TL;DR
What this proposal does:
What this proposal does NOT do:
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This pilot is designed to give the DAO sufficient information to make an informed decision regarding borrowing stablecoins against assets in the treasury, and the confidence to use our proposed solution safely.
The Arbitrum community is seeking ways to more efficiently and effectively use the capital in the treasury. The strategies for grant programs, Mergers and Acquisitions, long term investments, and treasury sustainability seek sustainable solutions that minimize required sell pressure on the ARB token.
The treasury currently has about $3.8B USD worth of ARB tokens. Long term diversification of this is key, but the community also needs access to capital now for grants, treasury management, M&A, and more. Developing an alternative strategy for accessing stablecoins gives Arbitrum DAO more options and power.
CDP - Collateralized Debt Position. A type of financial primitive used by protocol like Maker, Open Dollar, Reflexer, etc.. Collateral backs stablecoins with required loan to value ratios.
Liquidation - an event which happens when the value of collateral backing a loan is less than the value of the loan, or below a required threshold. This forces the collateral to be sold in order to pay back the debt.
The DAO should have the option to borrow stablecoins against its ARB and other future assets. However, using traditionally structured lending protocols creates too much risk of liquidation. Our proposed solution is a Treasury Backed Vault that severely limits the liquidation risks and lets the community achieve its goals with open access to its capital.
Liquidations are mitigated by a “savior module” connected to a CDP position. The savior module adds an additional step between a vault being marked for liquidation and becoming liquidated. The module automatically pulls more ARB tokens directly from the DAO treasury (or elsewhere), adds them to the collateral of the position until it is raised above the liquidation threshold, and completely prevents liquidations from occurring. Any time liquidation on the DAO’s position is called, the savior activates first. The module contract would be given an allowance of ARB tokens by the Treasury to spend, allowing the Arbitrum DAO to completely control and at any time update the bounds of how many tokens can be pulled from the treasury.
Example usage of Treasury Backed Vaults:
The implementation is essentially split into 4 phases
A team of 3 solidity developers design, build, and document Treasury Backed Vaults with support for Arbitrum DAO specifically in mind.
A team of 2 financial analysts complete a report on suggested parameters and the greater ecosystem impact of different borrowing scenarios for Arbitrum DAO. This will come with many helpful recommendations that future delegates can lean on to make proposals to use the vaults how they choose.
A public audit contest will be conducted and managed by our team to review the security of the smart contracts of the TBV. This is important to complete at this stage because we want the DAO to be able to feel confident in the readiness of the system. A formal security report will be published and summarized in a post to the DAO. Audit reward recipients will be required to complete compliance and KYC before receiving funds.
At the end of the pilot a report will be made to the DAO that includes results of the security audit, documentation on using TBVs, and results of the risk analysis. The report will include recommendations like how much ARB should be allowed to be pulled by a TBV to limit risk, how many stablecoins could safely be borrowed at a time if the DAO should choose to use the TBVs, how much sell pressure on ARB could be avoided in different scenarios, suggested collateralization settings, and other parameters for real usage.
Overall time to project completion: ~2.5 months
Research and Development, done asynchronous with risk analysis reporting: 1.5 months
Security audit and reporting: 2 weeks
Complete report for the DAO and documentation on usage: 2 weeks
Research and development will be completed by a designated team made up on contributors to Open Dollar and led specifically by CupOjoseph & Pi0neerpat. Open Dollar is the largest Arbitrum native stablecoin protocol by TVL. We will also oversee the third party audit of the code that is developed, and personally present the risk analysis (including recommendations) to the DAO at the end of the pilot.
Total cost: 250,000 ARB
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Remaining or unspent funds will be returned to the DAO treasury promptly.
Thank you!! Please support our proposal, we think this could be a huge unlock for the DAO and a powerful tool to add to the community’s toolbox. We appreciate any further feedback on and off the forum on this proposal and the Treasury Backed Vaults concept overall.
Treasury Backed Vaults Overview from Open Dollar
Original DAO Owned Liquidations post
Arbitrum Treasury Sustainability Group discussion on DAO Owned Liquidations
Existing proof of concept implementation. That's right, we already started building. :sunglasses:
EDIT: Based on the feedback so far we will publish this week a list of specific research and modeling questions that should be answered in the risk analysis report.
A list of topics, as requested by the community, that will be covered in the report. Each will have a model of different scenarios and specific recommendations to take on short, medium, and long term time horizons.
TL;DR
What this proposal does:
What this proposal does NOT do:
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This pilot is designed to give the DAO sufficient information to make an informed decision regarding borrowing stablecoins against assets in the treasury, and the confidence to use our proposed solution safely.
The Arbitrum community is seeking ways to more efficiently and effectively use the capital in the treasury. The strategies for grant programs, Mergers and Acquisitions, long term investments, and treasury sustainability seek sustainable solutions that minimize required sell pressure on the ARB token.
The treasury currently has about $3.8B USD worth of ARB tokens. Long term diversification of this is key, but the community also needs access to capital now for grants, treasury management, M&A, and more. Developing an alternative strategy for accessing stablecoins gives Arbitrum DAO more options and power.
CDP - Collateralized Debt Position. A type of financial primitive used by protocol like Maker, Open Dollar, Reflexer, etc.. Collateral backs stablecoins with required loan to value ratios.
Liquidation - an event which happens when the value of collateral backing a loan is less than the value of the loan, or below a required threshold. This forces the collateral to be sold in order to pay back the debt.
The DAO should have the option to borrow stablecoins against its ARB and other future assets. However, using traditionally structured lending protocols creates too much risk of liquidation. Our proposed solution is a Treasury Backed Vault that severely limits the liquidation risks and lets the community achieve its goals with open access to its capital.
Liquidations are mitigated by a “savior module” connected to a CDP position. The savior module adds an additional step between a vault being marked for liquidation and becoming liquidated. The module automatically pulls more ARB tokens directly from the DAO treasury (or elsewhere), adds them to the collateral of the position until it is raised above the liquidation threshold, and completely prevents liquidations from occurring. Any time liquidation on the DAO’s position is called, the savior activates first. The module contract would be given an allowance of ARB tokens by the Treasury to spend, allowing the Arbitrum DAO to completely control and at any time update the bounds of how many tokens can be pulled from the treasury.
Example usage of Treasury Backed Vaults:
The implementation is essentially split into 4 phases
A team of 3 solidity developers design, build, and document Treasury Backed Vaults with support for Arbitrum DAO specifically in mind.
A team of 2 financial analysts complete a report on suggested parameters and the greater ecosystem impact of different borrowing scenarios for Arbitrum DAO. This will come with many helpful recommendations that future delegates can lean on to make proposals to use the vaults how they choose.
A public audit contest will be conducted and managed by our team to review the security of the smart contracts of the TBV. This is important to complete at this stage because we want the DAO to be able to feel confident in the readiness of the system. A formal security report will be published and summarized in a post to the DAO. Audit reward recipients will be required to complete compliance and KYC before receiving funds.
At the end of the pilot a report will be made to the DAO that includes results of the security audit, documentation on using TBVs, and results of the risk analysis. The report will include recommendations like how much ARB should be allowed to be pulled by a TBV to limit risk, how many stablecoins could safely be borrowed at a time if the DAO should choose to use the TBVs, how much sell pressure on ARB could be avoided in different scenarios, suggested collateralization settings, and other parameters for real usage.
Overall time to project completion: ~2.5 months
Research and Development, done asynchronous with risk analysis reporting: 1.5 months
Security audit and reporting: 2 weeks
Complete report for the DAO and documentation on usage: 2 weeks
Research and development will be completed by a designated team made up on contributors to Open Dollar and led specifically by CupOjoseph & Pi0neerpat. Open Dollar is the largest Arbitrum native stablecoin protocol by TVL. We will also oversee the third party audit of the code that is developed, and personally present the risk analysis (including recommendations) to the DAO at the end of the pilot.
Total cost: 250,000 ARB
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Remaining or unspent funds will be returned to the DAO treasury promptly.
Thank you!! Please support our proposal, we think this could be a huge unlock for the DAO and a powerful tool to add to the community’s toolbox. We appreciate any further feedback on and off the forum on this proposal and the Treasury Backed Vaults concept overall.
Treasury Backed Vaults Overview from Open Dollar
Original DAO Owned Liquidations post
Arbitrum Treasury Sustainability Group discussion on DAO Owned Liquidations
Existing proof of concept implementation. That's right, we already started building. :sunglasses:
EDIT: Based on the feedback so far we will publish this week a list of specific research and modeling questions that should be answered in the risk analysis report.
A list of topics, as requested by the community, that will be covered in the report. Each will have a model of different scenarios and specific recommendations to take on short, medium, and long term time horizons.
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/62?u=tane
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/61?u=blockworksrese
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/62?u=tane
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/61?u=blockworksrese
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/59
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/58?u=griff
https://forum.arbitrum.foundation/t/savvy-dao-delegate-communication-thread/21266/49?u=savvydao
we are not in support of this proposal
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/57?u=maxlomu
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/54
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/53?u=ocandocrypto
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/50?u=jojo
https://forum.arbitrum.foundation/t/ultra-delegate-communication-thread/24425/16?u=0x_ultra
https://forum.arbitrum.foundation/t/dao-owned-liquidations-using-collaterized-debt-positions/21109/3?u=larva
Even though this could be a good idea, we don't feel comfortable voting in favor without a proper risk assessment
This direction of exploration is currently meaningless, focusing on ecological investment is more meaningful.
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/39?u=mcfly
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/38?u=bruce
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/59
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/58?u=griff
https://forum.arbitrum.foundation/t/savvy-dao-delegate-communication-thread/21266/49?u=savvydao
we are not in support of this proposal
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/57?u=maxlomu
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/54
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/53?u=ocandocrypto
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/50?u=jojo
https://forum.arbitrum.foundation/t/ultra-delegate-communication-thread/24425/16?u=0x_ultra
https://forum.arbitrum.foundation/t/dao-owned-liquidations-using-collaterized-debt-positions/21109/3?u=larva
Even though this could be a good idea, we don't feel comfortable voting in favor without a proper risk assessment
This direction of exploration is currently meaningless, focusing on ecological investment is more meaningful.
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/39?u=mcfly
https://forum.arbitrum.foundation/t/non-constitutional-pilot-stage-treasury-backed-vaults-research-and-development/24692/38?u=bruce
I think this is an interesting idea. A couple questions that come to mind are:
I think this is an interesting idea. A couple questions that come to mind are:
Savior module sounds great from the arb treasury standpoint, but it could potentially have LUNA like symptoms due if $ARB were to become extremely volatile.
This is an interesting proposal that may solve some important problems. I am especially enthused by the saviour module.
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be? Grant recipients (that is the primary demographic here, correct?) will need to cover operating costs and will have to swap into assets that can be offboarded from DeFi.
This is an interesting proposal that may solve some important problems. I am especially enthused by the saviour module.
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be? Grant recipients (that is the primary demographic here, correct?) will need to cover operating costs and will have to swap into assets that can be offboarded from DeFi.
GHO experienced difficulty with its peg and has settled at $1 after Aave DAO directed significant resources at it. It is indicative of the complexity synthetic stablecoins face that this new treasury backed stablecoin would potentially deal with.
I think this is an interesting idea. A couple questions that come to mind are:
I think this is an interesting idea. A couple questions that come to mind are:
Savior module sounds great from the arb treasury standpoint, but it could potentially have LUNA like symptoms due if $ARB were to become extremely volatile.
This is an interesting proposal that may solve some important problems. I am especially enthused by the saviour module.
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be? Grant recipients (that is the primary demographic here, correct?) will need to cover operating costs and will have to swap into assets that can be offboarded from DeFi.
