[Non-Constitutional] Fund the Arbitrum Grants Framework Proposal Milestone 1

Proposer: disruptionjoe.eth

Authors: Plurality Labs

Reviewers: ccerv1.eth, emu.eth, dennison.eth, nich.eth, zer8🧠.eth, pepperonijoe.eth, shawn164.eth, azeemkhan.eth, jmcook.eth, boilerrat.eth, jord.eth, ui369.eth, spengrah.eth, griff.eth

A 7 min explainer

TL;DR

This proposal requests 3.971 million ARB (0.08% of the total treasury) to fund the first of three milestones in a comprehensive plan to build an Arbitrum DAO Pluralistic Grants Program.

If successful, the project will further establish Arbitrum as the go to scaling solution for Ethereum.

Milestone 1 is the start of this journey with a funding request that breaks down as follows:

1. 2.6 million ARB (72%): Funding Arbitrum ecosystem development
2. 450k ARB (12.5%): Plurality Labs Services
3. 260k ARB (7.2%): Grant Program Managers
4. 300k ARB (8.3%): Matching Gitcoin funding pools using Arbitrum
5. 361k ARB project buffer*

*Representing 10% of funds requested. This will be used as a project buffer with funds either deployed in support of the program, recycled into ecosystem development or returned to Arbitrum DAO.

Successful completion of these deliverables will be a major value driver for the Arbitrum ecosystem. This success of this program will be assessed through metrics including, but not limited to:

• Number of active developers
• Dev Github quality
• Delegate engagement satisfaction
• Voter participation
• Capture-resistance

Deliverables

At the end of Milestone 1, Plurality Labs will have delivered:

Discover | Facilitate DAO native workshops

• Conduct Arbitrum DAO Vision, Mission, Values workshops
• Clearly define funding priorities in a bottom-up way
• Establish and confirm key success metrics for the Grants Program
• Scope out requirements for a Gitcoin Grants round on Arbitrum
• Establish clear communications cadences & channels for all key stakeholders to engage with the program

Design | Construct best in class Pluralistic Grants Program

• Identify suitable tools and technology to support a robust, secure and efficient grants program (i.e. Allo)
• Design and process map the end to end grant funding flows
• Design approach, process and channels for sourcing high impact grants ideas
• Design Grantee Registration process and grant pipeline management structure
• Design Grant Program manager application process and assessment criteria
• Work with Gitcoin to set up and launch a Gitcoin Grants round on Arbitrum
• Design credibly neutral grant funding evaluation criteria, reporting structure and cadence

Execute | Facilitate the successful execution of Pluralist Grants Programs

• Onboard and coach Pluralist Program Managers in grant program best practices
• Deploy 2.6 million ARB in funding to programs selected via the Pluralist Program Managers
• Deploy 300k ARB to Gitcoin Grants round recipients
• Oversee grants rounds to ensure they are free from fraud or abuse

Evaluate | Report back on grant funding outcomes

• Publish financial & analytics reports on grant funding value, volume, outcomes and other relevant metrics requested by the community
• Share key learnings and grants program best practices with Arbitrum DAO and the wider web3 community
• Collate community feedback and input on grants programs efficacy and success
• Evaluate, review and iterate based on this feedback to continually improve the overall impact of the Arbitrum DAO grants program

Motivation

We are here because Arbitrum intends to deploy one of the largest DAO treasuries ever to grow their ecosystem. A 10% difference in the allocation efficiency of funds could mean hundreds of millions of waste which would impede Arbitrum’s ability to actualize its full potential. It’s easy to say, “we can solve these problems later”, but we have an opportunity to start on the right track and solve these problems today

The Plurality Labs team has a chip on our shoulder. We have all been in DAOs and have seen how governance can fail, sometimes quickly, sometimes quietly. Our common thread is the shared values of trust, transparency and freedom combined with a passion for helping DAOs solve hard problems.

Issues with fully Centralized and Decentralized Grants Programs

Within web3 we have seen three main vehicles by which Grants Funding can be allocated to builders. Below we have outlined why we believe Arbitrum DAO should take a pluralist approach to grants funding.

Centralised Grants Program: Problems

• Limited transparency and auditability: A centrally managed grants program may lack transparency in decision-making processes, grant distribution, and fund allocation. This opacity can undermine trust and hinder the overall effectiveness of the program
• Limited community participation: Web3 communities thrive on active participation and collaboration. A centrally managed grants program may not effectively engage community members at all levels of the organization in the decision-making and codesign processes.
• Domain expertise and scale: Volume of grants requests may overwhelm capacity of small centralized team who may also lack domain specific expertise on programs requesting funding
• Bias and limited experimentation: Centralized Grants teams bring their standardized approach to grant vetting leading to a lack of experimentation which creates an inherent selection bias. The selection bias can even be non-malicious as they are biased by forces like being more likely to “open the door” for those who they know or have worked with before.h.

