The Arbitrum Research & Development Committee (ARDC), in collaboration with Castle Labs and DefiLlama Research, conducted a comprehensive evaluation of the DAO’s grant programs. Tasked with analyzing both internal and external grant structures, their goal was to identify operational strengths and weaknesses, assess best practices from other ecosystems, and provide actionable recommendations to improve efficiency and impact.
The evaluation involved a dual-pronged analysis:
- Internal Review – A deep dive into the existing Questbook grant programs to pinpoint inefficiencies and areas for optimization, particularly in light of Season 3’s approval.
- External Benchmarking – A comparative study of successful grant programs from leading ecosystems such as Solana, Ethereum, and Optimism. Insights from their governance models, funding workflows, and accountability mechanisms informed recommendations tailored to Arbitrum’s needs.
Internal Assessment of the Delegated Domain Allocation (DDA) Program
The DDA program was designed to address funding gaps between small community initiatives and large foundation-level grants. It operates across four primary domains:
- New Protocols and Ideas – Supporting novel infrastructure and governance tools.
- Education, Community Growth, and Events – Enhancing community engagement through events and educational initiatives.
- Developer Tooling – Improving developer experience with essential resources.
- Gaming – Strengthening Web3 gaming development within Arbitrum’s ecosystem.
Key Performance Indicators (KPIs) and Success Metrics
Performance assessment varied across seasons:
- Season 1 focused on ecosystem growth, engagement, and brand awareness.
- Season 2 introduced structured outcomes, refining community involvement and funding efficiency.
- Season 3 emphasized sustainability, tracking grantees’ long-term contributions.
Data revealed that while project funding was effectively allocated, delays in disbursement and approval processes created bottlenecks, particularly in the Developer Tooling and Education domains. Additionally, tracking post-grant success metrics was inconsistent due to the lack of a centralized monitoring framework.
External Benchmarking
A comparative analysis of grant programs from Solana, Ethereum, and Optimism revealed best practices that could be adopted to enhance Arbitrum’s operations:
- Governance Transparency – Clear and structured funding processes to reduce ambiguity.
- Standardized Reporting – Uniform metrics for assessing project impact.
- Post-Funding Support – Providing networking and growth opportunities to funded projects.
Operational Challenges and Recommendations
Governance & Operations
- Establish Questbook as the single source of truth for grant decisions to eliminate miscommunication across platforms.
- Standardize reporting templates for program managers, domain allocators, and grantees to track performance consistently.
- Appoint a DAO-experienced Program Manager (PM) for oversight, ensuring accountability and streamlined operations.
- Recruit highly qualified Domain Allocators (DAs) from a DAO-centric talent pool to enhance funding decisions.
- Define strategic program goals aligned with the DAO’s broader objectives, linking projects to measurable impact KPIs.
Funding & Budgeting
- Address disbursement errors to prevent duplicate fund distributions and financial mismanagement.
- Implement safeguards against manual transaction errors, which could lead to funding discrepancies.
- Establish clear milestone funding rules, ensuring that project scopes and budgets remain consistent post-approval.
Impact & Accountability
- Define a standardized methodology for tracking success metrics and assigning clear responsibilities for data collection.
- Impact KPIs are required to be reported at each milestone completion to ensure project accountability.
- Develop a structured framework for post-grant tracking, incorporating extended KPI monitoring and well-crafted surveys.
- Provide post-grant support, including networking opportunities, co-marketing assistance, and guidance toward additional funding.
Conclusion
The ARDC’s research highlights the strengths of Arbitrum’s grant programs while identifying critical areas for improvement. By implementing structured governance, refining funding processes, and enhancing accountability measures, the DAO can create a more efficient, transparent, and impactful grant system. These recommendations lay the foundation for a more sustainable and effective funding ecosystem, ensuring that projects receiving grants contribute meaningfully to Arbitrum’s long-term success. Full details on this can be found here on this forum.
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