This is an interesting proposal that may solve some important problems. I am especially enthused by the saviour module.
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be? Grant recipients (that is the primary demographic here, correct?) will need to cover operating costs and will have to swap into assets that can be offboarded from DeFi.
GHO experienced difficulty with its peg and has settled at $1 after Aave DAO directed significant resources at it. It is indicative of the complexity synthetic stablecoins face that this new treasury backed stablecoin would potentially deal with.
Feedback on proposal from Savvy DAO.
This proposal for Treasury Backed Vaults (TBV) shows promise in enhancing DAO capital management. To add some feedback on it for improvements there should be more clarity integration with existing DAO strategies like grants, highlight use cases, and detail security measures and contingency plans for market conditions. More community engagement and transparency in refining these aspects would maximize impact and adoption within the DAO ecosystem.
Feedback on proposal from Savvy DAO.
This proposal for Treasury Backed Vaults (TBV) shows promise in enhancing DAO capital management. To add some feedback on it for improvements there should be more clarity integration with existing DAO strategies like grants, highlight use cases, and detail security measures and contingency plans for market conditions. More community engagement and transparency in refining these aspects would maximize impact and adoption within the DAO ecosystem.
Linking voting rationale here for ease: https://forum.arbitrum.foundation/t/savvy-dao-delegate-communication-thread/21266/49?u=savvydao
Below are the opinions of the UADP:
We voted against this proposal since more thought needs to be put behind the collateralization of native tokens directly from the DAO’s treasury. This is especially the case when the native token is incredibly volatile and subject to severe downside beta. Recent approvals of initiatives that have the potential of largely suppressing ARB price furthers this concern. The dormant, unissued ARB tokens in the treasury are effectively acting as a way to bail out the given loans in the event of a downward spiral. Of course this depends on how much ARB is placed in the savior module. I’d assume it’s relatively high since the DAO doesn’t want to face a liquidation and would rather bear the brunt of fronting more and more capital in the short term. An infinite line of credit, ie the treasury, tends to blind us from the risks--until the LOI begins to run dry. This is a dangerous setup. Hence, from a risk-adjusted perspective, we don’t believe that moving forward with this proposal is prudent.
Below are the opinions of the UADP:
We voted against this proposal since more thought needs to be put behind the collateralization of native tokens directly from the DAO’s treasury. This is especially the case when the native token is incredibly volatile and subject to severe downside beta. Recent approvals of initiatives that have the potential of largely suppressing ARB price furthers this concern. The dormant, unissued ARB tokens in the treasury are effectively acting as a way to bail out the given loans in the event of a downward spiral. Of course this depends on how much ARB is placed in the savior module. I’d assume it’s relatively high since the DAO doesn’t want to face a liquidation and would rather bear the brunt of fronting more and more capital in the short term. An infinite line of credit, ie the treasury, tends to blind us from the risks--until the LOI begins to run dry. This is a dangerous setup. Hence, from a risk-adjusted perspective, we don’t believe that moving forward with this proposal is prudent.
That isn’t to say that this proposal is not interesting–it certainly is something we’d like to see researched. We look forward to seeing a more fleshed out proposal from the team and the ARDC considering a handful of these risks and other points of feedback from the DAO. The teams need to solidify what sorts of risks the DAO is subject to if we were to proceed. We would suggest first outlining the perspective that the DAO comes from in relation to the native token. Do we want to collateralize ARB in the first place? And how willing are we to top up a loan to prevent liquidation?
We are voting Against this proposal on Snapshot.
We agree with the views expressed by many of our fellow delegates that the research and concepts entertained by this proposal are very interesting and worth further exploration. However, we have significant reservations about moving forward with a Treasury-backed vault without proper research and feel this approach will not end well in practice. There continues to be innovation in the lending space, with potential new projects such as Collar Protocol developing new models for borrowers that may make more sense for DAO treasuries.
We are voting Against this proposal on Snapshot.
We agree with the views expressed by many of our fellow delegates that the research and concepts entertained by this proposal are very interesting and worth further exploration. However, we have significant reservations about moving forward with a Treasury-backed vault without proper research and feel this approach will not end well in practice. There continues to be innovation in the lending space, with potential new projects such as Collar Protocol developing new models for borrowers that may make more sense for DAO treasuries.
We look forward to continued research here and thank @cupojoseph for their effort and communication throughout this process.
DAOplomats voted Against this proposal.
TBV research does sound interesting with a ton of learnings and concepts to unfold. However, we believe this proposal was indeed rushed as a couple of delegates already stated in the comments. We would appreciate if there is more due diligence in having conversations around this topic, discussing things thoroughly with the ARDC to find out how best they could potentially come in to help, and then defining steps to move forward.
Thanks again for all the constructive feedback, krst and the rest of the L2beat team! We look forward to working with ARDC more directly to separate the research from the development part of this, and returning to the community with a new proposal that better reflects the needs of the DAO.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting AGAINST the proposal during the temp check.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting AGAINST the proposal during the temp check.
While we are not opposed to using CDP protocols as a DAO or implementing treasury-backed vaults (TBV) and their safety module, we’re not comfortable with how the proposal is currently structured.
The proposal has intertwined the research, development, and audit of the related smart contracts, without considering the possibility that the research might lead us to the conclusion that we should not proceed or proceed in a different way.
Furthermore, some portion of the analysis - if not all of it - could be carried out through the ARDC, an entity established specifically for this purpose, provided that there is consensus on its desirability from the DAO. We would like first to try using that avenue to get a better understanding of which research directions require further and deeper analysis before allocating additional funds to research. As a DAO Advocate for ARDC we already asked ARDC members to explore ways how they can provide delegates with more information regarding the approach described in this proposal.
Furthermore, we should also first explore how the DAO would go about using a CDP protocol to borrow stablecoins against ARB, from all perspectives, including operational, legal, and risk. Unless there’s an appetite (with significant amounts, justifying spending 250k ARB on R&D) from the DAO to use a CDP protocol in the first place, there’s no need to look into TBV further.
To conclude, while we’re currently voting against the proposal, we respect the authors' efforts and commitment to driving the initiative forward. We are eager to collaborate with them in a constructive way, exploring the viability of using TBV to safeguard any position the DAO takes in a CDP protocol in the future.
I was hoping to see some other protocols express desire for this research, but I haven't seen any.
I think this approach can be successful, but I have also seen it go disastrously bad, remember rari fuse pools? ICHI is just one example of this going poorly
gm, I am voting abstain on this one.
I think finding ways to fund projects without applying sell pressure to ARB is valuable.
I don't think we are in the right position to enable this: the amount we could borrow vs the amount we would have to lock indeterminately and the downside risk doesn't justify it.
We vote AGAINST the proposal on Snapshot.
We also suggest that separating the research work with limited scopes and budgets first from the whole R&D proposal is a great first step for the further considerations within the DAO to achieve what this proposal originally aimed to do. As Joseph seemingly has already agreed with the general direction, we appreciate all the effort so far from the OD team and look forward to the revised proposal in the near future.
I have voted "Against" this proposal. Based on current feedback and edit by the OP, it looks like there is going to be some research that is being published this upcoming week. I'd like to see that research before this goes further.
As a broad concept, I think this is creating a lot of risk for the DAO in the event of a price spiral. I'd like to see the research on 'Loan sizes based on different market conditions (including worst case scenario), as I'd be curious what this looks like with concrete numbers and formulas.
I have decided to vote "Abstain" on this proposal.
The proposal is in a pilot phase and has not yet completed risk analyses or security audits.
Therefore, I prefer to be cautious and wait for more information and evaluations before moving forward, ensuring the protection of the DAO's interests and its community.
but not the main player: we will go into a trust me bro situation
Blockworks Research will be voting AGAINST this proposal on Snapshot.
We find the idea interesting, but it seems extremely risky at first glance. In our opinion, the current proposal includes too many deliverables. It would be more sensible to research the subject first and address the concerns raised by community members in this forum post before starting the development process for the solution. If the positive findings outweigh any negative ones, finer details related to the implementation could be ironed out and the development work could begin. We also agree with @swmartin that if the research findings are positive and the DAO supports a TBV implementation, the development work should be structured as an RFP process.
Feedback on proposal from Savvy DAO.
This proposal for Treasury Backed Vaults (TBV) shows promise in enhancing DAO capital management. To add some feedback on it for improvements there should be more clarity integration with existing DAO strategies like grants, highlight use cases, and detail security measures and contingency plans for market conditions. More community engagement and transparency in refining these aspects would maximize impact and adoption within the DAO ecosystem.
Feedback on proposal from Savvy DAO.
This proposal for Treasury Backed Vaults (TBV) shows promise in enhancing DAO capital management. To add some feedback on it for improvements there should be more clarity integration with existing DAO strategies like grants, highlight use cases, and detail security measures and contingency plans for market conditions. More community engagement and transparency in refining these aspects would maximize impact and adoption within the DAO ecosystem.
Linking voting rationale here for ease: https://forum.arbitrum.foundation/t/savvy-dao-delegate-communication-thread/21266/49?u=savvydao
Below are the opinions of the UADP:
We voted against this proposal since more thought needs to be put behind the collateralization of native tokens directly from the DAO’s treasury. This is especially the case when the native token is incredibly volatile and subject to severe downside beta. Recent approvals of initiatives that have the potential of largely suppressing ARB price furthers this concern. The dormant, unissued ARB tokens in the treasury are effectively acting as a way to bail out the given loans in the event of a downward spiral. Of course this depends on how much ARB is placed in the savior module. I’d assume it’s relatively high since the DAO doesn’t want to face a liquidation and would rather bear the brunt of fronting more and more capital in the short term. An infinite line of credit, ie the treasury, tends to blind us from the risks--until the LOI begins to run dry. This is a dangerous setup. Hence, from a risk-adjusted perspective, we don’t believe that moving forward with this proposal is prudent.
Below are the opinions of the UADP:
We voted against this proposal since more thought needs to be put behind the collateralization of native tokens directly from the DAO’s treasury. This is especially the case when the native token is incredibly volatile and subject to severe downside beta. Recent approvals of initiatives that have the potential of largely suppressing ARB price furthers this concern. The dormant, unissued ARB tokens in the treasury are effectively acting as a way to bail out the given loans in the event of a downward spiral. Of course this depends on how much ARB is placed in the savior module. I’d assume it’s relatively high since the DAO doesn’t want to face a liquidation and would rather bear the brunt of fronting more and more capital in the short term. An infinite line of credit, ie the treasury, tends to blind us from the risks--until the LOI begins to run dry. This is a dangerous setup. Hence, from a risk-adjusted perspective, we don’t believe that moving forward with this proposal is prudent.
That isn’t to say that this proposal is not interesting–it certainly is something we’d like to see researched. We look forward to seeing a more fleshed out proposal from the team and the ARDC considering a handful of these risks and other points of feedback from the DAO. The teams need to solidify what sorts of risks the DAO is subject to if we were to proceed. We would suggest first outlining the perspective that the DAO comes from in relation to the native token. Do we want to collateralize ARB in the first place? And how willing are we to top up a loan to prevent liquidation?
We are voting Against this proposal on Snapshot.
We agree with the views expressed by many of our fellow delegates that the research and concepts entertained by this proposal are very interesting and worth further exploration. However, we have significant reservations about moving forward with a Treasury-backed vault without proper research and feel this approach will not end well in practice. There continues to be innovation in the lending space, with potential new projects such as Collar Protocol developing new models for borrowers that may make more sense for DAO treasuries.
We are voting Against this proposal on Snapshot.
