Abstract

In order to foster good governance participation in the ArbitrumDAO, this proposal puts forward the DAO Incentive Program, distinguishing between delegates, rewarded for their voting record and public rationale, and contributors, rewarded through a peer recognition program and "Nudge Seasons" to encourage positive governance actions. Since it serves as a continuation of, and builds upon learnings from the Delegate Incentive Program, we refer to it as DIP 2.0.

Key Terms

• Delegate: A party with voting power used to vote on proposals, eligible for voting activity-related incentives.
• Contributor: A party who positively supports ArbitrumDAO governance and/or the broader Arbitrum ecosystem.
• Peer Assembly: A peer-to-peer community group enabling contributors to receive rewards.
  • Vouches: Public endorsements from existing members and Arbitrum Aligned Entities (AAEs), required for new members to join the Peer Assembly.
• Peer Recognition: A monthly reward system for impactful contributions to the ArbitrumDAO/wider ecosystem.
  • Peer Assembly Recommendations: Submissions made by Peer Assembly members and AAEs to nominate impactful contributions for rewards.
• Nudge Seasons: Time-bound initiatives to encourage specific positive behaviors among contributors.
• OpCo: The AAE overseeing the DIP 2.0, authorized to modify the program, hire/terminate the Program Manager, and approve budgets.
• Program Manager: The team hired by the OpCo to handle day-to-day operations of the DIP 2.0.

Motivation and Rationale

We propose a new incentive program for the ArbitrumDAO that separates out rewards for delegates and contributors:

• Delegate. A party with voting power with the capability to vote on proposals.
• Contributor. A party who positively supports ArbitrumDAO governance and/or the broader Arbitrum ecosystem.

A delegate can be a contributor, but we should not assume that a contributor must be a delegate.

The incentive reward paid to delegates will only focus on their voting record and making public the rationale behind their decision. On the other hand, for contributors, there will be two forms of rewards available:

• Peer recognition program. Focus on identifying impactful contributions in the DAO based on the recommendation of their peers.
• Nudge seasons. Nudge the behaviour of contributors towards actions that are perceived as positive for the Arbitrum ecosystem as a whole.

We note the DAO incentive program should not replace a salary-like paid role or be sufficient to self-sustain an individual. However, it could be a stepping stone to enable parties to eventually find part time or full time work in the ecosystem. Most importantly, all payments should be viewed as a ‘thank you’ from others in the community.

To make the above work, we also propose introducing an Arbitrum Peer Assembly via a peer-to-peer vouching system. It requires existing members and/or AAEs to vouch for others to join before they are eligible for any payments, for delegates and/or contributors, in the DAO incentive program. The vouching system is designed to allow members to hold each other accountable and boost comradery among participants.

Specification

Rewarding Active Delegates

This program is designed to be objective and on a per-proposal basis. Any member of the Arbitrum Peer Assembly is eligible to receive a payment provided they:

• Cast a vote on a proposal,
• Publicly post rationale for how they voted and why.

Tracking Active Voters

Long-term program objectives are measured through the following key performance indicators:

• Increased active voting power. The total amount of active voting power is steadily increasing over time.
• Reduced voter apathy. The share of active voting power compared to total delegated voting power is increasing over time.

The following metric will be used to track the cost-effectiveness of the program:

• Dollar spent per vote cast. A cost-efficiency metric that measures the total program expenditure divided by the number of votes incentivized in a proposal. It represents how much funding is required to generate a single vote through the program.

The cost-efficiency metric should find a fair cost per vote that encourages delegates to participate without overspending the budget. For example, if the incentive budget per proposal is $10,000 and if the program manager decides to incentivize up to 200,000,000 votes per proposal, then the dollar spent per vote cast is 0.00005.

Periodic Incentive Budget

Proposal type	Incentive Budget	Payout Cap	Reward Distribution	Contributor Bonus
On-chain constitutional	10,000 ARB	700 ARB	Proportional to voting power	1,000 ARB
On-chain funding transfer	8,000 ARB	500 ARB	Proportional to voting power	1,000 ARB
Off-chain decision making	8,000 ARB	500 ARB	Proportional to voting power	0 ARB
Off-chain temperature check (non-binding)	3,000 ARB	300 ARB	Quadratic relative to voting power	0 ARB

Table 1: A hypothetical illustration of incentive grant budget for delegate rewards

As seen in Table 1, the program manager, in agreement with the OpCo, is required to set out an incentive grant budget that is paid on a per-proposal basis:

• Proposal type. Type of decision voted on by the DAO,
• Incentive budget. Budget allocated to a single proposal,
• Reward distribution curve. Strategy for allocating the incentive grant to active voting power,
• Payout caps (per proposal). Maximum incentive grant a delegate can receive from this vote.
• Contributor bonus. A bonus that is split between assembly members nominated by the proposal author.

