S1 Ep.10 Arbitrum’s Governance Evolution: Delegates, Decentralization, and DAO Maturity
In this episode of Governance Futures, hosts Jamilya and Eugene sit down with Mateusz Rzeszowski and Raam Chandrasekharan of the Arbitrum Foundation to discuss Arbitrum’s evolving governance model.They trace the DAO’s journey from its “big bang” launch to today’s more structured system, highlighting initiatives like the new Operations Company and Arbitrum-aligned entities designed to improve accountability while keeping token-holders in control.<br>The conversation also explores delegate participation and incentives.With hundreds of thousands registered but only a fraction active, Arbitrum has tested different incentive programs - sometimes leading to unintended behaviors like AI-generated comments.Mateusz and Raam share how recent updates aim to reward meaningful contributions and attract larger stakeholders, while stressing that long-term governance should be driven by alignment, not compensation.<br>Throughout, they reflect on the balance between decentralization and efficiency, the importance of facilitation, and what DAOs can learn from political philosophy and even nature.It’s a candid look at how one of the largest DAOs is navigating growth and maturity.<br>Some of the materials we mention in the episode:Updates to the DIP- https://snapshot.box/#/s:arbitrumfoundation.eth/proposal/0x008f190725018c3db0e6464bf31d44f09a4d7773fd1486dff0c52c27b8aba289Vision for the future of Arbitrum - https://forum.arbitrum.foundation/t/a-vision-for-the-future-of-arbitrum/28962The Operation Company (OpCo) proposal - https://www.tally.xyz/gov/arbitrum/proposal/41351298371775353090222506531903916823291804644712693824312064183457809617851?govId=eip155:42161:0x789fC99093B09aD01C34DC7251D0C89ce743e5a4<br>Timestamps<br>00:00 – Episode introduction & host overview (Arbitrum’s governance context)04:32 – Guest introductions: Mateusz and Raam share their backgrounds09:37 – Governance overhaul: new vision with an Operations Company and aligned entities15:58 – DAO origins & maturity: from Arbitrum’s decentralized launch to structured evolution20:07 – Delegate engagement: registered vs. active participation in the DAO21:43 – Centralization debate: balancing operational efficiency with token-holder power25:10 – Decentralized legitimacy: how the DAO retains control over aligned entities27:31 – Governance facilitators: team roles as peacemakers and execution overseers37:08 – Delegate incentives: program design, gaming the system, and improvements44:57 – Incentive alignment: fostering intrinsic commitment versus financial rewards01:05:48 – Quick-fire quiz: one-word answers on the future of governance01:06:25 – Closing Note
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Transcript
We're trying to deal with with problems that humanity has been trying to solve for thousands of years. If you're thinking that some type of technological evolution can can solve human coordination, then you might unfortunately
be wrong. I think it's easier to start decentralized and organize over time
rather than start centralized and progressively decentralized over time. What does it mean to be a good citizen to both know how to be governed and how to govern? Becoming a delegate quickly became
a part time job with full time expectations. Many of the delegates, especially last year, they were spending twenty hours a week. But do you think the most disruptive force in governance will be? I'd say apathy. I'd say incentives or correct incentives.
Hello. I'm Eugene. And I'm Jamila. And this is Governance Futures, a podcast where we explore the past, present, and future of decentralized governance. So we just finished recording an episode with Mateus and Ram from the Arbitrum Foundation. And, yeah, Jamila, what are some of your takeaways from the conversation?
First of all, I'm so grateful that we're able to have this conversation. And, obviously, Arbitrum DAO stands out in just the landscape of DAOs, and it's great to be able to talk directly to people who do governance there. I'm very appreciative how open they were were they were, and it's clear that it's not, like, as easy and smooth, and probably there is just a lot of challenges. But I'm also very excited to see people who continue to stay within the governance just loop and continue to experiment, and it's it's really exciting. Some of the things that I loved is they are, it seems to me, very hopeful. And on the same side, they're very realistic, And it's very nice to have people who practice governance, but also they refer to some of the ideas and the books that they've mentioned. I could, I align in that sense very much. So it's really nice to see people doing this job and, experimenting, but also kinda, like, thinking about big picture as well, not just, like, on the ops or what's what is it that we have to do for tomorrow. It's always nice to also have that sense that there's, like, a bigger vision and picture and just appreciation for for decentralization or, like, polycentric governance that Ram was mentioning. So really excited. Very happy it happened. That's my feeling. What about you? How how do you feel post our conversation with Bram and Mateusz?
Yeah. Likewise. I really enjoyed the conversation. You know, I think we touched on a number of things that kinda they're going through and experiencing that just feel emblematic of the the maturation of DAOs more broadly. And it's really exciting to both see them kind of be leaders in many ways as well as just being open to to kinda sharing and, you know, helping spread that knowledge beyond just the arbitrary ecosystem. But, yeah, this kind of, you know, seeing the Opco come together and the focus of creating this operational excellence layer and getting these arbitral aligned entities, I think that's a really interesting move. And, yeah, it's gonna be fascinating to both see how it plays out there as that actual team comes together, and they put everything in place, as well as kind of seeing how the role of the delegates will evolve. Because I think, you know, both we're seeing this in one way. I feel like every ecosystem is seeing it in their own unique flavor, but we are seeing this kind of and all experiencing this growth and change together. So, yeah, I just really appreciate that, you know, through this, we get to talk to our peers in places that have been doing this for longer, And I appreciate how many times they brought up that their role is peacemakers and Yeah. Needing to make sure that everyone is hearing each other and, you know, getting that kind of, functional conversation going. So, yeah, a lot of, kudos to that team and really excited to hear what folks think about the conversation.
And now, here's to our chat with Mateusz and Ram.