We agree with the views expressed by many of our fellow delegates that the research and concepts entertained by this proposal are very interesting and worth further exploration. However, we have significant reservations about moving forward with a Treasury-backed vault without proper research and feel this approach will not end well in practice. There continues to be innovation in the lending space, with potential new projects such as Collar Protocol developing new models for borrowers that may make more sense for DAO treasuries.
We look forward to continued research here and thank @cupojoseph for their effort and communication throughout this process.
DAOplomats voted Against this proposal.
TBV research does sound interesting with a ton of learnings and concepts to unfold. However, we believe this proposal was indeed rushed as a couple of delegates already stated in the comments. We would appreciate if there is more due diligence in having conversations around this topic, discussing things thoroughly with the ARDC to find out how best they could potentially come in to help, and then defining steps to move forward.
Thanks again for all the constructive feedback, krst and the rest of the L2beat team! We look forward to working with ARDC more directly to separate the research from the development part of this, and returning to the community with a new proposal that better reflects the needs of the DAO.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting AGAINST the proposal during the temp check.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting AGAINST the proposal during the temp check.
While we are not opposed to using CDP protocols as a DAO or implementing treasury-backed vaults (TBV) and their safety module, we’re not comfortable with how the proposal is currently structured.
The proposal has intertwined the research, development, and audit of the related smart contracts, without considering the possibility that the research might lead us to the conclusion that we should not proceed or proceed in a different way.
Furthermore, some portion of the analysis - if not all of it - could be carried out through the ARDC, an entity established specifically for this purpose, provided that there is consensus on its desirability from the DAO. We would like first to try using that avenue to get a better understanding of which research directions require further and deeper analysis before allocating additional funds to research. As a DAO Advocate for ARDC we already asked ARDC members to explore ways how they can provide delegates with more information regarding the approach described in this proposal.
Furthermore, we should also first explore how the DAO would go about using a CDP protocol to borrow stablecoins against ARB, from all perspectives, including operational, legal, and risk. Unless there’s an appetite (with significant amounts, justifying spending 250k ARB on R&D) from the DAO to use a CDP protocol in the first place, there’s no need to look into TBV further.
To conclude, while we’re currently voting against the proposal, we respect the authors' efforts and commitment to driving the initiative forward. We are eager to collaborate with them in a constructive way, exploring the viability of using TBV to safeguard any position the DAO takes in a CDP protocol in the future.
I was hoping to see some other protocols express desire for this research, but I haven't seen any.
I think this approach can be successful, but I have also seen it go disastrously bad, remember rari fuse pools? ICHI is just one example of this going poorly
gm, I am voting abstain on this one.
I think finding ways to fund projects without applying sell pressure to ARB is valuable.
I don't think we are in the right position to enable this: the amount we could borrow vs the amount we would have to lock indeterminately and the downside risk doesn't justify it.
We vote AGAINST the proposal on Snapshot.
We also suggest that separating the research work with limited scopes and budgets first from the whole R&D proposal is a great first step for the further considerations within the DAO to achieve what this proposal originally aimed to do. As Joseph seemingly has already agreed with the general direction, we appreciate all the effort so far from the OD team and look forward to the revised proposal in the near future.
I have voted "Against" this proposal. Based on current feedback and edit by the OP, it looks like there is going to be some research that is being published this upcoming week. I'd like to see that research before this goes further.
As a broad concept, I think this is creating a lot of risk for the DAO in the event of a price spiral. I'd like to see the research on 'Loan sizes based on different market conditions (including worst case scenario), as I'd be curious what this looks like with concrete numbers and formulas.
I have decided to vote "Abstain" on this proposal.
The proposal is in a pilot phase and has not yet completed risk analyses or security audits.
Therefore, I prefer to be cautious and wait for more information and evaluations before moving forward, ensuring the protection of the DAO's interests and its community.
but not the main player: we will go into a trust me bro situation
Blockworks Research will be voting AGAINST this proposal on Snapshot.
We find the idea interesting, but it seems extremely risky at first glance. In our opinion, the current proposal includes too many deliverables. It would be more sensible to research the subject first and address the concerns raised by community members in this forum post before starting the development process for the solution. If the positive findings outweigh any negative ones, finer details related to the implementation could be ironed out and the development work could begin. We also agree with @swmartin that if the research findings are positive and the DAO supports a TBV implementation, the development work should be structured as an RFP process.
I was hoping to see some other protocols express desire for this research, but I haven't seen any.
I think this approach can be successful, but I have also seen it go disastrously bad, remember rari fuse pools? ICHI is just one example of this going poorly
That said, I do think it can be done well with smart limits set in place and I would fully support this research if other DAOs stepped forward with interest to use it for their treasury.... Until then though, I have to vote no.
gm, I am voting abstain on this one.
I think finding ways to fund projects without applying sell pressure to ARB is valuable.
I don't think we are in the right position to enable this: the amount we could borrow vs the amount we would have to lock indeterminately and the downside risk doesn't justify it.
Ideally, we should do that once we have a yield-bearing ARB, where the loan is either self repaid or the percentage of borrowed money is continuously reduced.
I have voted "Against" this proposal. Based on current feedback and edit by the OP, it looks like there is going to be some research that is being published this upcoming week. I'd like to see that research before this goes further.
As a broad concept, I think this is creating a lot of risk for the DAO in the event of a price spiral. I'd like to see the research on 'Loan sizes based on different market conditions (including worst case scenario), as I'd be curious what this looks like with concrete numbers and formulas.
Also, the DAO sets a limit of how much ARB can be used as collateral for a loan, meaning there will be a mathematically defined price point where our loan will be liquidated. I think this creates a target for bad actors.
I don't know if the benefits outweigh the negatives. The nature of these types of loans is that in a period of downward price pressure on the collateral, your either going to get liquidated or have to keep throwing already 'bad' money trying to keep your collateral afloat. I know it's going to feel 'safe' due to the large treasury, but noting in this space is too big to fail... so this is a big decision to make.
A final note specific to the proposal - I'm not sure if I'm missing something here... and I'm not opposed to funding research projects... and I'm not trying to hurt feelings... but I feel a 250,000 ARB ask is a lot to ask for this type of research. These types of loan protocols have existed for years so I feel the book is pretty much out on these things. I don't think there is much new information to be gained here.
This project has always been structured as an open source public good that can work with any CDP or lending market, not specific to OD – and we very explicitly do not want to create any winner-take-all scenario or dependence on Open Dollar specifically.
We’re committed to being Open (its right there in the name!) and fair.
Totally fine with it and let me clarify for the sake of, well, clarity: not saying we fall necessarily in the trust me bro situation, and openess of lending market helps in risk mitigation. But the moment in which the research is done mainly or partially by one of the possible third party who can implement it, there could potentially be a classic conflict of interest.
BTW thanks for your approach, oriented toward turning criticism into positive feedbacks. I know I have sounded pretty harsh on my judgment, is just my passion on the topic. But I really appreciate your attitude toward it, kudos to you ser.
Blockworks Research will be voting AGAINST this proposal on Snapshot.
We find the idea interesting, but it seems extremely risky at first glance. In our opinion, the current proposal includes too many deliverables. It would be more sensible to research the subject first and address the concerns raised by community members in this forum post before starting the development process for the solution. If the positive findings outweigh any negative ones, finer details related to the implementation could be ironed out and the development work could begin. We also agree with @swmartin that if the research findings are positive and the DAO supports a TBV implementation, the development work should be structured as an RFP process.
Disclaimer: Please note that as one of the Research Members of the ARDC, it is possible that Blockworks Research will undertake some parts of the research put forward in this proposal.
Thanks for the feedback Jojo, I really appreciate your optimism that we can improve the approach and possibly move forward with the research part of this in the future. I still feel strongly this approach will be crucial to scaling Arbitrum DAO successfully.
I think we've had plenty of discussion on your points and reasoning so the last thing I want to add/respond to is:
Thanks for the feedback Jojo, I really appreciate your optimism that we can improve the approach and possibly move forward with the research part of this in the future. I still feel strongly this approach will be crucial to scaling Arbitrum DAO successfully.
I think we've had plenty of discussion on your points and reasoning so the last thing I want to add/respond to is:
This project has always been structured as an open source public good that can work with any CDP or lending market, not specific to OD – and we very explicitly do not want to create any winner-take-all scenario or dependence on Open Dollar specifically.
We're committed to being Open (its right there in the name!) and fair.
I am pretty sure the whole team has done a lot of work here, as well as I am sure they have no bad intentions
The Princeton Blockchain Club is abstaining from the Treasury Backed Vaults R&D proposal Snapshot vote.
Definitely think the research part is worth funding, but as other delegates have pointed out, we might not want to fund and pursue TBVs depending on the research outcomes.
Looking forward to the reworked proposal after the ARDC's input!
These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.
For the reasons I stated above, I have to unfortunately vote Against this proposals. I will just quote my previous post for the motivation, and add something as a follow up.
These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.
For the reasons I stated above, I have to unfortunately vote Against this proposals. I will just quote my previous post for the motivation, and add something as a follow up.
First, I’ll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
Let’s not consider scenario 1, because to me scenario 1 is not likely important nor worth the effort. Let’s only consider scenario 2, with whatever degree of numbers you want (amount of arb, price of arb, amount we borrow), keeping in mind tho that we want numbers that have an impact, so we are on the high end of the barbell.
Whatever amount you have as collateral. Whatever amount you have in the reserve. Whatever amount you borrow. You now have a target on your back. You have a series of number which, summed with depth of liquidity of dexes and cexes, can be put in a spreadsheet to calculate how much capital you need to liquidatate that position. This could be economically viable, or not. But the moment in which it becomes viable, trust me someone will exploit it.
I want to state that
And this was my take on the product. I also reflected upon it, chatting with proposers, and agreed that, for sure, we can do researches on this.
Which takes me to the second big surprise that I have: why are we packing the research with the product? Shouldn’t we first just research if this is viable, or if we are just falling in a crv type of scenario, with the difference that mitch can pick up the phone, his trezor, send money around, gather collateral and manage risk and we, as a dao, are as slow as a crippled elephant?
I thank a lot @cupojoseph for the numerous answers. We discussed about a research being important in this topic, re: can we effectively create a vault in which DAO can deposits ARB and borrow against them? I don't see anything wrong in the research. I personally think the answer of such a research will, likely, be a big sounding no, but I am happy to be proven wrong. All the risks I stated above I think are here, and what has happened to curve just show that a target will be hit at some point. What I am seeing as a problem here is that the research here is tied to development of such product. And I don't see why the two should be packaged together.
I would more gladly see something like
I am pretty sure the whole team has done a lot of work here, as well as I am sure they have no bad intentions, nor they are a malicious actor. Just, I think the risk is too high in general, and one way to derisk is to have first the research and then, if any, the product.
Voting "for" as the treasury should be allowed more flexibility to adapt based on the current phase of the cycle and include a risk management systems. This would enable the treasury to retain ARB while also supporting new proposals.
This idea is very interesting, but again, the cost in our eyes is just too much right now.
Some questions we have that are brought up before but we want to re-echo are:
Votes against the proposal in is current form. It is an interesting topic, but IMO we should leverage the current structures/committees that the DAO pays for to do at least part of the research/risk analysis.
First, we would like to thank @cupojoseph for coming up with this initiative. The idea is very interesting; however, after reviewing this proposal, we have decided to vote against it based on the following rationale:
The ARDC elections were held a month after this post, they also had a delay due to KyC. I see that this post was not brought forward or re-solicited once the ARDC was active. I don't see why we should rush anyway. I again ask ARDC members (@BlockworksResearch @Delphi-Digital @chaoslabs @krst ) if they can do a risk assessment of this proposal and what would be the best way to implement it, as I think it should be accompanied by good treasury management and I would also evaluate different protocols.