The incentive grant budget for proposals that are published within a 3-month period must be shared at the start of every 3-month period by the program manager alongside an optional maximum cap for the entire period.

The intention is to provide delegates with predictability on the reward structure in the coming months while allowing the payout strategies to change over time. For example, as seen in Table 1, if an on-chain constitutional proposal is voted on by the DAO, then a 10k ARB incentive grant will be allocated for that specific proposal.

The program manager, in agreement with the OpCo, reserves the right to offer bespoke incentive grant budgets for specific proposals. For example, if the DAO is required to participate in several sub-proposals within a single initiative (like in the STIP), then all such proposals may fall within a single bespoke incentive budget. They may decide not to offer any reward in order to prevent potential abuse such as an avalanche of unnecessary proposals or decisions that are deemed very minor in nature (including cancelled proposals). If so, the rationale should be published prior or during the on-chain/off-chain proposal by the program manager.

The contributor bonus allows the proposal author to nominate contributors who made a meaningful impact on the proposal. This is not limited to posts on the forum, but any communication medium that enables the contributor to support the proposal author. The proposal author can name a handful of contributors alongside a short description on each contributor’s impact on the proposal. This is sent to the program manager, who will then publish it to the DAO. The bonus will be split between the named contributors. The contributor bonus is optional and it should be viewed as a small ‘thank you’ for making the proposal better.

Finally, the incentive budget should define a minimum voting power required to be eligible for delegate rewards. It will apply across all proposal types. This should be set to a reasonable value to help reduce the overhead of tracking rewards.

Peer Recognition Program for DAO Contributors

The program is designed to recognise contributors who have made meaningful contributions to the ArbitrumDAO or the wider ecosystem as acknowledged by their peers.

Eligible Contributions

The contribution should be:

• Worthy in stature such that there is likely to be no objection that the work deserves praise among the DAO,
• Not solely restricted to activities within the DAO, but any contribution that aids and strengthens the Arbitrum ecosystem,
• Focused on voluntary activities, but eventually recognized by others as impactful.

The program may reward recurring tasks, but it should be an exception. For example, if a contributor hosts a monthly call, this will not result in a payout being issued every month.

Rankings and Rewards

The program manager is expected to act as an ordering service:

• Review all recommendations,
• Pick a final ordering,
• Require approval from the OpCo (including any required modifications).

The full final ranking will not be publicly released. Only the top N recommendations, where N is a program-defined threshold, will be published to the DAO. Each selected recommendation from the top N will receive a fixed payout.

Additionally, if there is an outstanding contribution, the program manager (with agreement from the OpCo), can issue a ‘special reward’ with a higher payout. These should be rare and generally a moment of great praise.

Initial Configuration for Peer Recognition Program.

• $500 in ARB per recommendation,
• N=5, top 5 recommendations,
• Up to $2,500 in ARB per-month for the outstanding contribution reward.

For clarity, there is no obligation to publish exactly N recommendations every month. Only those deemed worthy of a reward should be published and in some months there may be none. If there are too many worthy contributions to fit within a single month, then the program manager can carry some over to future months, to ensure that eligible contributions are eventually recognized.

Submission process

Every month, the program manager will request all members of the Arbitrum Peer Assembly, as well as AAEs, to submit their recommendations. It should be written in the following format:

• Contributor’s name:
• Contribution:
• Why was it impactful:

Note, the recommendation should be concise and easy to digest as it will be published (alongside the reward) if it is chosen by the program manager. A participant can also submit a recommendation that covers their own actions.

The recommendation must be sent privately to the program manager. It is up to the recommender to ensure the program manager has acknowledged that it was indeed received by them.

For Example:

• Contributor’s name: tnorm
• Contribution: Shepherding the STIP proposal
• Why was it impactful: The DAO was in a gridlock. Camelot’s proposal had failed, not because it was bad, but other DeFi protocols wanted access to incentive grants too. It became a tragedy of the commons that tnorm was able to resolve. He helped push a proposal through the DAO that enabled the wider community to decide the allocation of incentive grants and gave all protocols a fair shot at receiving them.

