Constitutional
We propose to unlock ARB utility and improve the governance and security of the Arbitrum protocol by implementing ARB staking, without yet turning on fee distribution to token holders. Through ARB staking, token holders who delegate to active governance participants will be able to capture value. The proposal will also implement a liquid staked ARB token (stARB) via the Tally Protocol that enables any future rewards to auto-compound, is (re)stakeable, and is compatible with DeFi. Separately, we will work with the Arbitrum DAO to decide whether and how to fund rewards and split rewards between token holders and delegates.
The ARB token is struggling to accrue value.

The ARB token is struggling as a governance mechanism

Meanwhile, the Arbitrum DAO treasury has accumulated over 16 Million $ETH in surplus fees from Arbitrum One and Nova. As a result, it is becoming economically attractive for a malicious actor to launch a governance attack on the DAO treasury. The potential profit of attacking the DAO treasury is increasing as more ETH accumulates in the treasury, while the cost of attacking the DAO through purchasing ARB for its voting power is not increasing proportionally to defend against attacks. A more developed version of this dynamic exists in the ENS and Compound DAOs, both of which are actively fighting off governance attacks (ENS documented here).
ARB Staking unlocks utility and aligns governance by creating a mechanism to stream future rewards from DAO-generated sources like sequencer fees, MEV fees, validator fees, token inflation, and treasury diversification to token holders who are delegated to an active governance participant. ARB Staking makes ARB usable in restaking and DeFi by returning voting power locked in contracts to the DAO.
This proposal contributes to Arbitrum Community Values by making the Arbitrum DAO more sustainable and secure.
ARB Staking enables ARB utility while allowing the DAO to retain governance power. It includes a few modular components that come together to power the system.
Governance Staking

The DAO
stARB (Tally Protocol LST)

Governance Staking requires that tokens are delegated to an active delegate in order to be eligible to receive rewards. We will define an "active delegate" using Karma Score. The implementation of Karma for ARB Staking is designed to be modular. If, in the future, the DAO wishes to add additional or alternative providers to define "active delegate", it can do so. The DAO will define the Karma Score requirement for being considered an active delegate. Karma Score is a combination of delegate’s Snapshot voting stats, onchain voting stats and their forum activity. To accurately calculate forum activity score, delegates are required to prove ownership of their forum handle by signing a message with their delegate address and posting on the forum. The current Karma score formula is below, which can be adjusted by the DAO going forward:
((100) * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights times Max Score Setting * 1)
Karma Score will be included in ARB staking via a smart contract that writes data onchain from the Karma API. We will include several guardrails to ensure that this aspect of the implementation is robust and decentralized:
In the future, we believe it would make sense to integrate delegate incentives with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from onchain revenue. We will lead a working group to develop a recommendation on this topic.
Tally will build ARB staking into our existing Arbitrum DAO platform, so that users can easily stake and delegate in one place.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
We anticipate that multiple Arbitrum staking systems will be developed over time, perhaps to incentivize decentralized block production in BoLD or to create an efficient MEV market in Time Boost. We view multiple staking systems as complementary. Each system would ask the staker to do different work for Arbitrum, take different risks, and pay out different rewards. Having multiple systems lets ARB holders pick between different risk/reward payoffs and specialize in different types of work to secure the system.
Post proposal on forum for feedback: June
Post temp check proposal on Snapshot: August
Post onchain proposal on Tally for funding: August
Begin development: August
Submit smart contracts for audit: September
Submit onchain proposal on Tally including full ARB Staking implementation: October
Publish working group recommendations and turn them into DAO proposals: November
If this proposal passes temperature check, we will submit an onchain proposal that includes $200,000 USD in ARB of funding to cover the costs of development, including the following funding categories:
Separately, we will submit an onchain proposal with the full ARB Staking implementation at the conclusion of the development process.
This proposal should not be relied on as legal, tax, or investment advice. Any projections included here are based on our best estimates and presented for informational purposes only.
Constitutional
We propose to unlock ARB utility and improve the governance and security of the Arbitrum protocol by implementing ARB staking, without yet turning on fee distribution to token holders. Through ARB staking, token holders who delegate to active governance participants will be able to capture value. The proposal will also implement a liquid staked ARB token (stARB) via the Tally Protocol that enables any future rewards to auto-compound, is (re)stakeable, and is compatible with DeFi. Separately, we will work with the Arbitrum DAO to decide whether and how to fund rewards and split rewards between token holders and delegates.
The ARB token is struggling to accrue value.

The ARB token is struggling as a governance mechanism

Meanwhile, the Arbitrum DAO treasury has accumulated over 16 Million $ETH in surplus fees from Arbitrum One and Nova. As a result, it is becoming economically attractive for a malicious actor to launch a governance attack on the DAO treasury. The potential profit of attacking the DAO treasury is increasing as more ETH accumulates in the treasury, while the cost of attacking the DAO through purchasing ARB for its voting power is not increasing proportionally to defend against attacks. A more developed version of this dynamic exists in the ENS and Compound DAOs, both of which are actively fighting off governance attacks (ENS documented here).
ARB Staking unlocks utility and aligns governance by creating a mechanism to stream future rewards from DAO-generated sources like sequencer fees, MEV fees, validator fees, token inflation, and treasury diversification to token holders who are delegated to an active governance participant. ARB Staking makes ARB usable in restaking and DeFi by returning voting power locked in contracts to the DAO.
This proposal contributes to Arbitrum Community Values by making the Arbitrum DAO more sustainable and secure.
ARB Staking enables ARB utility while allowing the DAO to retain governance power. It includes a few modular components that come together to power the system.
Governance Staking

The DAO
stARB (Tally Protocol LST)