This idea was original suggested and asked for by the treasury sustainability group members 6 months ago, and no real progress has been made. We wish to work as closely with ARDC as they are willing to, but it doesnt seem like they have bandwidth for this kind of large project. A full RFQ for actually moving funds, and giving different CDP protocols a chance to apply for TBV funding could be run through ARDC if they want any time.
Explain what the purpose of this proposal is? The goal is to increase the value of the token? This proposal will not solve this, because the main expenses are on grants paid to the ARB. The cost of ARB needs to be increased in other ways, but here I see only costs. I don’t see how selling a token is worse than collateral.
I voted FOR this proposal at the temp check stage. Re-sharing my feedback below.
I like this proposal for a couple of reasons:
* It creates an avenue for the DAO to directly use Arbitrum protocols, which I think is a win-win.
* It creates an avenue for the DAO to access stablecoins, which I think is important for DAO ops and treasury diversification.
Some potential concerns to consider:
* The DAO will need to have an alternative source of stables available to pay off the debt per the concern of @GFXlabs. I don’t think the DAO can sell ARB for stables fast enough via governance for this use case.
* Moving DAO ARB into DeFi protcols introduces additional risk to governance. I’d like to have a robust plan for mitigating risk (cap on total ARB deposited, plan for gradually increasing TVL, audits, etc.)
Hey @mcfly thanks for the review and engagement! I want to address your points briefly:
On behalf of the Arbitrum community members who delegated their voting power to us, we're voting Against this proposal in its current form. While the concept of Treasury Backed Vaults is intriguing, we have concerns about using ARB tokens as collateral. We would prefer to see a smaller pilot tied to a specific initiative with a corresponding budget, along with a clear plan for debt repayment, before pursuing this at scale. It should be noted here that the Arbitrum DAO already has several promising initiatives underway to productively deploy treasury capital.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Can you specify a bit more on why the ARDC chose not to cooperate on this? This seems like a very interesting idea for Arbitrum at least. I have to say I'm also intrigued as to how this could help the DAO diversify, as such I've voted for this proposal.
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Ideally both :wink:
But my question was regarding lower the proposal cost: if it is possible to use the ARDC structure to conduct part of the research.
Would be dependent on several factors, but potentially yes
Thanks for tagging. Is the thought to use ARCD if the proposal passes, to help with the research, or to leverage the ARDC before the proposal passes to potentially help improve it?
Arbitrum needs this because the DAO is incapable of accessing cheap lines of credit. Also, if our only strategy for spending on grants and making long term investments is to sell ARB, then we are leaving all the upside on the table.
ArbitrumDAO does not need stablecoins in its operation
I was hoping to see some other protocols express desire for this research, but I haven't seen any.
I think this approach can be successful, but I have also seen it go disastrously bad, remember rari fuse pools? ICHI is just one example of this going poorly
That said, I do think it can be done well with smart limits set in place and I would fully support this research if other DAOs stepped forward with interest to use it for their treasury.... Until then though, I have to vote no.
gm, I am voting abstain on this one.
I think finding ways to fund projects without applying sell pressure to ARB is valuable.
I don't think we are in the right position to enable this: the amount we could borrow vs the amount we would have to lock indeterminately and the downside risk doesn't justify it.
Ideally, we should do that once we have a yield-bearing ARB, where the loan is either self repaid or the percentage of borrowed money is continuously reduced.
I have voted "Against" this proposal. Based on current feedback and edit by the OP, it looks like there is going to be some research that is being published this upcoming week. I'd like to see that research before this goes further.
As a broad concept, I think this is creating a lot of risk for the DAO in the event of a price spiral. I'd like to see the research on 'Loan sizes based on different market conditions (including worst case scenario), as I'd be curious what this looks like with concrete numbers and formulas.
Also, the DAO sets a limit of how much ARB can be used as collateral for a loan, meaning there will be a mathematically defined price point where our loan will be liquidated. I think this creates a target for bad actors.
I don't know if the benefits outweigh the negatives. The nature of these types of loans is that in a period of downward price pressure on the collateral, your either going to get liquidated or have to keep throwing already 'bad' money trying to keep your collateral afloat. I know it's going to feel 'safe' due to the large treasury, but noting in this space is too big to fail... so this is a big decision to make.
A final note specific to the proposal - I'm not sure if I'm missing something here... and I'm not opposed to funding research projects... and I'm not trying to hurt feelings... but I feel a 250,000 ARB ask is a lot to ask for this type of research. These types of loan protocols have existed for years so I feel the book is pretty much out on these things. I don't think there is much new information to be gained here.
This project has always been structured as an open source public good that can work with any CDP or lending market, not specific to OD – and we very explicitly do not want to create any winner-take-all scenario or dependence on Open Dollar specifically.
We’re committed to being Open (its right there in the name!) and fair.
Totally fine with it and let me clarify for the sake of, well, clarity: not saying we fall necessarily in the trust me bro situation, and openess of lending market helps in risk mitigation. But the moment in which the research is done mainly or partially by one of the possible third party who can implement it, there could potentially be a classic conflict of interest.
BTW thanks for your approach, oriented toward turning criticism into positive feedbacks. I know I have sounded pretty harsh on my judgment, is just my passion on the topic. But I really appreciate your attitude toward it, kudos to you ser.
Blockworks Research will be voting AGAINST this proposal on Snapshot.
We find the idea interesting, but it seems extremely risky at first glance. In our opinion, the current proposal includes too many deliverables. It would be more sensible to research the subject first and address the concerns raised by community members in this forum post before starting the development process for the solution. If the positive findings outweigh any negative ones, finer details related to the implementation could be ironed out and the development work could begin. We also agree with @swmartin that if the research findings are positive and the DAO supports a TBV implementation, the development work should be structured as an RFP process.
Disclaimer: Please note that as one of the Research Members of the ARDC, it is possible that Blockworks Research will undertake some parts of the research put forward in this proposal.
Thanks for the feedback Jojo, I really appreciate your optimism that we can improve the approach and possibly move forward with the research part of this in the future. I still feel strongly this approach will be crucial to scaling Arbitrum DAO successfully.
I think we've had plenty of discussion on your points and reasoning so the last thing I want to add/respond to is:
Thanks for the feedback Jojo, I really appreciate your optimism that we can improve the approach and possibly move forward with the research part of this in the future. I still feel strongly this approach will be crucial to scaling Arbitrum DAO successfully.
I think we've had plenty of discussion on your points and reasoning so the last thing I want to add/respond to is:
This project has always been structured as an open source public good that can work with any CDP or lending market, not specific to OD – and we very explicitly do not want to create any winner-take-all scenario or dependence on Open Dollar specifically.
We're committed to being Open (its right there in the name!) and fair.
I am pretty sure the whole team has done a lot of work here, as well as I am sure they have no bad intentions
The Princeton Blockchain Club is abstaining from the Treasury Backed Vaults R&D proposal Snapshot vote.
Definitely think the research part is worth funding, but as other delegates have pointed out, we might not want to fund and pursue TBVs depending on the research outcomes.
Looking forward to the reworked proposal after the ARDC's input!
These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.
For the reasons I stated above, I have to unfortunately vote Against this proposals. I will just quote my previous post for the motivation, and add something as a follow up.
These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.
For the reasons I stated above, I have to unfortunately vote Against this proposals. I will just quote my previous post for the motivation, and add something as a follow up.
First, I’ll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
Let’s not consider scenario 1, because to me scenario 1 is not likely important nor worth the effort. Let’s only consider scenario 2, with whatever degree of numbers you want (amount of arb, price of arb, amount we borrow), keeping in mind tho that we want numbers that have an impact, so we are on the high end of the barbell.
Whatever amount you have as collateral. Whatever amount you have in the reserve. Whatever amount you borrow. You now have a target on your back. You have a series of number which, summed with depth of liquidity of dexes and cexes, can be put in a spreadsheet to calculate how much capital you need to liquidatate that position. This could be economically viable, or not. But the moment in which it becomes viable, trust me someone will exploit it.
I want to state that
And this was my take on the product. I also reflected upon it, chatting with proposers, and agreed that, for sure, we can do researches on this.
Which takes me to the second big surprise that I have: why are we packing the research with the product? Shouldn’t we first just research if this is viable, or if we are just falling in a crv type of scenario, with the difference that mitch can pick up the phone, his trezor, send money around, gather collateral and manage risk and we, as a dao, are as slow as a crippled elephant?
I thank a lot @cupojoseph for the numerous answers. We discussed about a research being important in this topic, re: can we effectively create a vault in which DAO can deposits ARB and borrow against them? I don't see anything wrong in the research. I personally think the answer of such a research will, likely, be a big sounding no, but I am happy to be proven wrong. All the risks I stated above I think are here, and what has happened to curve just show that a target will be hit at some point. What I am seeing as a problem here is that the research here is tied to development of such product. And I don't see why the two should be packaged together.
I would more gladly see something like
I am pretty sure the whole team has done a lot of work here, as well as I am sure they have no bad intentions, nor they are a malicious actor. Just, I think the risk is too high in general, and one way to derisk is to have first the research and then, if any, the product.
Voting "for" as the treasury should be allowed more flexibility to adapt based on the current phase of the cycle and include a risk management systems. This would enable the treasury to retain ARB while also supporting new proposals.
This idea is very interesting, but again, the cost in our eyes is just too much right now.
Some questions we have that are brought up before but we want to re-echo are:
Votes against the proposal in is current form. It is an interesting topic, but IMO we should leverage the current structures/committees that the DAO pays for to do at least part of the research/risk analysis.
First, we would like to thank @cupojoseph for coming up with this initiative. The idea is very interesting; however, after reviewing this proposal, we have decided to vote against it based on the following rationale:
The ARDC elections were held a month after this post, they also had a delay due to KyC. I see that this post was not brought forward or re-solicited once the ARDC was active. I don't see why we should rush anyway. I again ask ARDC members (@BlockworksResearch @Delphi-Digital @chaoslabs @krst ) if they can do a risk assessment of this proposal and what would be the best way to implement it, as I think it should be accompanied by good treasury management and I would also evaluate different protocols.
This idea was original suggested and asked for by the treasury sustainability group members 6 months ago, and no real progress has been made. We wish to work as closely with ARDC as they are willing to, but it doesnt seem like they have bandwidth for this kind of large project. A full RFQ for actually moving funds, and giving different CDP protocols a chance to apply for TBV funding could be run through ARDC if they want any time.
Explain what the purpose of this proposal is? The goal is to increase the value of the token? This proposal will not solve this, because the main expenses are on grants paid to the ARB. The cost of ARB needs to be increased in other ways, but here I see only costs. I don’t see how selling a token is worse than collateral.
I voted FOR this proposal at the temp check stage. Re-sharing my feedback below.
I like this proposal for a couple of reasons:
* It creates an avenue for the DAO to directly use Arbitrum protocols, which I think is a win-win.
* It creates an avenue for the DAO to access stablecoins, which I think is important for DAO ops and treasury diversification.
Some potential concerns to consider:
* The DAO will need to have an alternative source of stables available to pay off the debt per the concern of @GFXlabs. I don’t think the DAO can sell ARB for stables fast enough via governance for this use case.
* Moving DAO ARB into DeFi protcols introduces additional risk to governance. I’d like to have a robust plan for mitigating risk (cap on total ARB deposited, plan for gradually increasing TVL, audits, etc.)
