I do want to insert into this discussion the following graphic courtesy of DefiLlama that to me shows a clear relation between the decreasing valuation of the ARB token and the abrupt decrease in fees after the EIP-4844 update.

I do think that the as @PanteraCapital indicated, users are price elastic but I don't think they are at these kind of levels which is an order of magnitude lower than pre-EIP 4844.

To me it's clear that if we revive fee income closer to the levels of pre EIP 4844, ARB token price will follow, which will in turn drive more capital into the ARB ecosystem (As ARB gets more valuable more can be lent on AAVE against ARB, the Uniswap/Camelot etc LP's with ARB will grow larger, the STIP rewards get more valuable etcetera etcetera.)

I do want to insert into this discussion the following graphic courtesy of DefiLlama that to me shows a clear relation between the decreasing valuation of the ARB token and the abrupt decrease in fees after the EIP-4844 update.

I do think that the as @PanteraCapital indicated, users are price elastic but I don't think they are at these kind of levels which is an order of magnitude lower than pre-EIP 4844.

To me it's clear that if we revive fee income closer to the levels of pre EIP 4844, ARB token price will follow, which will in turn drive more capital into the ARB ecosystem (As ARB gets more valuable more can be lent on AAVE against ARB, the Uniswap/Camelot etc LP's with ARB will grow larger, the STIP rewards get more valuable etcetera etcetera.)

As part of our efforts at the Pantera Research Lab and the Pantera Catalyze Research Fellowship, we've explored the potential impact of a fee adjustment.

Below are findings that may contribute to the discussion here:

• A study from Pantera Catalyze fellow and UCLA PhD student Dongryeol Lee found that Arbitrum users are price elastic. This would argue against a price increase since it could drive away users. The net effect on revenue could even be negative despite the fee increase.
• Lee’s study design uses pre-4844 data. Since 4844 was a big change and may have impacted elasticities*, the finding may not be decisive.
• We conducted a follow up analysis and observed that price elasticity of demand is significantly lower post-4844. This means Arbitrum users are less elastic than Lee’s study suggests.
• One possible tie-breaker is that current thinking suggests L2 markets are winner-take-most. If Arbitrum should be targeting market share and not revenue in the short run, this would argue against raising fees.

*e.g. shifting the supply curve to an equilibrium where elasticities are lower.

Why do we care about ‘demand elasticity’ and why is it hard to measure?

The elasticity of demand predicts how users respond to fee changes, like those being considered in this thread. Given how important elasticities are, it would be nice if it were simple to measure them. Unfortunately there’s a saying in economics that applies here: “Don’t reason from a price change.” Econ 101 tells you that prices and quantities are the result of supply and demand, so we look for cases where it’s plausible that there were unanticipated shifts in supply and then measure the resulting effect on demand.

The figure below explains this in the context of semiconductor production. To discover the elasticity of demand for semiconductors, the authors needed to find sudden unanticipated changes in supply. Using the supply chain disruption caused by Covid, they could then observe the slope of the demand curve and determine the elasticity.

Here is more of the nitty gritty of our analysis:

To address the challenges of estimating demand elasticities, Lee employed a Two-Stage Least Squares regression using the plausible exogeneity of L1 gas fees as an instrumental variable. In the first stage, Lee instrumented Arbitrum's gas fees using L1 gas fees to predict transaction values based on L1 fee variation. In the second stage, he regressed Arbitrum gas usage on these predicted values, effectively isolating the variation in Arbitrum gas fees that is independent of user demand. Below is a table from Lee’s analysis, showing the estimates from the second stage of his regression:

In order to test how applicable this finding would be post-4844, we decided to test whether 4844 had a significant impact on elasticities themselves. In our subsequent analysis, using the sudden fee adjustment of EIP-4844 as a shock, we observed that Arbitrum users became less sensitive to fee fluctuations (decreased elasticity.) This indicates that post-4844 users are less elastic than in Lee's analysis.

In conclusion:

Our strongest evidence suggests that a fee increase on Arbitrum would cause a decrease in user demand. This decrease could be large enough to offset the revenue from a fee increase.

However, that evidence relies on pre-4844 data and we are in a post-4844 world. A further analysis we conducted indicates that 4844 did make Arbitrum users less price sensitive. We also observe that there is a good argument against raising fees even on Arbitrum in general: that current thinking suggests L2 markets are winner-take-most. That is, if the goal is acquiring and retaining users in the short run, then it may be ideal to charge them as a little as possible.