Governance Staking requires that tokens are delegated to an active delegate in order to be eligible to receive rewards. We will define an "active delegate" using Karma Score. The implementation of Karma for ARB Staking is designed to be modular. If, in the future, the DAO wishes to add additional or alternative providers to define "active delegate", it can do so. The DAO will define the Karma Score requirement for being considered an active delegate. Karma Score is a combination of delegate’s Snapshot voting stats, onchain voting stats and their forum activity. To accurately calculate forum activity score, delegates are required to prove ownership of their forum handle by signing a message with their delegate address and posting on the forum. The current Karma score formula is below, which can be adjusted by the DAO going forward:
((100) * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights times Max Score Setting * 1)
Karma Score will be included in ARB staking via a smart contract that writes data onchain from the Karma API. We will include several guardrails to ensure that this aspect of the implementation is robust and decentralized:
In the future, we believe it would make sense to integrate delegate incentives with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from onchain revenue. We will lead a working group to develop a recommendation on this topic.
Tally will build ARB staking into our existing Arbitrum DAO platform, so that users can easily stake and delegate in one place.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
We anticipate that multiple Arbitrum staking systems will be developed over time, perhaps to incentivize decentralized block production in BoLD or to create an efficient MEV market in Time Boost. We view multiple staking systems as complementary. Each system would ask the staker to do different work for Arbitrum, take different risks, and pay out different rewards. Having multiple systems lets ARB holders pick between different risk/reward payoffs and specialize in different types of work to secure the system.
Post proposal on forum for feedback: June
Post temp check proposal on Snapshot: August
Post onchain proposal on Tally for funding: August
Begin development: August
Submit smart contracts for audit: September
Submit onchain proposal on Tally including full ARB Staking implementation: October
Publish working group recommendations and turn them into DAO proposals: November
If this proposal passes temperature check, we will submit an onchain proposal that includes $200,000 USD in ARB of funding to cover the costs of development, including the following funding categories:
Separately, we will submit an onchain proposal with the full ARB Staking implementation at the conclusion of the development process.
This proposal should not be relied on as legal, tax, or investment advice. Any projections included here are based on our best estimates and presented for informational purposes only.
https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/8?u=alexlumley
This should be put on hold until it’s clear what staking would do. This proposal does not include authorization to direct special privileges or revenues to stARB. Particularly, we do not want the approval of this to be seen as approval of specific spending for staking incentives.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/121?u=castlecapital
Democratising lobbyism, on-chain. Check out lobbyfi.xyz
We were in support on Snapshot so we are maintaining that stance here
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/161?u=ocandocrypto
The Event Horizon Community Voted to Support this Proposal ehARB-19: EventHorizon.vote/vote/arbitrum/ehARB-19
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/159
I believe staking at this moment raises unacceptable risks of SEC claiming ARB is a security
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/118
https://forum.arbitrum.foundation/t/seed-latam-delegate-communication-thread/13895/45?u=seedgov
Voted FOR. Excited to open doors for more ARB utility, and the funding ask is reasonable.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/155?u=mcfly
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/152?u=0x_ultra
I approve the initiative and its adjustments on the forum in full.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/149?u=tekr0x.eth
Spoke with Frisson prior to the snapshot, and he accommodated to alleviate my concerns.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/101?u=ezr3al
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/147?u=blockworksresearch
Great, ARB Staking makes the ARB practical whilst retaining governance, as a delegate would love to see the ARB empowered and seen as valuable by more people!
I support this proposal because implementing ARB staking without immediate fee distribution is a strategic move that enhances both governance and security of the Arbitrum protocol. Additionally, the introduction of a liquid staked ARB token (stARB) via the Tally Protocol aligns with DeFi compatibility and offers flexibility for token holders to compound potential rewards.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/143?u=0xdonpepe
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/128?u=coinflip
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/127?u=ermia
Democratising lobbyism, on-chain. Check out lobbyfi.xyz
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/125
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/124?u=camelot
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/122?u=blockworksresearch
https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/121?u=castlecapital
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/120
we are in favor of enacting Arbitrum staking
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/118
https://forum.arbitrum.foundation/t/griff-green-delegate-communication-thread/25040/19?u=griff
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/117?u=tane
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/114?u=bruce
https://forum.arbitrum.foundation/t/tekr0x-eth-delegate-communication-thread/24804/3?u=tekr0x.eth
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/109?u=ocandocrypto
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/107?u=0x_ultra
https://forum.arbitrum.foundation/t/gfx-labs-delegate-communication-thread/13794
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/102?u=maxlomu
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/101?u=ezr3al
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/99?u=larva
I fully support this proposal as it offers a well-structured approach to token delegation and governance within the Arbitrum ecosystem.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/95?u=seedgov
https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/8?u=alexlumley
This should be put on hold until it’s clear what staking would do. This proposal does not include authorization to direct special privileges or revenues to stARB. Particularly, we do not want the approval of this to be seen as approval of specific spending for staking incentives.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/121?u=castlecapital
Democratising lobbyism, on-chain. Check out lobbyfi.xyz
We were in support on Snapshot so we are maintaining that stance here
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/161?u=ocandocrypto
The Event Horizon Community Voted to Support this Proposal ehARB-19: EventHorizon.vote/vote/arbitrum/ehARB-19
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/159
I believe staking at this moment raises unacceptable risks of SEC claiming ARB is a security
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/118
https://forum.arbitrum.foundation/t/seed-latam-delegate-communication-thread/13895/45?u=seedgov
Voted FOR. Excited to open doors for more ARB utility, and the funding ask is reasonable.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/155?u=mcfly
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/152?u=0x_ultra
I approve the initiative and its adjustments on the forum in full.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/149?u=tekr0x.eth
Spoke with Frisson prior to the snapshot, and he accommodated to alleviate my concerns.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/101?u=ezr3al
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/147?u=blockworksresearch
Great, ARB Staking makes the ARB practical whilst retaining governance, as a delegate would love to see the ARB empowered and seen as valuable by more people!
I support this proposal because implementing ARB staking without immediate fee distribution is a strategic move that enhances both governance and security of the Arbitrum protocol. Additionally, the introduction of a liquid staked ARB token (stARB) via the Tally Protocol aligns with DeFi compatibility and offers flexibility for token holders to compound potential rewards.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/143?u=0xdonpepe
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/128?u=coinflip
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/127?u=ermia
Democratising lobbyism, on-chain. Check out lobbyfi.xyz
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/125
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/124?u=camelot
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/122?u=blockworksresearch
https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/121?u=castlecapital
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/120
we are in favor of enacting Arbitrum staking
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/118
https://forum.arbitrum.foundation/t/griff-green-delegate-communication-thread/25040/19?u=griff
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/117?u=tane
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/114?u=bruce
https://forum.arbitrum.foundation/t/tekr0x-eth-delegate-communication-thread/24804/3?u=tekr0x.eth
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/109?u=ocandocrypto
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/107?u=0x_ultra
https://forum.arbitrum.foundation/t/gfx-labs-delegate-communication-thread/13794
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/102?u=maxlomu
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/101?u=ezr3al
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/99?u=larva
I fully support this proposal as it offers a well-structured approach to token delegation and governance within the Arbitrum ecosystem.
https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/95?u=seedgov
Hi Cliffton and Tally Team,
Huge thanks for updates! and thanks for the completing the ARB Staking smart contracts, UI, and audits—it’s a tremendous effort and solid progress toward unlocking ARB’s utility.
Hi Cliffton and Tally Team,
Huge thanks for updates! and thanks for the completing the ARB Staking smart contracts, UI, and audits—it’s a tremendous effort and solid progress toward unlocking ARB’s utility.
That said, it’s honestly disheartening that, despite the DAO approving the ARB Staking proposal last year, there's still no consensus on a rewards source. This risks rendering all those dev hours, audits, and governance work essentially meaningless—leaving us with a functional staking system lacking the crucial component to activate it.
To move forward, here are some viable funding ideas:
Sequencer surplus and MEV fees Per the original proposal, future Arbitrum sequencer and MEV surplus could power staking rewards for active delegators .
Validator fees or future rollup-based revenues As components like BoLD or Time Boost go live, transaction or validation fees could be redirected into the staking rewards pool.
Dedicated transfers from the Arbitrum Treasury With healthy reserves, DAO could approve allocations—perhaps 1–2% of treasury ARB or stablecoins/ETH—specifically to seed staking rewards.
Ecosystem partnerships & project co-funding Encourage DeFi or app projects on Arbitrum to contribute rewards—creating dual incentives: they gain security through stake, users earn, and DAO scales sustainably.
🔔 Call to Action: Build Consensus on Rewards This requires community alignment. Here's a proposed process:
Let’s not let ARB Staking become a high-potential system stuck in limbo. Together—with Tally, DAO delegates, and the wider community—we can decide on a sustainable framework that “feeds” staking and truly unlocks ARB’s on-chain utility and tool-like nature.
Thanks again for your work. Let’s push this over the finish line! 💪
I wanted to check if there have been any recent updates or announcements regarding the utility of the ARB token beyond just a governance token. Has there been any progress or clarification from the team on its intended use or future role within the ecosystem?
Appreciate any insights—thank you!
Curious if there’s any updates here!
Hi Cliffton and Tally Team,
Huge thanks for updates! and thanks for the completing the ARB Staking smart contracts, UI, and audits—it’s a tremendous effort and solid progress toward unlocking ARB’s utility.
Hi Cliffton and Tally Team,
Huge thanks for updates! and thanks for the completing the ARB Staking smart contracts, UI, and audits—it’s a tremendous effort and solid progress toward unlocking ARB’s utility.
That said, it’s honestly disheartening that, despite the DAO approving the ARB Staking proposal last year, there's still no consensus on a rewards source. This risks rendering all those dev hours, audits, and governance work essentially meaningless—leaving us with a functional staking system lacking the crucial component to activate it.
To move forward, here are some viable funding ideas:
Sequencer surplus and MEV fees Per the original proposal, future Arbitrum sequencer and MEV surplus could power staking rewards for active delegators .
Validator fees or future rollup-based revenues As components like BoLD or Time Boost go live, transaction or validation fees could be redirected into the staking rewards pool.
Dedicated transfers from the Arbitrum Treasury With healthy reserves, DAO could approve allocations—perhaps 1–2% of treasury ARB or stablecoins/ETH—specifically to seed staking rewards.
Ecosystem partnerships & project co-funding Encourage DeFi or app projects on Arbitrum to contribute rewards—creating dual incentives: they gain security through stake, users earn, and DAO scales sustainably.
🔔 Call to Action: Build Consensus on Rewards This requires community alignment. Here's a proposed process:
Let’s not let ARB Staking become a high-potential system stuck in limbo. Together—with Tally, DAO delegates, and the wider community—we can decide on a sustainable framework that “feeds” staking and truly unlocks ARB’s on-chain utility and tool-like nature.
Thanks again for your work. Let’s push this over the finish line! 💪
I wanted to check if there have been any recent updates or announcements regarding the utility of the ARB token beyond just a governance token. Has there been any progress or clarification from the team on its intended use or future role within the ecosystem?
Appreciate any insights—thank you!
Curious if there’s any updates here!
So, no one cares about this proposal now?
Hi @Frisson, is there any update about the testing and the next steps?
So, no one cares about this proposal now?
Hi @Frisson, is there any update about the testing and the next steps?
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
Hey @crypfuto appreciate the comments - the DAO did commission a Rewards Source working group through this proposal to do extensive evaluation on various potential rewards sources, with the first 3 ideas you brought up being areas of research. You can find their final recommendations here, and the final recommendations of the Delegation WG here as well.
Hey @crypfuto appreciate the comments - the DAO did commission a Rewards Source working group through this proposal to do extensive evaluation on various potential rewards sources, with the first 3 ideas you brought up being areas of research. You can find their final recommendations here, and the final recommendations of the Delegation WG here as well.
I fully support the ARB staking proposal, which represents a significant milestone in enhancing ARB’s utility. It’s encouraging to see that we are finally making concrete progress on this front.
Initially, I had concerns about some aspects of the proposal, particularly regarding the delegate incentives and Karma Score system, as well as the funding sources for stakeholder rewards. Specifically, the discussions highlighted potential issues with the Karma Score system, such as the risk of gamification and the concentration of power among larger delegates, which could undermine the fairness of the governance process. Additionally, there were valid concerns about the sustainability of relying solely on sequencer fees for staking rewards.
I fully support the ARB staking proposal, which represents a significant milestone in enhancing ARB’s utility. It’s encouraging to see that we are finally making concrete progress on this front.
Initially, I had concerns about some aspects of the proposal, particularly regarding the delegate incentives and Karma Score system, as well as the funding sources for stakeholder rewards. Specifically, the discussions highlighted potential issues with the Karma Score system, such as the risk of gamification and the concentration of power among larger delegates, which could undermine the fairness of the governance process. Additionally, there were valid concerns about the sustainability of relying solely on sequencer fees for staking rewards.
However, the thoughtful revisions from @Frisson and the establishment of dedicated working groups to further refine these details have alleviated these concerns.
After all, liqudity matters. Currently there is not significant liquidty for ARB on ETH mainnet. With $stARB adoption, we expect better liquidity for ARB token in DeFi and be more accessible for on chain users.
I look forward to the continued discussions and the forthcoming proposals from these working groups.
I fully support the ARB staking proposal, which represents a significant milestone in enhancing ARB’s utility. It’s encouraging to see that we are finally making concrete progress on this front.
Initially, I had concerns about some aspects of the proposal, particularly regarding the delegate incentives and Karma Score system, as well as the funding sources for stakeholder rewards. Specifically, the discussions highlighted potential issues with the Karma Score system, such as the risk of gamification and the concentration of power among larger delegates, which could undermine the fairness of the governance process. Additionally, there were valid concerns about the sustainability of relying solely on sequencer fees for staking rewards.
I fully support the ARB staking proposal, which represents a significant milestone in enhancing ARB’s utility. It’s encouraging to see that we are finally making concrete progress on this front.
Initially, I had concerns about some aspects of the proposal, particularly regarding the delegate incentives and Karma Score system, as well as the funding sources for stakeholder rewards. Specifically, the discussions highlighted potential issues with the Karma Score system, such as the risk of gamification and the concentration of power among larger delegates, which could undermine the fairness of the governance process. Additionally, there were valid concerns about the sustainability of relying solely on sequencer fees for staking rewards.
However, the thoughtful revisions from @Frisson and the establishment of dedicated working groups to further refine these details have alleviated these concerns.
After all, liqudity matters. Currently there is not significant liquidty for ARB on ETH mainnet. With $stARB adoption, we expect better liquidity for ARB token in DeFi and be more accessible for on chain users.
I look forward to the continued discussions and the forthcoming proposals from these working groups.
it is too soon to add staking for arb tokens in my opinion, the yields will be very low and there are very unclear regulatory risks. in my opinion, this appears to be a way to quickly try and give some value to the ARB token given how low it is, but it could have the opposite effect if rushed through like this
can we please get comments from the Arbitrum Foundation legal team to understand their position on this and the risks it might represent to the DAO?
I want to see more proposals like this. Promoting governance and improving the form of governance should be one of the main objectives.
it is too soon to add staking for arb tokens in my opinion, the yields will be very low and there are very unclear regulatory risks. in my opinion, this appears to be a way to quickly try and give some value to the ARB token given how low it is, but it could have the opposite effect if rushed through like this
can we please get comments from the Arbitrum Foundation legal team to understand their position on this and the risks it might represent to the DAO?
I want to see more proposals like this. Promoting governance and improving the form of governance should be one of the main objectives.
OpenZeppelin, as the Security Member of the ARDC, reviewed the proposed changes of ARB Staking: Unlock ARB Utility and Align Governance to inform participants in the snapshot vote.
We mainly highlighted two important factors regarding integration risks with the Tally Protocol and the general risks that come with LSTs. We made recommendations for how the community could address these risks should they decide to move forward with the ARB Staking Proposal. You can read our analysis in full here:
OpenZeppelin, as the Security Member of the ARDC, reviewed the proposed changes of ARB Staking: Unlock ARB Utility and Align Governance to inform participants in the snapshot vote.
We mainly highlighted two important factors regarding integration risks with the Tally Protocol and the general risks that come with LSTs. We made recommendations for how the community could address these risks should they decide to move forward with the ARB Staking Proposal. You can read our analysis in full here:
We worked with Frisson and Tally team on fleshing out the details specifically around Karma's implementation and enhancements needed for this initiative. We are in full agreement with the updated proposal Frisson posted.
When snapshot? You are not following your timeline! What is happening
That's my question too 🤔
When snapshot? Already August 6
OpenZeppelin, as the Security Member of the ARDC, reviewed the proposed changes of ARB Staking: Unlock ARB Utility and Align Governance to inform participants in the snapshot vote.
We mainly highlighted two important factors regarding integration risks with the Tally Protocol and the general risks that come with LSTs. We made recommendations for how the community could address these risks should they decide to move forward with the ARB Staking Proposal. You can read our analysis in full here:
OpenZeppelin, as the Security Member of the ARDC, reviewed the proposed changes of ARB Staking: Unlock ARB Utility and Align Governance to inform participants in the snapshot vote.
We mainly highlighted two important factors regarding integration risks with the Tally Protocol and the general risks that come with LSTs. We made recommendations for how the community could address these risks should they decide to move forward with the ARB Staking Proposal. You can read our analysis in full here:
We worked with Frisson and Tally team on fleshing out the details specifically around Karma's implementation and enhancements needed for this initiative. We are in full agreement with the updated proposal Frisson posted.
When snapshot? You are not following your timeline! What is happening
That's my question too 🤔
When snapshot? Already August 6
Although it lacks customization, and not being CL can bring disadvantages in terms of liquidity depth; the case of veBAL is a good example to resolve this point.
Hey @Jadmat, good question on "improve liquidity". My suggestion to integrate with Double Restaking will solve the dilemma. See: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/42
Hey @Frisson; I agree that it makes sense to share the sequencer revenue with the token holders. I am surprised that the Foundation has not defined the use of the income.
This is the right approach. Nearly everyone seems to be in agreement that staking is the right direction to take. The thornier question of how much reward to distribute is something that can be modeled and tested over time. The important thing is to get the ball rolling.
Hello. This is a very good proposal. If you announce that you will allocate Arbitrum's sequencer rewards to stakers, it should lead to the acquisition of many new users. Implementing staking is important for expanding the ecosystem. I hope you will continue with the development. At the same time, there are security concerns. I would like you to simultaneously create an environment where you can participate in staking even from a hardware wallet.
Absolutely agree. $ARB must be the most important part of the entire Arbitrum ecosystem. And investors have their right to share the protocol incomes. 97% retails got lost money from $ARB token price drop, it's unacceptable and unreasonable.
"...incentive programs that make planning around treasury management difficult, ceding 50% of our sequencer revenue, one of the few sources of diversity we have is a risky move to put it kindly"
I disagree. These other programs have no relevance to this proposal, don't share the same source of funds and don't jeopardize the existing treasury. The proposal is to spend from revenue not savings.
"...incentive programs that make planning around treasury management difficult, ceding 50% of our sequencer revenue, one of the few sources of diversity we have is a risky move to put it kindly"
I disagree. These other programs have no relevance to this proposal, don't share the same source of funds and don't jeopardize the existing treasury. The proposal is to spend from revenue not savings.
"Again, we are losing half of our ETH from the treasury. Another 50% taken from the sequencer..."
This is a very misleading hyperbolic statement. The DAO isn't losing half its ETH, and drawing from future profits won't diminish the current treasury at all.
"And finally, there’s the question if our current reputation system would be able to handle this without retroactive changes in the future"
I am also skeptical of the karma score system but I think you've made a great case for why any delegate incentives should come from profits not treasury funds. Delegates are more aligned if they are only incentivized when the DAO is generating cash flow. In the absence of cash flow these programs do not draw on the treasury, they halt.
More importantly your last point could itself be considered an attack on the DAO. You are proposing we take no action that isn't perfected in spec before implementation. And that evolving implementation and spec shouldn't be allowed. This is impossible and prevents all meaningful action from the DAO.
I take it that your point is to protect the treasury in order to reduce long term risks. But the biggest risk of all is to have the treasury lost to governance capture or manipulation. The ARB token must be a part of the Arbitrum economy, otherwise it's an existential and reputational hazard to the successful operating of the Arbitrum L2.
Although it lacks customization, and not being CL can bring disadvantages in terms of liquidity depth; the case of veBAL is a good example to resolve this point.
Hey @Jadmat, good question on "improve liquidity". My suggestion to integrate with Double Restaking will solve the dilemma. See: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/42
Hey @Frisson; I agree that it makes sense to share the sequencer revenue with the token holders. I am surprised that the Foundation has not defined the use of the income.
This is the right approach. Nearly everyone seems to be in agreement that staking is the right direction to take. The thornier question of how much reward to distribute is something that can be modeled and tested over time. The important thing is to get the ball rolling.
Hello. This is a very good proposal. If you announce that you will allocate Arbitrum's sequencer rewards to stakers, it should lead to the acquisition of many new users. Implementing staking is important for expanding the ecosystem. I hope you will continue with the development. At the same time, there are security concerns. I would like you to simultaneously create an environment where you can participate in staking even from a hardware wallet.
Absolutely agree. $ARB must be the most important part of the entire Arbitrum ecosystem. And investors have their right to share the protocol incomes. 97% retails got lost money from $ARB token price drop, it's unacceptable and unreasonable.
"...incentive programs that make planning around treasury management difficult, ceding 50% of our sequencer revenue, one of the few sources of diversity we have is a risky move to put it kindly"
I disagree. These other programs have no relevance to this proposal, don't share the same source of funds and don't jeopardize the existing treasury. The proposal is to spend from revenue not savings.
"...incentive programs that make planning around treasury management difficult, ceding 50% of our sequencer revenue, one of the few sources of diversity we have is a risky move to put it kindly"
I disagree. These other programs have no relevance to this proposal, don't share the same source of funds and don't jeopardize the existing treasury. The proposal is to spend from revenue not savings.
"Again, we are losing half of our ETH from the treasury. Another 50% taken from the sequencer..."
This is a very misleading hyperbolic statement. The DAO isn't losing half its ETH, and drawing from future profits won't diminish the current treasury at all.
"And finally, there’s the question if our current reputation system would be able to handle this without retroactive changes in the future"
I am also skeptical of the karma score system but I think you've made a great case for why any delegate incentives should come from profits not treasury funds. Delegates are more aligned if they are only incentivized when the DAO is generating cash flow. In the absence of cash flow these programs do not draw on the treasury, they halt.
More importantly your last point could itself be considered an attack on the DAO. You are proposing we take no action that isn't perfected in spec before implementation. And that evolving implementation and spec shouldn't be allowed. This is impossible and prevents all meaningful action from the DAO.
I take it that your point is to protect the treasury in order to reduce long term risks. But the biggest risk of all is to have the treasury lost to governance capture or manipulation. The ARB token must be a part of the Arbitrum economy, otherwise it's an existential and reputational hazard to the successful operating of the Arbitrum L2.
The proposal represents step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
I am 100% in favor of staking rewards.
But I oppose any and all complex mechanisms to promote "meritocracy". The problem with this well intentioned idea is that people will have to start deciding who and what does and does not have merit. This is either a quagmire or an inevitable corruption. What actions have merit? Probably those taken by me and my friends and definitely not those taken by people who aren't my friends. So give me and my friends all the money.
I am 100% in favor of staking rewards.
But I oppose any and all complex mechanisms to promote "meritocracy". The problem with this well intentioned idea is that people will have to start deciding who and what does and does not have merit. This is either a quagmire or an inevitable corruption. What actions have merit? Probably those taken by me and my friends and definitely not those taken by people who aren't my friends. So give me and my friends all the money.
The DAO should not be picking winners. Either reward all stakers or even better just buy back and burn ARB.
But if we can't buy back and burn then we will need a means to align stakers for the long term. Which really just means discouraging insta sell yield farming. So let's discourage dumping with multi-week warm up and cool down periods.
These are simple systems with a history of success. No need to reinvent a wheel that only spins for the good people(that I pick).
Here @BlockworksResearch recalibrate our collective mindset and reconfigure our operational paradigms in perfect alignment with the DAO's core objectives and ethos. Through this synergistic effort, we architect mere formality, evolving into a dynamic force of meaningful change, while simultaneously cultivating an ecosystem that not only incentivizes but celebrates exemplary delegate performance.
Envision a DAO invigorated by the essence of delegates who consistently demonstrate superlative participation and voting practices. This creates a virtuous cycle of excellence, permeating every stratum of our decentralized structure and yielding bearing for all stakeholders. The ripple effects of such high-caliber engagement would be profound, potentially catalyzing unprecedented growth and innovation within our ecosystem.
Here @BlockworksResearch recalibrate our collective mindset and reconfigure our operational paradigms in perfect alignment with the DAO's core objectives and ethos. Through this synergistic effort, we architect mere formality, evolving into a dynamic force of meaningful change, while simultaneously cultivating an ecosystem that not only incentivizes but celebrates exemplary delegate performance.
Envision a DAO invigorated by the essence of delegates who consistently demonstrate superlative participation and voting practices. This creates a virtuous cycle of excellence, permeating every stratum of our decentralized structure and yielding bearing for all stakeholders. The ripple effects of such high-caliber engagement would be profound, potentially catalyzing unprecedented growth and innovation within our ecosystem.
This proposal represents more than incremental progress; it embodies a quantum leap towards the realization of our shared aspirations. By harmonizing our actions with these lofty ideals, we position ourselves at the @Avantgarde of decentralized governance evolution.
However, as we navigate this exciting frontier, we must remain vigilant. While expanding our active voter base is undoubtedly beneficial, it is paramount that this numerical growth is matched by a commensurate elevation in the qualitative aspects of governance. In the pursuit of substantive, impactful participation that propels the DAO towards its strategic objectives.
In essence, this proposal offers us a blueprint for a governance renaissance – one where blue chips , meme, quantity and quality coalesce to forge a more robust, responsive, . Let us seize this opportunity to redefine the very paradigms of decentralized governance and set new benchmarks for excellence.
You will be notified if someone mentions your @name or replies to you.
I like this suggestion of Skin in the game. Its gives new dimension to the approach aligning token holders to the ecosystem.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
Great work.
Aligning on all aspects together will be challenging, but an approach / plan to make this happen should be thought though. I like this suggestion and the similar ones that are made by others.
The proposed represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem. Also we need to also apply thoughts on a more holistic skin in the game approach beyond token holdings and governance participation. Angles on token holding, creating MVP, engaging token and token holders within the ecosystem e.g. staking or LP which will give long term value to the holders and automatically creating interest in governance and decentralization through delegation of self delegate.
I support the idea of using the surplus fees to enhance governance within the community, but yet the mechanism could be improved and be more meritocratic based on real contributions.
This proposal is a win win at multiple levels. But how will you balance between the rating / ranking for big and small delegators should also be thought of?
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
Great work.
The proposal represents step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
I am 100% in favor of staking rewards.
But I oppose any and all complex mechanisms to promote "meritocracy". The problem with this well intentioned idea is that people will have to start deciding who and what does and does not have merit. This is either a quagmire or an inevitable corruption. What actions have merit? Probably those taken by me and my friends and definitely not those taken by people who aren't my friends. So give me and my friends all the money.
I am 100% in favor of staking rewards.
But I oppose any and all complex mechanisms to promote "meritocracy". The problem with this well intentioned idea is that people will have to start deciding who and what does and does not have merit. This is either a quagmire or an inevitable corruption. What actions have merit? Probably those taken by me and my friends and definitely not those taken by people who aren't my friends. So give me and my friends all the money.
The DAO should not be picking winners. Either reward all stakers or even better just buy back and burn ARB.
But if we can't buy back and burn then we will need a means to align stakers for the long term. Which really just means discouraging insta sell yield farming. So let's discourage dumping with multi-week warm up and cool down periods.
These are simple systems with a history of success. No need to reinvent a wheel that only spins for the good people(that I pick).
Here @BlockworksResearch recalibrate our collective mindset and reconfigure our operational paradigms in perfect alignment with the DAO's core objectives and ethos. Through this synergistic effort, we architect mere formality, evolving into a dynamic force of meaningful change, while simultaneously cultivating an ecosystem that not only incentivizes but celebrates exemplary delegate performance.
Envision a DAO invigorated by the essence of delegates who consistently demonstrate superlative participation and voting practices. This creates a virtuous cycle of excellence, permeating every stratum of our decentralized structure and yielding bearing for all stakeholders. The ripple effects of such high-caliber engagement would be profound, potentially catalyzing unprecedented growth and innovation within our ecosystem.
Here @BlockworksResearch recalibrate our collective mindset and reconfigure our operational paradigms in perfect alignment with the DAO's core objectives and ethos. Through this synergistic effort, we architect mere formality, evolving into a dynamic force of meaningful change, while simultaneously cultivating an ecosystem that not only incentivizes but celebrates exemplary delegate performance.
Envision a DAO invigorated by the essence of delegates who consistently demonstrate superlative participation and voting practices. This creates a virtuous cycle of excellence, permeating every stratum of our decentralized structure and yielding bearing for all stakeholders. The ripple effects of such high-caliber engagement would be profound, potentially catalyzing unprecedented growth and innovation within our ecosystem.
This proposal represents more than incremental progress; it embodies a quantum leap towards the realization of our shared aspirations. By harmonizing our actions with these lofty ideals, we position ourselves at the @Avantgarde of decentralized governance evolution.
However, as we navigate this exciting frontier, we must remain vigilant. While expanding our active voter base is undoubtedly beneficial, it is paramount that this numerical growth is matched by a commensurate elevation in the qualitative aspects of governance. In the pursuit of substantive, impactful participation that propels the DAO towards its strategic objectives.
In essence, this proposal offers us a blueprint for a governance renaissance – one where blue chips , meme, quantity and quality coalesce to forge a more robust, responsive, . Let us seize this opportunity to redefine the very paradigms of decentralized governance and set new benchmarks for excellence.
You will be notified if someone mentions your @name or replies to you.
I like this suggestion of Skin in the game. Its gives new dimension to the approach aligning token holders to the ecosystem.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
Great work.
Aligning on all aspects together will be challenging, but an approach / plan to make this happen should be thought though. I like this suggestion and the similar ones that are made by others.
The proposed represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem. Also we need to also apply thoughts on a more holistic skin in the game approach beyond token holdings and governance participation. Angles on token holding, creating MVP, engaging token and token holders within the ecosystem e.g. staking or LP which will give long term value to the holders and automatically creating interest in governance and decentralization through delegation of self delegate.
I support the idea of using the surplus fees to enhance governance within the community, but yet the mechanism could be improved and be more meritocratic based on real contributions.
This proposal is a win win at multiple levels. But how will you balance between the rating / ranking for big and small delegators should also be thought of?
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
This is a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
Great job on Karma Score and clarity on how it will work, however there is a need to also align to active delegates and passive delegates. Publishing the scores or appreciating the work of top delegates big and small should be done, allowing community to know whom the can delegate or redelegate.
Great work.
Hey Frisson, thanks for submitting this proposal. I really like the "one stone, two birds" design: it solves the potential security issue for the Arbitrum DAO while at the same time add a new utility to ARB token!
I would like to make a suggestion to improve the proposal. In the current design, the ARB tokens locked in the staking contract is unproductive. I propose to make use of those unproductive ARB tokens via Double Restaking as illustrated in the diagram below:
Hey Frisson, thanks for submitting this proposal. I really like the "one stone, two birds" design: it solves the potential security issue for the Arbitrum DAO while at the same time add a new utility to ARB token!
I would like to make a suggestion to improve the proposal. In the current design, the ARB tokens locked in the staking contract is unproductive. I propose to make use of those unproductive ARB tokens via Double Restaking as illustrated in the diagram below:

The design is that ARB holders deposit ARB into ArbGov staking contract, and then the ArbGov staking contract will automatically deposit ARB into Double, and vice versa. The value proposition is simple and clear: 1) the unproductive ARB will now be used to support on-chain liquidity of ARB; 2) ARB holders can earn additional yields from Double's incentives on top of DAO treasury. With Double Restaking, ARB holders don't need to choose between yield from staking or yield from AMM. They will get both!
For people who are not familiar with Double, the ARB will be deposit into the Token side of Double as shown in the diagram below:

In the current design, the token side always get back their token that are matched to capital providers. The concept of IL does not apply to the token side.
(Please note: currently, ARB is not configured as a capital type on Double, only USDC/USDT/DAI/WETH are configured as capital types. There is a discussion on whether ARB should be used as a capital type, which will add another utility for ARB. But that should be a separate discussion and will not have any impact on this proposal.)
Even though the token side won't earn the AMM trading fees, it will, by design, receive Double's incentives via Double Dip Joy (DDJ), a utility ERC20 token that has no pre-mine and strong protocol native demand. The ArbGov can decide how to handle the DDJ received: 1) pass DDJ directly to ARB holders; 2) convert to stable/ETH and then pass along to ARB holders; 3) take a cut.
There is a little technical work required for integration and Double will work with Tally team on the technical integration. The timing is good though since the staking contract has not been deployed yet. (The Double restaking is designed to work with veToken model as well. But it will require contract upgrade if the veToken contacts have been deployed).
In addition, Double will work with Tally and ArbGov to support the on-chain liquidity for Tally ARB LST, which is important for ARB LST holders and also critical for many DeFi integration of ARB LST such as Pendle.
The following comment represent the views of @SavvyDAO as I'm part of their team as Governance Analyst:
Thanks for this proposal @Frisson! It’s a great way to boost security and get more people involved in the DAO governance. Redirecting surplus ETH to active ARB holders is a smart move. The use of Karma Scores is interesting, but it could be improve adjusting it to focus on recent activity to avoid concentrating power among older delegates. Adding measures to balance voting power would also be beneficial.
The following comment represent the views of @SavvyDAO as I'm part of their team as Governance Analyst:
Thanks for this proposal @Frisson! It’s a great way to boost security and get more people involved in the DAO governance. Redirecting surplus ETH to active ARB holders is a smart move. The use of Karma Scores is interesting, but it could be improve adjusting it to focus on recent activity to avoid concentrating power among older delegates. Adding measures to balance voting power would also be beneficial.
The introduction of liquid staked ARB tokens and a fair cost structure are strong points. Address the concerns about timing and power concentration, and this proposal could significantly strengthen the DAO by keeping things secure and ensuring ongoing participation.
It is nice to have thoughtful discussion. But. As we notice 4th July 2024 has come and arb had terrible price action. I believe, flexible enough to tune later implementation should be pushed asap. We cant afford to make mistake, proper development and audit is a must. But. Investors took a hit, running incetives got devalued. It is shaking people's confidence in the whole ecosystem. I am sorry that I cant add something meaningful to the proposal itself, only expressing urgency. WAGMI
Hey @Frisson , I have some questions that should be resolved prior to such a relevant implementation as the one you propose:
I don't know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
Hey @Frisson , I have some questions that should be resolved prior to such a relevant implementation as the one you propose:
I don't know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
Resolving voter apathy is key; I also find that making them participate in the income is the way to align both the staker and the voter; but a stake module has complexities that I do not read that have been mentioned, for example, the decrease in the onchain liquidity of ARB; there were efforts by the DAO to achieve depth, the proposed mechanism would reduce liquidity, eliminating depth; and derived problems such as the decrease in the quality of ARB, and the impact on its parameters in lending markets, or even the delisting of these; as well as the increase in volatility, due to decreased onchain liquidity.
To defend against an attack, can we reuse this idea from ENS? Control could be given to the security council.
https://discuss.ens.domains/t/introducing-veto-ensdao-eth/19088
Hey all, Ben from ScopeLift here. For context, we built the UniStaker contracts for the Uniswap Foundation and would be involved in bringing this proposal to fruition if it is passed. I love the quality of the discussion we've had here so far—really thoughtful and great points raised all around. Unsurprisingly, I'm in favor of this proposal, but several responses have made me think a bit more deeply about my opinion. Allow me to expand a bit on a few points:
Hey all, Ben from ScopeLift here. For context, we built the UniStaker contracts for the Uniswap Foundation and would be involved in bringing this proposal to fruition if it is passed. I love the quality of the discussion we've had here so far—really thoughtful and great points raised all around. Unsurprisingly, I'm in favor of this proposal, but several responses have made me think a bit more deeply about my opinion. Allow me to expand a bit on a few points:
Several responses have indicated the timing doesn't seem right, and implied the DAO has more time to work out a solution before a governance attack becomes a serious issue. I want to highlight a few reasons I think we should be careful about assuming these kinds of attacks are still far off.
Rapid price changes can swing the incentives quickly. Imagine that, as one thought experiment, ETH price quadruples to ~$13K post ETF launch, while ARB stays the same or drops. It's not implausible to imagine a scenario where the incentives are 4-8x stronger in only a few months. This isn't a prediction, but just an example of something that's well within the realm of possibility and could happen fast.
We also shouldn't assume an attacker has to buy the ARB they will use to execute the attack. ARB in lending markets can be used for an attack while paying only a few days worth of interest. This means acquiring the ARB needed to execute an attack can be much cheaper than the actual price of the token would imply. (Importantly, offering rewards to users who participate in governance staking, by giving holders a more productive way to get utility from their ARB, will also decrease the amount of ARB available cheaply in these lending pools. This is another way in which staking helps improve governance safety).
Finally, as @Frisson alluded to earlier, looking only at the treasury assets underestimates the upside for an attacker. To a certain degree (with some mitigation from the security council, to be sure) the full TVL of the Arbitrum networks come in to play. An attacker can also gain further upside externally by doing things like shorting ARB, longing assets that stand to benefit from ARB being attacked, draining AMM pools with ARB acquired from the treasury, etc... What this means is that the upside for an attacker is likely to be significantly more than the ETH held in the treasury.
In short, while a naive calculation of treasury assets vs. cost of the ARB token might imply a certain cushion of economic security in the short term, the reality is likely worse, and could become much worse much quicker than one might expect.
I think @swmartin made a really interesting point here that's worth considering:
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples.
What's implied is that the current value of the ARB token enjoys a speculative premium that might erode if investors have "real" numbers to do calculations on. It's possible this could play out to a certain extent, but I think it actually highlights why moving in this direction is so needed.
Right now the incentives to hold ARB are purely speculative. As such, they are also fickle. A shift in the narrative around Arbitrum—or even just around crypto or L2s in general—could crater the token price, exacerbating the security issues as discussed above. Rather than fearing providing preliminary rewards to ARB holders will erode the speculative premium, we should be concerned that speculative premium is the only thing providing ARB with value today.
In the long run, this is just not sustainable. I think there are enough investors sophisticated enough to understand that traditional multiple calculations will not look great at first. However, demonstrating that ARB is a productive asset, one that will reward holders for their participation in governance stewardship, anchors ARB's value in something real and tangible. If we shake out unsophisticated holders expecting short term gains, in exchange for sophisticated investors who can recognize the longer term potential, I would consider that a win.
I share a lot of the concerns voiced by others about the difficultly of defining "active participation" in a way that isn't gameable or ineffective. What's important here is that the system be designed in such a way as to allow this to evolve over time. I don't expect we'll get it 100% right on the first swing. That said, the work Karma is doing here seems like a solid starting point.
It is possible and we have to put it onchain anyway for staking contract to read. We are evaluating various approaches.
gm! Founder of Karma here. I'm very excited for this proposal. I see a number of questions/concerns about Karma score I would like to address:
Karma score displayed on Tally's website today is lifetime score (since the delegate started participating in the DAO). However, we also calculate last 30 days, 180 days, 1 year etc. scores too. We can simply configure for any timeframe the DAO wants.
We have spent a LOT of time trying to make the score less gameable. A while back we moved away from absolute numbers to percentiles. Example: Someone can not simply spam the forum and increase their forum score. Even if they do it, it will only increase the value by single digit. We also do basic checks for spam but have already started using chatgpt for arbitrum delegate compensation and we will extend it to forum content. I acknowledge some gamification will still happen (Goodhart's law) but we will continue to improve.
Our dashboard shows score breakdown. Click on any score or forum score. Metrics and weights are already open source. If this proposal passes, we will start storing granular raw data that anyone can download and calculate the score and verify themselves.
The scoring logic is not set in stone, really the community here has complete say on how scoring should work.
I'm for this proposal.
I don't think it's a good idea to score actions on forums and link them to rewards. This means that posts on the forum are defined to some extent by how the score is calculated. However, I am very interested in the method of using ChatGPT, could you please tell me more about it?
Hey Frisson, thanks for submitting this proposal. I really like the "one stone, two birds" design: it solves the potential security issue for the Arbitrum DAO while at the same time add a new utility to ARB token!
I would like to make a suggestion to improve the proposal. In the current design, the ARB tokens locked in the staking contract is unproductive. I propose to make use of those unproductive ARB tokens via Double Restaking as illustrated in the diagram below:
Hey Frisson, thanks for submitting this proposal. I really like the "one stone, two birds" design: it solves the potential security issue for the Arbitrum DAO while at the same time add a new utility to ARB token!
I would like to make a suggestion to improve the proposal. In the current design, the ARB tokens locked in the staking contract is unproductive. I propose to make use of those unproductive ARB tokens via Double Restaking as illustrated in the diagram below:

The design is that ARB holders deposit ARB into ArbGov staking contract, and then the ArbGov staking contract will automatically deposit ARB into Double, and vice versa. The value proposition is simple and clear: 1) the unproductive ARB will now be used to support on-chain liquidity of ARB; 2) ARB holders can earn additional yields from Double's incentives on top of DAO treasury. With Double Restaking, ARB holders don't need to choose between yield from staking or yield from AMM. They will get both!
For people who are not familiar with Double, the ARB will be deposit into the Token side of Double as shown in the diagram below:

In the current design, the token side always get back their token that are matched to capital providers. The concept of IL does not apply to the token side.
(Please note: currently, ARB is not configured as a capital type on Double, only USDC/USDT/DAI/WETH are configured as capital types. There is a discussion on whether ARB should be used as a capital type, which will add another utility for ARB. But that should be a separate discussion and will not have any impact on this proposal.)
Even though the token side won't earn the AMM trading fees, it will, by design, receive Double's incentives via Double Dip Joy (DDJ), a utility ERC20 token that has no pre-mine and strong protocol native demand. The ArbGov can decide how to handle the DDJ received: 1) pass DDJ directly to ARB holders; 2) convert to stable/ETH and then pass along to ARB holders; 3) take a cut.
There is a little technical work required for integration and Double will work with Tally team on the technical integration. The timing is good though since the staking contract has not been deployed yet. (The Double restaking is designed to work with veToken model as well. But it will require contract upgrade if the veToken contacts have been deployed).
In addition, Double will work with Tally and ArbGov to support the on-chain liquidity for Tally ARB LST, which is important for ARB LST holders and also critical for many DeFi integration of ARB LST such as Pendle.
The following comment represent the views of @SavvyDAO as I'm part of their team as Governance Analyst:
Thanks for this proposal @Frisson! It’s a great way to boost security and get more people involved in the DAO governance. Redirecting surplus ETH to active ARB holders is a smart move. The use of Karma Scores is interesting, but it could be improve adjusting it to focus on recent activity to avoid concentrating power among older delegates. Adding measures to balance voting power would also be beneficial.
The following comment represent the views of @SavvyDAO as I'm part of their team as Governance Analyst:
Thanks for this proposal @Frisson! It’s a great way to boost security and get more people involved in the DAO governance. Redirecting surplus ETH to active ARB holders is a smart move. The use of Karma Scores is interesting, but it could be improve adjusting it to focus on recent activity to avoid concentrating power among older delegates. Adding measures to balance voting power would also be beneficial.
The introduction of liquid staked ARB tokens and a fair cost structure are strong points. Address the concerns about timing and power concentration, and this proposal could significantly strengthen the DAO by keeping things secure and ensuring ongoing participation.
It is nice to have thoughtful discussion. But. As we notice 4th July 2024 has come and arb had terrible price action. I believe, flexible enough to tune later implementation should be pushed asap. We cant afford to make mistake, proper development and audit is a must. But. Investors took a hit, running incetives got devalued. It is shaking people's confidence in the whole ecosystem. I am sorry that I cant add something meaningful to the proposal itself, only expressing urgency. WAGMI
Hey @Frisson , I have some questions that should be resolved prior to such a relevant implementation as the one you propose:
I don't know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
Hey @Frisson , I have some questions that should be resolved prior to such a relevant implementation as the one you propose:
I don't know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
Resolving voter apathy is key; I also find that making them participate in the income is the way to align both the staker and the voter; but a stake module has complexities that I do not read that have been mentioned, for example, the decrease in the onchain liquidity of ARB; there were efforts by the DAO to achieve depth, the proposed mechanism would reduce liquidity, eliminating depth; and derived problems such as the decrease in the quality of ARB, and the impact on its parameters in lending markets, or even the delisting of these; as well as the increase in volatility, due to decreased onchain liquidity.
To defend against an attack, can we reuse this idea from ENS? Control could be given to the security council.
https://discuss.ens.domains/t/introducing-veto-ensdao-eth/19088
Hey all, Ben from ScopeLift here. For context, we built the UniStaker contracts for the Uniswap Foundation and would be involved in bringing this proposal to fruition if it is passed. I love the quality of the discussion we've had here so far—really thoughtful and great points raised all around. Unsurprisingly, I'm in favor of this proposal, but several responses have made me think a bit more deeply about my opinion. Allow me to expand a bit on a few points:
Hey all, Ben from ScopeLift here. For context, we built the UniStaker contracts for the Uniswap Foundation and would be involved in bringing this proposal to fruition if it is passed. I love the quality of the discussion we've had here so far—really thoughtful and great points raised all around. Unsurprisingly, I'm in favor of this proposal, but several responses have made me think a bit more deeply about my opinion. Allow me to expand a bit on a few points:
Several responses have indicated the timing doesn't seem right, and implied the DAO has more time to work out a solution before a governance attack becomes a serious issue. I want to highlight a few reasons I think we should be careful about assuming these kinds of attacks are still far off.
Rapid price changes can swing the incentives quickly. Imagine that, as one thought experiment, ETH price quadruples to ~$13K post ETF launch, while ARB stays the same or drops. It's not implausible to imagine a scenario where the incentives are 4-8x stronger in only a few months. This isn't a prediction, but just an example of something that's well within the realm of possibility and could happen fast.
We also shouldn't assume an attacker has to buy the ARB they will use to execute the attack. ARB in lending markets can be used for an attack while paying only a few days worth of interest. This means acquiring the ARB needed to execute an attack can be much cheaper than the actual price of the token would imply. (Importantly, offering rewards to users who participate in governance staking, by giving holders a more productive way to get utility from their ARB, will also decrease the amount of ARB available cheaply in these lending pools. This is another way in which staking helps improve governance safety).
Finally, as @Frisson alluded to earlier, looking only at the treasury assets underestimates the upside for an attacker. To a certain degree (with some mitigation from the security council, to be sure) the full TVL of the Arbitrum networks come in to play. An attacker can also gain further upside externally by doing things like shorting ARB, longing assets that stand to benefit from ARB being attacked, draining AMM pools with ARB acquired from the treasury, etc... What this means is that the upside for an attacker is likely to be significantly more than the ETH held in the treasury.
In short, while a naive calculation of treasury assets vs. cost of the ARB token might imply a certain cushion of economic security in the short term, the reality is likely worse, and could become much worse much quicker than one might expect.
I think @swmartin made a really interesting point here that's worth considering:
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples.
What's implied is that the current value of the ARB token enjoys a speculative premium that might erode if investors have "real" numbers to do calculations on. It's possible this could play out to a certain extent, but I think it actually highlights why moving in this direction is so needed.
Right now the incentives to hold ARB are purely speculative. As such, they are also fickle. A shift in the narrative around Arbitrum—or even just around crypto or L2s in general—could crater the token price, exacerbating the security issues as discussed above. Rather than fearing providing preliminary rewards to ARB holders will erode the speculative premium, we should be concerned that speculative premium is the only thing providing ARB with value today.
In the long run, this is just not sustainable. I think there are enough investors sophisticated enough to understand that traditional multiple calculations will not look great at first. However, demonstrating that ARB is a productive asset, one that will reward holders for their participation in governance stewardship, anchors ARB's value in something real and tangible. If we shake out unsophisticated holders expecting short term gains, in exchange for sophisticated investors who can recognize the longer term potential, I would consider that a win.
I share a lot of the concerns voiced by others about the difficultly of defining "active participation" in a way that isn't gameable or ineffective. What's important here is that the system be designed in such a way as to allow this to evolve over time. I don't expect we'll get it 100% right on the first swing. That said, the work Karma is doing here seems like a solid starting point.
It is possible and we have to put it onchain anyway for staking contract to read. We are evaluating various approaches.
gm! Founder of Karma here. I'm very excited for this proposal. I see a number of questions/concerns about Karma score I would like to address:
Karma score displayed on Tally's website today is lifetime score (since the delegate started participating in the DAO). However, we also calculate last 30 days, 180 days, 1 year etc. scores too. We can simply configure for any timeframe the DAO wants.
We have spent a LOT of time trying to make the score less gameable. A while back we moved away from absolute numbers to percentiles. Example: Someone can not simply spam the forum and increase their forum score. Even if they do it, it will only increase the value by single digit. We also do basic checks for spam but have already started using chatgpt for arbitrum delegate compensation and we will extend it to forum content. I acknowledge some gamification will still happen (Goodhart's law) but we will continue to improve.
Our dashboard shows score breakdown. Click on any score or forum score. Metrics and weights are already open source. If this proposal passes, we will start storing granular raw data that anyone can download and calculate the score and verify themselves.
The scoring logic is not set in stone, really the community here has complete say on how scoring should work.
I'm for this proposal.
I don't think it's a good idea to score actions on forums and link them to rewards. This means that posts on the forum are defined to some extent by how the score is calculated. However, I am very interested in the method of using ChatGPT, could you please tell me more about it?
gm! Founder of Karma here. I'm very excited for this proposal. I see a number of questions/concerns about Karma score I would like to address:
Karma score displayed on Tally's website today is lifetime score (since the delegate started participating in the DAO). However, we also calculate last 30 days, 180 days, 1 year etc. scores too. We can simply configure for any timeframe the DAO wants.
We have spent a LOT of time trying to make the score less gameable. A while back we moved away from absolute numbers to percentiles. Example: Someone can not simply spam the forum and increase their forum score. Even if they do it, it will only increase the value by single digit. We also do basic checks for spam but have already started using chatgpt for arbitrum delegate compensation and we will extend it to forum content. I acknowledge some gamification will still happen (Goodhart's law) but we will continue to improve.
Our dashboard shows score breakdown. Click on any score or forum score. Metrics and weights are already open source. If this proposal passes, we will start storing granular raw data that anyone can download and calculate the score and verify themselves.
The scoring logic is not set in stone, really the community here has complete say on how scoring should work.
I am happy to answer any other questions.
Hello @Frisson I don't know how this score is calculated, but I think there is a high possibility that the quality of the forum will deteriorate.
linking the discussion at ens given there are multiple parallels to the discussion here (liquid staking of governance token) https://discuss.ens.domains/t/liquid-staking-for-ens/19242
The offer is nice but I don't see sustainability because Dao revenues will not be able to subsidize this payment in the future. So, I think this proposal should be based on the expectation of future Dao income rather than the current accumulated Dao treasure. For this, the fee rate that will go to $ARB stakers in the network can be determined. Current L2, L1 fees should be investigated and an additional fee such as a Staker fee may be added to bring the Arbitrum network closer to the median.
Arbitrum doesn't need to be the cheapest L2. The important thing, according to Game Theory, is to create a system where projects, teams, VCs and $ARB investors can consistently gain profit in the long run. However, according to game theory, I see no advantage for investors and project is being funded with investors' money.
gm! Founder of Karma here. I'm very excited for this proposal. I see a number of questions/concerns about Karma score I would like to address:
Karma score displayed on Tally's website today is lifetime score (since the delegate started participating in the DAO). However, we also calculate last 30 days, 180 days, 1 year etc. scores too. We can simply configure for any timeframe the DAO wants.
We have spent a LOT of time trying to make the score less gameable. A while back we moved away from absolute numbers to percentiles. Example: Someone can not simply spam the forum and increase their forum score. Even if they do it, it will only increase the value by single digit. We also do basic checks for spam but have already started using chatgpt for arbitrum delegate compensation and we will extend it to forum content. I acknowledge some gamification will still happen (Goodhart's law) but we will continue to improve.
Our dashboard shows score breakdown. Click on any score or forum score. Metrics and weights are already open source. If this proposal passes, we will start storing granular raw data that anyone can download and calculate the score and verify themselves.
The scoring logic is not set in stone, really the community here has complete say on how scoring should work.
I am happy to answer any other questions.
Hello @Frisson I don't know how this score is calculated, but I think there is a high possibility that the quality of the forum will deteriorate.
linking the discussion at ens given there are multiple parallels to the discussion here (liquid staking of governance token) https://discuss.ens.domains/t/liquid-staking-for-ens/19242
The offer is nice but I don't see sustainability because Dao revenues will not be able to subsidize this payment in the future. So, I think this proposal should be based on the expectation of future Dao income rather than the current accumulated Dao treasure. For this, the fee rate that will go to $ARB stakers in the network can be determined. Current L2, L1 fees should be investigated and an additional fee such as a Staker fee may be added to bring the Arbitrum network closer to the median.
Arbitrum doesn't need to be the cheapest L2. The important thing, according to Game Theory, is to create a system where projects, teams, VCs and $ARB investors can consistently gain profit in the long run. However, according to game theory, I see no advantage for investors and project is being funded with investors' money.
Hi everyone, providing an update here -
Tally has completed development of ARB Staking smart contracts and UI. The staking system is built to the spec of the ARB Staking proposal that passed last year. Here are some helpful resources to review -
Hi everyone, providing an update here -
Tally has completed development of ARB Staking smart contracts and UI. The staking system is built to the spec of the ARB Staking proposal that passed last year. Here are some helpful resources to review -
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
Hi Frisson, has a yield and lock period been set for this?
Hi everyone, providing an update here -
Tally has completed development of ARB Staking smart contracts and UI. The staking system is built to the spec of the ARB Staking proposal that passed last year. Here are some helpful resources to review -
Hi everyone, providing an update here -
Tally has completed development of ARB Staking smart contracts and UI. The staking system is built to the spec of the ARB Staking proposal that passed last year. Here are some helpful resources to review -
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
Hi Frisson, has a yield and lock period been set for this?
The results are in for the ARB Staking: Unlock ARB Utility and Align Governance on-chain proposal.
See how the community voted and more Arbitrum stats: https://dhive.io/proposal/1044
I understand where this proposal is coming from.
Considering the significant price fluctuations, the goal of fostering governance, the risks of governance attacks, providing utility to ARB, and the experience gained from other DAOs, I believe the proposal makes sense.
I understand where this proposal is coming from.
Considering the significant price fluctuations, the goal of fostering governance, the risks of governance attacks, providing utility to ARB, and the experience gained from other DAOs, I believe the proposal makes sense.
I appreciated the DAO's active participation and the valuable feedback it provided, including the working groups. I think it's a bet worth making.
The results are in for the ARB Staking: Unlock ARB Utility and Align Governance on-chain proposal.
See how the community voted and more Arbitrum stats: https://dhive.io/proposal/1044
I understand where this proposal is coming from.
Considering the significant price fluctuations, the goal of fostering governance, the risks of governance attacks, providing utility to ARB, and the experience gained from other DAOs, I believe the proposal makes sense.
I understand where this proposal is coming from.
Considering the significant price fluctuations, the goal of fostering governance, the risks of governance attacks, providing utility to ARB, and the experience gained from other DAOs, I believe the proposal makes sense.
I appreciated the DAO's active participation and the valuable feedback it provided, including the working groups. I think it's a bet worth making.
The results are in for the ARB Staking: Unlock ARB Utility and Align Governance offchain proposal.
See how the community voted and more Arbitrum stats: https://dhive.io/proposal/708
The results are in for the ARB Staking: Unlock ARB Utility and Align Governance offchain proposal.
See how the community voted and more Arbitrum stats: https://dhive.io/proposal/708
The proposed solution does represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
The proposal also does a great job in its formula proposition of Karma Score, which (in the event of this proposal passing) likely becomes an attack vector increasingly prone to manipulation and gamification. However, the proposed solution effectively combines both on-chain and off-chain metrics and selects those that accurately reflect, represent and measure the desired activity and scope of involvement.
The proposed solution does represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
The proposal also does a great job in its formula proposition of Karma Score, which (in the event of this proposal passing) likely becomes an attack vector increasingly prone to manipulation and gamification. However, the proposed solution effectively combines both on-chain and off-chain metrics and selects those that accurately reflect, represent and measure the desired activity and scope of involvement.
On all levels, it is clearly a win-win proposal and outcome for everyone involved.
The only aspect which remains worth unpacking and exploring in greater depth is:
This is arguably one of the greatest reasons why better value-accrual and incentive mechanisms are not more widely adopted across the industry. Hence, it would be worth elaborating on the potential design of the surplus fee distribution and how it takes these aspects into account.
I believe that if this system is to be an integral part helping secure Arbitrum's governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
The proposed solution does represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
The proposal also does a great job in its formula proposition of Karma Score, which (in the event of this proposal passing) likely becomes an attack vector increasingly prone to manipulation and gamification. However, the proposed solution effectively combines both on-chain and off-chain metrics and selects those that accurately reflect, represent and measure the desired activity and scope of involvement.
The proposed solution does represent a meaningful step forward in terms of incentive alignment between token holders, governance participants and Arbitrum, while continuing to enhance the economic security and sustainability of the ecosystem.
The proposal also does a great job in its formula proposition of Karma Score, which (in the event of this proposal passing) likely becomes an attack vector increasingly prone to manipulation and gamification. However, the proposed solution effectively combines both on-chain and off-chain metrics and selects those that accurately reflect, represent and measure the desired activity and scope of involvement.
On all levels, it is clearly a win-win proposal and outcome for everyone involved.
The only aspect which remains worth unpacking and exploring in greater depth is:
This is arguably one of the greatest reasons why better value-accrual and incentive mechanisms are not more widely adopted across the industry. Hence, it would be worth elaborating on the potential design of the surplus fee distribution and how it takes these aspects into account.
I believe that if this system is to be an integral part helping secure Arbitrum's governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
I believe that if this system is to be an integral part helping secure Arbitrum's governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
Our staking implementation directs 1% of surplus fees to delegates to sustain the ongoing growth and development of Arbitrum, a large portion of which is driven by the DAO.
I believe that if this system is to be an integral part helping secure Arbitrum's governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
Our staking implementation directs 1% of surplus fees to delegates to sustain the ongoing growth and development of Arbitrum, a large portion of which is driven by the DAO.
We checked some numbers of Arbitrum DAO again, and we assume the DAO is not ready to implement staking as there are several things to be solved before that, especially the funding of staking rewards. (We voted for the proposal itself as we believe it would be amazing if we could make it work.)
Would you give us some updates on how you are thinking about or discussing the funding aspect?
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
We checked some numbers of Arbitrum DAO again, and we assume the DAO is not ready to implement staking as there are several things to be solved before that, especially the funding of staking rewards. (We voted for the proposal itself as we believe it would be amazing if we could make it work.)
Would you give us some updates on how you are thinking about or discussing the funding aspect?
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
As many community members have already highlighted, the design of ARB staking raises significant concerns regarding price impact and sustainability. For staking to serve as a mechanism to strengthen ARB, there must be strong underlying factors supporting token value, such as a consistently positive treasury balance, sustainable buybacks, or clear network effects centered around ARB that create durable demand. Without these, staking risks becoming a mechanism that increases sell pressure rather than supporting the token.
Looking at the current financials of Arbitrum DAO, the situation is challenging. According to the Entropy`s dashboard, the DAO generates around $15M in annual revenue but spends approximately $35M per year, resulting in a deficit of about $20M. In this state, it is difficult to construct a sustainable flywheel around staking. The more urgent priority is to address revenue generation and move the DAO toward profitability, rather than introducing staking rewards that could strain the treasury further. Until there is a stable and growing revenue base, staking cannot fulfill its intended purpose of strengthening ARB.
For comparison, Aave recently approved a buyback program under very different financial circumstances. This can be a good example of a sustainable buybacks that support staking. The Aave DAO has roughly $130M in annual revenue, with estimated service provider expenses of $40–50M.