Thank you for joining us today, Mateusz and Ram. Really excited to get into the conversation. And I figure for starters, it would be great to just hear, some introductions and kind of backgrounds or origin stories, so to say. So, yeah, Mateusz, we'll start with you, if you don't mind. Absolutely.
Thank you for inviting us, first of all, and thank you to anyone listening to this podcast. I hope there is some value to be found. Yeah. My name is Mateusz. I've been in this space since 2014, working professionally since 2018. In that time, I have been part of, multiple different, protocols, including Dapper Labs, Flow, MakerDAO, Polygon, and now most recently, Arbitrum. So I've joined the Arbitrum Foundation about four months ago. I'm still relatively new, but it's been a blast so far.
And, Ram, before we jump to actually Mateusz, I'd just like to ask the quick follow-up of what was the origin story prior to web three, or did you kinda start your career right into web three?
I started my career right into, web three to to answer that question. I think, what fascinated me the most was, the political nature of Bitcoin and then Ethereum once it's, once it launched. The, simple act of of of miners coming to consensus on the contents of of blocks is something that is, in my view, very meaningful. And I could spend a long time breaking it down, but that's essentially what got me into it in the first place, in addition to the usual, you know, digital gold of the twenty first century,
kind of, slogans. Got it. Thank you for sharing. And, yeah, jumping over to you, Ram, would you mind kinda telling us what brought you to where you are today? Sure. So, I joined the space in 2017,
through academia. I was very interested in how the technology could bring more integrity into our socioeconomic systems. And, this led me into the niche of decentralized governance within Web three. I was fascinated by how communities could collectively govern, and work towards their shared objectives in a transparent and more democratic way. I have been working in DAO governance and operations for a few years now. Prior to that, I was working in blockchain consulting, and I joined the Arbitrum Foundation in January 2024. Since then, I've been facilitating the end to end governance life cycle, also focusing on DAO operations. And I think what brought me to Arbitrum is that I consider it to be the best example of decentralized and autonomous governance being applied at scale.
And likewise, just double clicking. Did you, do you mind sharing a little more about kinda what you were doing in academia or what you were focused on that got you excited about web three? Because I know folks always, kind of question how do you get into a thing like governance. So we do, like, double clicking a bit on how people got there in the first place. Yeah. Sure. So,
one of my passions is sports. So I was interested in how Web three point zero and blockchain could, I guess, supplement the sports industry. So my dissertation at university was about how to eradicate fraud from, the ticketing events industry. So, you know, like having to eradicate touts and ensuring that your ticket has, the right provenance, it's original, how you, control, resell, price flows and and caps, etcetera, to to ensure that no one's being exploited. And then, yeah, that also got me thinking about how sports fans can collectively own and govern the teams they're so passionate about. And, I always like to say that the sports industry is probably one of the best that DAOs can apply to because all of the so called delegates or contributors would just already have that intrinsic motivation there. They care so much about their teams already. They probably wouldn't need to be paid at all or need any additional incentives because, they've already, you know, spent lifetimes and lots of money contributing to
to their respective teams. Yeah. I really appreciate you both sharing there. And, yeah, the ticket provenance deeply resonates as I remember in undergrad, it was LCD Soundsystems kind of farewell tour, and I had to buy secondary tickets and got to the venue and got a big fraud stamp right on it, which was super painful. But, despite how much I wanna keep double clicking with both of you on just the backgrounds and your own interest, I know we're here really to dive into, what's been going on, in the governance sphere of Arbitrum. And, Rom, I know you mentioned kind of what got you really excited about joining Arbitrum initially was how decentralized they were and, you know, it's really been cool seeing Arbitrum be a leader in that sense of having this kind of very decentralized governance system. And it seems in the last kind of six to twelve ish months, you know, there's been some very interesting updates in terms of the arbitral aligned entity vision, with the opco happening. I guess, would you mind, for both of you, would you mind just giving a little bit of, kind of how you see the narrative, say, of the last twelve months or so going, and what you see as some of the most exciting developments happening in the arbitrium ecosystem from a governance perspective?
I don't know Mateo Shoram who wants to jump in first on that one. I think I can kick us off on the opco and the new vision. I believe the arbitrum DAO, is at a very important crossroad where, you know, some key changes have to take place for the DAO to to keep evolving and, become more and more efficient. And so one of those is the Opco, the operational company, which has been proposed a while back, I believe, in October 2024 and has been, slowly but steadily, being realized. That is is one of those important components of the new vision to which I'll I'll revert in in a second. But the OPCO itself, sort of a a medication to several, several problems, that that the, that the DAO has been facing. For example, you could say with, with service providers reporting directly to the DAO, there's a lack of accountability mechanisms and, inadequate operational continuity. You see products and services be tied to a service provider, whereas it most likely would be much more efficient to have that that that product or service be tied to a particular mandate, and not a service provider. A DAO does, however, provide, you know, a a marketplace of of service providers that can be leveraged towards, any type of mandate. In addition to that, I would say that the DAO also, lacks in in some of the operational, capabilities. It's it's not the best mechanism to to ensure that the day to day execution of mandates happens. It does, however, provide a very strong legitimization layer, which I believe should be, should be retained at all costs. And so the operations company addresses these issues, by, for example, providing some legal capacities, with the dial numb or capable of entering contracts, and managing earmarked funds more efficiently. And it also provides an operational, layer. So it, unbundles the initiatives from service providers. It introduces operational continuity. So in the case that a service provider leaves, there is no there is no stop, of of services. And it also creates clear accountability mechanisms. So that's, one of the the major, I would say, changes in in how the Dow is going to to operate going forward. The second one would be, the vision. And so what the new vision does is in it introduces the concept of arbitral aligned entities, which are entities, that are fully focused on arbitral winning. You could say