As part of our efforts at the Pantera Research Lab and the Pantera Catalyze Research Fellowship, we've explored the potential impact of a fee adjustment.

Below are findings that may contribute to the discussion here:

• A study from Pantera Catalyze fellow and UCLA PhD student Dongryeol Lee found that Arbitrum users are price elastic. This would argue against a price increase since it could drive away users. The net effect on revenue could even be negative despite the fee increase.
• Lee’s study design uses pre-4844 data. Since 4844 was a big change and may have impacted elasticities*, the finding may not be decisive.
• We conducted a follow up analysis and observed that price elasticity of demand is significantly lower post-4844. This means Arbitrum users are less elastic than Lee’s study suggests.
• One possible tie-breaker is that current thinking suggests L2 markets are winner-take-most. If Arbitrum should be targeting market share and not revenue in the short run, this would argue against raising fees.

*e.g. shifting the supply curve to an equilibrium where elasticities are lower.

Why do we care about ‘demand elasticity’ and why is it hard to measure?

The elasticity of demand predicts how users respond to fee changes, like those being considered in this thread. Given how important elasticities are, it would be nice if it were simple to measure them. Unfortunately there’s a saying in economics that applies here: “Don’t reason from a price change.” Econ 101 tells you that prices and quantities are the result of supply and demand, so we look for cases where it’s plausible that there were unanticipated shifts in supply and then measure the resulting effect on demand.

The figure below explains this in the context of semiconductor production. To discover the elasticity of demand for semiconductors, the authors needed to find sudden unanticipated changes in supply. Using the supply chain disruption caused by Covid, they could then observe the slope of the demand curve and determine the elasticity.

Here is more of the nitty gritty of our analysis:

To address the challenges of estimating demand elasticities, Lee employed a Two-Stage Least Squares regression using the plausible exogeneity of L1 gas fees as an instrumental variable. In the first stage, Lee instrumented Arbitrum's gas fees using L1 gas fees to predict transaction values based on L1 fee variation. In the second stage, he regressed Arbitrum gas usage on these predicted values, effectively isolating the variation in Arbitrum gas fees that is independent of user demand. Below is a table from Lee’s analysis, showing the estimates from the second stage of his regression:

In order to test how applicable this finding would be post-4844, we decided to test whether 4844 had a significant impact on elasticities themselves. In our subsequent analysis, using the sudden fee adjustment of EIP-4844 as a shock, we observed that Arbitrum users became less sensitive to fee fluctuations (decreased elasticity.) This indicates that post-4844 users are less elastic than in Lee's analysis.

In conclusion:

Our strongest evidence suggests that a fee increase on Arbitrum would cause a decrease in user demand. This decrease could be large enough to offset the revenue from a fee increase.

However, that evidence relies on pre-4844 data and we are in a post-4844 world. A further analysis we conducted indicates that 4844 did make Arbitrum users less price sensitive. We also observe that there is a good argument against raising fees even on Arbitrum in general: that current thinking suggests L2 markets are winner-take-most. That is, if the goal is acquiring and retaining users in the short run, then it may be ideal to charge them as a little as possible.

Thank you for mentioning Avantgarde during the discussion as a potential service provider for calibrating the base fee. We would agree that Option 2 utilizing optimistic control over the fee adjustment to be run by a specialist would provide a sensible balance of flexibility, expertise, and oversight.

Having run modelling work on sequencer revenues and their intersection with economics at the DAO treasury level, we are happy to be part of that discussion to help contribute to a potential Transaction Fee Mechanism Committee in a meaningful way

Thank you for mentioning Avantgarde during the discussion as a potential service provider for calibrating the base fee. We would agree that Option 2 utilizing optimistic control over the fee adjustment to be run by a specialist would provide a sensible balance of flexibility, expertise, and oversight.

Having run modelling work on sequencer revenues and their intersection with economics at the DAO treasury level, we are happy to be part of that discussion to help contribute to a potential Transaction Fee Mechanism Committee in a meaningful way

The current design and architecture underlying Arbitrum allow for the Min Base Fee to be increased in accordance with the proposal, while not meaningfully compromising the chain's feasibility, usability, competitiveness and USPs.

Financial sustainability is an essential component of any long-term oriented organization and its prioritization can be a key differentiator for the future prospects and viability of the ecosystem.

The proposal effectively combines the two aforementioned aspects in a manner that clearly positions its implementation to be a net positive for Arbitrum.

The current design and architecture underlying Arbitrum allow for the Min Base Fee to be increased in accordance with the proposal, while not meaningfully compromising the chain's feasibility, usability, competitiveness and USPs.

