Introduction

The ArbitrumDAO approved the OpCo: A DAO-adjacent Entity for Strategy Execution which allocates 30M ARB towards an operation company whose mandate is to operationalise, assist and oversee proposals approved by the ArbitrumDAO.

The OpCo elections have been completed which appointed Patrick McCorry, A.J. Warner, and Frisson. The three council members have appointed Pedro Breuer as an OAT council member and are in final stage conversations with an identified candidate. All council members, alongside the Arbitrum Foundation, are now working towards operationalizing the OpCo entity and hiring the initial team to lead the organisation.

In the course of our work we reviewed the original OpCo proposal to fully internalize its mandate and operational capability. We discovered a number of restrictions during this process that may hinder the OpCo’s ability to fulfil its mission, attract the best talent who can contribute towards the OpCo’s success, and prevent the OpCo from proactively working on initiatives that can lead to future proposals in the DAO.

We want to take this opportunity to go through each identified restriction, how it may impact the OpCo’s operational capability, and a proposed fix that can resolve the restrictions.

Restrictions Identified & Proposed Solutions

We’ll take this opportunity to go through each restriction alongside the proposed updates for the OpCo. Keep in mind, we will pick the problem statement from the OpCo proposal that most accurately reflects the problem, as sometimes the same restriction is repeated several times in the proposal.

Inability to Interact with Service Providers

• Problem: It’s important to note that OpCo will not have the authority to enter into contracts with service providers or individual contributors for strategies not approved by the DAO through governance, unless directly related to its operational needs (e.g., hiring an accounting firm).

The OpCo is unable to enter service agreements with service providers or individual contributors unless it is related to its own operational needs.

To illustrate the issue, let’s consider an example where a contributor approaches the OpCo with a proposal for the DAO and the OpCo thinks it may be valuable for the ecosystem. Unfortunately, the OpCo cannot engage with a consulting firm to evaluate the idea. The only option available for OpCo is to encourage the contributor to seek permission (and potential funding from exploratory work) from the DAO.

We believe this situation is counter to the OpCo’s core mandate to support preliminary work on potentially promising proposals before it reaches the DAO. It should have the freedom to engage third parties, when necessary, to work on initiatives that it believes will receive a positive response from the DAO.

We believe it should be fixed with the following:

• Proposed Fix: OpCo has the authority to enter contracts with service providers or individual contributors for any matter it deems necessary to fulfil its mandate to support the ArbitrumDAO. The OAT will offer its recommendation to help adjudicate agreements.

This proposed fix will enable the OpCo to enter agreements with service providers or individual contributors alongside allowing the OAT to provide oversight on whether the agreement indeed fulfils the mandate of supporting the ArbitrumDAO.

Restrictive Treasury Spend

• Problem: OpCo’s initial capital allocation is meant to cover the entity’s setup costs and operating expenses, including full-time internal staff salaries, recurring administrative costs, and OpCo’s oversight committee.

The OpCo restricts its budget to only be used for operational costs related to employees, running the organisation, and administrative costs.

We can re-use the previous example to highlight the issue. Let’s assume a contributor approaches the OpCo with a proposal for the DAO. The OpCo cannot offer a grant to the contributor to investigate the idea further, in a similar manner to M&A Pilot or the Arbitrum Venture Initiative Pilot. To obtain any exploratory funding, the OpCo will need to work with the contributor on a proposal for the DAO, as opposed to offering its own funds to support preliminary work.

We believe it should be fixed with the following:

• Proposed Fix: OpCo’s capital should be reserved to cover the costs of administrative and operational duties as approved by the OAT, but any excess capital that is available can be used on a discretionary basis to fulfil its mandate as a proactive entity in the ArbitrumDAO.

This proposed fix will enable the OpCo to spend funds on a discretionary basis with oversight of the OAT. We believe this is mandatory to ensure the OpCo can be ‘proactive, meaning if the entity has the bandwidth and recognizes an area within its focus categories where developers could be made, it can propose a strategy’ as written in the original proposal.

