C4IP-21: Code4rena Treasury Diversification #93
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I really like both Paradigm and C4, and if Paradigm wanted to capitalize my venture, I'd say yes. I have many friends, acquaintances, and comrades in low-Paradigm orbit, and a lot of respect for their research, advocacy, and open source work. But as part of the C4 org, I'd appreciate hearing more about the motivation for this proposal and vision for future collaboration from both sides. From Paradigm:
From C4 and $ARENA owners:
Full disclosure from me: I own a small amount of $ARENA and am active as a C4 warden and judge. |
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Hey everyone, I'd like to build upon @horsefacts' excellent points by raising a few more questions related to performance measurement, organizational changes, and funding. Keep in mind I'm not part of the org and I do not hold any tokens. Regarding performance measurement, I'm particularly interested in understanding:
In response to @horsefacts' inquiry about the areas of improvement identified by Paradigm and the policy or organizational changes they recommend, I'd like to know:
For the $6,000,000 USDC investment, I'm curious about the following:
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Hey
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I’m going to address all of these questions from @horsefacts and the further elaborations from @bytes032 and @0xA5DF:
The (sort of) short answer:
At present, additional working capital is the most feasible way to accomplish all of the above – it allows us to focus on and invest in product and community growth without using our contest revenue. It’s essential that said working capital comes from parties aligned with our philosophy and mission— and even better if that capital comes with additional expertise, research, and insight, that can help us understand how best to scale while remaining authentic to our values. Paradigm fits that very well for all the reasons you cite and more. The long answer:Code4rena’s competitive audits started as a clever solution to the bull market problem of auditor scarcity, but they now have become critical infrastructure. The market’s full reverse means the solution to the problem is now a problem of the solution, so to speak: we have auditors out the ears! That’s a good thing for the industry and a good thing for Code4rena, but no question it multiplies the pressure and complexity of the platform. As a further multiplier, AI presents a tremendous opportunity for smart contract security, but it is also an accelerator of all the challenges inherent to C4’s model. C4 award calculation started as a spreadsheet and very quickly outgrew that. I slammed together the original website, process, submission tools, and calculator as a DAO volunteer, with a lot of tradeoffs focused on my own ability to maintain it as the only person working full-time on C4 for the first several months. We built a team to take that on, but from day one they have been hemmed in by the compounding technical debt of my original choices further complicated by the fact that new audits ship every week, and new challenges and needs arise constantly, and the ball of mud architecture that resulted from all of the above. We have a lot of work in progress to improve the platform and the tip of the iceberg that’s visible is already bearing some fruit. Meanwhile we have identified several other opportunities for wardens to make money in the industry using the platform in ways that align with real industry needs. We are not ready to share those yet, but we will begin sharing some soon. The social engineering attack surface area has always been a real concern. With the rise of AI, humans have never been more vulnerable. Ensuring we have good process controls when it comes to the most privileged information access adds a considerable level of organizational complexity. Those things all take capital. Like the short list of VCs invited to participate in the first token sale, Paradigm has a very good big picture view of the industry, has proven themselves to be a good actor, understands the value of open source contribution, and will be a net positive as a DAO member and contributor. The security and trustworthiness of web3 is absolutely critical to Paradigm's involvement in the space – they’re very much incentive- and values-aligned. I see their capital as a statement of their intent to contribute to the growth and success of the platform as a critical piece of web3 infrastructure.
Code4rena is a platform that should be as scalable as possible. This proposal will ensure we are able to continue to build toward the next phase of growth in order to better meet our “common nonprofit purpose of furthering the trustworthiness of protocols and code in the blockchain industry.” I believe we gain considerable traction toward our goals; passage of this proposal ensures we have the input and insight of an industry-wide perspective backed by research.