existentially so, to give an example of the Arbitral Foundation. Well, without Arbitral, the Foundation simply does not exist. And so what the vision puts forward is a change in scope of those existing, arbitrum aligned entities to become more involved in the functioning of the DAO, thus making it more efficient. There's this idea of guiding proposals through AEs, that is one of the, more important changes that the vision puts forward as well. And so there have been five, main arbitral aligned entities identified, including the Arbitrum Foundation, Ofchain Labs, the Opco, which I've mentioned before. Offchain Labs, I should also mention, is the main, engineering arm of Arbitrum. We also have the, Arbitrum gaming investment arm, the AGV, and we also have the entropy advisors entity who are responsible for, for strategy proposals as well as shepherding, you know, key partners through the DAO, which has also been a pain point in the past. Following on that, there are two main transformational changes. One relates to operations, the other one to delegates. So as it relates to operations, once a proposal goes through the DAO and is approved by it, it is tied to a particular AE whose job it is to fulfill that mandate. Right? So we're no longer talking about service providers going directly to the DAO. Instead, we would have a a mesh of AEs that are independent in their mandates but still collaborate fully, where each proposal or each, initiative is is tied to a particular AE responsible for its execution, and, you know, maintaining any type of service provider relationships, towards that goal. And then the second transformational change would be, as it relates to delegates, who, you know, would go away perhaps from the more day to day operational tasks that they have been undertaking before and more towards the strategic vision setting, for the DAO, which I believe is something that the delegates and contributors in the Arbitrum DAO are very uniquely skilled to do, and something that I believe they will they will excel at and already do, in fact, which I hope we can also get into,
during this podcast. For sure. Yeah. And I guess, Rom, obviously, if you have anything to add to that, please do. And especially given, you know, you've been there for going on almost two years, would love to hear kind of any surprises or anything in particular that's come up, especially with the, experience over that time? Yeah. So I think to supplement what Amatir said, I think it would help to provide some pretext as to how the DAO started, what its journey was like early days, and what it actually,
owns and governs. So since day one, the DAO has had full control over both the Arbitrum technology stack as well as the Arbitrum DAO Treasury. And because the DAO is the chain owner, it has full upgradability over the protocol through governor contracts. This means that it has always been able to autonomously make changes to things like network parameters, call smart contracts, the the governor contracts themselves, which kind of control the governance process, as well as the ability to permissionlessly spend its treasury. And it's worth noting that the Dow Treasury, receives income from arbitrum transaction fees, licensing fees for when projects deploy, their own orbit chains, as well as from the yield generated from the Dow's various treasury management initiatives. And, yeah, this essentially ensures that there has never been any single points of failure and also that decisions about how the ecosystem evolves are truly in the hands of the community. And I mean, since I've joined, I've seen many examples of organic initiatives that have been spun up from the community, such as the multiple incentive and grant programs that actually attracted builders and users, the initiatives to diversify parts of the DAOs Treasury across, real world asset products on Arbitrum, which actually led to, certain, global financial institutions joining the arbitraceutical system, as well as, as Matias already mentioned, bootstrapping some specialised companies like the AGV fund, like the Opco and like Entropy, and also doing things like setting up audit programmes and real life events. And I think it's worth noting that regarding the start of the Arbitrum DAO compared to many other DAOs, the Arbitrum DAO, I like to say, started with a big bang. So there was full decentralisation, full chaos. And as I said, the DAO was in complete control. So this meant that contributors were empowered to experiment, to own, and to run their own initiatives. And this was important because it let the DAO organically develop its identity. And the Abercrom Foundation would only really, get involved if we were asked to do so by the DAO or if it was necessary, because, of course, the the foundation is the DAO's legal wrapper to help it enter into contracts and agreements, etcetera. And the foundation would also maintain extreme neutrality and objectivity with its feedback. However, as the DAO matured, it quickly learned from its early experiences. There was more intentionality around spending, prioritization on accountability, structure, and operational efficiency. And, yeah, as its sense of identity grew, it started to, seek the foundation's guidance, ask the foundation to become more involved on certain initiatives, ask for our feedback, asked us to speak up on key issues, and, you know, give our opinions, especially as we were able to do so in a way that would serve the Dow's long term interests as we are considered to be one of the most aligned arbitrum entities there is, and also to take some more of the operational workload on. And I think this is actually what led to the new vision being published. It's what led to the operating company being spun up. Yeah. So that's some helpful pretext about how we arrived at this new vision of having multiple arbitral identities.
Thank you so much. I'm curious. Quick question here. What is the actual size of currently active delegates, you would say? Like, rough number. It doesn't have to be exact just to understand.
So I was checking this earlier. There are around 250,000 delegates who, who have actually registered to be delegates. In terms of active delegates voting or proposals, I'd say between three and four thousand cast their votes on average per per proposal. This is based on recent, proposals that have gone through the life cycle. In terms of delegates that actively partake in governance calls, commenting on the forum, I'd say around a 100. I don't know, Matias, if you'd agree with those estimates.
Yeah. I think it's it's close to the truth.
Thank you. Yeah. Going back to the vision for the future of Arbitrum that was shared earlier this year, I'm curious because it seems like the feedback from the community, at least what we can see publicly available, is that there is a lot of kind of, like, alignment with, involvement of AEs and the foundation to strengthen the, you know, due diligence and just operational efficiency overall. But at the same time, it seems like there are some concerns, over Ofqual potentially becoming a gatekeeper. So what would you say to people who might see this as a step towards more centralization? As you've mentioned, Ram, at the beginning, the Arbitron DAO started with a big bang, completely decentralized, and remains to be one of the most decentralized DAOs till this day. But what would you say to critics? Would say that this is kind of a step backwards towards more centralized governance?