Compensation for OpCo Employees

• Problem: 4M ARB allocated to a bonus pool for internal employees and OpCo’s oversight committee (3M reserved for internal employees and 1M reserved for the committee). If bonuses are paid out, they must be denominated in ARB and have a vesting structure attached, with internal employees’ payouts additionally being performance-based.

In many organisations, it is common for employees to have a base salary, token agreement that vests over time as a structure of the initial compensation package, and a bonus structure for good performance. We believe the bonus pool should be available to support token agreements as well as bonuses.

We believe it should be fixed with the following:

• Proposed Fix: 4M ARB allocated to a compensation pool and bonus pool for internal employees and the OpCo’s oversight committee (3M reserved for internal employees and 1M reserved for the committee). The compensation pool should be paid out in ARB with a vesting schedule, while the bonus pool shall be denominated in ARB, available for employees only and shall be performance-based. The exact split between the compensation pool and bonus pool shall be determined by the OAT Council.

This will offer the optionality to offer future employees a token vesting agreement alongside a bonus structure for performance related compensation.

Restrictions Around Council Elections.

• Problem: Any individual may apply to the OAT. However, all appointed individuals that have a non-observing seat, as well as any companies with which these appointees maintain a professional or financial relationship, are required to relinquish any and all contributor roles within the Arbitrum DAO that were obtained through an official election or ratification process conducted via Snapshot or Tally. As long as an individual has a non-observing seat on the OAT, they and their affiliates as defined above are prohibited from becoming an internal employee for OpCo, entering into service provider contracts with the entity, and applying to a contributor role related to the Arbitrum DAO that requires an official election or ratification process through Snapshot or Tally. Due to legal constraints, an OAT member and their affiliates as defined above cannot be members of another initiative’s or DAO-adjacent entity’s oversight committee. If an appointed individual or their affiliate as defined above sits on another oversight committee(s), they are required to resign from any such position(s) to be able to join the OAT.

The initial restrictions were crafted to prevent conflicts of interests for OAT council members, but as we have witnessed in the previous election, several promising candidates who generally have the best interests in Arbitrum in mind were unable to apply and join the OAT. For example, tnorm was unable to apply as it would restrict Gauntlet’s ability to enter service level agreements.

We believe it should be fixed with the following:

• Proposed Fix: An individual will be entitled to run as a candidate for the election. No single organisation should be overly represented in the OAT. There should be no more than 1 candidate associated with a single entity. No candidate with conflicts of interest that would prevent them from acting in the best interests of the ArbitrumDAO which include, but not limited to: affiliates with direct Arbitrum competitors, proven histories of exploiting projects and others. If a candidate is elected on behalf of an organisation, then the OAT membership is tied to them and cannot be rotated to someone else in the organisation. It will be up to the current OAT to enforce the above policy, and if a candidate is excluded from the election, then the rationale must be publicly disclosed to the ArbitrumDAO. If the DAO disagrees, they can initiate a vote with a non-constitutional quorum to overturn the OAT’s decision to exclude a candidate.

The proposed fix is inspired by the eligibility policy that is applied to Arbitrum’s Security Council as outlined in the ArbitrumDAO’s constitution. It relies on the current OAT to enforce the policy, but if the ArbitrumDAO disagrees with the decision, they can overturn with a vote that achieves a non-constitutional quorum.

OAT members are no longer required to relinquish their role as contributors within the ArbitrumDAO and are allowed to be a member of other DAO-adjacent entity oversight committees. The motivation is to ensure talented individuals can continue to support initiatives in the ArbitrumDAO while offering their expertise to help the OAT navigate its own future. Of course, a contributor may voluntarily decide to relinquish some roles depending on time commitments, to ensure they can dedicate themselves to this role.