Financial sustainability is an essential component of any long-term oriented organization and its prioritization can be a key differentiator for the future prospects and viability of the ecosystem.

The proposal effectively combines the two aforementioned aspects in a manner that clearly positions its implementation to be a net positive for Arbitrum.

Thanks for your analysis and proposal. I am in support of raising the base fee on the L2 to provide a more sustainable revenue stream for the DAO.

I want to echo @JoJo - has any survey been conducted to gauge sentiment among all builders? Particularly if there is any onchain game with a high number of txs where their users might be more sensible.

Thanks for your analysis and proposal. I am in support of raising the base fee on the L2 to provide a more sustainable revenue stream for the DAO.

I want to echo @JoJo - has any survey been conducted to gauge sentiment among all builders? Particularly if there is any onchain game with a high number of txs where their users might be more sensible.

Hey Pantera team! I think I speak for everyone when I say how happy we are to have you guys here actively contributing in Arbitrum governance. Huge W for the ecosystem.

However, I would have like to of seen "user" defined in Lee's study. There is a ton of bot activity occuring on Arbitrum One, and to not segregate the users into cohorts somewhat misses the forrest for the trees in my opinion. We need to know how REAL users and developers would be affected by a minimum base fee increase rather than bots, because i am of the belief that increasing fees for the latter camp is okay. What we don't want is to lose actual people with organic demand to use ArbOne to other networks due to demand elasticity in rfr to fees. To reinforce my point, consider the fact that a project not many in the community have heard of or used (UXLink) has held a 30-60% market share over ArbOne transactions for months now (Dark Blue shaded).

To reinforce this point, if we look at the amount of revenue being driven to the DAO on a per transaction basis - we are earning far less on UXLink "users" versus legitiment DeFi primitives like GMX and Uniswap. For UXLink, 0.000002 ETH of fees are generated for the DAO for every contract interaction versus 0.0001 ETH for GMX V2 and 0.00003 ETH for Uniswap's universal router. That's ~100x and ~10x differences respectively when compared to UXLink. An increase in the L2 minbase fee would force the UXLink "users" to pay more but would largely leave GMX V2 and Uniswap uneffected assuming no congestion similar to what we saw with the LayerZero airdrop that drove congestion fees extremely high. Additionally, given the fact that Arbitrum is the leading chain for DeFi - I am hard pressed to believe that a user with a $5,000 position that needs to be managed is thinking twice about making the move based on a $0.05 fee or a $0.50 fee.

In terms of other ecosystem's strategies, specifically base - which has been gradually INCREASING the target gas per block in an effort to increase throughput and lower fees, that is indeed a viable strategy. And to your point, maybe prioritizing this short term growth in usage metrics is the better move for the long-term. My view is that we have orbit chains that can do whatever they want with gas configurations, but ArbOne is premium block space secured by Ethereum with actual security guarantees… and should be priced as such. We are handing out ARB left and right as incentives, so why make block space even cheaper when a vast majority of activity still happens on ArbOne? If there actually are certain use cases being built out today that need additional/cheaper throughput (I personally don’t think that’s true - and there are more optimal options on the market today that would be more suitable than ArbOne for extremely high throughput use cases, so why would they not build there anyways?), then we should not be thinking about increasing the base fee but instead lowering fees while juicing throughput. But I’d rather profit off the bot activity / airdrop farmers / mercenary capital for now and see if base’s thesis actually plays out. And like I said, you can still experiment at the orbit level as to not miss out on innovation at base and other ecosystems operating under the same thesis: prioritize growth and do not concern ourselves with profit.

I would be keen to see a revamped study on the elasticity of user demand in relation to tx fees, especially considering blob prices are near 0 as of now and the L1 gas spikes (outside of the blob market) have no impact on L2 fees anymore. I believe @chaoslabs is nearing completion on their backtesting on a min base fee increase as apart of their scope with the ARDC, so I will be sure to drop that here as well so you guys can check it out!

All this to say - you guys raise some great points. It becomes a strategy question of "should the dao focus a little bit on profit, or solely focus on growth?" I do not have a good answer here, but my opinion is to focus a little bit on profit so we can more easily navigate the next bear market without being forced into selling ARB tokens at low valuations.

Hey Pantera team! I think I speak for everyone when I say how happy we are to have you guys here actively contributing in Arbitrum governance. Huge W for the ecosystem.