Hey @mcfly thanks for the review and engagement! I want to address your points briefly:
On behalf of the Arbitrum community members who delegated their voting power to us, we're voting Against this proposal in its current form. While the concept of Treasury Backed Vaults is intriguing, we have concerns about using ARB tokens as collateral. We would prefer to see a smaller pilot tied to a specific initiative with a corresponding budget, along with a clear plan for debt repayment, before pursuing this at scale. It should be noted here that the Arbitrum DAO already has several promising initiatives underway to productively deploy treasury capital.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Can you specify a bit more on why the ARDC chose not to cooperate on this? This seems like a very interesting idea for Arbitrum at least. I have to say I'm also intrigued as to how this could help the DAO diversify, as such I've voted for this proposal.
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Ideally both :wink:
But my question was regarding lower the proposal cost: if it is possible to use the ARDC structure to conduct part of the research.
Would be dependent on several factors, but potentially yes
Thanks for tagging. Is the thought to use ARCD if the proposal passes, to help with the research, or to leverage the ARDC before the proposal passes to potentially help improve it?
Arbitrum needs this because the DAO is incapable of accessing cheap lines of credit. Also, if our only strategy for spending on grants and making long term investments is to sell ARB, then we are leaving all the upside on the table.
ArbitrumDAO does not need stablecoins in its operation
Hey @mcfly thanks for the review and engagement! I want to address your points briefly:
This proposal is meant to develop a system for Arbitrum and other DAOs. It does not need to be specific to ARB. Even if the Treasury was full of ETH, with our current set of tools we would be unable to borrow against it or use it efficiently.
Since this proposal deploys $0 and creates no positions, it’s hard to imagine what a smaller pilot would look like. If you have other ideas on how to limit it further please let us know! We want to improve the proposal as much as possible.
This is something that arbitrum DAO, and specifically the treasury sustainability group, has already put resources into proposing, but has been unable to actually move forward with any implementation until now. We feel it's essential for our long-term projects that you mentioned that we research new ways for the DAO to activate capital once it is diversified.
I'd love to discuss one-on-one if you're open to it. And we're completely open to limiting the scope if you have ideas for what you mean specifically by a smaller pilot.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Tagging @Sinkas for visibility.
But my question was regarding lower the proposal cost: if it is possible to use the ARDC structure to conduct part of the research.
I see that it has been discussed here. A few days ago.
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Remaining or unspent funds will be returned to the DAO treasury promptly.
Interesting proposal. But why resort to these expenses if the DAO pays the service providers to cover these expenses. For example for the analysis of this proposal in feasible or not and the risks we can ask some member of the ARDC research team.
cc: @BlockworksResearch @Delphi-Digital
Arbitrum needs this because the DAO is incapable of accessing cheap lines of credit. Also, if our only strategy for spending on grants and making long term investments is to sell ARB, then we are leaving all the upside on the table.
Big assumption here IMO. Selling ARB forever is not a sustainable growth strategy.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit.
Agreed. The system is not specific to ARB token, and other DAO treasuries on arbitrum can make use of it as well. ETH if the Arbitrum treasury had tons more ETH, it still wouldnt be in a position to use that in CDPs safely without many extra safety rails, like TBVs.
If you have one in mind, I'm definitely open to discussing!!
Definitely! If they are open to supporting. We will take all the feedback and support we can get.
why are we packing the research with the product?
slow as a crippled elephant?
We've already put a lot of work into preparing this proposal and the feedback we've gotten from risk analysis is that it is much easier to begin a study on the risks if we have a given implementation and spec to go off of. It's harder to judge the risk of a system without an actual spec of it to go off of. I think thats one of the reasons that the original DAO Owned Liquidations proposal has taken this long to move forward meaningfully.
We are that slow right now. Which is why actually using our treasury capital in DeFi safely is impossible. I see this grant as a giant step towards automating risk management on-chain and giving the DAO more tools to do so.
The most important question is that I really don't understand why the Arbitrum needs this.
First, thank you for bringing this proposal. It's one of the more interesting ones mechanically.
After giving it some thought, we're not opposed to the concept, but would prefer governance avoid borrowing against ARB as a collateral asset. This boils down to two reasons:
First, thank you for bringing this proposal. It's one of the more interesting ones mechanically.
After giving it some thought, we're not opposed to the concept, but would prefer governance avoid borrowing against ARB as a collateral asset. This boils down to two reasons:
First, ARB in the treasury should not be considered an asset. From an accounting standpoint, counting that uncirculated ARB as an asset would violate accounting norms and perhaps even be alleged to be a misrepresentation. GFX believes in firmly stamping down the misconception that uncirculated native tokens are assets. It encourages excess spending due to a feeling of wealth, and is simply incorrect from an accounting standpoint. So utilizing ARB tokens as collateral would -- aside from other objections raised by others -- be the same as minting new ARB if a liquidation were to occur.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit. Governance has access to ETH, and soon will have stable-value assets as well (even if they're more exotic or legally encumbered RWAs). To the extent that credit is needed, we would prefer to see existing assets used as collateral instead of a dilutive mechanism.
More broadly, slowing down dilution from spending ARB by making new spending a mixture of ARB and borowings is appealing. We support continued exploration of this kind of financial planning. but we do not support any significant spending or moving forward with such an arrangement until a clear need to borrow is identified and a plan to repay the debt is included.
Attaching borrowing to a smaller upcoming initiative would be a way to test out governance debt as a concept, and see if credit can be responsibly managed by governance.
This proposal is necessary which outlines a strategic approach for the Arbitrum DAO to borrow stablecoins against its ARB assets through a new Treasury Backed Vault (TBV) system, significantly reducing the risk of liquidations. The plan includes research and development, a comprehensive risk analysis, and a security audit, ensuring that the DAO can make informed decisions about using stablecoins. By implementing the TBV system, the DAO gains more flexibility in capital management without selling ARB tokens, which is crucial for funding grants, investments, and other strategic initiatives. The proposal is well-structured, aiming to enhance financial efficiency and security for the Arbitrum community. I fully support this initiative as it provides innovative solutions for sustainable treasury management and strengthens the DAO’s financial infrastructure.
I am not opposed to more research being conducted on treasury backed vaults, but I would like the end goal to be an RFP process rather than funding an entity to build TBVs from scratch.
For example, I believe Curve's crvUSD that introduced soft liquidations via LLAMMA pools would be highly compelling for the use case being described. We even granted Curve ~240k ARB a few weeks ago to create a market for ARB/crvUSD/CRV and soon LRT/WETH pools. Why would we not want Curve (and others) to be able to throw their hat in the ring for this type of initiative?
I am not opposed to more research being conducted on treasury backed vaults, but I would like the end goal to be an RFP process rather than funding an entity to build TBVs from scratch.
For example, I believe Curve's crvUSD that introduced soft liquidations via LLAMMA pools would be highly compelling for the use case being described. We even granted Curve ~240k ARB a few weeks ago to create a market for ARB/crvUSD/CRV and soon LRT/WETH pools. Why would we not want Curve (and others) to be able to throw their hat in the ring for this type of initiative?
I also think the price tag is too high here - I think 100k ARB is more inline with the proposed outputs. We have the ARDC for a reason, and if DAO treasury utilization for borrows is something that is desired, we should utilize the resources we have already paid for to conduct the R&D. An added benefit of utilizing the ARDC would be the lack of bias in the report.
I have reservations as a whole on the proposed TBVs, as a vast majority of the DAO's spend is not expected to be returned. In the cases where we DO expect a return (see the GCP), the value is so large that a TBV would be rendered entirely infeasible anyways. I understand people here are bullish ARB and want to avoid selling it, but does this actually make sense in practice? My gut tells me no...
Thanks for the review team!
something the DAO needs as stated in its current form
Thanks for the review team!
something the DAO needs as stated in its current form
assuming most of the borrowed stablecoins are used to cover expenses (or grants/investments
this position remains locked until the debt is repaid
I think we can agree that treasury diversification is the end game here for sure. Wintermute can diversify its fund easily because it can take uncollateralized loans any time. Arbitrum DAO has to be more creative. If you dont support deploying capital this way, please consider supportting the research we are doing to come up with new strategies for the DAO.
Thanks for this post, as it is a very interesting topic and solution proposed.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Tagging @Sinkas for visibility.
Thanks for the review Griff! We have had several internal conversations with defi protocols that are interested in this system, but want to see what the final implementation will be before commiting to support. I'm trying to round up some more support more publicly from them now and expect some protocol teams to vote in the snapshot.
Thanks for the proposal @cupojoseph, this is an interesting idea, however, we do have some reservations about whether or not this is something the DAO needs as stated in its current form.
A mechanism like this seems good because the DAO refrains from selling ARB to fund grants, expenses, and investments. However, assuming most of the borrowed stablecoins are used to cover expenses (or grants/investments) at a modest LTV ratio we end up with more and more ARB locked up in the CDP as the price goes down or expenses go up (or both). So we are locking a large amount of ARB to access a small to moderate amount of stablecoins to cover expenses and this position remains locked until the debt is repaid which will either require the DAO to sell ARB (which is bad for the position) or finance it through other alternatives such as the current treasury diversification initiatives or sequencer revenue. We'd much prefer the DAO to continue focusing on treasury diversification efforts that are more capital efficient which can then be used to fund the DAO's expenses.
This proposal is way more straightforward than I initially thought, I think it would be great to confirm that there is buy-in from a few other projects in the ecosystem to use this for their own treasury moves, (even if it's just with rETH) before throwing down $250k into the research.
At first thought, it doesn't seem like a good idea for most DAO initiatives, but it does seems suitable for some, specifically investment-style proposals with expected returns or proposals that explicitly have an objective to make ARB number go up. However, there should be stop losses and plans to pay down the loans at specific ARB price targets as part of any proposal that wants to integrate this very cool tool.
Thanks for feedback Jenga!
All of the research topics mentioned so far will have short, medium, long term modeling for different market scenarios. I have updated the proposal to make this more explicit in the new Risk Analysis Report Topics section.
Thanks for feedback Jenga!
All of the research topics mentioned so far will have short, medium, long term modeling for different market scenarios. I have updated the proposal to make this more explicit in the new Risk Analysis Report Topics section.
A bug bounty is a great idea, and we can potentially work with Pessimistic which has gotten ARB grants to do audits for Arbitrum protocols before. We want this to be production ready with extremely high confidence in security at the end of the timeline for this grant.
IMO continuous security monitoring and regular reporting should 100% be included and even required in any future proposals to actually deploy funds with a TBV.
This proposal is very interesting, more efficient treasury management for Arbitrum DAO by enabling stablecoin borrowing against ARB assets without liquidation risks. It enhances financial flexibility for grants, investments, and operations, ensuring access to capital while preserving ARB value. The research, development, and audit phases ensure robust, secure implementation, ultimately benefiting the DAO with diversified funding options.
I would hope they want to work with us, but the members of that council also only have so much bandwidth and the risk analysis portion of this pilot is pretty significant amount of work for a whole team. We have taken feedback to get this far from several members of ARCD and also the arbitrum treasury sustainability group, who original proposed the idea of DAO owned liquidations. But I cant speak for any ARCD members
Sids2000 research was the original inspiration for this project and proposal completely. But we left this feature out for these (reluctant) reasons:
Hey everyone, the Treasury Backed Vault (TBV) proposal sounds useful- especially that "savior module" idea! I had a couple of thoughts:
Thanks for putting in the work on this! Its gratifying to see research from our treasury working group converted into a proposal and hopefully a product very soon.
@sids2000 research also proposed the reverse of a saviour module, where if the ARB price increases a lot it is sold to pay down earlier debts.
Thanks for putting in the work on this! Its gratifying to see research from our treasury working group converted into a proposal and hopefully a product very soon.
@sids2000 research also proposed the reverse of a saviour module, where if the ARB price increases a lot it is sold to pay down earlier debts.
However, I don't see this aspect referenced in the current proposal. Is there thoughts of including a reverse of a savior module , where ARB price increases beyond a threshold pull in ARB to pay down debts?
