Arbitrum Multi-sig Support Service (MSS)

Abstract

We propose creating a structured multi-sig framework to facilitate funded programs within Arbitrum DAO to reduce operational spend and increase proposal efficiency.

As of April 2024, the DAO administers six programs with a designated budget for multi-sig signing. The aggregate budgeted cost across these programs for signers stands at 158,000 ARB, with an annualized total expenditure, based on estimations, of 470,000 ARB or $627,840 at an ARB price of $1.34. This is a high cost for the DAO to pay on a purely operational function, especially considering that these operational costs will likely rise as more programs are funded.

We propose creating a “Multi-sig Support Service” (MSS) to unlock significant cost-saving opportunities, lessen committee fragmentation, ensure signers are competent with multi-sigs, and reduce friction for contributors creating proposals. The MSS will comprise 12 elected individuals to all DAO-funded multi-sigs. They will be compensated a base USD amount, paid in ARB, for performing these services across the DAO.

This proposal also funds the implementation of r3gen monthly Token Flow reporting on inflows (revenue) and outflows (spend) across the DAO as well as providing detailed information and analysis on spending from MSS multisigs. Together, this proposal will help create a “backroom finance” function within the DAO that can be used across different initiatives.

The proposed changes offer the potential to generate substantial cost savings, estimated to be ~$315,000 per annum, while increasing efficiency, transparency, and security of DAO spending.

Motivation

The Arbitrum DAO oversees six programs which pay multi-sig signers. Each multi-sig typically has five signers, except for the STIP and STIP backfund programs, which share the same multi-sig and have nine signers budgeted for. The table below outlines these programs, including the amount funded, duration (in months), and annualized figures to project a forecasted amount if future programs were to continue in the same manner.

Here’s a breakdown of the programs:

The analysis underscores the operational unsustainability of the current expenditure level, with an annualised cost totalling $627,840 USD based on the average ARB price of $1.34 between August 7, 2023 and April 30, 2024, the period starting when Arbitrum DAO’s first multisig was funded.

The cost per transaction appears excessive when comparing these figures against the volume of unique transactions sent from each multi-sig. While analysis for all multi-sig wallets is included for completeness, the STIP/Backfund multi-sig provides the clearest picture of the “cost per transaction” due to its proximity to completion.

This analysis highlights the urgent need for restructuring and cost optimization within the Arbitrum DAO to ensure financial sustainability and operational efficiency in the long term.

It is also worth highlighting that the current structure has individuals appearing across multiple different multi-sigs, drawing income from each.

Currently, the DAO experiences a significant dispersion in its structure, where each funded program operates its own multi-sig. This fragmentation not only leads to redundancy but also elevates the overall cost of operations. Through the “Multi-sig Support Service” (MSS), we can eliminate these inefficiencies and significantly reduce unnecessary expenditure.

Additionally, individuals on multi-sigs are generally not elected, posing a challenge in consistently ensuring that only the most trusted and competent members manage these critical roles. By shifting to an elected model within the MSS, we can enhance transparency, accountability, and professionalism, ensuring that every signer meets a high standard of trust and competency.

Finally, contributors currently face friction in advancing proposals due to the need to wrangle signers, which can delay or deter the proposal process. The MSS aims to streamline this process by providing a reliable and consistent team of signers to be included in proposals, thereby reducing the time and effort of contributors, and accelerating the pace at which the DAO can execute its initiatives.

By creating a structured multisig committee, process, and reporting cadence around spending, the DAO will be better equipped to service its plethora of proposals that require payments and maintain transparency around the programs.

Proposed solution

The proposed framework for the Arbitrum DAO aims to address these issues by:

1. Arbitrum DAO elects 12 signers via Snapshot weighted voting, shielded with Shutter
   • Signers, when submitting their application to join the MSS, may opt in to be an MSS Chair, who will be responsible for communicating to the DAO on the MSS’s behalf. The three opted-in signers with the highest weight according to Snapshot will be allocated MSS Chairs.
2. For each new DAO initiative requiring a multisig, a new 12 signer multisig is set up.
   • The signing threshold will be dependent on the total dollar denominated value of the wallet i. 6/12: <$1M ii. 7/12: $1M-$5M iii. 8/12: $5M-$10m iiii. 9/12 $10M-$50M
3. Signers are paid a fixed monthly fee of $1500 in ARB using spot price at the time of payment. The MSS Chairs will be paid $2500 per month in ARB using the spot price.
   • We feel denominating the payment in a $ value is important to ensure the DAO pays a fair price for service rendered without the risk of ARB price movement leading to a series of overpayment or underpayment to signers for their duty.
4. This will be paid out monthly from the MSS multi-sig, which will be a 6/12 including the entirety of the MSS.
   • Payment for multisig signers will only start once the first new multisig is onboarded under the Multisig Support Service MSS structure.
   • Existing multi-sigs have the option to “opt in” to the MSS structure. If they do so any existing ring-fenced budget for multisig signing should be sent directly to a new MSS multisig. An MSS Chair will coordinate with the Program to manage the transition process. We expect a gradual turnover given the incentives at play and that most multi-sigs will not opt into the transition process.
5. The same process is repeated to onboard new MSS members 12 months after the first is complete (starting the process 4 months before the term is up to allow for ample time)

The funds in the multisigs belong to the DAO and the signers act as grant managers on behalf of the DAO in coordination with the Arbitrum Foundation.

We suggest the program is capped at initiatives seeking funding of $50M or less. This will help ensure that the program is not bottlenecked by one single initiative. For programs seeking more than $50M in funding, we suggest inspiration in design be taken from this model while creating a dedicated multisig committee and process.

MSS Mechanics

Who would be a suitable multi-sig signer?

• Actively involved in the Arbitrum ecosystem
• Prior experience being on multi-sigs. Understanding of batched transactions and transaction builder.
  • All multi-sig signers will also undergo training on security best practices and multisig efficacy at the commencement of their role. This training will be completed by Entropy Advisors.
• Able to complete KYC
  • The Arbitrum Foundation will conduct KYC on all multisig signers to ensure they are compliant and can serve this role for the DAO.
• Organisation or professional signers can submit a nomination to be a multi-sig signer. Only one member per organisation.
  • If nominating an organisation, one member of the company should be listed as the primary point of contact.

Creating new MSS multisigs

The process flow for creating new multisigs is as follows

• Snapshot vote passes
• Multisig is created by MSS Chair and signers onboard. The 3 chairs will rotate multisig creation responsibility
• Proposal passes Tally
• Vaults must be named well to help with organisation

Processing payments through MSS multisigs

To improve security and clarity of payments running through MSS multi-si

... please visit link below to view full proposal

https://tally.xyz/gov/arbitrum/proposal/47904929527582233304785161920776863155691990219898799848510210794906211250836