that volume? And what has the Dow voted on over time? Here's like a sample of some of their proposals. So they really enjoy incentive grants. You know, I'm a DeFi protocol. I want to get some ARB and then distribute it to my users and incentivize growth. They have bootstrapped companies like the gaming catalyst program, Entropy Advisors, OPCO, and even Plur Labs. We'll talk about that soon. They funded audits for

projects. They have their own grant program. So if you want to run an event, you can get, you know, funding for your event, protocol ideas, tooling, gaming. They have funded cryptoleal defense. very relevant to the previous talk. They've obviously voted on software upgrades, real world assets. The DAO now owns T bills. That's pretty cool across a range of providers, developer funding, and of course, they funded their own community events. And generally every week there's a handful of governance calls. So this is a screenshot I took last year where the DAO was discussing the fund the stylist sprint aka funding for developers and there's about 47 people

in the call talking about how we can fund developers. So I think that's really cool actually. You know it's random people on the internet getting involved in how we fund developers in arbitum. So I think that's really cool and exciting and generally speaking a lot of these calls do get 50 70 20 you know it rains depending on the topic and the DAO is also real you know they're real people out there that do get involved we had a governance hackathon last year organized by hack humanity we've had delegate days where people with voting power come together and we discuss issues this is like sometime last year our our discourse forum it's just very active to be honest there's too any posts at this point. We need less posts. And the judges for that

hackathon, there are people from the community. It wasn't anyone from the AF or offchain labs judging their governance proposal. It's people from the community judging those proposals. And with every proposal, well, you need someone to execute on it. And I think our Dell has too many elections. Uh they typically have an election. They hire people to then, you know, execute on the proposal. So we have a growth management committee, events committee, multiig service, incentive grant committee, real world asset program manager, procurement committee. There's a lot of elections out there and a lot of paid opportunities for people to get involved. So the arbitum dow is alive and well. It's been a crazy two years.

I've got a lot more gray hair than I did two years ago, but it's been a fun experiment to do it. But with everything that's good, there's also problems, which is what I want to talk about and hopefully how we can fix those problems going forward. So the first one is talent acquisition and the adverse selection agency problem. People love to throw this term around for Dows, but what does this mean? So in January 2024, I was at home reading some DAO proposals and I could see lots of different opportunities. You know, you could get paid $20,000 to do A, $30,000 to do B, maybe $40,000, you work for three months as part of the DAO. So, if I was to ask

people here, if there was like a opportunity, they earned $20,000, would you want to get involved? Raise your hand. Who would like to earn 20K? Of course, I want to earn 20K. You know, that that'd be great, isn't it? But what's stopping people? You know, all these opportunities exist, but we don't have 100 applicants for the role. why aren't people applying for this? So I asked on Twitter and of course in Twitter everyone has an opinion don't they? So it's great uh and here are some general comments people left on the thread but to summarize it a lot of us to do a politics the messy's form and opportunity cost and so I don't expect people to read this so I summarize the comments the first commenter said potty why would I spend three months working

in the DAO to get a one-time gig where I get paid slightly more than my salary no thank you someone else said uh well potty The Dow is full of politics. I don't want to beg for a job. No, thank you. And the last commenter said, "Well, Patty, there's a learning curve. The form's scary. Dows are generally quite toxic. Why do I want to get involved in that?" And actually, the arbitum dow is very polite. It's not toxic at all, but we got to, you know, change how people perceive Dows and how they can get involved in that. But they're all great comments. So, what are the insights? The insight number one is not everyone wants to interact with the DAO and that's okay. Our job should be try to find the best people to execute a proposal and

get them on boarded but they don't have to talk to the DAO. They're just working for the DAO and carrying it out and that's okay. The second one is we really need to have proper recruitment processes as in there should be a job description. We should advertise that. We should have like, you know, 20 applicants. We should screen them, shortlist them, interview them, hire someone. People like processes where they can just apply for something and it's really easy. And it really sounds obvious when you say that as well. And what we should also work on is trying to get more full-time organizations over part-time workers. As in, if you want to get great people working for your DAO, they want job security and they want to work as part of a team. You need an organization