Awesome questions Sid, thank you so much for the close revue. Areta's M&A strategy proposal that was just approved is a big inspiration for this proposal.
What do you mean by "module is full" exactly? If theres no more ARB allowed to be pulled from the treasury normal liquidations can happen. Our liquidation engine is essentially the same as Maker with a few efficiency improvements. Unique to Open Dollar, all CDP positions are stored as NFTs that themselves can be sold instead of liquidated. It's possible the position could be handed off to a market maker partner like wintermute in that scenario instead to wind down. As opposed to market sold into spot markets during a normal liquidation
agreed, to prevent #1 from happening and avoiding spirals there needs to be conservative debt ceilings. For example, Open Dollar debt ceiling for ARB is only 5M OD, while rETH and wstETH are each 10M. We want to build this so it can sit on top of existing protocols, and we're only backing a portion, (maybe 20% max?) Ultimately the investment helps us do a lot of modeling of different scenarios. TBV could be for long term investments that are better made via stables.
If the DAO needs to pay back $10M in stablecoin debt which it issued for some program, they would have otherwise have to sell $10M ARB right away to access that capital. Ie theres no new sell pressure. Long term I think there will be staked ARB generating rewards, sequencer revenue shared with the DAO, a stablecoin L3 that pays fees back to the DAO treasury to support paying back debt, diversification into interest bearing assets that pay down debt, etc.. lots of long term strategies that should be considered individually & separately IMO.
Hey @mcfly thanks for the review and engagement! I want to address your points briefly:
This proposal is meant to develop a system for Arbitrum and other DAOs. It does not need to be specific to ARB. Even if the Treasury was full of ETH, with our current set of tools we would be unable to borrow against it or use it efficiently.
Since this proposal deploys $0 and creates no positions, it’s hard to imagine what a smaller pilot would look like. If you have other ideas on how to limit it further please let us know! We want to improve the proposal as much as possible.
This is something that arbitrum DAO, and specifically the treasury sustainability group, has already put resources into proposing, but has been unable to actually move forward with any implementation until now. We feel it's essential for our long-term projects that you mentioned that we research new ways for the DAO to activate capital once it is diversified.
I'd love to discuss one-on-one if you're open to it. And we're completely open to limiting the scope if you have ideas for what you mean specifically by a smaller pilot.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Tagging @Sinkas for visibility.
But my question was regarding lower the proposal cost: if it is possible to use the ARDC structure to conduct part of the research.
I see that it has been discussed here. A few days ago.
Research and Development: 125,000 ARB
Independent Security Audit: 50,000 ARB
Risk Analysis Report: 50,000 ARB
Administrative: 25,000 ARB
Remaining or unspent funds will be returned to the DAO treasury promptly.
Interesting proposal. But why resort to these expenses if the DAO pays the service providers to cover these expenses. For example for the analysis of this proposal in feasible or not and the risks we can ask some member of the ARDC research team.
cc: @BlockworksResearch @Delphi-Digital
Arbitrum needs this because the DAO is incapable of accessing cheap lines of credit. Also, if our only strategy for spending on grants and making long term investments is to sell ARB, then we are leaving all the upside on the table.
Big assumption here IMO. Selling ARB forever is not a sustainable growth strategy.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit.
Agreed. The system is not specific to ARB token, and other DAO treasuries on arbitrum can make use of it as well. ETH if the Arbitrum treasury had tons more ETH, it still wouldnt be in a position to use that in CDPs safely without many extra safety rails, like TBVs.
If you have one in mind, I'm definitely open to discussing!!
Definitely! If they are open to supporting. We will take all the feedback and support we can get.
why are we packing the research with the product?
slow as a crippled elephant?
We've already put a lot of work into preparing this proposal and the feedback we've gotten from risk analysis is that it is much easier to begin a study on the risks if we have a given implementation and spec to go off of. It's harder to judge the risk of a system without an actual spec of it to go off of. I think thats one of the reasons that the original DAO Owned Liquidations proposal has taken this long to move forward meaningfully.
We are that slow right now. Which is why actually using our treasury capital in DeFi safely is impossible. I see this grant as a giant step towards automating risk management on-chain and giving the DAO more tools to do so.
The most important question is that I really don't understand why the Arbitrum needs this.
First, thank you for bringing this proposal. It's one of the more interesting ones mechanically.
After giving it some thought, we're not opposed to the concept, but would prefer governance avoid borrowing against ARB as a collateral asset. This boils down to two reasons:
First, thank you for bringing this proposal. It's one of the more interesting ones mechanically.
After giving it some thought, we're not opposed to the concept, but would prefer governance avoid borrowing against ARB as a collateral asset. This boils down to two reasons:
First, ARB in the treasury should not be considered an asset. From an accounting standpoint, counting that uncirculated ARB as an asset would violate accounting norms and perhaps even be alleged to be a misrepresentation. GFX believes in firmly stamping down the misconception that uncirculated native tokens are assets. It encourages excess spending due to a feeling of wealth, and is simply incorrect from an accounting standpoint. So utilizing ARB tokens as collateral would -- aside from other objections raised by others -- be the same as minting new ARB if a liquidation were to occur.
Secondly, and more optimistically, Arbitrum has other assets it could leverage for credit. Governance has access to ETH, and soon will have stable-value assets as well (even if they're more exotic or legally encumbered RWAs). To the extent that credit is needed, we would prefer to see existing assets used as collateral instead of a dilutive mechanism.
More broadly, slowing down dilution from spending ARB by making new spending a mixture of ARB and borowings is appealing. We support continued exploration of this kind of financial planning. but we do not support any significant spending or moving forward with such an arrangement until a clear need to borrow is identified and a plan to repay the debt is included.
Attaching borrowing to a smaller upcoming initiative would be a way to test out governance debt as a concept, and see if credit can be responsibly managed by governance.
This proposal is necessary which outlines a strategic approach for the Arbitrum DAO to borrow stablecoins against its ARB assets through a new Treasury Backed Vault (TBV) system, significantly reducing the risk of liquidations. The plan includes research and development, a comprehensive risk analysis, and a security audit, ensuring that the DAO can make informed decisions about using stablecoins. By implementing the TBV system, the DAO gains more flexibility in capital management without selling ARB tokens, which is crucial for funding grants, investments, and other strategic initiatives. The proposal is well-structured, aiming to enhance financial efficiency and security for the Arbitrum community. I fully support this initiative as it provides innovative solutions for sustainable treasury management and strengthens the DAO’s financial infrastructure.
I am not opposed to more research being conducted on treasury backed vaults, but I would like the end goal to be an RFP process rather than funding an entity to build TBVs from scratch.
For example, I believe Curve's crvUSD that introduced soft liquidations via LLAMMA pools would be highly compelling for the use case being described. We even granted Curve ~240k ARB a few weeks ago to create a market for ARB/crvUSD/CRV and soon LRT/WETH pools. Why would we not want Curve (and others) to be able to throw their hat in the ring for this type of initiative?
I am not opposed to more research being conducted on treasury backed vaults, but I would like the end goal to be an RFP process rather than funding an entity to build TBVs from scratch.
For example, I believe Curve's crvUSD that introduced soft liquidations via LLAMMA pools would be highly compelling for the use case being described. We even granted Curve ~240k ARB a few weeks ago to create a market for ARB/crvUSD/CRV and soon LRT/WETH pools. Why would we not want Curve (and others) to be able to throw their hat in the ring for this type of initiative?
I also think the price tag is too high here - I think 100k ARB is more inline with the proposed outputs. We have the ARDC for a reason, and if DAO treasury utilization for borrows is something that is desired, we should utilize the resources we have already paid for to conduct the R&D. An added benefit of utilizing the ARDC would be the lack of bias in the report.
I have reservations as a whole on the proposed TBVs, as a vast majority of the DAO's spend is not expected to be returned. In the cases where we DO expect a return (see the GCP), the value is so large that a TBV would be rendered entirely infeasible anyways. I understand people here are bullish ARB and want to avoid selling it, but does this actually make sense in practice? My gut tells me no...
Thanks for the review team!
something the DAO needs as stated in its current form
Thanks for the review team!
something the DAO needs as stated in its current form
assuming most of the borrowed stablecoins are used to cover expenses (or grants/investments
this position remains locked until the debt is repaid
I think we can agree that treasury diversification is the end game here for sure. Wintermute can diversify its fund easily because it can take uncollateralized loans any time. Arbitrum DAO has to be more creative. If you dont support deploying capital this way, please consider supportting the research we are doing to come up with new strategies for the DAO.
Thanks for this post, as it is a very interesting topic and solution proposed.
My 2 cents in here are just cost-related: Is it possible to leverage the ARDC structure (namely the risk management & security members) in part of this research?
Tagging @Sinkas for visibility.
Thanks for the review Griff! We have had several internal conversations with defi protocols that are interested in this system, but want to see what the final implementation will be before commiting to support. I'm trying to round up some more support more publicly from them now and expect some protocol teams to vote in the snapshot.
Thanks for the proposal @cupojoseph, this is an interesting idea, however, we do have some reservations about whether or not this is something the DAO needs as stated in its current form.
A mechanism like this seems good because the DAO refrains from selling ARB to fund grants, expenses, and investments. However, assuming most of the borrowed stablecoins are used to cover expenses (or grants/investments) at a modest LTV ratio we end up with more and more ARB locked up in the CDP as the price goes down or expenses go up (or both). So we are locking a large amount of ARB to access a small to moderate amount of stablecoins to cover expenses and this position remains locked until the debt is repaid which will either require the DAO to sell ARB (which is bad for the position) or finance it through other alternatives such as the current treasury diversification initiatives or sequencer revenue. We'd much prefer the DAO to continue focusing on treasury diversification efforts that are more capital efficient which can then be used to fund the DAO's expenses.
This proposal is way more straightforward than I initially thought, I think it would be great to confirm that there is buy-in from a few other projects in the ecosystem to use this for their own treasury moves, (even if it's just with rETH) before throwing down $250k into the research.
At first thought, it doesn't seem like a good idea for most DAO initiatives, but it does seems suitable for some, specifically investment-style proposals with expected returns or proposals that explicitly have an objective to make ARB number go up. However, there should be stop losses and plans to pay down the loans at specific ARB price targets as part of any proposal that wants to integrate this very cool tool.
Thanks for feedback Jenga!
All of the research topics mentioned so far will have short, medium, long term modeling for different market scenarios. I have updated the proposal to make this more explicit in the new Risk Analysis Report Topics section.
Thanks for feedback Jenga!
All of the research topics mentioned so far will have short, medium, long term modeling for different market scenarios. I have updated the proposal to make this more explicit in the new Risk Analysis Report Topics section.
A bug bounty is a great idea, and we can potentially work with Pessimistic which has gotten ARB grants to do audits for Arbitrum protocols before. We want this to be production ready with extremely high confidence in security at the end of the timeline for this grant.
IMO continuous security monitoring and regular reporting should 100% be included and even required in any future proposals to actually deploy funds with a TBV.
This proposal is very interesting, more efficient treasury management for Arbitrum DAO by enabling stablecoin borrowing against ARB assets without liquidation risks. It enhances financial flexibility for grants, investments, and operations, ensuring access to capital while preserving ARB value. The research, development, and audit phases ensure robust, secure implementation, ultimately benefiting the DAO with diversified funding options.
I would hope they want to work with us, but the members of that council also only have so much bandwidth and the risk analysis portion of this pilot is pretty significant amount of work for a whole team. We have taken feedback to get this far from several members of ARCD and also the arbitrum treasury sustainability group, who original proposed the idea of DAO owned liquidations. But I cant speak for any ARCD members
Sids2000 research was the original inspiration for this project and proposal completely. But we left this feature out for these (reluctant) reasons:
Hey everyone, the Treasury Backed Vault (TBV) proposal sounds useful- especially that "savior module" idea! I had a couple of thoughts:
Thanks for putting in the work on this! Its gratifying to see research from our treasury working group converted into a proposal and hopefully a product very soon.