Finally, if an OAT member is affiliated with an entity, that entity is no longer prevented from engaging in service provider contracts with the OpCo. Keep in mind, there will be a conflict of interest policy that will require a conflicted OAT member to recuse themselves on all matters related to that entity or any service agreement signed with OpCo.

Declaring Conflict of Interest

• Problem: Required to maintain a public record of all actual and potential conflicts of interest.

We believe this requirement is overkill as a requirement for the OAT elections. It is important that direct conflicts of interests are disclosed (e.g., working at a competitor), but potential conflicts of interests can become impractical for certain user profiles (e.g., prolific investors) who have valuable networks and skillsets that can be beneficial to the council. It is easier for potential conflicts to be handled within the council as they must be disclosed when necessary and the conflicted OAT member must exclude themselves from the matter.

We believe it should be fixed with the following:

• Proposed fix: All OAT members are required to publicly disclose actual conflicts of interests (e.g., employed by a competitor) at the time of proposing themselves as a candidate for the OAT election. Potential conflicts of interest should be privately declared, when required and if elected as an OAT member, with the OAT council. If the remaining OAT council believe it is indeed a conflict of interest, then the conflicted OAT member will be excluded from voting.

Our proposed fix aims to strike a balance. Candidates for the OAT election are required to publicly disclose direct conflicts, in a similar manner as Arbitrum’s Security Council elections. If the candidate is elected as an OAT member, then they can disclose potential conflicts of interests with the remaining members of the OAT council. If the OAT council believes it is indeed a conflict of interest, then the conflicted OAT member will be forced to recluse themselves from the matter at hand.

Ecosystem Support or Financial Management only

• Problem: As initiated, OpCo’s core mandate will be to enable the execution of DAO-defined strategies within the Financial Management and Ecosystem Support categories when requested by delegates.

The original proposal fixed the mandate of OpCo to only focus on ecosystem support or financial management unless there is an additional proposal that expands its scope. We are weary about pigeon-holing the OpCo’s mandate before it is operational as there are many verticals that can arise that the OpCo is best suited to tackle, but it is unable to do so without an explicit vote by the ArbitrumDAO. For example, taking the reins on governance related matters in the ArbitrumDAO seems like a natural fit for OpCo, but at present it is unable to take up that mantle due to this restriction.

Additionally, since the OpCo will offer oversight capabilities for proposals passed by the ArbitrumDAO and executed by others (like AAEs, contributors, etc), it should have the full freedom to take that on without contention on whether it is focused on ecosystem support, financial management or whether the DAO needs to approve a new domain for OpCo. In fact, as written in the proposal, the OpCo should proactively work on identifying opportunities and we believe restricting the OpCo to specific categories can be problematic in this pursuit.

We believe it should be fixed with the following:

• Proposed Fix: OpCo’s core mandate is to work on, facilitate, and provide operational and oversight support for strategies that have the potential to benefit the ArbitrumDAO.

The proposed fix will allow the OpCo to proactively work on and experiment with new strategies and verticals that it believes the ArbitrumDAO may positively vote on in the future. For example, it can begin work on a proposal focused on improving governance in the DAO or a future grant program for public goods. This can enable the OpCo to operate in a flexible manner with rough consensus amongst delegates and the OAT on initiatives it believes will ultimately benefit the ArbitrumDAO.

Of course, to carry out any large initiative, the OpCo will still need to request funds from the ArbitrumDAO’s treasury, so this flexibility should be viewed as enabling small-scale experiments by the OpCo and proactive work towards acquiring future funding when it is required on domains that it believes is important for the DAO’s success.

Conclusion

The proposed fixes should enable the OpCo to voluntarily enter service agreements with service providers or individual contributors using discretionary funding available to help access additional resources to fulfil its mandate to the DAO. Additionally, it helps fix the compensation structure for OpCo employees to be in line with industry standards and relaxes restrictions for OAT council elections to enable attract more candidates who have the interests of Arbitrun in mind.