to do that who can hire these people and bring them on board. The second problem is that proposals are typically focused on operational details and not strategy. So what do I mean by this? I see someone laughing in the audience because they're probably familiar with this. A lot of proposals, they tend to look like a cooking recipe. Here's the ingredients. Here's the instructions and how to do it. And then in the end, I get a cake and you're going to pay me x amount to do that. Now the problem with this is that let's say Bob comes along. We all like Bob. Bob works on a proposal. He works throughout the DAO process. Two months later the DA votes for the proposal and he gets funded. Now Bob's ready to do work. And Bob's like, "Oh,

actually Patty or not not Patty, sorry. Bob started has got Bob has started doing work and he's realized, oh, I've made a mistake in the proposal. there's actually a better way to do this that could be cheaper and lead to a better outcome. So then Bob will contact the AF and Bob will say I need to pivot how that proposal is carried out. We could have a better outcome if I do this. And so at the AF what we do is well we read the proposal and we read what he wants to do and unfortunately we have to say to the guy you promised that Dell you would do exactly XYZ because you wrote a set of instructions. If you want to change how you're going to do it, well, you're going to have to go back to the DAO and get their approval. And that's

going to take another month. And when it takes a month to do anything, well, you're just going to get a face pal, aren't you? It's like, gh, that's a pain in the ass. And in the end, Bob doesn't go back to the DAO. He sticks to the original approach and it sucked for everyone involved. So, what are the insights? A lot of the time proposals have these explicit instructions and it's sort of like a way for the DAO to safeguard itself. You know, it's it's basically saying, well, you're going to do XYZ. We're going to pay you exactly this and we can hold you accountable to that. So, they're trying to safeguard and make it more accountable to the author. Another problem is it's not like

you can't see the forest for the trees. It's very easy to write comments on operational details. It's much harder to create proposals that focus on strategy and then comment on that and obviously modify it towards something of a bigger bigger picture. And finally, service providers like to sell their services to Dows. If I'm a service provider, well, what I'm going to do is I'll create a proposal, submit it to the DAO, make it very specific, so only I can carry this out and no one else can. So that's why it's very specific, operationally focused. And we need to get away from this. This drives me crazy. You know, it's been two years now and I still like this. We need to change proposals to focus on strategy. You know, a bigger

picture where you don't necessarily have all the details, but you do have a OKRs, you have KPIs, you have a goal of what you want to achieve and you leave it up to the team to work out how are we going to do this. Another problem is negotiations are awkward and actually the DAO often lacks the upper hand in negotiations. So the first example is the following. You know, it's difficult to navigate DAO politics. So let's say Bob comes along and Bob submits a proposal to the DAO. One week later, Bob's going to have 30 different comments on his proposal from 30 different people. One person might say, "Oh, Bob, you should target a different user profile. That's the wrong

user profile." Another commenter may say, "Bob, I only offer the same service to the DAO. I'm your competitor. So, let's create a framework and we could both get money from the DAO." Or the third person might say, "Hm, there's no DAO participation in this proposal. How are you going to involve us in doing it?" And so, in the end, the author's like, "Well, there's 30 different comments. I can't rectify them all." And so even well-intentioned proposals just die off because this is way too difficult to navigate. The flip side is Bob may get really angry and say, "You know what? I'm dumb of this, dumb of the DA politics. Either you pay me $500,000 and I do this or I walk away." And then

the Dow has another problem. and they're like, "Oh, actually, we want this to happen, but Bob's charging way too much money for this, but we don't pay him $500,000, then he's not going to do it." And so, in the end, delegates may end up voting for the proposal because they want something to happen. They want to make some movement, even if they overpay for the proposal itself. And so, what are the insights here? One, if the DAO is going to pay a service provider, they should be milestone based. They should not be based on retainers. You know, we shouldn't be paying service providers a monthly statement just for being around because then their financial incentive is well if I get paid every month that's partially complete the work then go back