As described above, we need additional working capital, broad expertise, and additional connections that are best achieved by a sale like this. Distributing additional tokens does not give us the same level of confidence that we would immediately have increased resources on the fronts addressed above when compared to this approach. Paradigm is one of the most trusted leaders in the space—especially from a security perspective. Their proposal to join the DAO is a full validation of the model and an important signal to the most conservative and established projects that the competitive audit model is the future of audits. It also lets us continue to build on our success confidently and find more ways for independent security researchers and experts to make their livelihood doing what they want, when they want, with whoever they want. I believe this validation is an extremely good thing for people who make their living and build their careers on the platform—and that’s my first concern. That said, it’s not necessarily an either/or, as I also believe the DAO should consider further governance token distribution to contributors as we continue to pursue greater decentralization and continue to improve the ability for DAO members to have a potent voice in decision making process.
These have not been formalized in any way, but I actually think the target KPIs are very simple:
Longer-term, we hope this partnership helps us establish Code4rena audit contests as a new industry standard and creates sustainable revenue opportunities for those who have demonstrated a high level of skill on the platform and choose to rely on Code4rena as their primary income.
In my view, extremely strong alignment. I don’t recall one conversation in the past year where a suggestion or concept was made by Paradigm that I haven’t also heard in a similar direction from wardens, judges, and sponsors. In part, I think this is because Paradigm has been interested in C4 for a long time:
I see what we’re doing here as just a continuation of what we’ve already been doing. This formalizes Paradigm’s involvement in the DAO and positions them visibly as an advisor and supporter of C4, which they already have been behind the scenes for a considerable amount of time.
The ARENA token is an extremely simple governance token.
545,312,372 tokens of 1,000,000,000 have been distributed, roughly half of which are still vesting.
I think the DAO will need to decide on further distribution :) |
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In May 2022, we started a conversation with Paradigm about joining the Code4rena DAO. Paradigm’s work is likely familiar to many of us in the community – they run arguably the most difficult CTF competition in the space, developed the Ethereum toolkit Foundry, and have frequently published writings about the exploits they uncover, such as “Ethereum is a Dark Forest” and “Escaping the Dark Forest.” As a leader in smart contract security with a talented team and a uniquely crypto-native perspective, Paradigm is a natural fit to join the DAO.
During their time evaluating a collaboration with Code4rena, the Paradigm team conducted extensive interviews and research on ways Code4rena can improve the experience for sponsors, wardens, and judges. We agree strongly with all of the areas of improvement Paradigm has identified, and we’re excited to have their expertise in helping Code4rena achieve our shared mission of making the web3 ecosystem more secure, whilst rewarding all contributors.
As such, we are pleased today to present the DAO with a proposal to make Paradigm part of the Code4rena community.
The terms of this proposal approves a sale of 15% of the total supply of $ARENA tokens, or 150,000,000 $ARENA, to Paradigm for $6,000,000 USDC. These funds are intended as working capital for the DAO in growing Code4rena. Access to the tokens will be set to unlock via a contractual lockup, with the same schedule used for the initial airdrop and others who have joined the DAO via token purchase. After a 1 year cliff, the remaining balance will unlock at the same rate as the initial institutional recipients.
If approved, this proposal would authorize the DAO to sell 150,000,000 $ARENA to Paradigm (or its affiliate entities). As Code4rena’s UNA Association Agreement requires specific authorizations of authority for members of the association to act on its behalf – passing this proposal authorizes, empowers and directs Code4 to prepare or cause to be prepared and to execute, deliver, verify, acknowledge, file, record or sign any documents, instruments, certificates, statements, papers, or any amendments thereto, as may be deemed necessary or advisable in order to effectuate the sale contemplated by this proposal.
About Paradigm
Founded in 2018, Paradigm is a crypto investment firm focused on supporting the crypto/Web3 companies of tomorrow. The team is a frequent research collaborator with its portfolio companies, such as Flashbots (e.g., codebase contributions here), Uniswap (e.g., co-authoring v3 here), and Optimism (e.g., codebase contributions here). You can learn more about Paradigm’s team here.
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