Yeah. I think this is a very broad topic, so probably won't be able to to answer all of the, all of the questions or concerns here. But I would what I would like to do is, give the example of, a real life sovereign state, where you do have the sovereign or citizens who, essentially, you know, in a democratic, setting, elect their representatives, who then perform their, their duties, but are accountable at the end of the, of the cycle, to that sovereign or the citizens. What thou do what thou do and, the arbitrum thou in particular, I believe does very well is that it essentially superpowers this, this concept. Meaning, at any time of the day or night, there can be a proposal to essentially, change the entire system. Right? It can change the, the framework. So for example, removing the elected representatives or, completely reshaping the governance framework itself or in the case of technical proposals, changing how the protocol functions. That is what's in the hands of of Arbitrum, token holders. They can do that at any time, and that is where the fundamental legitimacy of the system comes from. And this legitimacy is not, you know, in any way in danger, as more and more efficiency is added to the system. Meaning, we can have, you know, specialized entities and and bodies that are, you know, legitimized by the DAO to perform certain mandates and make operational strategic at times decisions, but that does does not inhibit the ability of token holders to enact any type of change at any time, which I believe is is a critical component. And this is something, where I would say, decentralization does not suffer. That is something that also not all DAOs can claim. I believe that Arbitrum DAO is in fact one of the most, most, decentralized DAOs out there, and that is the the superpower that comes, with it. So that's hopefully, at least partly an answer to, to that question.
No. That's wonderful. I'm curious. A quick follow-up. So you would say that legitimacy of the decision, being taken or the processes, the main source of that legitimacy lies in decentralization. Did I understand you correctly? Or is it just that's tightly connected to it?
No. No. That's, I mean, that's depending on how you look at it, correct. Right? You have a set of decision makers. In our case, that's the token holders who then delegate their voting power to to a subset of of delegates, that at any time can enact change. And I believe that's something that that, you know, essentially legitimizes the, the the decision making of that entire, system. We can consider it political or or not, depending on on on the definition, but it certainly does bring legitimacy, and it it it is retained, in the new vision.
Yeah. I I would also like to add that all of these organizations or at least the ones that were spun up after the DAO was created were all incepted by the DAO. So the AGV was ratified through a proposal to allocate set amount of funds for for this gaming venture. The Opco, similarly, was spun up by the DAO. The current oversight and transparency committee has been elected by the DAO, or at least the first three members were elected. The second two members as per the proposal were then chosen by the existing members. The Entropy Oak team, they were granted one year of funds from the DAO a year ago. They've they've recently granted additional funds to continue running for another two years. So, yeah, as Matt was saying, all of these organisations were legitimised by the DAO already. Even with the foundation, the the DAO actually controls the foundation's vesting contracts. And according to the bylaws, you know, the DAO can choose to replace the foundation's directors and things like this. So the DAO truly does have control over all of these entities that may have a more operational, influence in in the future of the DAO, yet governance still sits within the hands of the DAO. And, something I like to say with regards to this transition is that, you know, I mentioned that the DAO started off with a big bang. But I think it's easier to start decentralized and organize over time rather than start centralized and progressively decentralized over time. Because by starting decentralized and letting the DAO learn and do what it wants, it actually ensures that its founding pillars are decentralized and ensures that the DAO can, grow its own strong identity. And as we're seeing, it can push back if it doesn't agree with something and it it's not afraid to to do so. That's an interesting thing because,
most DAOs start rather centralized, and then they try to decentralize, exit the community. So you've definitely taken a different approach here. I'm curious just because all of us here on the call, part of governance teams in different protocols. How do you see your role as governance facilitators, as governance enablers? Do you see yourselves as architect, maybe as negotiators, facilitators, peacemakers even. What would you say is that, that defines your role closer to how you feel your role is as a governance lead facilitator?
So I think it depends based on what exactly we do in the team. On day? And day to day. I'd say my experience has been more facilitator and peacemaker. Mhmm. Going forwards and then you vision it, it might become more negotiator, but definitely facilitator, making sure that, delegates are aware of proposals, giving feedback on proposals, hosting governance calls, you know, writing up content and articles about various proposals. And most importantly, I think ensuring that what has been agreed upon in a proposal is actually executed as, as expected. And this is something that's often forgotten about in the governance life cycle. Obviously, you have the proposal process, which is, you know, post in the forum, discuss it for a few days, have a governance call, have a temperature check on snapshot. Once this this passes, it might be ratified a bit more. Then it goes to tally where the payload data is uploaded. And then if it passes and it meets the respective quorums, the, you know, proposed changes will will take effect. But, of course, not everything happens on chain. Most proposals tend to deal with, giving funds to certain initiatives. But then once those initiatives receive the funds, how do you ensure that, the teams that receive the funds are meeting their milestones, achieving their KPIs, doing what they said they would do? So, yeah, I'd say a lot of my work is overseeing that that last mile of the governance life cycle.
I think Ram covered a lot, of of what I could say here as well. I think there is an aspect of firefighting that we perform, you know, for certain. There are also other aspects that the AF, with its governance mandate has been stepping more and more into. For example, we have been more opinionated as it relates to existing and and future initiatives, in addition to just taking a a more active role, in in the, in the ongoing operations of of initiatives. So that's, I think, something that that wasn't necessarily present before, but we are, steadily moving towards that, that that broader AE mandate.