to the DAO for more funding. What we should care about are milestones and outcomes not retainers. The next one is there's no single party to negotiate with. You know server providers have to negotiate with 30 people in a DAO. That's sucks for everyone involved. And finally, and this is a few other speakers mentioned this problem, so I'm glad I'm not the only one that bring it up, but there's no direct consequence for delegates to overpay a service provider. What do I mean by that? Well, if I pay you an extra 30k or $50, well, it doesn't cost a delegate any money. It just comes out of the treasury. But the arbitrum da was given 30 3.5 billion ARB. So, their treasury is huge. So,

there's no direct consequence. they actually overpaying right now and we should try to figure out ways to fix this because the incentives clearly aren't aligned. And finally, part-time workers running multi-million dollar initiatives. So, as I mentioned at the start of the talk, our goal was let's get people stepping up and running initiatives. And it's been fun watching people do it. It's, you know, there've been great successes and of course some failures as well. And what are the problems that pop up? Well, first, every proposal with a different contributor has a bespoke process. So, it's a bit confusing on how to even interact with it. Contributors might make decisions

that are a bit weird because they're missing context. You know, maybe they're making a decision about business development, but actually they haven't spoken to a BD team about it. Contributors tend to have a full-time job, and the Dow work is like a side gig. So, if their full-time job gets busy, well, the Dow work sort of falls behind and they don't work on it. And more often than not, they've underestimated the workload and the Dow's actually underpaying them for it as well. And that obviously demoralizes them to do the work. And it sounds a bit obvious to say this now, but it's probably not fair to ask part-time workers to, you know, take on the full responsibility to run multi-million dollar programs. You know, sounds a bit obvious to say that out loud.

So, how do we fix this? How do we better organize ourselves not to have these problems? So, what's this new vision for the arbitum dow? The new vision is posted on the form uh is a northstar. It's a goal. It's something we want to achieve, but it's only going to work if people are bought into the idea. So vision number one and the best way to think of this is earlier this year we took a step back and we looked at our DAO and we're like what is the current state of our DAO and what can we take advantage of and actually arbitum is really lucky to have several organizations who actually care about success there's the arbitum foundation

where I work you know that's for they focus we focus on ecosystem growth we have offchain labs their engineering product technical research. We have the gaming gaming catalyst program. They focus on gaming investments and grants. And we have NRP advisers who work on strategic proposals, Dow financials, and obviously uh actually their data analytics is amazing. They're June wizards. I love it. And now we have the OPC code that's being formed. And the OPC code is basically how does a DAO create its own foundation, its own operations company where its only mandate is supporting the DAO. that's currently being stowed up now. But what's also really cool about these orgs is three of them organically came

from the DAO itself. So OPCO was an idea by a guy called DK. The gaming countless program is two guys called Don and Rick. They came from the DAO. I didn't know about them prior to the DAO. And then Enterprises is M and Sam. They're quite interesting because they worked at Block Works. They were one of our delegates. They decided to quit their full-time job, get funding from the Dow, and I think they got I think it was like 1.6 million USD for a year to fund seven people. Uh so they quit their full-time job, got funding from the DAO, and now they're working for the DAO full-time. That's crazy. You know, how many people are willing to quit their job to go work for a DAO? I love it. And this organically came from the DAO and it's independent of us. You know,

they've never worked at OFT Labs or the Arbitrum Foundation. And so a big part of this is if we have these orgs, why don't we get these guys to do the work and then involve people when needed. So the next part is DA proposals need to focus on strategy and actually get endorsement from an arbitr entity aka one of these companies. So how does that work? Well, let's say we do have a proposal. What should happen is the opco will take this proposal and review it or maybe they created the proposal and so the opco should act as a coordinator in this world and the opco will say okay given this proposal who is the best entity or

organization to take this on and so they'll obviously look at offchain labs af GCP entropy and maybe other entities that form over time and in this example opco decides oh given this proposal It actually fits the arbitran foundation's mandate, you know, ecosystem growth. So, AF, do you guys want to take this on? Do you think this is a good idea? And we might like the idea. We might re read the proposal and say, "Oh, this is a great idea. Probably need some tweaks, but we'll take it on. Let's go through the DAO process, get the funding, and execute it." Or we might say, "We don't think this is a good idea. We don't recommend the DAO goes forward

with it, but here's our rational why, like why we don't think it's a good idea. The third part of the vision is these organizations should really own the initiative and onboard server providers and computer contributors when needed. So what do I mean by this? We really need to stop service providers lobbying the DAO. We've been doing this for two years and I mean service providers don't like it. the Dow politics is confusing. They really need to, you know, negotiate with a single counterparty aka one of these orgs. So, and also lobbying, people tend to think of lobbying as a bad thing.