However, I would have like to of seen "user" defined in Lee's study. There is a ton of bot activity occuring on Arbitrum One, and to not segregate the users into cohorts somewhat misses the forrest for the trees in my opinion. We need to know how REAL users and developers would be affected by a minimum base fee increase rather than bots, because i am of the belief that increasing fees for the latter camp is okay. What we don't want is to lose actual people with organic demand to use ArbOne to other networks due to demand elasticity in rfr to fees. To reinforce my point, consider the fact that a project not many in the community have heard of or used (UXLink) has held a 30-60% market share over ArbOne transactions for months now (Dark Blue shaded).

To reinforce this point, if we look at the amount of revenue being driven to the DAO on a per transaction basis - we are earning far less on UXLink "users" versus legitiment DeFi primitives like GMX and Uniswap. For UXLink, 0.000002 ETH of fees are generated for the DAO for every contract interaction versus 0.0001 ETH for GMX V2 and 0.00003 ETH for Uniswap's universal router. That's ~100x and ~10x differences respectively when compared to UXLink. An increase in the L2 minbase fee would force the UXLink "users" to pay more but would largely leave GMX V2 and Uniswap uneffected assuming no congestion similar to what we saw with the LayerZero airdrop that drove congestion fees extremely high. Additionally, given the fact that Arbitrum is the leading chain for DeFi - I am hard pressed to believe that a user with a $5,000 position that needs to be managed is thinking twice about making the move based on a $0.05 fee or a $0.50 fee.

In terms of other ecosystem's strategies, specifically base - which has been gradually INCREASING the target gas per block in an effort to increase throughput and lower fees, that is indeed a viable strategy. And to your point, maybe prioritizing this short term growth in usage metrics is the better move for the long-term. My view is that we have orbit chains that can do whatever they want with gas configurations, but ArbOne is premium block space secured by Ethereum with actual security guarantees… and should be priced as such. We are handing out ARB left and right as incentives, so why make block space even cheaper when a vast majority of activity still happens on ArbOne? If there actually are certain use cases being built out today that need additional/cheaper throughput (I personally don’t think that’s true - and there are more optimal options on the market today that would be more suitable than ArbOne for extremely high throughput use cases, so why would they not build there anyways?), then we should not be thinking about increasing the base fee but instead lowering fees while juicing throughput. But I’d rather profit off the bot activity / airdrop farmers / mercenary capital for now and see if base’s thesis actually plays out. And like I said, you can still experiment at the orbit level as to not miss out on innovation at base and other ecosystems operating under the same thesis: prioritize growth and do not concern ourselves with profit.

I would be keen to see a revamped study on the elasticity of user demand in relation to tx fees, especially considering blob prices are near 0 as of now and the L1 gas spikes (outside of the blob market) have no impact on L2 fees anymore. I believe @chaoslabs is nearing completion on their backtesting on a min base fee increase as apart of their scope with the ARDC, so I will be sure to drop that here as well so you guys can check it out!

All this to say - you guys raise some great points. It becomes a strategy question of "should the dao focus a little bit on profit, or solely focus on growth?" I do not have a good answer here, but my opinion is to focus a little bit on profit so we can more easily navigate the next bear market without being forced into selling ARB tokens at low valuations.

I don’t understand why everyone writes that this has minimal impact on users? First: You want to increase the cost of gas by 5 times. This will affect the cost of gas for users also by 5 times. If you make 1 transaction per month, then of course this does not affect anything, but for active users it will be a rollback to previous indicators.

Secondly, we all voted to reduce the base fee to 0.01 , and in a couple of months we want to roll back. Why?

Third, if we vote for ARB staking, then I can still understand the benefits for ordinary users. But what are the benefits of this increase now? Just show that now making a small profit is a problem. What is it, what is this money intended for?

I support adjusting Arbitrum’s gas fees to increase DAO revenue. This change has a minimal impact on users but significantly improves resource utilization.

Suggestions:

1. Technical Feasibility: Ensure the technical solution for automatic fee adjustments is viable and implement it promptly.

2. User Feedback: Establish a feedback mechanism to continuously collect user opinions on fee adjustments for timely optimization.

I hope these suggestions help improve the proposal and ensure its successful implementation.

Thanks to Entropy for the offer!

The proposal discusses adjusting Arbitrum's gas fees by increasing the base fee from 0.01 to 0.05. This change aims to boost the DAO's revenue without significantly affecting user decisions due to the minimal cost difference. It also suggests collaborating with trusted service providers (SPs) for Milestone 2, including implementing KYC measures and possibly automating fee adjustments based on other L2 activities to enhance flexibility and efficiency.