Yeah. And it would be interesting to also get a sense, you know, as, you know, you're going from this very decentralized to slightly more centralized phase, at least in terms of getting the operational side of it, you know, more centralized. It's it would be interesting to hear just what has the experience and dialogue been like with delegates, because, you know, on the pure ops side Yeah. I mean, just from our own experience, like, we get it. When we were launching the DAO, you know, end of last year, delegates were very explicit to us of, like, please own more ops. Like, don't make us do it. It's gonna be a mess. So I like, that seems very aligned with just, like, the general vibe, I guess, from delegates these days. But also going through some of the documentation that's currently on the forum around the opco and whatnot, it does seem that there might be some, say, growth components to the opco, which might already get towards strategy. So I guess, how do you see both the interaction so far with delegates and getting all these ideas APCO team versus the delegates in terms of, you know, coming up with, say, the next growth initiative for 2026
or something like that? So I think we can split this question into two parts, one being the past and then the next part being the the present and the future. It's worth caveating that, you know, as all DAOs are, they're they're forever in in transition. They're forever evolving beings. But, yeah, in terms of the justification for this transition, there was pretty strong consensus on on the pain points that the DAO had, I guess, in its previous phase where proposals focused extensively on operational details instead of strategy, which oftentimes led to gridlock. You know, it was very hard for proposal authors or vendors trying to sell their services to the DAO to convince the entire communities of every single small detail, especially when, you know, there are so many cooks in the kitchen. Everyone has their own interests, has their own opinions. And then it was even more challenging if people wanted to then revise proposals or go back on things that were previously agreed upon, which led to many proposals even being abandoned, through their life cycle. In terms of delegates, it made it harder for them to keep up with this level of granularity as they were expected to evaluate a very high frequency of complex proposals, and, you know, have their say on things which they might not always have the expertise or full context on, things like job applications, milestones, tracking KPIs, technical upgrades. So becoming a delegate quickly became a part time job with full time expectations, And this actually deterred many large arbitrum stakeholders who might not have the time to actually partake in governance because, you know, many of the delegates, especially last year, they were spending probably twenty hours a week, I'd say, on keeping up with all things governance and upturn. And in terms of vendors wanting to negotiate with the DAO, it was hard for them as well because, without a single counterparty, you have to convince every delegate, like I said, that you deserve to be the one selected for x initiative. And this bureaucracy often gave gave the vendors the upper hand in terms of how they would price their services, because when you're negotiating and you don't actually have a counterparty you're negotiating with, you can often charge more for your services and also charge more for the effort you put into actually writing up the proposal to the point at which it can actually be voted on. So a lot of these inefficiencies were why delegates and vendors and other stakeholders were happy about the proposed changes. In terms of what it looks like from now, I'd say we're still very much in a transitionary phase. The Opco is still being I mean, the Opco has been incepted, but, the the Opco team members are still being hired. And and once the Opco is fully operationalized, we will have a better picture, on what exactly the adoption of the vision will look like at a more granular level. So I'd say the picture isn't fully there yet, but we are progressing in the right direction slowly but steadily.
Yeah, I think to build on that, the vision, a lot of it is, social consensus, meaning the changes that it's proposing will need to happen, on that more social layer instead of the, you know, on chain one. We're we're already seeing this that, you know, vendors, instead of being, tasked with the very political and highly exhausting task of lobbying the DAO, they're coming, directly to the AF, for example, and engaging with us, on that more usual, you know, understandable, business counterparty, type of type of, relationship, which I believe is is a much more efficient system, and it's something that will, allow the DAO to focus more on the strategic questions. One thing I I wanted to to mention in terms of, you know, where the DAO decision making goes, would be, something like the SOS, initiative, which is the strategic objective setting framework, that was proposed, and is being executed currently, where we've seen, an incredible response from the community, proving that the Arbitrum DAO community is very much interested in having these high level conversations on where, the Arbitrum ecosystem and protocol should go. And that is very, very encouraging, in terms of what, what the DAO does, and on what kind of decision making it's it focuses its attention on. I believe this is a very good example of it. That is incredibly
interesting. And I have one question to follow-up on incentives and the state of incentives at Arbitrum today. We interviewed, for example, governance team at ZK Sync, and we know that there's no, like, economic incentives for delegates. I know at Arbitrum, you've had for almost a year now delegate incentive program, and most recently, the IP 1.7 introduced new metrics, new enforcement mechanisms. So, would be curious to hear from you what do you think role incentives play in shaping arbitrage governance and culture over long term and perhaps some of the insights about your biggest learning so far?
Sure. So I can start this one. I suppose as in the Web three ecosystem as a whole, incentives play a very big part in, shifting behaviors. I think in arbitrum, as well as maybe other layer two DAOs, but of course I can speak most closely on arbitrum. I think delegate incentives haven't always incentivised the most aligned decision makers, because in a permissionless delegation system, from the delegates perspective, there's no real downside if a delegate were to overspend the treasury, if they don't actually have much at stake, personally. So for example, if they don't have the success of their business, directly tied to arbitrum success or if they and even though the arbitrum DAO's delegate incentive programme has been thoroughly designed and implemented, I do think SeedGov who are the service provider who've been running this have done a great job. They've done a very thorough job. It still has led to some, negative behaviors. So in order to meet certain metrics, some delegates might have, you know, used AI generated comments just for the sake of ticking off a box. There's often more energy spent on debating technicalities on how a comment is scored rather than debating the merit of a proposal. And, things like this have often led to, yeah, inefficiencies, wasted energies, and you could say not ideal governance. Pajamala, you mentioned that there was the most recent iteration of the incentive programme, the 1.7, which which was approved by the Dow. I do believe that this version, will help mitigate such behaviors. It was only approved a week or two ago. So I guess we're yet to see the the outcomes, But it will be reducing overall spending on delegate incentives by around 40%. It also tries to incentivise and reduce the barrier to entry for larger arbitrum stakeholders to participate in governance, extend this by introducing a new tier for large arbitrum token holders, to be able to participate without necessarily requiring them to spend so much time, in governance and in providing contributions. And I think looking forwards, this is coming from a very ideological perspective, at least in my own opinion, delegates should participate out of genuine self interest in in the DAO success and not simply for compensation for compensation stake compensation sake. Sorry. And I believe that incentive programmes, when used, should only be used to reward meaningful and responsible participation, rather than activity for activity sake. And accordingly, I think it would help if the delegate incentive programme had a clear distinction or was almost even split into two programmes, a, to reward voting behaviour and b, to reward contributions because they're definitely not two in the same things. And, yeah, lastly, I'd say that participation alone should not create an expectation of payment. Rather, compensation should merely be a vehicle to reward positive behavior that actually advances the DAOs goals.