Lobbying is really useful. Lobbying is a tool for teaching someone why your service is useful. So, if they can lobby us, then we can understand why their service is useful and then work out, okay, does this fit as part of a wider strategy? If it does, we work on the strategy. we get it through the DAO and then we try to pick the best vendors for that job. So lobbying is really useful even though a lot of people don't like to do it. And we've sort of tried we've started this process now with one of the recent proposals. If you I don't know if you're a project or not but we have the arbitum audit program. If you're an audit firm you can apply. We will interview you, perform our due diligence and then whitelist you. Or we're also currently looking for a

contributor to join our committee. It'll be a committee of three to four people. It's a part-time role. I think they'll get $60,000 for a year. It's like one to two days work a week. Um, we created a formal JD. We broadcasted it. I think we've had like 30 applicants so far. We're currently screening them, shortlisting them, interviewing them, and hopefully one person will be picked. So, that's much better now compared to, you know, the applicants we got in the past. But most importantly, all server providers and contributors should have an SLA with the AE with us. So it's that if let's say the service provider doesn't live up to their expectations, you know, we can just terminate the contract and pick another one. You know, we don't have to go through a Dow process for two to

three months to get the next service provider. And also that means they're accountable to us, which actually ser providers really like. And finally, this vision doesn't work if we can't make the life of a delegate easier while making sure they retain control and power in the DAO. as the first I think it was the first set talk of the session the big part of the DAO is control and we got to guarantee that the delegates retain control but we make their life easier at the same time and there's two ways we're going to try to do this is one we're going to try to be more active in the DAO we're going to give feedback on proposals and whether we like the proposal aka should it be approved or should it be rejected

delegates can take our feedback on board they might agree with us maybe we don't like the proposal they reject But it also allows delegates to go over our head. You know, if they don't agree with us, well, they can still vote for it anyway. But aka we're going to be more actively involved. But really, proposals should be bigger and there should be less proposals. Four proposals a week, it's a bit like a denial of service attack. Like trying to review four proposals a week is crazy. Uh you want like one proposal a week, but it's much bigger in scale and impact. And so delegates have much more time. they actually review the proposal and have an idea of what's going on and also have a dedicated team actually running the proposal. And so that's it. Um, if this works, delegates will have more

impactful work. Orgs will make sure proposals are successful and contributors can be recruited to help out and actually work with a dedicated team so they can help out, but they're not responsible for a multi-million dollar program. And hopefully I used GDP, you know, join the arbitum farm. didn't do a very good job with the logo, but that's life, isn't it? Uh, thank you guys for listening and if you have any questions, I'm happy to answer them. Oh, thanks. Uh, Hackin here, part of ADPC security panel, first cohort. Um, I'm glad to see that a lot of delegates

motivation has been seemingly addressed. I know you guys worked with Aretta. Yep. Are they part of uh EA Aretta or it's on? No, AR is an investment bank. So they work with many Dows. They work with Polygon, Arbitum etc. to be an arbitral aligned entity. The main goal is know your core mandate should be arbitum succeedings. You I don't want to say exclusive but generally speaking your only goal is arbitrum succeeds. Okay, that was a side question. Main question is um how would you object a statement that basically governance voting is just um way to fixate the decision on chain

whereas most of decision is happening before the onchain voting. Yeah, I mean that that should be the case if you think about it. You know, the proposal process takes about four weeks. You put it on the form, there's a week discussion at least. You put it on Snapchat for a oneweek vote and then you put it on tally and that takes about two weeks for the vote. And so throughout that process, the author should be trying to temperature check with everyone to say, "Oh, do you like this idea? Does something be modified?" And trying to get everyone's buy in before you go to that final vote. you go to the vote and you know it's going to fail then there's there's just no point for the vote. Um, but one goal now in the new vision should be the typical author should be hopefully like an AE or

someone familiar with the DAO and it shouldn't be a server provider who's coming in and trying to sell their service and then obviously being oh this is crazy what's going on here you know be much more like familiar parties doing that process and making it easier for other people as in they can get the benefits without being stressed out by it. Thank you. Cool. And then I think that one. Yes. I would like to know what do you think is the main downside of this new model compared to the legacy model? You mean the new one? The main downside.