Supporting

• Increasing the base fee minimally impacts users but significantly benefits the DAO's revenue.
• Working with trusted SPs and implementing KYC measures ensures reliability and security.
• Automating fee adjustments based on other L2 activities could enhance efficiency and flexibility.

I support the proposal due to its potential to increase the DAO's revenue with minimal user impact and the inclusion of measures to ensure SP reliability and security. However, the feasibility of automation should be thoroughly assessed to ensure its practicality and efficiency.

At SEED, we believe this proposal is well-intentioned and holds potential benefits for the ecosystem. We think it is a good proposal, as it can help streamline various processes within the Arbitrum network. At the common user level, the proposed increase in gas fees is not particularly significant and should not pose a substantial burden.

However, the timing of this proposal appears suboptimal, since these last couple of months we spent a significant part of our treasury (eg. Catalyze Gaming Ecosystem), so these actions feel like covering a stab wound with a band-aid. It is essential to synchronize it with the Strategic Treasury Management proposal to ensure cohesive financial planning and execution. We consider it might be a good idea to align this proposal with the Arbitrum DAO Budget proposal that you guys also created.

We are also interested in understanding how this gas fee increase might impact builders who are currently deploying or those planning to deploy on Arbitrum. Assessing the potential impact on developers is essential to gauge the proposal's broader implications.

In the event that both this proposal and the ARB Staking: Use Surplus Fees to Align Governance proposal are approved, 50% of the hypothetical fees will go to the ARB Staking initiative. Has this potential allocation been considered?

Overall, while we support the core idea of the proposal, we believe these considerations and alignments are crucial for its successful implementation. Thank you, @entropy, for putting this proposal together and for considering our feedback.

There is indeed an unanswered question: has there been any thought on the consequeunce of raising fees?

Everybody is excited about getting more revenue for the dao; but what would the impact potentially be currently?

There is a world in which gas cost, amount of transaction and revenue could follow a supply-demand-cost model for example, and maybe increasing the fee could mean a drop in txs activity in a way that could be meaningful for specific protocols for example.

And since the proposal will go to vote soon, wanted to ask about any study on the potential consequences, for the good or the bad.

I don’t understand why everyone writes that this has minimal impact on users? First: You want to increase the cost of gas by 5 times. This will affect the cost of gas for users also by 5 times. If you make 1 transaction per month, then of course this does not affect anything, but for active users it will be a rollback to previous indicators.

Secondly, we all voted to reduce the base fee to 0.01 , and in a couple of months we want to roll back. Why?

Third, if we vote for ARB staking, then I can still understand the benefits for ordinary users. But what are the benefits of this increase now? Just show that now making a small profit is a problem. What is it, what is this money intended for?

I support adjusting Arbitrum’s gas fees to increase DAO revenue. This change has a minimal impact on users but significantly improves resource utilization.

Suggestions:

1. Technical Feasibility: Ensure the technical solution for automatic fee adjustments is viable and implement it promptly.

2. User Feedback: Establish a feedback mechanism to continuously collect user opinions on fee adjustments for timely optimization.

I hope these suggestions help improve the proposal and ensure its successful implementation.

Thanks to Entropy for the offer!

The proposal discusses adjusting Arbitrum's gas fees by increasing the base fee from 0.01 to 0.05. This change aims to boost the DAO's revenue without significantly affecting user decisions due to the minimal cost difference. It also suggests collaborating with trusted service providers (SPs) for Milestone 2, including implementing KYC measures and possibly automating fee adjustments based on other L2 activities to enhance flexibility and efficiency.

Supporting

• Increasing the base fee minimally impacts users but significantly benefits the DAO's revenue.
• Working with trusted SPs and implementing KYC measures ensures reliability and security.
• Automating fee adjustments based on other L2 activities could enhance efficiency and flexibility.

I support the proposal due to its potential to increase the DAO's revenue with minimal user impact and the inclusion of measures to ensure SP reliability and security. However, the feasibility of automation should be thoroughly assessed to ensure its practicality and efficiency.

At SEED, we believe this proposal is well-intentioned and holds potential benefits for the ecosystem. We think it is a good proposal, as it can help streamline various processes within the Arbitrum network. At the common user level, the proposed increase in gas fees is not particularly significant and should not pose a substantial burden.

However, the timing of this proposal appears suboptimal, since these last couple of months we spent a significant part of our treasury (eg. Catalyze Gaming Ecosystem), so these actions feel like covering a stab wound with a band-aid. It is essential to synchronize it with the Strategic Treasury Management proposal to ensure cohesive financial planning and execution. We consider it might be a good idea to align this proposal with the Arbitrum DAO Budget proposal that you guys also created.