And very quick follow-up. So as far as I understand it, for now, all those metrics are being counted manually. So SIGGOV just, goes manually for the forum, counts how many contributions, comments, etcetera, etcetera.
They have a very detailed, framework for scoring all of this. They, count the number of days. This is just off the top of my head. The number of days that's a that the voting power threshold per delegate has been maintained, percentage attendance on governance calls, comments on various proposals, whether or not they voted on each proposal, whether or not the contribution or comment was actually beneficial in in the proposal, meaning That's very subjective though, isn't it? Sorry. There are there are certain things that you could
deem to be subjective. I can only imagine how many conversations you must have had to to just discuss whether that fits the objective, it doesn't. I mean, it just sounds like a lot of work.
Yeah. I feel like I'm saying it's a it's a very fine balance. So it started off extremely objective, but I think with very objective things, they you could argue that they're easier to gain. This is when you started to see the behaviour of AI generated comments, people commenting for the sake of it, people just copying the preference of what a big delegate has said and just tweaking it slightly because they know that if they comment what a big delegate said, it's likely to be in alignment with the group think. But then when you start to actually consider what adds value to a governance system, Sometimes it can't be quantified objectively. And if you consider the health of a governance ecosystem, right, there are many numbers you can think about. Number of delegates, number of tokens delegated, who votes on what, different percentages, etcetera. But things that are harder to consider is how do you know stakeholders who are actually deeply involved in arbitrim are participating? How do you know that people have come to their conclusions independently rather than following groupthink? And how can you ensure that the culture is more open and welcoming to newcomers? So, yeah, I think with intensive programmes, there is a fine line to be maintained between subjectivity and objectivity. There are lots of, tensions and and balances that need to be maintained in this space. You should you think that delegates should be paid for their work? I think delegates should be rewarded for good work, and they should not be expected to be paid just because they are contributing. They're Yeah. Yeah. In itself.
To go a step back, perhaps, I believe very strongly that the incentives should be aligned, right, which is very broad. But at the end of the day, that is what matters the most. Right? Do delegates want to make good decisions, because there are some incentives, and those incentives can take all types of forms. Right? I believe that for a dApp to participate as a delegate, the incentive is going to be drastically different than for a, you know, part time contributor who who who just wants to get into the arbitrum DAO and and and and, you know, provide some valuable work. And so it's it's critical to to to sort of, distinguish between the different groups, of participants, ensure that all of their needs are met and that the incentives are there, whichever form they take. And I believe that's what ultimately makes, you know, the, the the system work well.
Yeah. And, hopefully, we do see this more natural incentive alignment if the vision successfully makes it easier for more aligned arbitrum stakeholders to actually participate in governance, then you could argue that they don't even need to be given a financial incentive to participate because they are participating because they wanna steer the arbitrage ship in the right direction and not for the sake of of getting a part time salary every month.
For sure, Anne. One quick small clarification because I think it was mentioned it it made it it might sound as though cDove is doing everything manually. But if I'm not mistaken, the way it's been done, you have tooling. I think Karma's tool, to do the actual objective measures. So anything that can be kind of quickly codified. And then there's the separate framework that was approved by the DAO through which, seed gov goes through every month or, I'm forgetting if it's monthly or quarterly, but goes through on the appropriate cadence and does sort of the subjective measures with, I think, a one week, open period to kind of, make any revisions just to make sure we're accurately reflecting the way it's been until this most recent proposal.
Yes. That's correct. SeedGov are the program managers. They use Karma, to help quantify contributions, and all of this is actually linked on Tali. So if you go to, each delegate profile, you can actually see their their scoring across a multitude of metrics. But then, yeah, seed government essentially facilitate the program, and, they do some additional evaluations at on top of the objective scorings.
Got it. Thank you for that quick clarification. The the this kind of discussion both this point in the the previous kind of element of just the the benefits of shifting to this arbitral maligned vision and having a group like the opco exist and taking on these responsibilities. You know, if stepping away even from the specifics of Arbitrum for a second, it just generally speaks to this evolution of the role that delegates are broadly playing in a lot of DAOs and ecosystems. And so, you know, under this broad banner of what do you think about the future of delegation, you know, how do you see that evolving? Do you really see it being that the future of delegates is to be these kind of more public strategic setting roles, and it's more about how do we define the right processes to engage delegates meaningfully in that process. Where do you see them playing kind of other fundamental roles and I guess also what does that mean for say professional delegates versus individual delegates going forward?
I believe that in general, the actual responsibilities of delegates will be highly dependent on the setting, whether or not it's technical or non technical governance we're discussing. But overall, I would say, the philosopher Aristotle, had a, very interesting take on this, when discussing politics and and, the virtues of of a citizen. What does it mean to be a good citizen? He said that it's, to both know how to be governed and how to govern, which is something that, you know, political systems as we know them, they do potentially teach you how to be governed, but how to govern is is a foreign concept to to the majority of citizens. Whereas in a Dao setting, you know, it's it's completely different. You do have the ability to to govern, and be governed at the same time. So you're creating laws, both on chain and off chain, right, as it relates to the protocol and the treasury, to where you as a DAO citizen, let's call call them that, you can have a a true impact. And you can, you know, educate yourself, and you can become a a a a virtuous citizen of a DAO. And I believe that delegates, will need to to play the role of of of decision makers on the strategic level for sure, in the arbitrum DAO. That is that is one of the more critical roles that I, I foresee, and that is where the wisdom of the crowd, to use that, term is is very much, needed.
