Strategic Treasury Management on Arbitrum

Description

Abstract

The following proposal evaluates the consensus in the DAO to begin implementing the Arbitrum Strategic Treasury Management Group (ASTMG).

With DAO support, the ASTMG will be allocated 250M ARB to be managed by karpatkey to achieve long-term sustainability of the Arbitrum DAO and foster Ecosystem growth through transparent and accountable treasury management practices. All funds will be managed using the non-custodial tooling of Zodiac Modules and Aera Vaults. This tooling permits the DAO to retain oversight and ownership of the funds at all times while only allowing specific strategies to be employed by the ASTMG. The costs incurred from this initiative are a 1% management fee on the AUM of the ASTMG and a $180k ARB annual budget to support the DAO Oversight Committee.

Key outcomes supported by voting favourably on this proposal are:

1. Supporting the allocation of 250 million ARB towards the ASTMG managed by karpatkey.
2. The DAO Oversight Committee will be established to serve as the accountability and communication layer between the Arbitrum DAO and the ASTMG.

Full Proposal Description

Please review the proposal forum post for a full proposal description: https://forum.arbitrum.foundation/t/strategic-treasury-management-on-arbitrum/25301

Motivation

Arbitrum has 3rd largest treasury of any DAO, but the treasury is unutilised mainly, posing threats to the sustainability and efficient resource allocation of the DAO. Effective treasury management will help the Arbitrum DAO achieve the following three goals:

1. Ensuring long-term sustainability: treasury should be able to support ecosystem efforts throughout market cycles; in the long run, DAO should be a self-sustaining vehicle, with expenses covered by yield generated from Treasury, without having to materially compromise on Treasury principal.
2. Fostering ecosystem growth: treasury should be used to foster a vibrant community of users and builders. The DAO should utilise strategies such as protocol-owned liquidity to support sustainable liquidity across the ecosystem.
3. Transparency and accountability: treasury should be expertly managed, and uses of the treasury should be transparent and held accountable to the DAO

Rationale

The ASTMG's overarching objective is to act as the asset allocator for the Arbitrum ecosystem to ensure effective treasury management. This is the crucial first step to ensuring the DAO's sustainability.

Specifications

Three main areas of priority for ASTMG would be:

1. Ecosystem alignment and growth. Bolster ecosystem growth by utilising Arbitrum's treasury via protocol-owned liquidity (POL) and allow ecosystem grant recipients a swap program to convert ARB into other assets (stables or ETH).
2. Fortress balance sheet. Diversify Arbitrum treasury to build strong runways and resiliency to market downturns by reducing long-tail asset exposure, and ensuring 1-year financial runway.
3. Sustainability. Generating sustainable yields to fund the DAO's operations.

The priorities would result in the following deliverables:

• Yield Optimisation Program: to generate sustainable yields to fund the DAO's operations in a non-custodial and risk-minimised manner.
• DAO Owned Liquidity Program: to expand ecosystem liquidity, attract builders to Arbitrum, and deepen ARB on-chain liquidity. Treasury Swaps Program: execute swaps with partner DAO treasuries with guidance from the DAO Oversight Committee.
• Treasury Diversification Program: to reduce long-tail asset exposure and capital raising.

The DAO Oversight Committee will serve as a layer of checks & balances between the ASTMG and the DAO and will be responsible for:

1. Setting of treasury management mandate and guardrails together with ASTMG.
2. Ensuring accuracy of reporting and compliance with the mandate.
3. Acting as DAO Liaison.

Further details on platforms and technologies and the design of the ASTMG can be seen in the full forum post.

Steps & Timeline

The proposers (karpatkey, Gauntlet) have engaged in extensive discussions with the ArbitrumDAO community. Following the approval of this Snapshot, this proposal will progress to on-chain voting via Tally. It will incorporate feedback received and provide a more in-depth explanation of the execution as needed.

Overall Cost

• Program Size: 250M ARB
• Fees for ASTMG: 1% management fee (on AUM) to karpatkey, no performance fee.
• Operating budget for DAO Oversight Committee: $180k in ARB per year (12 months * $5,000 per month * 3 members), representing <0.15% of program size* (at $ARB = $0.65).