We are also interested in understanding how this gas fee increase might impact builders who are currently deploying or those planning to deploy on Arbitrum. Assessing the potential impact on developers is essential to gauge the proposal's broader implications.

In the event that both this proposal and the ARB Staking: Use Surplus Fees to Align Governance proposal are approved, 50% of the hypothetical fees will go to the ARB Staking initiative. Has this potential allocation been considered?

Overall, while we support the core idea of the proposal, we believe these considerations and alignments are crucial for its successful implementation. Thank you, @entropy, for putting this proposal together and for considering our feedback.

There is indeed an unanswered question: has there been any thought on the consequeunce of raising fees?

Everybody is excited about getting more revenue for the dao; but what would the impact potentially be currently?

There is a world in which gas cost, amount of transaction and revenue could follow a supply-demand-cost model for example, and maybe increasing the fee could mean a drop in txs activity in a way that could be meaningful for specific protocols for example.

And since the proposal will go to vote soon, wanted to ask about any study on the potential consequences, for the good or the bad.

In my opinion, the main task of Arbitrum is not to become an organization that generates income. In the long term - yes, but now there is a struggle for users. And this is the main goal.

After the update and reduction of commissions, Arbitrum still has a good competitive advantage. If the commission is increased, then other chains will take over users who want to pay less commissions.

As a result, for the sake of the short-term prospect of making more money, we will lose the opportunity to increase users and the opportunity to receive, accordingly, more commissions in the future.

Excellent proposal, as it makes the milestone 1 easily executable and a more in-depth analysis for a later stage.

Regarding this point (for milestone 2), can we add a mechanism where the DAO can challenge the change? You guys mentioned that it will be reported X Days before being made. What happens if there is a disagreement (ex. DAO members don't agree that is the right time to change the fee)

Thanks for the suggestion @Entropy I like the two fold approach of making a swift change and then a dynamic market based approach.

Establish clear performance metrics that service providers must meet along with regular reviews of their performance against these metrics. In addition, incentive structures where service providers are rewarded for meeting or exceeding performance targets & penalized for underperformance would be cool to have.

There are pros and cons to either approach. Allowing providers to manage multiple aspects can lead to a more holistic approach to network fee and performance optimization, on the other hand there's a centralization risk as well as managing multiple parameters can introduce additional complexity and potential for errors.

I suggest, starting with limited powers such as target gas per block and accessing impact.

Quoted from  Entropy

As a rough exercise, we applied various L2 minimum base fees via a Dune query to simulate what sequencer revenue would have been since Atlas went live on March 18th. The DAO would have profited an extra 427 ETH @ 0.02 gwei minimum base fee, 1760 ETH @ 0.05, and 4016 ETH @ 0.1. The nuances around Arbitrum’s fee mechanism likely render this backtest as a loose approximation, and we would like to see more thorough analysis brought forth from the broader community before we attempt to submit an executable proposal to the forum.

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This is taken from the original discussion post, but please note these are very rough estimates.

Its grea to see that @Entropy kicked off this topic. I absolutely agree that something has to happen and I am in favour of executing Milestone 1 asap. Changing the base fee from 0.01 to 0.05 should not have any impact on a users decision which L2 he is going to use in the future. Its such a small impact for an individual, but a huge for the DAO and its future revenue. Because in the end (speaking for myself) it doesn't matter if a transaction costs me 0.05$ or 0.1$ it is still cheap compared to mainnet.

For Milestone 2 I think its crucial to work with SP that are already working with the Foundation and can be trusted. In my opinion these individuals should have KYC towards the Arbitrum foundation just like delegates that are being compensated. Best case would be even to have an automated system, tracking other L2and thus deciding to change the base rate based on these information within a predetermined range to reduce overhead and be more flexible. But I am not sure if its technical possible and how much time this will need to be implemented.

But it would definitely be a pro, similar to all lending markets adjusting their borrow rates for example for stablecoins.

In my opinion, the main task of Arbitrum is not to become an organization that generates income. In the long term - yes, but now there is a struggle for users. And this is the main goal.

After the update and reduction of commissions, Arbitrum still has a good competitive advantage. If the commission is increased, then other chains will take over users who want to pay less commissions.

As a result, for the sake of the short-term prospect of making more money, we will lose the opportunity to increase users and the opportunity to receive, accordingly, more commissions in the future.