The controversy over DAO grants has resurfaced, as detective ZachXBT reveals the "chaos" in OP public fund applications

Original author: Azuma, Odaily Planet Daily

In the past few days, discussions about the pros and cons of the DAO funding mechanism have become a hot topic within various decentralized communities.

The incident was triggered by a proposal initiated by Bankless DAO in the Arbitrum governance forum, which sparked widespread outrage.

The content of the Bankless DAO proposal was to apply for a budget of 1.82 million ARB to assist Arbitrum in market promotion over the next year. At first glance, it seemed there was no problem other than the large amount, but the community discovered that Bankless DAO had previously made similar proposals in other project forums like Optimism, and the actual promotional results were quite ridiculous—after receiving a budget of 70,000 OP, Bankless DAO did not use its official account to publish all content but chose to promote it through multiple small accounts, with the lowest promotional post view count being in single digits.

As a result, Bankless DAO quickly became the target of community criticism, and its actions were mocked as a new "business model" of leveraging brand reputation to extract value from projects.

Afterward, the two founders of Bankless urgently came forward to conduct extensive crisis management, clarifying that Bankless DAO is a completely independent entity from Bankless and stating that Bankless did not participate in the Bankless DAO proposal.

Just as one wave of controversy subsided, another arose. While discussions about the Bankless DAO incident were still ongoing, new controversies regarding DAO funding events emerged.

First, the Arbitrum community discovered some small-scale fraudulent activities within the Short-Term Incentive Program (STIP)—two projects, Dolomite and Umami, applied for funding support falsely, while actually pocketing the funds.

Subsequently, well-known on-chain detective ZachXBT disclosed some controversial situations within the third round of RetroPGF in the Optimism ecosystem.

RetroPGF is Optimism's "Retroactive Public Goods Funding Program," aimed at providing financial support to some public welfare projects. The total funding amount for the third round of RetroPGF is 30 million OP, which is approximately 50 million USD at current market prices.

ZachXBT stated that many projects currently ranking high in the RetroPGF governance voting are not genuinely public welfare projects; some of these projects either have received large VC funding or are still not open-source, which may prevent truly public welfare projects like OtterScan, BlockScout, Revoke Cash, Defillama, and Rotki from receiving the funding they deserve.

ZachXBT also compiled a list of the top 100 projects in the voting rankings that have received VC investments, revealing that some of these projects have received tens of millions or even hundreds of millions in funding, and some have already issued tokens:

Gelato (funding of 11 million USD, token issued);

Rainbow (funding of 18 million USD);

ImmunFi (funding of over 24 million USD);

Mirror (funding of over 10 million USD);

Zora (funding of over 50 million USD);

Synthetix (nine-figure treasury, token issued);

Hop (funding of 2 million USD, token issued);

Tenderly (funding of 40 million USD);

Snapshot (funding of over 4 million USD);

OpenZeppelin (funding of 23 million USD through Forta);

Socket (funding of 5.5 million USD);

Alchemy (funding of 545 million USD);

Rabbithole (funding of 21.6 million USD);

According to Optimism's governance plan, the voting phase for this round of RetroPGF will end on December 6. Based on the current voting situation, the aforementioned projects are likely to receive a substantial OP grant.

ZachXBT believes that he holds no bias against the aforementioned projects, but compared to truly public welfare projects, these projects do not seem to lack operational funding, and thus he calls for all projects to disclose their funding sources when applying for grants.

ZachXBT's disclosure quickly sparked intense discussions within the community. Some voices agreed with ZachXBT's viewpoint, arguing that projects with sufficient operational reserves should not seek to "take a share" and even began to help ZachXBT identify gaps; however, others argued that the criterion for judging whether a project is public welfare should not be based on whether the team has received VC funding. For example, while OpenZeppelin and Forta share the same origin, OpenZeppelin as an independent project can also be considered a public welfare project. These discussions are still ongoing, and interested readers can visit ZachXBT's tweets for more details.

In summary, from the professional exploitation of Bankless DAO to the alleged fraud of Dolomite and Umami, and the distribution controversies of Optimism's RetroPGF, these events reflect some shortcomings of the current DAO funding mechanism.

From the perspective of project parties, it is necessary for DAOs to continuously distribute treasury reserves to support ecological growth, but at present, how to thoroughly review funding applications and enable precise fund flow through a relatively decentralized voting process remains a daunting challenge.