I'm sure it has downsides. I think the main downside I'm worried about is um what's good about the old model was you got lots of wacky proposals where sometimes you're like, "Oh, that's actually quite interesting." You know, it's very good for generating ideas. Although there were a lot of ideas where in the new model my only fear is we might discourage that spontaneous wackiness towards new ideas because people will be like oh I need to get approval from someone or at least endorsement before putting this to the DAO. And so we still need to find this compromise where you know we can still have the wacky ideas pop up and be like oh that's actually like a diamond in the rough versus just like not having that.

So that's my biggest fear. Yeah. Hi, thanks for the presentation. My name is Andre. I wonder if you thought about uh such questions like accountability of this u structures that you presented like did you try to communicate clearly that this is will be reelected these parties maybe periodically like uh in democratic governance systems. Yeah. Well, maybe for accountability, so I didn't present it here, but a big part of the OPCO is that the OPCO has an oversight committee called the OAT.

They're directly elected by the DAO. And so every proposal now that gets passed by the DAO, the OAT will be a default oversight committee for that proposal. So their job will be if a proposal is passed by the DAO, whoever's running that proposal, we should, you know, keep a tab on them to make sure they're actually doing the work. And then the proposal author if they have to hire a service provider well they have an SLA to hold that service provider accountable. So actually I didn't mention it here but a big part of the opco is accountability to make sure that if you are doing something for the DAO there's a default oversight committee you can always we will always oversee your work to make sure you're actually doing what you promise the DAO.

Okay, thank you. But I also meant the accountability of these committees like um are you going to reelect the new providers or the new members of these committees periodically? What was it? Sorry, reelect new members of the committees like you have entropy advisors for example. Do you envision that there will be some periodic process? So where you make a competition between selecting a new so are we going to reelect the committees that are currently exist? Um I think there's two sides to it. One is obviously the opco the oat should always be reelected every year. I think a lot of the committees should uh be absorbed by these AEES. So one example is like the multisig service committee where they

run all the multisigs that should eventually be under the UPCO who then has a professional team that does finances. So some committees may still exist but I think a lot of them will just be absorbed over time. If that's what you mean I think that was the question. Cool. Then is there time for one more or I don't know what the time's like. Yeah, maybe one more question. Correct. Uh how the new way would help you to solve the overpaying problem so you not overpay the service providers?

How are you going to solve that problem? Yeah. Yeah. With the new way of organizing things. Yeah. And this is what I meant by that like when you're a service provider and you go to the DAO you have a lot more leverage to you know quote your price and the problem is delegates don't really understand the you know what is the fair market price for that service because maybe they've never [Music] negotiates may not be aware of what the current rates on the market are for that type of service. So we're hoping that if as a dedicated organization, you know, at the AF, a big part of our job is just to negotiate with people all the time.

So you get a rough idea on how what a service should roughly cost relative to what the Dow would know. So hopefully having a single counterparty can help better with price discovery. You know, we can actually go back and forth in the negotiation and the terms. Okay. So you just want your uh aligned entities to be involved in the negotiation, not like some random delegates. So it is the answer. Yes. I didn't I didn't understand. So basically your idea that there your stakeholders will be more involved in the negotiations. So they would like protect your interest like long term. Yes. So not Yeah. Exactly.

Yeah. We're going to be much more involved in those negotiations basically. And so far every time we tell the server providers about it, they like it because they're like, "Oh, we actually have someone to be accountable to." Um Yeah. Thanks. So, the next speaker couldn't make it, so we now have a 30-minut break and we start at uh 2 p.m. sharp. Thank you. Awesome. GG. [Music]