@sids2000 research also proposed the reverse of a saviour module, where if the ARB price increases a lot it is sold to pay down earlier debts.
Thanks for putting in the work on this! Its gratifying to see research from our treasury working group converted into a proposal and hopefully a product very soon.
@sids2000 research also proposed the reverse of a saviour module, where if the ARB price increases a lot it is sold to pay down earlier debts.
However, I don't see this aspect referenced in the current proposal. Is there thoughts of including a reverse of a savior module , where ARB price increases beyond a threshold pull in ARB to pay down debts?
Awesome questions Sid, thank you so much for the close revue. Areta's M&A strategy proposal that was just approved is a big inspiration for this proposal.
What do you mean by "module is full" exactly? If theres no more ARB allowed to be pulled from the treasury normal liquidations can happen. Our liquidation engine is essentially the same as Maker with a few efficiency improvements. Unique to Open Dollar, all CDP positions are stored as NFTs that themselves can be sold instead of liquidated. It's possible the position could be handed off to a market maker partner like wintermute in that scenario instead to wind down. As opposed to market sold into spot markets during a normal liquidation
agreed, to prevent #1 from happening and avoiding spirals there needs to be conservative debt ceilings. For example, Open Dollar debt ceiling for ARB is only 5M OD, while rETH and wstETH are each 10M. We want to build this so it can sit on top of existing protocols, and we're only backing a portion, (maybe 20% max?) Ultimately the investment helps us do a lot of modeling of different scenarios. TBV could be for long term investments that are better made via stables.
If the DAO needs to pay back $10M in stablecoin debt which it issued for some program, they would have otherwise have to sell $10M ARB right away to access that capital. Ie theres no new sell pressure. Long term I think there will be staked ARB generating rewards, sequencer revenue shared with the DAO, a stablecoin L3 that pays fees back to the DAO treasury to support paying back debt, diversification into interest bearing assets that pay down debt, etc.. lots of long term strategies that should be considered individually & separately IMO.
Awesome questions Sid, thank you so much for the close revue. Areta's M&A strategy proposal that was just approved is a big inspiration for this proposal.
What do you mean by "module is full" exactly? If theres no more ARB allowed to be pulled from the treasury normal liquidations can happen. Our liquidation engine is essentially the same as Maker with a few efficiency improvements. Unique to Open Dollar, all CDP positions are stored as NFTs that themselves can be sold instead of liquidated. It's possible the position could be handed off to a market maker partner like wintermute in that scenario instead to wind down. As opposed to market sold into spot markets during a normal liquidation
agreed, to prevent #1 from happening and avoiding spirals there needs to be conservative debt ceilings. For example, Open Dollar debt ceiling for ARB is only 5M OD, while rETH and wstETH are each 10M. We want to build this so it can sit on top of existing protocols, and we're only backing a portion, (maybe 20% max?) Ultimately the investment helps us do a lot of modeling of different scenarios. TBV could be for long term investments that are better made via stables.
If the DAO needs to pay back $10M in stablecoin debt which it issued for some program, they would have otherwise have to sell $10M ARB right away to access that capital. Ie theres no new sell pressure. Long term I think there will be staked ARB generating rewards, sequencer revenue shared with the DAO, a stablecoin L3 that pays fees back to the DAO treasury to support paying back debt, diversification into interest bearing assets that pay down debt, etc.. lots of long term strategies that should be considered individually & separately IMO.
Hope this answers the questions a bit, and I think it will be really important to spend significant time on modeling different price scenarios and debt ceiling requirements so the community can make the best informed decisions.
This is a great idea, we can try to incorporate this! thanks for this feedback.
The main point of doing it when liquidations are marked is that these hooks already exist in many CDP protocols (like reflexer, Open Dollar, HAI, etc..) and somewhat similar savior systems. So we can build this in a way that it can sit on top of these existing stablecoins without requiring us to launch our own stable from scratch or make any changes to protocols that are already deployed.
Functionally I think its pretty similar tho, and if the price is fluctuating a lot you only want to pull from the treasury as little as possible IMO, so only when really needed.
Hi @cupojoseph,
Thanks for the proposal! It’s certainly very interesting and a novel way for the DAO to use its ARB to unlock liquidity via stablecoins. I wanted to clarify a few questions about the process:
Hi @cupojoseph,
Thanks for the proposal! It’s certainly very interesting and a novel way for the DAO to use its ARB to unlock liquidity via stablecoins. I wanted to clarify a few questions about the process:
Overall, would love to see these issues ironed out and a practical solution to be found as we agree with the premise behind the TBV: seeking sustainable solutions that minimise sell pressure on ARB.
Thanks for this interesting proposal @cupojoseph
Will your research include, an analysis of the long-term implications of using TBVs, including potential scenarios where the savior module might need to activate frequently due to prolonged market downturns?
While the proposal mentions a security audit, it would be beneficial to outline a continuous security & risk management plan, including periodic audits, bug bounties & real-time monitoring.
The proposal could benefit from outlining specific mechanisms for regular reporting, community engagement & feedback
I was a bit surprised when this popped up on snapshot today. This proposal was brought to life just 1 week ago in the forum, and there are several unanswered questions from several folks.
First, I'll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
I was a bit surprised when this popped up on snapshot today. This proposal was brought to life just 1 week ago in the forum, and there are several unanswered questions from several folks.
First, I'll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
Let’s not consider scenario 1, because to me scenario 1 is not likely important nor worth the effort. Let’s only consider scenario 2, with whatever degree of numbers you want (amount of arb, price of arb, amount we borrow), keeping in mind tho that we want numbers that have an impact, so we are on the high end of the barbell.
Whatever amount you have as collateral. Whatever amount you have in the reserve. Whatever amount you borrow. You now have a target on your back. You have a series of number which, summed with depth of liquidity of dexes and cexes, can be put in a spreadsheet to calculate how much capital you need to liquidatate that position. This could be economically viable, or not. But the moment in which it becomes viable, trust me someone will exploit it.
I want to state that
And this was my take on the product. I also reflected upon it, chatting with proposers, and agreed that, for sure, we can do researches on this.
Which takes me to the second big surprise that I have: why are we packing the research with the product? Shouldn't we first just research if this is viable, or if we are just falling in a crv type of scenario, with the difference that mitch can pick up the phone, his trezor, send money around, gather collateral and manage risk and we, as a dao, are as slow as a crippled elephant?
Thanks for the support Frisson!!
These are good questions and the additional risk that lending creates is a valid concern. That's why such a big part of this is doing risk analysis on top of everything that gets built. We need to do this as a pilot first and make decisions on how to use the financial tools in front of us carefully.
Thanks for the support Frisson!!
These are good questions and the additional risk that lending creates is a valid concern. That's why such a big part of this is doing risk analysis on top of everything that gets built. We need to do this as a pilot first and make decisions on how to use the financial tools in front of us carefully.
I don’t think the DAO can sell ARB for stables fast enough via governance for this use case
Existing CDP systems are certainly too risky IMO for DAOs like arbitrum to use effectively. If collateral prices go down they require active management. That's why TBVs can be such a game changer: no active management, just set an allowance once.
Moving DAO ARB into DeFi protcols introduces additional risk to governance. I’d like to have a robust plan for mitigating risk (cap on total ARB deposited, plan for gradually increasing TVL, audits, etc.)
Future proposals can guarantee before depositing that the ARB is not being delegated and can't be used in governance attacks. For example, Open Dollar currently delegates ARB deposited to
Future proposals could delegate some sequencer revenue to auto paying down debt without DAO management.
ARB tokens always require approvals to move, so theres no way a TBV could ever move more tokens than the DAO has explicitly voted should be able to move.
All of these suggestions would have recommendations in the final report. Thanks for this feedback and let us know if there are other risks we should focus on. We will take any other community suggestions what the community whats to learn and what hypothetical situations to model out.
On audits, etc: I think we should fund multiple audits, like 5 or more, before actually putting millions into any defi protocols. But we want to keep our proposal lean enough to have a great ROI. No reason to spend $1m on audits before the DAO has seen risk analysis recommendations and decided whether or not the community even wants to pursue this option.
I like this proposal for a couple of reasons:
Some potential concerns to consider:
I like this proposal for a couple of reasons:
Some potential concerns to consider:
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be?
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be?
Borrowing a stablecoin without deep liquidity is much less useful than giving the DAO the option to more safely plug into existing ecosystem on Arbitrum.
To be clear, we are not suggesting creating a new stablecoin. But rather, plug in the savior module to existing stablecoins on Arbitrum like Open Dollar (but in an agnostic way so the DAO is not picking winners). If the stablecoin is backed by a basket of assets and arbitrum DAO is just one of the users we dont have to bootstrap liquidity from the ground and there will be enough market participants to keep the stablecoin pegged safely.
Thanks for the review Juanrah! Glad you see how useful this could be.
How can we make sure everyone knows exactly when it kicks in and how much it can grab from the treasury?
Thanks for the review Juanrah! Glad you see how useful this could be.
How can we make sure everyone knows exactly when it kicks in and how much it can grab from the treasury?
The TBV can not pull any arbitrary amount. The DAO must call the approve(TBV Savior, amount of ARB) on the ARB token contract to give approvals. So it could only pull a maximum amount that was explicitly set. And that amount could be increased or decreased to certain bounds by the community at any time.
Transparency is a top priority. It should be designed so there are never any surprises, and the amount of allowance the TBV has at any given time is always clearly community.
:heart: :heart: :heart:
If you have something specific in mind I would love to add it to this proposal or otherwise include it in the research. Ideally we are building this to plug into existing CDP protocols without having to make any changes to them.
Borrowing against ARB would give the DAO capital to diversify into other assets like GMX pool tokens that bear yield, LSTs like lido or rocketpool ETH, etc., without having to create tons of sell pressure on ARB. I actually would not support that personally, because its too much leverage/risk, but it would be a new option for diversification long term if the community wants it. Having the TBV decreases risk of such actions.
why triggering the saviour module at liquidation threshold instead of highening it at, i don't know, 1.10 health factor, and bring enough funds in it to send it back to a target of safety which could be 1.2, 1.3 or whatever? AKA why not doing it incrementally, and avoid having to act during a liquidation?
Thank you for the thoughtful reply, @GFXlabs! I really appreciate your time.
but what would be the natural way to unwind the debt?
Thank you for the thoughtful reply, @GFXlabs! I really appreciate your time.
Excellent question.
After the CRV near-miss, protocols are unlikely to just let Arbitrum pledge near-infinite amounts of ARB to continue collateralizing the debt. What’s the protocol to reduce the debt and not just increase the collateralization?
Or are we assuming funds will become available from the STEP or other programs to service the debt?
Hope this answers your questions! I would love to chat more any time.
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This is an interesting idea, but what would be the natural way to unwind the debt? After the CRV near-miss, protocols are unlikely to just let Arbitrum pledge near-infinite amounts of ARB to continue collateralizing the debt. What's the protocol to reduce the debt and not just increase the collateralization? Or are we assuming funds will become available from the STEP or other programs to service the debt?
Thanks for the question and feedback 🙏
The main limiter in that case would be the allowance set by the DAO on the max number of ARB that can be pulled. Technically Arbitrum DAO can mint new tokens if I recall correctly. To keep the stablecoin backed a liquidation would have to be processed at some point.
