API3 DAO Receives 75,000 ARB Tokens from Offchain Labs Airdrop - Discussion on Next Steps?

[UgurMersin]

Hello Peeps!

API3 has been considered for 75,000 ARB tokens in the upcoming airdrop from Offchain Labs for offering QRNG on both Arbitrum and Arbitrum Nova. As you know, the API3 DAO does not natively exist on the Arbitrum network, which poses some challenges for managing these tokens. Since the dAPI team is already operating multisigs on various chains, one suggestion is for us to take on the responsibility of handling this airdrop, pending a vote of some sort.

The question now is how to best utilize these tokens in a way that benefits the API3 DAO. We cannot hold onto them indefinitely on Arbitrum and will need to find a way to return value to the DAO on the Ethereum mainnet. To achieve this, we propose converting the ARB tokens into a different asset that is compatible with Ethereum. I’ve outlined three potential scenarios for discussion:

Scenario 1: Convert ARB to ETH

• Sell all 75,000 ARB tokens for ETH
• The resulting ETH can be repurposed in any manner the DAO deems appropriate

Scenario 2: Convert ARB to USDC

• Sell all 75,000 ARB tokens for USDC
• The resulting USDC can be repurposed in any manner the DAO deems appropriate

Scenario 3: Keep all ARB

• come up with a way to keep all ARB while the DAO has full control over the funds

While discussing the potential scenarios, it’s important to acknowledge that Offchain Labs might perceive the immediate sale of all ARB tokens negatively. As recipients of the airdrop, we should also consider the possible ramifications this action could have on our relationship with Offchain Labs and the broader ecosystem.

One option for utilizing the USDC or ETH obtained from selling the ARB tokens is to subsidize dAPIs on the Arbitrum network. The advantages of this approach include supporting the Arbitrum ecosystem by reinvesting the value back into it, which could foster goodwill and positive sentiment. However, there are challenges associated with this strategy, such as managing the subsidies, deciding which dAPIs to support, and determining the duration of support without knowing the level of demand or the entities that might utilize these funds. Essentially, we would be offering credits for the Arbitrum ecosystem, but with uncertainties surrounding their usage.

An alternative approach is to treat the airdropped tokens as profits and use the proceeds according to the API3 whitepaper. We already have a burning contract in place that could be employed for this purpose. This option has the potential to directly benefit the API3 project by demonstrating our commitment to implementing the burning mechanism and providing an opportunity to test it firsthand. However, the downside is that we would simply be selling the ARB tokens, which, as mentioned earlier, could be perceived negatively by Offchain Labs and other stakeholders.

My personal opinion on this matter is, that I don’t believe in subsidies, and that our main method of attracting usage will be through OEV, which seems to be a consensus among us. Additionally, I don’t think the resulting proceeds from selling ARB to subsidize dAPIs would last for a significant amount of time, considering the costs of running dAPIs on Arbitrum and the deviations that other oracle projects currently offer (which we cannot match without OEV). This would mean that we would burn through this money on a select few dAPIs with worse specs than what is currently available (again until OEV).

As such, my suggestion would be to either use all the proceeds in USDC in accordance with the whitepaper and drive immediate benefit to the DAO and its token holders, or explore a solution that allows us to simply hold the tokens and do nothing (which i currently don’t see without trust implications, and no the dAPI team holding on to these funds indefinitely is not an option ).

Happy to hear your thoughts on this!

Also pinging @Erich as i’d be interested in how exactly the ball gets “rolling” on this. Who has the “authority” to talk to Offchain Labs and receive the Airdrop. It should probably be voted on what happens with the proceeds or nah? Etc, etc.

[Erich]

Because Arbitrum earmarked the airdrop specifically for API3’s enabling of QRNG, I’d say the most appropriate contacts would be those responsible for arranging / deploying QRNG on Arbitrum and Nova. Of course I can join in too.

As for the use of the airdrop I do think it’s debatable and should at least take some informal thoughts here in the forum. Personally, I’d say that it’s fair to use some to reimburse already paid QRNG expenses and feed funding expenses, especially those that weren’t already accounted in a proposal (i.e. paying off outstanding debts, which would have first priority). Following those, the airdrop is basically another flavor of “protocol revenue” that should be treated in accordance with the whitepaper/bylaws.

[UgurMersin]

I think in this case the people responsible for deploying QRNG on Arbitrum and then Arbitrum Nova should determine first if there are any costs that we need to cover (not sure what can be written here and what not) and move the remaining funds to the DAO somehow.

It appears like ARB will be bridgable to L1 and after determining how exactly this is done (as in who/how is it bridged, etc) we could move the remainder to the DAO. Or move it all to the DAO and pass a proposal to cover any potential QRNG costs.

[kcorstor]

I’d be in favor of using a percentage of the tokens to subsidize some Arbitrum feeds, and the other portion in the burn mechanism you described earlier. It would keep goodwill with Arbitrum, and would allow us to expand our offering in their ecosystem.

I agree that OEV will be a main factor in attracting usage, but there is a scenario where a small or new dApp would want to use us, but the projected OEV proceeds may not outweigh the gas cost and doesn’t pencil out for them to go with us versus another oracle. There’s also the dApp’s objection of ‘why should I subsidize this for everyone else’.

At this stage in our launch I think that any kind of usage is to our advantage, and getting integrations however possible is probably to our benefit. If they can look at the feeds and see they are live and paid for, rather than having to project OEV returns to make it work, it makes the decision a lot simpler.

[Midhav]

in favour of selling as little as possible - use it to fund qrng, feeds, etc
dapi team can thus hold it on behalf of the dao
we can decide to sell it later for bbblp if we want, but not right away when they’ve given it to us as a show of good faith

[UgurMersin]

Yeah after sleepin on it i think this should be mainly used to cover QRNG costs as QRNG brought these tokens in. If there is anything left we could decide what to do with it.

[UgurMersin]

I’d rather have them drop it to us on mainnet and/or bridge them over. Don’t want the dAPI team handling these tokens indefinitely and taking on the responsibility of it.