Even after accounting for these costs and additional obligations, Aave should maintain a healthy surplus, which provides room to experiment. On top of that, they are running a $4M/month buyback as a six-month pilot. This is built upon a strong and profitable financial foundation.
We'd love to hear what people think, but, at the moment, the focus should first be on improving revenue streams and securing long-term financial sustainability in our view.
We checked some numbers of Arbitrum DAO again, and we assume the DAO is not ready to implement staking as there are several things to be solved before that, especially the funding of staking rewards. (We voted for the proposal itself as we believe it would be amazing if we could make it work.)
Would you give us some updates on how you are thinking about or discussing the funding aspect?
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
We checked some numbers of Arbitrum DAO again, and we assume the DAO is not ready to implement staking as there are several things to be solved before that, especially the funding of staking rewards. (We voted for the proposal itself as we believe it would be amazing if we could make it work.)
Would you give us some updates on how you are thinking about or discussing the funding aspect?
Our understanding is that there is not currently consensus in the DAO about funding staking rewards. When the DAO is ready to re-engage on a rewards framework, we will participate actively in that process. The contracts have been architected to accommodate the addition of a rewards mechanism with minimal further engineering, so an approved funding decision can be implemented relatively quickly.
As many community members have already highlighted, the design of ARB staking raises significant concerns regarding price impact and sustainability. For staking to serve as a mechanism to strengthen ARB, there must be strong underlying factors supporting token value, such as a consistently positive treasury balance, sustainable buybacks, or clear network effects centered around ARB that create durable demand. Without these, staking risks becoming a mechanism that increases sell pressure rather than supporting the token.
Looking at the current financials of Arbitrum DAO, the situation is challenging. According to the Entropy`s dashboard, the DAO generates around $15M in annual revenue but spends approximately $35M per year, resulting in a deficit of about $20M. In this state, it is difficult to construct a sustainable flywheel around staking. The more urgent priority is to address revenue generation and move the DAO toward profitability, rather than introducing staking rewards that could strain the treasury further. Until there is a stable and growing revenue base, staking cannot fulfill its intended purpose of strengthening ARB.
For comparison, Aave recently approved a buyback program under very different financial circumstances. This can be a good example of a sustainable buybacks that support staking. The Aave DAO has roughly $130M in annual revenue, with estimated service provider expenses of $40–50M.