Decentralised Grants Program: Problems

• Lack of time: Delegates will stop engaging if the request is for more than is reasonable. Reviewing a grant, especially if it is a direct grant for larger amounts can be expected to take from 1-4 hours each. Delegates cannot take that much time.
• Inclusion and accessibility: Navigating the delegates and governance process of a large DAO represents a major lift for any prospective grants applicants. Those able to do so will likely have the best network and most capital, not necessarily the best grants ideas…
• Lack of coordination: With a decentralized grants program, decision-making and coordination are distributed among multiple stakeholders. This can lead to challenges in achieving consensus, coordinating efforts, and aligning priorities.
• Evaluation of impact: It is challenging for the DAO to assess the relative impact of different grants programs if no standardized reporting cadence, key metrics and evaluation criteria is maintained centrally.
• Mitigating risks and fraud: Decentralized grants programs are vulnerable to risks such as fraudulent proposals, mismanagement of funds, and malicious actors. Implementing mechanisms for due diligence, verification, reputation systems and Sybil defense can help mitigate these risks and protect the integrity of grants funding.
• Not fully developed: Even solutions like quadratic funding which lets users directly express their interest still require a program manager. They must shepherd the round and ensure quality fraud protection while making objective decisions about eligibility criteria, user and project appeals, and more. Until we design the open and permissionless protocol to handle these subjective components, the model still has single points of failure.

Launching the Arbitrum DAO Pluralistic Grants program

A Pluralist Grants program provides a perfect middle ground between Decentralized and Centralized Grants programs, unlocking the “best of both worlds.

At its core the Pluralistic Grants Model will see the Pluralistic Grants Program Allocator onboard 4-6 pluralist grants managers who will be responsible for distributing funds to grant applicants that benefits the Arbitrum Ecosystem. Sourcing and selection of these ideas will use novel combinations of bottoms-up and top-down mechanisms facilitated by Plurality Labs.

The programs will focus on specific needs within the ecosystem and their potential impact, for example, one Pluralist Grants Manager may focus on bringing a novel new technique for fund allocation or deep grants proposal expertise (i.e. Questbook). Another might stand up an Arbitrum gaming specific grants program. This flexibility allows for experimentation to allow Arbitrum DAO to discover what works best and allows for the specific needs of the Arbitrum ecosystem to be catered to.

Our approach includes a progressive decentralization of the Pluralist Grants Program Allocator. During Milestone 1, Plurality Labs will maintain accountability for sourcing, selecting, reporting on and delivering results of the chosen pluralist grants programs.

Milestones 2 & 3 will see experimentation with decentralized allocation mechanisms in a Proof of Concept stage with the goal of running at least one round of Pluralist Grants Program selection in a fully decentralized way without needing any corrective intervention.

💡The Pluralist Grants Programs will be selected after the proposal passes governance and the Discovery Phase is completed.

During the discovery phase, we will gather input from delegates and the broader community to define the vision, mission, and values of the Arbitrum DAO, and determine what needs to be funded.

Once this foundation is established, we will evaluate the best domains and mechanisms for allocating resources and capital to grantees. Pluralistic Program managers will play a crucial role in promoting experimentation, decentralization of decisions, and improved resource allocation outcomes.

We have observed that many previous grants programs has struggled with an inability to source great grant opportunities, which we hope to address in the following ways:

• Applications to be program managers should separate from the applications for grant program ideas
• Create a backlog of “high impact work to be done” be created, allowing competent builders to step to deliver impact for Arbiturm DAO
• Create a list of builders, potential grantees, and those interested in supporting the Arbitrum ecosystem which can be direct towards the “high impact work that needs to be done”
• Robust evaluation and reporting facilitated by Plurality Labs reduce time/effort/reliance on Project Manager and Grantees to demonstrate their success to the community
• Launch a Grant Program accelerator program to provide grantees clear guidelines, training and support to develop a high quality grant submissions

The selection of the Pluralist Grants Programs and their managers will involve a facilitated bottoms-up approach, sourcing ideas, people, and processes. Factors considered in the selection may include, but are not limited to:

• Previous experience delivering grants programs.
• Domain expertise and knowledge
• Ability to source innovate grants projects and support in the maintenance of a health pipeline of grants submission
• Maturity of program specific processes and tooling
• Nature of proposed funding allocation mechanism and data on demonstrated impact/success of mechanism
• Demonstrated involvement with and commitment to Arbitrum ecosystem and its values

This is an exhaustive list, and the criteria for selecting Program Managers will be further refined in the Discovery and Design phase, with input from delegates and the broader community. We are committed to maintaining credible neutrality in the selection process.

With this approach we are confident that the Arbitrum DAO Pluralistic Grants Program will be fair, impactful and ultimately support the growth and success of the Arbitrum Ecosystem.

The Pluralistic Grants model also provides 300k ARB to support matching Gitcoin rounds which run on Arbitrum.

This is not payment to Gitcoin the organization, but a payment to grant recipients in a Gitcoin Arbitrum round we intend to launch. Gitcoin core rounds include support for Open Source Software, Ethereum Infrastructure, & Zero Knowledge. This aligns with the stated Arbitrum goal of supporting the Ethereum ecosystem while also attracting users which might otherwise choose another L2. It also allows us to tap into support of the Gitcoin DevRel team to help source builders, host hackathons.