Review process

The program manager will collect and review all recommendations. It is their job to rank the recommendations according to a set of principles. For example:

• Originality & Initiative. Did the contributor proactively identify and address a gap or need?
• Arbitrum’s image. Does the contribution enhance the overall perception of Arbitrum in the wider community?
• Knowledge sharing. Has the contributor made their work accessible so others in the DAO can learn from it?
• Impact. Did the contribution meaningfully advance an initiative that would otherwise have slowed in progress, stalled, or simply failed?
• Sustainability & Relevancy. Can the work be maintained, scaled or built upon by the DAO?
• Peer Recognition. Would other contributors and delegates widely acknowledge this as a meaningful and worthy contribution?

Of course, we expect other considerations to arise over time and this list should not be viewed as exhaustive. The list simply helps set the tone on what it means for a contribution worthy of stature. An updated list of principles will be published to the DAO periodically to ensure everyone is aware of the criteria used to rank the recommendations.

Nudging Contributor Behaviour

The program is designed to nudge certain behaviours of participants that can positively impact the Arbitrum ecosystem through the offer of rewards.

Prior Success

In the previous iterations of the delegate incentive program, we witnessed delegates perform actions in order to earn rewards, such as leaving comments on the forum, joining governance calls, or voting early in Security Council elections.

Nudge Season

The program manager, with agreement of the OpCo, can put together ‘nudge seasons’ where contributors are offered a reward for performing certain actions within a timeframe. The contributors can provide evidence to the program manager that they have completed the action, as specified by the program manager at the time of the nudge season being announced, and if evaluated by the program manager as doing so, they will then be eligible to receive a payment for doing it.

For example:

• “A budget of 3000 ARB will be split among all voters who cast their vote within the first 5 days of the Security Council elections. It will be paid out proportionally based on the voting power that participates in this nudge season.”

Anyone who is registered in the DAO incentive program’s Peer Assembly will be eligible as long as they adhere to the conditions of the nudge season. In the above example, whether or not they meet criteria can be proven by on-chain activity.

All ‘nudge seasons’ should be accompanied with a single KPI/metric that can be used to evaluate whether it was successful in nudging behaviour. The program manager should provide a small report with data that demonstrates if the KPI was achieved after the nudge season has concluded.

A nudge season can be broad and may cover activity within the Arbitrum ecosystem. This may include participation in governance, helping real-world events or amplifying announcements. What will be nudged is subjective in nature, but when it comes to evaluating whether the behaviour was nudged, that should remain as objective as possible.

Arbitrum Peer Assembly

The DAO Incentive Program introduces a new community where parties can only join if they are vouched by existing members and/or AAEs. The intention is to enable the DAO to hold each other accountable to their actions. All payments in the DAO incentive program are contingent upon joining this assembly.

Bootstrapping Eligible Members

We have picked the top 8 earners from the soon expiring Delegate Incentive Program from (January - August) 2025 to bootstrap the initial list of eligible members:

• L2Beat
• Jojo
• Tekr0x.eth
• MaxLomu
• TempeTechie
• Reverie
• GFXLabs
• Gauntlet

There are some special requirements for these members:

• Must receive 3 vouches within the first 2 months of the program starting,
• Cannot receive a vouch from someone who they directly vouched to join the program,
• Initial members cannot vouch for each other.

The intention to keep this list short is to make this process manageable and it should not be perceived as a special privilege.

Additionally, to aid the bootstrapping process, all registered members can offer multiple vouches until 50 members have registered in the program. Priority registration will be given to members who were previously registered in DIP v1.7. Once 50 members are registered, then all members will be restricted to 1 vouch per month.

Vouching Process

A dedicated thread on the Arbitrum Forum should be created for the new member who wants to join:

• Brief description of the candidate alongside why they want to join,
• 3 members must reply and publicly vouch for the new member to join.

Once a member receives enough vouches to join the assembly and assuming any compliance requirements are completed, the new member will then be considered a member of the program and will have the authority to make their own vouch for others to join. As is the case for the initial members, new members also cannot receive a vouch from someone who they directly vouched to join the program. Registration is only finalized once it is confirmed by the program manager on the relevant thread.

If a member wants to remove their vouch, then they will be required to reply on the same thread that it should be removed.

If a member has left the program for whatever reason (i.e., inactive), then the relevant forum thread will be locked.

Tracking of Rewards

The Program Manager is responsible for keeping track of all rewards for delegate voting, the peer recognition program, and the nudge seasons. It should be available on a public spreadsheet for all members to access.