Even after accounting for these costs and additional obligations, Aave should maintain a healthy surplus, which provides room to experiment. On top of that, they are running a $4M/month buyback as a six-month pilot. This is built upon a strong and profitable financial foundation.
We'd love to hear what people think, but, at the moment, the focus should first be on improving revenue streams and securing long-term financial sustainability in our view.
Tally is running a closed beta to test the ARB Staking governance contracts and UI. The ARB Staking closed beta test tokens have no monetary value.
Hey Frisson, what’s the status and next steps with testing staking and moving forward?
Do you still need people to help with beta testing? I’m happy to help.
If you fill out the closed beta registration form, we'll send you some test tokens https://x.com/tallyxyz/status/1889741660591972522
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don’t want to have you guys answer the same questions again but also, there’s like 30 pages of comments…
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don’t want to have you guys answer the same questions again but also, there’s like 30 pages of comments…
What do you mean by canonical? It's the version that passed governance, so I don't think it makes sense to edit the text. We are keeping the DAO updated on progress via this thread and also via the GRC.
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
This contract code was built specifically to meet the requirements of ARB Staking. To ship ARB Staking, the contract code just needs to be assembled, configured, and deployed on Arbitrum One.
The repo linked is meant to modular and configurable, with components that can be modified or updated by the DAO in the future. We will release a separate repo that contains the deployment configuration and deploy logs for the actual instance to be used when it comes time for that.
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don't want to have you guys answer the same questions again but also, there's like 30 pages of comments...
What are the plans for launching official staking, are there any specific deadlines yet?
Hi, how to participate in beta testing? Where to get ARBTEST tokens?
Just wanted to say thanks @dennison for the frequent and reliable updates here.
Hello Folks, wanted to share more content around our progress in staking:
My cofounder @rafso talks about how Staking aligns your community: https://x.com/tallyxyz/status/1879262601361928332
The Staker Audit Report on Twitter: https://x.com/tallyxyz/status/1878867858064605507

We're excited to share the results of our recent Sherlock security audit for Arb Staking conducted from December 2nd to December 6th (2024), which focused on evaluating our governance staking system. The audit was carried out by a skilled team of security experts, including cergyk, Spearmint, and Jokr, and represents another step in our ongoing commitment to security and reliability.
Tally completed a public audit contest of ARB Staking with Sherlock. The audit came back with 0 significant issues found.

My pleasure! We're a little delayed on the Sherlock Contest Audit report, they are reviewing a change, but should have updates soon!
As an arb position user, my deep personal need is for the proposal to really enhance the value of the ARB and increase the activity of community governance, while guarding against potential risks. Personally, I would be concerned about transparency of the revenue model and crowdsourcing of development fees
What are the plans for launching official staking, are there any specific deadlines yet?
On the development side, our next step is to run an end-to-end public test of the staking UI + contracts. This is coming soon.
From the DAO side, the next step would be to create a proposal to fund rewards.
Will it be possible to use LST as planned before? Everything except redelegation remains the same?
The ARB Staking working groups published their analysis and recommendation here: https://forum.arbitrum.foundation/t/arb-staking-working-groups-final-recommendation/27651
As per the working group recommendation, Tally has committed to revisiting our implementation of the LST (stARB) to enable its functionality without requiring the redelegation of Voting Power. We are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
The closed beta for ARB Staking governance contracts is complete. We received quality feedback from a variety of Arbitrum delegates and community members. Thank you for your participation!
The ARB Staking governance contracts and UI are ready to deploy. As a next step, we are meeting with key stakeholders to ensure technical alignment on our implementation.
Tally is running a closed beta to test the ARB Staking governance contracts and UI. The ARB Staking closed beta test tokens have no monetary value.
Hey Frisson, what’s the status and next steps with testing staking and moving forward?
Do you still need people to help with beta testing? I’m happy to help.
If you fill out the closed beta registration form, we'll send you some test tokens https://x.com/tallyxyz/status/1889741660591972522
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don’t want to have you guys answer the same questions again but also, there’s like 30 pages of comments…
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don’t want to have you guys answer the same questions again but also, there’s like 30 pages of comments…
What do you mean by canonical? It's the version that passed governance, so I don't think it makes sense to edit the text. We are keeping the DAO updated on progress via this thread and also via the GRC.
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
Thank you for your hard work! I roughly read the code. Is this contract code about the implementation of ARB Staking, or the implementation of all similar token staking functions? It seems to me that it is the latter? It seems that many functional modules are abstracted to make it more general.
This contract code was built specifically to meet the requirements of ARB Staking. To ship ARB Staking, the contract code just needs to be assembled, configured, and deployed on Arbitrum One.
The repo linked is meant to modular and configurable, with components that can be modified or updated by the DAO in the future. We will release a separate repo that contains the deployment configuration and deploy logs for the actual instance to be used when it comes time for that.
@Frisson is the proposal at the top the canonical version now? I want to give this another check and don't want to have you guys answer the same questions again but also, there's like 30 pages of comments...
What are the plans for launching official staking, are there any specific deadlines yet?
Hi, how to participate in beta testing? Where to get ARBTEST tokens?
Just wanted to say thanks @dennison for the frequent and reliable updates here.
Hello Folks, wanted to share more content around our progress in staking:
My cofounder @rafso talks about how Staking aligns your community: https://x.com/tallyxyz/status/1879262601361928332
The Staker Audit Report on Twitter: https://x.com/tallyxyz/status/1878867858064605507

We're excited to share the results of our recent Sherlock security audit for Arb Staking conducted from December 2nd to December 6th (2024), which focused on evaluating our governance staking system. The audit was carried out by a skilled team of security experts, including cergyk, Spearmint, and Jokr, and represents another step in our ongoing commitment to security and reliability.
Tally completed a public audit contest of ARB Staking with Sherlock. The audit came back with 0 significant issues found.

My pleasure! We're a little delayed on the Sherlock Contest Audit report, they are reviewing a change, but should have updates soon!
As an arb position user, my deep personal need is for the proposal to really enhance the value of the ARB and increase the activity of community governance, while guarding against potential risks. Personally, I would be concerned about transparency of the revenue model and crowdsourcing of development fees
What are the plans for launching official staking, are there any specific deadlines yet?
On the development side, our next step is to run an end-to-end public test of the staking UI + contracts. This is coming soon.
From the DAO side, the next step would be to create a proposal to fund rewards.
Will it be possible to use LST as planned before? Everything except redelegation remains the same?
The ARB Staking working groups published their analysis and recommendation here: https://forum.arbitrum.foundation/t/arb-staking-working-groups-final-recommendation/27651
As per the working group recommendation, Tally has committed to revisiting our implementation of the LST (stARB) to enable its functionality without requiring the redelegation of Voting Power. We are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
The closed beta for ARB Staking governance contracts is complete. We received quality feedback from a variety of Arbitrum delegates and community members. Thank you for your participation!
The ARB Staking governance contracts and UI are ready to deploy. As a next step, we are meeting with key stakeholders to ensure technical alignment on our implementation.
Hello Folks, wanted to share more content around our progress in staking:
My cofounder @rafso talks about how Staking aligns your community: https://x.com/tallyxyz/status/1879262601361928332
The Staker Audit Report on Twitter: https://x.com/tallyxyz/status/1878867858064605507
Will try to cross post more often with different channels because some feedback we've gotten is that not everyone is reading this thread.

We're excited to share the results of our recent Sherlock security audit for Arb Staking conducted from December 2nd to December 6th (2024), which focused on evaluating our governance staking system. The audit was carried out by a skilled team of security experts, including cergyk, Spearmint, and Jokr, and represents another step in our ongoing commitment to security and reliability.
The process was collaborative and productive, allowing us to engage deeply with the auditors to evaluate findings, address potential improvements, and ensure our platform remains robust and secure. Many of the findings were centered on opportunities for optimization and documentation improvements, validating the soundness of our codebase while offering insights for refinement.
Our engineering team took decisive action where necessary, addressing key issues promptly and transparently. For findings where fixes weren't needed, we carefully documented our reasoning, maintaining transparency with the community.
As an industry standard for driving long-term protocol success, we take our responsibility seriously in helping teams manage and protect over $70 billion in value for on-chain protocols. This audit represents another step in our ongoing commitment to security and reliability.
We're grateful for the collaborative audit process with the Sherlock team, which has helped us strengthen our protocol while preserving its core functionality. We believe these improvements will serve our users well and continue to uphold the trust they place in our platform.
We encourage community members interested in the technical details to review the complete audit report, and we remain committed to maintaining the highest security standards as we continue to develop and improve our protocol.
Please check out the complete audit report: https://github.com/withtally/staker/tree/main/audits
Next up we will be sharing the results of the Audit Contest!
The ARB Staking working groups published their analysis and recommendation here: https://forum.arbitrum.foundation/t/arb-staking-working-groups-final-recommendation/27651
As per the working group recommendation, Tally has committed to revisiting our implementation of the LST (stARB) to enable its functionality without requiring the redelegation of Voting Power. We are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
After extensive discussions with stakeholders, consideration of current limitations for implementing a plural strategy (e.g., the lack of features such as Partial Delegation or Flexible Voting), analysis of potential legal implications, and challenges in reaching a consensus on a strategy, we concluded that eliminating its necessity from the design would be the most effective path forward.
As such, Tally has committed to revisiting the implementation of the LST to enable its functionality without requiring the redelegation of Voting Power. The goal is to create a design that allows users depositing their stARB in DeFi and to retain their chosen delegation. This redesign would also address cases where users delegate to an active delegate who later becomes inactive, ensuring that these users would need to take action (e.g., manually redelegating to an active delegate) to continue receiving rewards.
In summary, the Working Group recommendation is to proceed with the implementation of Native Staking based on the previously suggested parameters and to allow Tally the opportunity to redesign the LST. This approach ensures that the DAO can launch a platform aligned with its principles—a crucial consideration given that the creation of LSTs is currently 100% permissionless (i.e., anyone could create one without engaging with the DAO to discuss its design).
A large number of rewards should be applied for distribution when the arbtrum chain is profitable. A large number of token distribution applications will be a huge disaster for investors.
For example: how much did the arbitrum dao gain this year, then all rewards will be applied for based on this profit.
Just some of my thoughts.
Hi there, I have an update on the timeline for ARB Staking.
We've made solid progress on the smart contract implementation of ARB Staking outlined in the proposal. The proposal timeline calls for us to submit an onchain proposal on Tally including the full ARB Staking implementation in October. We are intentionally moving a bit more slowly than the original proposal timeline. The proposal includes working groups to recommend staking reward sources and the definition of an active delegate. These working groups are producing important insights that we want to take the time to make sure are fully accounted for in the smart contract implementation before we bring it to audit. We also want to take extra time to make sure our technical implementation is fully understood by stakeholders at the Arbitrum Foundation and Offchain Labs.
Hi there, I have an update on the timeline for ARB Staking.
We've made solid progress on the smart contract implementation of ARB Staking outlined in the proposal. The proposal timeline calls for us to submit an onchain proposal on Tally including the full ARB Staking implementation in October. We are intentionally moving a bit more slowly than the original proposal timeline. The proposal includes working groups to recommend staking reward sources and the definition of an active delegate. These working groups are producing important insights that we want to take the time to make sure are fully accounted for in the smart contract implementation before we bring it to audit. We also want to take extra time to make sure our technical implementation is fully understood by stakeholders at the Arbitrum Foundation and Offchain Labs.
The working groups will begin to circulate draft deliverables for feedback in the next 1-2 weeks.
We have begun the process of sharing our planned smart contract implementation with Offchain Labs and the Arbitrum Foundation.
Voted FOR the Tally ARB Staking Proposal: https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/11?u=alexlumley
I look forward to my feedback getting considered as the working group develops. I'm specifically interested in how ARB staking will bring in more of the VC tokens in to the ecosystem as this is the highest leverage point for governance participation.
Hey folks, I'm kicking off the Staking Rewards and Delegation Working Groups. Feel free to watch the thread posted below for updates.
https://forum.arbitrum.foundation/t/kicking-off-staking-rewards-and-delegation-working-groups/26776
I voted FOR this proposal. As mentioned on my previous vote, I'm looking forward for the discussions on the WG that will follow this initiative.
I think nothing will happen with these votes at all. Just like now: if you delegate to someone who doesn't vote, your vote is simply not counted.
then… what will happen to the voting power that will be delegated to delegates that become inactive? those tokenholders just stop getting rewards? and if they don’t redelegate, their voting power is counting for quorum, but not being used?
Hey cp0x. Yes, we are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
The FranklinDAO / Penn Blockchain Team voted FOR this proposal on Tally. We're excited to see increased participation and delegation in governance and unlocking utility and yield for the Arbitrum token.
There are still many questions to be answered, and we are interested in being apart of the groups to help provide answers these critical questions:
The FranklinDAO / Penn Blockchain Team voted FOR this proposal on Tally. We're excited to see increased participation and delegation in governance and unlocking utility and yield for the Arbitrum token.
There are still many questions to be answered, and we are interested in being apart of the groups to help provide answers these critical questions:
We vote FOR the proposal on Tally.
We maintain the support made during Snapshot and are excited to see how a governance token can evolve with the staking mechanism and staked tokens. We are also in support of any working groups that further the utility and sustainable use of the protocol.
I’m voting FOR here.
Governance tokens still face utility challenges, and recent months have shown that without proper incentives or tokenomics, it’s difficult to demonstrate long-term value for those currently involved.
I’m voting FOR here.
Governance tokens still face utility challenges, and recent months have shown that without proper incentives or tokenomics, it’s difficult to demonstrate long-term value for those currently involved.
I appreciate this effort and am very interested to see how this change plays out. Not only could it have a positive impact on Arbitrum, but it might also serve as a future example for the entire ecosystem.
Following my previous comment, I voted in favor of the proposal.
Benefits:
Increasing governance participation by incentivizing delegators to delegate their Voting power to active delegates.
Strengthening defenses against potential governance attacks.
Enhancing the utility of the $ARB token.
Supporting the stability of the $ARB price.
Aligning with the revenue-sharing narrative.
Hello Folks, wanted to share more content around our progress in staking:
My cofounder @rafso talks about how Staking aligns your community: https://x.com/tallyxyz/status/1879262601361928332
The Staker Audit Report on Twitter: https://x.com/tallyxyz/status/1878867858064605507
Will try to cross post more often with different channels because some feedback we've gotten is that not everyone is reading this thread.