Funding grants this way will not only benefit the Arbitrum ecosystem, but enable the Gitcoin product team to prioritize making their Allo protocol available on Arbitrum. By being able to execute pluralistic programs on their Allo protocol allows us an open data substrate which will enable us to compare programs and projects across the pluralist framework. It also allows program managers to use quadratic funding and quadratic voting (if they choose) which require Sybil defense. This is a crucial enabler for the next section.

Improved Accountability, Transparency and Reporting are key benefits of the Pluralistic Grants model.

Web3 spends 100’s of millions annually on different grants and grants programs and to date, there has been little focus on the efficiency of those grant programs or the efficacy of their spend. We intend to build grant program efficiency metrics as well specific grantee project efficacy (or results) metrics.

By using a common framework for executing a plurality of grant programs, we have the ability to identify, track and refine metrics for each unique grant program. Something that has not been done to date, and would be more difficult to do in stand alone grant environments.

By doing this, we can begin to build qualitative data on the efficiency of each distribution method in a way that can identify improvements for that mechanism, but also compare mechanisms across stakeholder groups and use cases. By building these metrics, Arbitrum will be able to parse down the crowded field of grant-execution options and deliver the most effective Grants Program web3 has seen to date.

Grant program execution typically stops when the money has been distributed, and we think that is premature. As part of this program we intend to experiment with a series of existing post-project evaluation tools (after action reviews, qualitative/quantitative metrics, case studies) but add in or invent novel web3 project evaluation solutions (hypercerts, on-chain analysis, panel reviews) to rate every project receiving funding in a way that can demonstrate the efficacy of the spending as it relates to building the Arbitrum ecosystem.

We know there are inefficiencies and fraud in the web3 grant mechanisms; this part of the program allows Arbitrum to make the most of its investments. Doing this will lead to a higher return on the Arbitrum investment and more funding for the most worthy projects, while leaving room to experiment with the novel web3 mechanism that can help us revolutionize the grant process.

Multisig Management

All funds will be sent to a Grants Safety Multisig*. This multisig will review, sign and execute all fund disbursement for the Arbitrum DAO Pluralistic Grants program. The role of the grants multisig is to process the requests made by Plurality Labs while also being able to review issues. At no point will Plurality Labs hold the funds designated for grant funding. The final form of this proposal will either name the selected individual or state the electoral process.

💡 We also intend to use the Zodiac module shared by the Tally team allowing the DAO the ability to clawback funds from the grants program at any time.

Team

Plurality Labs Team

Disruption Joe

Ran grants operations for Gitcoin Grants rounds 8-10 growing gross marketplace value from $2 - $10 million. First Gitcoin employee to leave the company and work full-time for the DAO. Started the Fraud Detection & Defense (FDD) workstream. FDD is responsible for stopping over $3 million in fraud while Gitcoin Grants delivered over $50 million in funding.

More reading about the work done in the FDD Review. Joe will be supporting overall project management and grants framework design.

Pepperoni Jo3 (on behalf of r3gen.finance)

Cofounder of r3gen, a web3 financial service provider working with clients including Squid, Coordinape, Inverse Finance and Treasure DAO. Previously PwC consulting alumni specializing in Org Design, Operational Excellence and Change. Joined web3 full time at Index Coop where he served on the Leadership Council as Head of People and Community.

More information on the r3gen services and team can be found here.

Mary Quandt

People-first strategic design-thinking and organizational development leader. Partners with global business leaders to accelerate business strategies and execute people- and organization-focused solutions. Leadership approach combines possibility and participation while keeping firm foot in practical implementation. Thrives on building, leading and growing inclusive cross-functional teams to challenge the status quo. Experience includes IndexCoop, US Election Assistance Commission, Johnson & Johnson, Human Performance Institute, GE, Amazon, Martha Stewart and Charles Schwab to name a few.

Shawn Grubb

As former CIO, CEO, and non-profit chairman of the board, Shawn spent his corporate career preparing for DAO governance. Introduced to the blockchain in 2015 he went full-time degen in 2019 but moved to DAOs in 2021 when he joined Index Coop leading the governance communications and people operations. In August 2022, he joined Gitcoin where he currently leads governance

Looking Ahead: Milestone 2 & 3

The overall plan is to deploy a pluralist grants framework which operates in a politically decentralized & capture resistant way. This will fund grants programs in a continuous way that minimizes bureaucracy and increases action while providing accountability as part of the system.

Prior to releasing funds for milestone 2 to begin, Plurality Labs will offer a review of the previous milestone accomplishments and failures. They will provide a breakdown at that time based on how this project evolves.

Milestones 2 & 3 are about scaling the frameworks and models we use while iteratively testing them. After Milestone 3, we hope to have built the needed components for this whole process to run on chain.

If successful, Plurality Labs would no longer be needed as a project manager of the overall grants program. Onchain decisions of the community would allocate funding to the programs which have been proven useful. Plurality labs could then be an equal peer to any other program competing for a portion of continuous funding available to the ecosystem.

Voting Options

1. Yes, fund Milestone 1 (3.971 million ARB)
2. No, do not fund Milestone 1
3. Abstain