For clarity, all records should be kept on a per calendar month basis, and payouts should be issued shortly after month’s end. When payouts are computed, the program manager should accurately keep track of total accrued rewards and total payouts, to ensure only the difference carries over to the next month.

All members already registered in the Arbitrum Peer Assembly will automatically accrue rewards. A member must earn at least $200 across the DAO incentive program before a payment is issued. The allocation will carry over to the next calendar month, but it will expire after 3 months if the threshold is not reached. This is simply to avoid sending dust transactions alongside the overhead in doing so.

Finally, non-members who have registered their intent to join the program via the Arbitrum Forum, can accrue rewards. They must complete the vouching and compliance process within the same calendar month that they submit their application to the program, in order to be officially registered into the assembly. If they fail to register by the month’s end, then they will forfeit any accrued rewards.

Governing Rules

All members are required to adhere to the program’s terms and conditions which outline the expected behaviour of members and how they conduct themselves when interacting with others.

Additionally, there are some program-specific rules, that will be enforced:

• Active members only. If a member has not received any payments in a 6 month period, then they will be removed from the program.
• Minimum recommendations. If a member leaves the program, then the party will have to find a replacement to vouch for them within 2 months.
• Non-Transferability. Membership is tied to a single individual or entity.
• Vouch accountability. If a member is penalized, then the members who vouched for them may also incur a penalty.
• One vouch per month. A member can only vouch for one candidate per month.

For clarity, it will be the Program Manager’s responsibility, with the OpCo’s approval, to uphold the rules with the ability to suspend or ban members from the Arbitrum Peer Assembly. If there is disagreement with the enforcement, then an appeal can be made to the OpCo who will make the final decision.

Membership Depends on Humanity

The DAO Incentive Program’s goal is to activate delegates and contributors who will express their opinion through voting or participating in governance. The program will exclude platforms that enable non-human activity (i.e., AI agents) or enable token holders who sell their votes for short-term profits. Additionally, all organisations classified as an AAE and the Program Manager, will not be allowed to earn any payouts, but will have the power to offer vouches for new members.

Facilitated by the OpCo

The Arbitrum OpCo Foundation (“OpCo”) retains the authority to change any aspect of the program. Any major change to the program should be published publicly to notify members of the Arbitrum Peer Assembly.

Additionally, the OpCo are in charge of hiring (and terminating) the program manager with an appropriate service level agreement. It is expected that the program manager will handle the day-to-day operations, but rely on instructions from the OpCo when necessary.

The Arbitrum Foundation, with agreement of the OpCo, will facilitate the program from the get-go with the intention that everything is eventually handed over to the OpCo. We expect different aspects of the DAO incentive program to be handed over as the OpCo ramps up. For clarity, anything that states “OpCo” in this proposal will be handled by the Arbitrum Foundation from the onset.

Budget

The Delegate Incentive Program multisig is still holding approximately 7 million ARB. The DAO incentive program will absorb the entire budget for use in this program.

The OpCo will use this budget for:

• Payouts related to the program,
• Program manager compensation,
• Other miscellaneous costs that arise.

Payouts related to the program, including the delegate rewards, the nudge seasons, and the peer recognition program, will be published to the DAO on a regular basis. For example, in relation to the delegate voting, the budget is allocated every 3 months and the payouts tracked on a per-month basis. This empowers the DAO to monitor how the budget is being used in real-time.

The program manager’s compensation and scope of work will be announced after it is negotiated by the OpCo. This will be periodically reviewed by the OpCo and any changes will be published to the DAO.

We do not expect miscellaneous costs to be substantial. An initial budget of $50k per year will be allocated. If the costs exceed this budget, then the OpCo’s OAT must approve and notify the DAO.

Finally, a transparency report will be prepared by the program manager and published every 6 months, to track total spend of the program alongside whether the key performance indicators and other relevant goals are being met.

Timeline

The official start date will be announced after the proposal has passed and members have begun onboarding to the Arbitrum Peer Assembly. The intention is for the DAO Incentive Program to run for 1 year. If the OpCo, based on feedback from members of the Assembly, deems the program is running well, it may authorise the program to continue operating beyond 1 year. If not, any excess funds will be returned to the DAO Treasury.

The off-chain proposal was posted on October 23rd and requires a non-constitutional quorum for it to pass. Assuming all goes well, the intention is to begin the program by November 1st, 2025. If the timetable is delayed, for whatever reason, then we plan to still allocate a budget and retrospectively reward any votes that have occurred during the intermission.