I would also add that, obviously, at the fundamental level, a delegate's responsibility is to vote and to participate in governance, but there's the flip side to that as well. Right? In the new vision, it mentions that, if the AEs, want or deem fit, they can engage with external service providers, especially if they may not have the experience or or capacity to, achieve a certain operational objective internally. And it could very well be the case that certain service providers who fill these needs are also delegates. So just like in the DAO's previous phase where, many DAO contributors were, applying for various committees and councils and and to be a part of things like the multisig service, that opportunity is still there, especially if this respective delegate slash contributor has a a skill set that, an arbitral line entity believes can actually supplement a proposal and, contribute.
Thank you so much. Madhush, I can't help, but I see just so many books behind you. Is there any particular book that you would say you read and now it guides your principles when it comes to your work in governance, or maybe a book that you would recommend anyone interested, passionate about governance, experimenting to read. If you pull it from the shelf, that would be just, like, even even more amazing. But
So I have I have a secret, that I need to disclose, which is that these are actually my father's in law's books. Mine are unfortunately still packed, tightly as we've been moving around for, quite a while. So it's it's yeah. But, what I would say is is one of the books that that probably have shifted my understanding, of of, political science and and also philosophy, is the idea of of of of a social contract that, that has been prevalent, you know, in in in political philosophy. So that's, Thomas Hobbes' Leviathan. That's, Jean Jacques Rousseau's Social Contract. Both of those books take a look at the idea of what makes a state happen, and what, what what even is a state to begin with. And I believe that, you know, any philosophy inclined operator, should probably take a look at at those, if I had a recommendation to make.
Nice. I like those recommendations. I've been reading some of the reflections, and then it's it's not an easy it's not easy books to read. But I feel like there is this foundational philosophical guardrails when we talk about governance and human cooperation and some of the most recently published works on governance, I think it's,
I would agree with you. Just to, follow-up on that. I think what this also points out very well is that, we're talking through and I mention this all the time. So, please forgive me if you've heard me say this before, but we're trying to deal with with problems that, you know, humanity has been trying to solve for thousands of years. Problems of social coordination and and building, states is not new, what we're doing here. That's that's why I like to think of DAOs, more so as states than just technological, problems to be solved, because at the end of the day, you know, we have made massive strides in in something like z k tech, right, in the last years. Whereas with Daoz, we're, you know, pretty much at the same point we started off in, which just goes to show that these are not easily solvable issues, easily solvable problems, to begin with. And and and, you know, if you're thinking that some type of, technological evolution can can can solve human coordination, then you might unfortunately be wrong.
I agree with that. We had an episode with Von, from butter, and we refer to Haik's book, The Road to Sergent. And even if you take away, like, this libertarian aspect from that book or so many references that reference this book as the source, you can see in so many essays that the discussion of the problems in society we we we seem to have very similar problems as opposed to what we had, like, fifty, a hundred years ago, two hundred years ago. I remember reading Adam Smith and being like, oh my god. What we are considering our problems are not new at all. And which actually shows us to you know, sometimes we think, in Web three that we are kind of inventing a wheel, trying to solve some of the problems that are just very Web three specific. But, actually, when it comes to human coordination, like, we're prone to disputes. I was doing my PhD in dispute resolution. We're as humans prone to disputes. We need humans need humans, and there should be some coordination in governance and everything in between. And that's what I love thing in governance. Ram, do you have any book recommendations to anyone who might be listening to us, or just even, like, observing governance and arbitrum and being like, oh my god. I I wish I wish I knew what people who do governance at arbitrum read. So I'm gonna go one level more abstract than Mateusz did.
I'm a big fan of bio mimicry, taking inspiration from, nature's designs and patterns. And there's a book about mycelium networks called Entangled Lives. And, I remember they made an analogy of a mycelium network as being a decentralized network with, you know, nodes and hyphen, that tries to optimize, the flow and allocation of natural resources, such as nutrients in the soil, with the objective of trying to, you know, grow or expand the the natural ecosystem that it that it supports. And I think a lot of what DAOs try to strive towards is is quite similar. How do we collectively govern our resources, in a way that best supports an ecosystem?
Great. I love that. I love reference to nature, to, common food resources. My personal hero is Elinor Ostrom, and I keep referring to her work on, managing the commons over and over again. Yeah. I love that. I love the book recommendations. I have one more question on the future of governance and how you see it. With our guests throughout this first season of our podcast, we often try to maybe just predict or hear their insights, worries, maybe even what the future of governance looks like to them. And very often, I would say personally, Eugene, maybe you would disagree with me here, I see people falling into two groups. First group saying that, well, it would have to rely on AI agent system in one way or another or perhaps it would be more veto based governance where there would be just a group of people that would allow to veto some proposals, but it will be more like optimistic governance, if anything. So moving away, shifting away from this kind of I I wouldn't like, delegated, involved, constantly, incentivized type of governance. So I'm curious to hear your thoughts, whether you see Arbitrum going either way, so maybe Arbitrum has its own unique way as we've learned throughout this conversation, and if you have any reflections on our state of governance overall beyond Arbitrum.
That's a very good question. I think as it relates to the points to the two points you've raised, I see both of them, so optimistic governance and AI as tooling, means towards an end. I think what I would describe as one of the ends we should be building, for is capture, resistance, since that is something that, we will definitely see more of as the game of governance, becomes playable to institutions and and, you know, huge players that we cannot even imagine, in our little bubble. We will be faced with the issues of, well, we have a big player come into a truly decentralized and permissionless setting. What does it mean for that, for that DAO, for that system? I don't think we're ready to to witness that fully, if I'm being honest, and we should build, our our DAOs, in with this in mind.