Yes, if the DAO abandons the position and no more ARB is pulled, normal liquidations will happen according to the protocol. (According to the current design)
Awesome questions Sid, thank you so much for the close revue. Areta's M&A strategy proposal that was just approved is a big inspiration for this proposal.
What do you mean by "module is full" exactly? If theres no more ARB allowed to be pulled from the treasury normal liquidations can happen. Our liquidation engine is essentially the same as Maker with a few efficiency improvements. Unique to Open Dollar, all CDP positions are stored as NFTs that themselves can be sold instead of liquidated. It's possible the position could be handed off to a market maker partner like wintermute in that scenario instead to wind down. As opposed to market sold into spot markets during a normal liquidation
agreed, to prevent #1 from happening and avoiding spirals there needs to be conservative debt ceilings. For example, Open Dollar debt ceiling for ARB is only 5M OD, while rETH and wstETH are each 10M. We want to build this so it can sit on top of existing protocols, and we're only backing a portion, (maybe 20% max?) Ultimately the investment helps us do a lot of modeling of different scenarios. TBV could be for long term investments that are better made via stables.
If the DAO needs to pay back $10M in stablecoin debt which it issued for some program, they would have otherwise have to sell $10M ARB right away to access that capital. Ie theres no new sell pressure. Long term I think there will be staked ARB generating rewards, sequencer revenue shared with the DAO, a stablecoin L3 that pays fees back to the DAO treasury to support paying back debt, diversification into interest bearing assets that pay down debt, etc.. lots of long term strategies that should be considered individually & separately IMO.
Hope this answers the questions a bit, and I think it will be really important to spend significant time on modeling different price scenarios and debt ceiling requirements so the community can make the best informed decisions.
This is a great idea, we can try to incorporate this! thanks for this feedback.
The main point of doing it when liquidations are marked is that these hooks already exist in many CDP protocols (like reflexer, Open Dollar, HAI, etc..) and somewhat similar savior systems. So we can build this in a way that it can sit on top of these existing stablecoins without requiring us to launch our own stable from scratch or make any changes to protocols that are already deployed.
Functionally I think its pretty similar tho, and if the price is fluctuating a lot you only want to pull from the treasury as little as possible IMO, so only when really needed.
Hi @cupojoseph,
Thanks for the proposal! It’s certainly very interesting and a novel way for the DAO to use its ARB to unlock liquidity via stablecoins. I wanted to clarify a few questions about the process:
Hi @cupojoseph,
Thanks for the proposal! It’s certainly very interesting and a novel way for the DAO to use its ARB to unlock liquidity via stablecoins. I wanted to clarify a few questions about the process:
Overall, would love to see these issues ironed out and a practical solution to be found as we agree with the premise behind the TBV: seeking sustainable solutions that minimise sell pressure on ARB.
Thanks for this interesting proposal @cupojoseph
Will your research include, an analysis of the long-term implications of using TBVs, including potential scenarios where the savior module might need to activate frequently due to prolonged market downturns?
While the proposal mentions a security audit, it would be beneficial to outline a continuous security & risk management plan, including periodic audits, bug bounties & real-time monitoring.
The proposal could benefit from outlining specific mechanisms for regular reporting, community engagement & feedback
I was a bit surprised when this popped up on snapshot today. This proposal was brought to life just 1 week ago in the forum, and there are several unanswered questions from several folks.
First, I'll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
I was a bit surprised when this popped up on snapshot today. This proposal was brought to life just 1 week ago in the forum, and there are several unanswered questions from several folks.
First, I'll report my opinion, already shared privately, and then a considerations on the proposal.
I see 2 scenarios here:
Let’s not consider scenario 1, because to me scenario 1 is not likely important nor worth the effort. Let’s only consider scenario 2, with whatever degree of numbers you want (amount of arb, price of arb, amount we borrow), keeping in mind tho that we want numbers that have an impact, so we are on the high end of the barbell.
Whatever amount you have as collateral. Whatever amount you have in the reserve. Whatever amount you borrow. You now have a target on your back. You have a series of number which, summed with depth of liquidity of dexes and cexes, can be put in a spreadsheet to calculate how much capital you need to liquidatate that position. This could be economically viable, or not. But the moment in which it becomes viable, trust me someone will exploit it.
I want to state that
And this was my take on the product. I also reflected upon it, chatting with proposers, and agreed that, for sure, we can do researches on this.
Which takes me to the second big surprise that I have: why are we packing the research with the product? Shouldn't we first just research if this is viable, or if we are just falling in a crv type of scenario, with the difference that mitch can pick up the phone, his trezor, send money around, gather collateral and manage risk and we, as a dao, are as slow as a crippled elephant?
Thanks for the support Frisson!!
These are good questions and the additional risk that lending creates is a valid concern. That's why such a big part of this is doing risk analysis on top of everything that gets built. We need to do this as a pilot first and make decisions on how to use the financial tools in front of us carefully.
Thanks for the support Frisson!!
These are good questions and the additional risk that lending creates is a valid concern. That's why such a big part of this is doing risk analysis on top of everything that gets built. We need to do this as a pilot first and make decisions on how to use the financial tools in front of us carefully.
I don’t think the DAO can sell ARB for stables fast enough via governance for this use case
Existing CDP systems are certainly too risky IMO for DAOs like arbitrum to use effectively. If collateral prices go down they require active management. That's why TBVs can be such a game changer: no active management, just set an allowance once.
Moving DAO ARB into DeFi protcols introduces additional risk to governance. I’d like to have a robust plan for mitigating risk (cap on total ARB deposited, plan for gradually increasing TVL, audits, etc.)
Future proposals can guarantee before depositing that the ARB is not being delegated and can't be used in governance attacks. For example, Open Dollar currently delegates ARB deposited to
Future proposals could delegate some sequencer revenue to auto paying down debt without DAO management.
ARB tokens always require approvals to move, so theres no way a TBV could ever move more tokens than the DAO has explicitly voted should be able to move.
All of these suggestions would have recommendations in the final report. Thanks for this feedback and let us know if there are other risks we should focus on. We will take any other community suggestions what the community whats to learn and what hypothetical situations to model out.
On audits, etc: I think we should fund multiple audits, like 5 or more, before actually putting millions into any defi protocols. But we want to keep our proposal lean enough to have a great ROI. No reason to spend $1m on audits before the DAO has seen risk analysis recommendations and decided whether or not the community even wants to pursue this option.
I like this proposal for a couple of reasons:
Some potential concerns to consider:
I like this proposal for a couple of reasons:
Some potential concerns to consider:
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be?
A little further down the line, I am wondering what your approach to the sell pressure on this dollar will be?
Borrowing a stablecoin without deep liquidity is much less useful than giving the DAO the option to more safely plug into existing ecosystem on Arbitrum.
To be clear, we are not suggesting creating a new stablecoin. But rather, plug in the savior module to existing stablecoins on Arbitrum like Open Dollar (but in an agnostic way so the DAO is not picking winners). If the stablecoin is backed by a basket of assets and arbitrum DAO is just one of the users we dont have to bootstrap liquidity from the ground and there will be enough market participants to keep the stablecoin pegged safely.
Thanks for the review Juanrah! Glad you see how useful this could be.
How can we make sure everyone knows exactly when it kicks in and how much it can grab from the treasury?
Thanks for the review Juanrah! Glad you see how useful this could be.
How can we make sure everyone knows exactly when it kicks in and how much it can grab from the treasury?
The TBV can not pull any arbitrary amount. The DAO must call the approve(TBV Savior, amount of ARB) on the ARB token contract to give approvals. So it could only pull a maximum amount that was explicitly set. And that amount could be increased or decreased to certain bounds by the community at any time.
Transparency is a top priority. It should be designed so there are never any surprises, and the amount of allowance the TBV has at any given time is always clearly community.
:heart: :heart: :heart:
If you have something specific in mind I would love to add it to this proposal or otherwise include it in the research. Ideally we are building this to plug into existing CDP protocols without having to make any changes to them.
Borrowing against ARB would give the DAO capital to diversify into other assets like GMX pool tokens that bear yield, LSTs like lido or rocketpool ETH, etc., without having to create tons of sell pressure on ARB. I actually would not support that personally, because its too much leverage/risk, but it would be a new option for diversification long term if the community wants it. Having the TBV decreases risk of such actions.
why triggering the saviour module at liquidation threshold instead of highening it at, i don't know, 1.10 health factor, and bring enough funds in it to send it back to a target of safety which could be 1.2, 1.3 or whatever? AKA why not doing it incrementally, and avoid having to act during a liquidation?
Thank you for the thoughtful reply, @GFXlabs! I really appreciate your time.
but what would be the natural way to unwind the debt?
Thank you for the thoughtful reply, @GFXlabs! I really appreciate your time.
Excellent question.
After the CRV near-miss, protocols are unlikely to just let Arbitrum pledge near-infinite amounts of ARB to continue collateralizing the debt. What’s the protocol to reduce the debt and not just increase the collateralization?
Or are we assuming funds will become available from the STEP or other programs to service the debt?
Hope this answers your questions! I would love to chat more any time.
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This pilot stage proposal seeks to complete Research & Development, as well as a comprehensive risk analysis, on a new Treasury Backed Vault (TBV) system which gives Arbitrum DAO the option to borrow stablecoins from existing protocols against ARB, with extremely reduced liquidation risk. It expands on existing discussions/designs of “DAO Owned Liquidations” for CDP protocols. Liquidations are always prevented by automatically pulling more collateral from the DAO treasury, increasing the collateral ratio of the loan.
This is an interesting idea, but what would be the natural way to unwind the debt? After the CRV near-miss, protocols are unlikely to just let Arbitrum pledge near-infinite amounts of ARB to continue collateralizing the debt. What's the protocol to reduce the debt and not just increase the collateralization? Or are we assuming funds will become available from the STEP or other programs to service the debt?
Thanks for the question and feedback 🙏
The main limiter in that case would be the allowance set by the DAO on the max number of ARB that can be pulled. Technically Arbitrum DAO can mint new tokens if I recall correctly. To keep the stablecoin backed a liquidation would have to be processed at some point.
Yes, if the DAO abandons the position and no more ARB is pulled, normal liquidations will happen according to the protocol. (According to the current design)
Thanks for the question and feedback 🙏
The main limiter in that case would be the allowance set by the DAO on the max number of ARB that can be pulled. Technically Arbitrum DAO can mint new tokens if I recall correctly. To keep the stablecoin backed a liquidation would have to be processed at some point.
Yes, if the DAO abandons the position and no more ARB is pulled, normal liquidations will happen according to the protocol. (According to the current design)
This is not like Luna, since ARB is not the backstop or governance token for any stablecoins. We intend to make this available for existing stablecoin protocols so stables are backed by a basket of assets and not dependent solely on arbitrum DAO for stability.
For example Open Dollar has a debt limit of 5M stablecoins that can be minted against ARB, but another 20M that can be backed by rETH and wstETH Thanks for the feedback, if you have other suggestions on how to communicate this difference clearly I'm all ears.
Thanks for the question and feedback 🙏
The main limiter in that case would be the allowance set by the DAO on the max number of ARB that can be pulled. Technically Arbitrum DAO can mint new tokens if I recall correctly. To keep the stablecoin backed a liquidation would have to be processed at some point.
Yes, if the DAO abandons the position and no more ARB is pulled, normal liquidations will happen according to the protocol. (According to the current design)
This is not like Luna, since ARB is not the backstop or governance token for any stablecoins. We intend to make this available for existing stablecoin protocols so stables are backed by a basket of assets and not dependent solely on arbitrum DAO for stability.
For example Open Dollar has a debt limit of 5M stablecoins that can be minted against ARB, but another 20M that can be backed by rETH and wstETH Thanks for the feedback, if you have other suggestions on how to communicate this difference clearly I'm all ears.