Yeah. I can only imagine what actual nation states targeting DAOs would look like from a ability to withstand any of that, and it seems like we are quite far away from being able to to manage that. But, yeah, Ram would also love to hear oh, sorry, Mateus. I don't know if you had a response there. No. No. I just wanted to to fully agree with you,
on that.
Ram, feel free to go ahead. Yeah. So I'm gonna keep in mind what you just mentioned about nation states, and I think this significantly impacts how, each respective DAO can evolve. I think networks like Arbitrum, which, you know, involve many stakeholders, protect a very significant amount of funds on the bridge, have many projects depend on on the reliability and and reliance of Arbitrum, need to be more robust and conservative in in its path forward. We see many governance experiments popping up around, you know, Futarchy, AI agents, vote buying, all of these, kind of touch upon new ways to to do governance. However, I think for an ecosystem like Arbitrum, balance is is the most important thing. Obviously, the DAO has progressed substantially over the past two years, and then hopefully the listeners have gotten a sense of that from this call. But considering the scale of the Arbitrum DAO and ecosystem, all of this progress is done with caution. And, yeah, for that reason, I say balance is the future of governance in Arbitrum.
And I realize I forgot to ask a silly question earlier when you were referring to the start with the bang. Does anyone refer to the first proposal as the Bing Bang in Arbitrum? That just seems like such a convenient setup.
I don't think they do, but they definitely could because it it was quite,
a loud one. It feels appropriate. If it happens in the future, we'll we'll know it's because of this conversation. One last actual question before shifting over to our final portion on the quiz. I guess, you know, Mateus, you shouted out anti CAPTURE. Are there any other particular domains of research or experimentation, whether in arbitrum or otherwise, that you just wanna see happening more of in the next, say, six to twelve months?
I'm very much interested in, VE, tokenomics. That's something that that I've I've dove into in the past, and I believe that's one of the approaches to to long term incentive alignment, within the the token holder set. Again, it's only a a a subset of alignment that is required for a dial to function. There are, you know, similarly important off chain aspects that have to be accounted for, but this is one that that, you know, has my interest, and and I I'm looking forward to see how it how it develops because I do believe that, even though the the mechanisms might be quite young today, they are a start potentially of something, something important. So that's that's my view.
Yeah. Thank you. And, Ram, any other specific areas you wanna shout out of research or experimentation kind of as a call to action for folks in the space generally wanting to help, DAO succeed in the future?
Yeah. I think mine is probably harder to implement, but it would be about successful polycentric governance. So within a DAO or governance ecosystem, you have multiple ways, to determine how decisions are made, in a way that best suits the decision being made. So sometimes you might want certain stakeholders deciding on things. You might want different ways of calculating their voting power. So, yeah, polycentric governance.
Yeah. That's exciting to hear. I'm very hopeful that kind of the subset of, you know, polycentric governance, plurality, and specifically doing different experiments on deliberative processes, deliberative tooling, and all the various facets of that. And and, yeah, shout out to Medigov, which I know is doing some cool work with Liz Berry, and, and DeepGov crew too with their broad listening tool that they launched recently. But, yeah, I know, unfortunately, time has been flying by because this has been a wonderful conversation. So I do wanna be mindful of that and shift us to the last portion of the conversation, which is our quiz. So we're gonna be asking a couple questions. Each question, please try to limit to one word answers. So I we will be, upfront that people have been loose with the hyphenates and we're we're, we judge them a little, but we'll allow it. But yeah. So, we'll start with Mitesh and Ram, and then we'll kinda swap the order each time just so each one of you experience the the joyous, experience of being first. The question I wanna start you off with is, what would you say the process of getting the Arbitrum ecosystem more aligned has felt like?
One word.
And can I ask follow-up questions, or is it just one word answer?
We'll allow it. What what's the follow-up question? I I wanted to understand what do you mean by more aligned? Well, going through this process of announcing the arbitrary aligned vision and kind of the last six to nine months of, you know, announcing it in, what was it, like, last October with Opco and some of the initial elements that led to it. So I know, Mateusz, you kinda if I'm not mistaken, you you joined as it was already midstream. So maybe as a jumping into it, what has it felt like? And then for Rom, what has it felt like seeing from, you know, from closer to the Big Bang to the current time?
I'd say engaging. I'd say roller coaster.
That's more along the lines of what I was expecting. Yeah. So the next question is a more broad one, not Arbitrum specific at all. But in your view, the biggest reason that DAOs have failed to date is Ram, please go first
this time. Information asymmetries.
Matej? I would say centralization, but then we might not even be talking about DAOs. Yeah. The next question will be the most disruptive force in governance when you're looking forward to the next twelve months. What do you think the most disruptive force in governance will be? One word. Mateusz, please go first. I'd say apathy.
I'd say incentives or correct incentives.
And then we always like to add, to finish with our signature question of, in one word, describe the future of governance.
I think I might be repeating myself, but I'll say balanced.
And I'll say, hopefully, it's aligned, with the protocol.
Wonderful. Well, Mateus and Ram, thank you so much for joining and sharing both about what's been going on in Arbitrum and some of your prehistory before Arbitrum as well as where you see governance heading more broadly. So, yeah, I just wanted to thank you both for joining for the conversations.
Thank you. It's been a pleasure.
Thank you. Absolutely. And thank you for having us. It's been an honor and a pleasure. And, again, I hope that the viewers have gotten something of value out of this conversation.
Thanks for tuning in. The Governance Futures podcast is sponsored by the Scroll Foundation and produced by the Jamila Kamalova and Eugene Leventhal. Any music and photos are attested in the episode description. Feel free to subscribe, leave a review, or share with a friend. Until next time.