We're excited to share the results of our recent Sherlock security audit for Arb Staking conducted from December 2nd to December 6th (2024), which focused on evaluating our governance staking system. The audit was carried out by a skilled team of security experts, including cergyk, Spearmint, and Jokr, and represents another step in our ongoing commitment to security and reliability.
The process was collaborative and productive, allowing us to engage deeply with the auditors to evaluate findings, address potential improvements, and ensure our platform remains robust and secure. Many of the findings were centered on opportunities for optimization and documentation improvements, validating the soundness of our codebase while offering insights for refinement.
Our engineering team took decisive action where necessary, addressing key issues promptly and transparently. For findings where fixes weren't needed, we carefully documented our reasoning, maintaining transparency with the community.
As an industry standard for driving long-term protocol success, we take our responsibility seriously in helping teams manage and protect over $70 billion in value for on-chain protocols. This audit represents another step in our ongoing commitment to security and reliability.
We're grateful for the collaborative audit process with the Sherlock team, which has helped us strengthen our protocol while preserving its core functionality. We believe these improvements will serve our users well and continue to uphold the trust they place in our platform.
We encourage community members interested in the technical details to review the complete audit report, and we remain committed to maintaining the highest security standards as we continue to develop and improve our protocol.
Please check out the complete audit report: https://github.com/withtally/staker/tree/main/audits
Next up we will be sharing the results of the Audit Contest!
The ARB Staking working groups published their analysis and recommendation here: https://forum.arbitrum.foundation/t/arb-staking-working-groups-final-recommendation/27651
As per the working group recommendation, Tally has committed to revisiting our implementation of the LST (stARB) to enable its functionality without requiring the redelegation of Voting Power. We are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
After extensive discussions with stakeholders, consideration of current limitations for implementing a plural strategy (e.g., the lack of features such as Partial Delegation or Flexible Voting), analysis of potential legal implications, and challenges in reaching a consensus on a strategy, we concluded that eliminating its necessity from the design would be the most effective path forward.
As such, Tally has committed to revisiting the implementation of the LST to enable its functionality without requiring the redelegation of Voting Power. The goal is to create a design that allows users depositing their stARB in DeFi and to retain their chosen delegation. This redesign would also address cases where users delegate to an active delegate who later becomes inactive, ensuring that these users would need to take action (e.g., manually redelegating to an active delegate) to continue receiving rewards.
In summary, the Working Group recommendation is to proceed with the implementation of Native Staking based on the previously suggested parameters and to allow Tally the opportunity to redesign the LST. This approach ensures that the DAO can launch a platform aligned with its principles—a crucial consideration given that the creation of LSTs is currently 100% permissionless (i.e., anyone could create one without engaging with the DAO to discuss its design).
A large number of rewards should be applied for distribution when the arbtrum chain is profitable. A large number of token distribution applications will be a huge disaster for investors.
For example: how much did the arbitrum dao gain this year, then all rewards will be applied for based on this profit.
Just some of my thoughts.
Hi there, I have an update on the timeline for ARB Staking.
We've made solid progress on the smart contract implementation of ARB Staking outlined in the proposal. The proposal timeline calls for us to submit an onchain proposal on Tally including the full ARB Staking implementation in October. We are intentionally moving a bit more slowly than the original proposal timeline. The proposal includes working groups to recommend staking reward sources and the definition of an active delegate. These working groups are producing important insights that we want to take the time to make sure are fully accounted for in the smart contract implementation before we bring it to audit. We also want to take extra time to make sure our technical implementation is fully understood by stakeholders at the Arbitrum Foundation and Offchain Labs.
Hi there, I have an update on the timeline for ARB Staking.
We've made solid progress on the smart contract implementation of ARB Staking outlined in the proposal. The proposal timeline calls for us to submit an onchain proposal on Tally including the full ARB Staking implementation in October. We are intentionally moving a bit more slowly than the original proposal timeline. The proposal includes working groups to recommend staking reward sources and the definition of an active delegate. These working groups are producing important insights that we want to take the time to make sure are fully accounted for in the smart contract implementation before we bring it to audit. We also want to take extra time to make sure our technical implementation is fully understood by stakeholders at the Arbitrum Foundation and Offchain Labs.
The working groups will begin to circulate draft deliverables for feedback in the next 1-2 weeks.
We have begun the process of sharing our planned smart contract implementation with Offchain Labs and the Arbitrum Foundation.
Voted FOR the Tally ARB Staking Proposal: https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/11?u=alexlumley
I look forward to my feedback getting considered as the working group develops. I'm specifically interested in how ARB staking will bring in more of the VC tokens in to the ecosystem as this is the highest leverage point for governance participation.
Hey folks, I'm kicking off the Staking Rewards and Delegation Working Groups. Feel free to watch the thread posted below for updates.
https://forum.arbitrum.foundation/t/kicking-off-staking-rewards-and-delegation-working-groups/26776
I voted FOR this proposal. As mentioned on my previous vote, I'm looking forward for the discussions on the WG that will follow this initiative.
I think nothing will happen with these votes at all. Just like now: if you delegate to someone who doesn't vote, your vote is simply not counted.
then… what will happen to the voting power that will be delegated to delegates that become inactive? those tokenholders just stop getting rewards? and if they don’t redelegate, their voting power is counting for quorum, but not being used?
Hey cp0x. Yes, we are working on a proposed implementation that meets this requirement and will update the DAO as we make progress.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
The FranklinDAO / Penn Blockchain Team voted FOR this proposal on Tally. We're excited to see increased participation and delegation in governance and unlocking utility and yield for the Arbitrum token.
There are still many questions to be answered, and we are interested in being apart of the groups to help provide answers these critical questions:
The FranklinDAO / Penn Blockchain Team voted FOR this proposal on Tally. We're excited to see increased participation and delegation in governance and unlocking utility and yield for the Arbitrum token.
There are still many questions to be answered, and we are interested in being apart of the groups to help provide answers these critical questions:
We vote FOR the proposal on Tally.
We maintain the support made during Snapshot and are excited to see how a governance token can evolve with the staking mechanism and staked tokens. We are also in support of any working groups that further the utility and sustainable use of the protocol.
I’m voting FOR here.
Governance tokens still face utility challenges, and recent months have shown that without proper incentives or tokenomics, it’s difficult to demonstrate long-term value for those currently involved.
I’m voting FOR here.
Governance tokens still face utility challenges, and recent months have shown that without proper incentives or tokenomics, it’s difficult to demonstrate long-term value for those currently involved.
I appreciate this effort and am very interested to see how this change plays out. Not only could it have a positive impact on Arbitrum, but it might also serve as a future example for the entire ecosystem.
Following my previous comment, I voted in favor of the proposal.
Benefits:
Increasing governance participation by incentivizing delegators to delegate their Voting power to active delegates.
Strengthening defenses against potential governance attacks.
Enhancing the utility of the $ARB token.
Supporting the stability of the $ARB price.
Aligning with the revenue-sharing narrative.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
Would have been also OK by setting parameters beforehand (i.e. what does an active delegate mean and how to calculate it, and source of staking rewards) but it clearly was an intelligent decision to decompress this idea and start proposing/developing -if approved- at least the structure (which is what this is). It seems at this point that the proposal will pass, having most top delegates voted favourably.
I voted in favour of the on-chain proposal for the reasons specified above.
Interesting to see how this impacts the DAO. Keeping tabs on the implementation.
The following reflects the views of the Lampros Labs DAO governance team, composed of @Blueweb, @Euphoria, and @Nyx, based on our combined research, analysis and ideation.
We're voting FOR this proposal on Tally.
The following reflects the views of the Lampros Labs DAO governance team, composed of @Blueweb, @Euphoria, and @Nyx, based on our combined research, analysis and ideation.
We're voting FOR this proposal on Tally.
What stands out to us is the transparency and level of detail in the proposal. The potential impact of ARB staking appears to fully justify the requested funding. The introduction of ARB staking and stARB provides a valuable way to strengthen governance while allowing token holders to capture value. The data provided highlights the need for stronger governance and DeFi support, and we believe that improving governance participation in this way is a step in the right direction.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We are voting FOR this proposal.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We are voting FOR this proposal.
As we mentioned back when we voted in favor of this proposal during Snapshot, we have discussed this proposal extensively with Frisson and the Tally team both in person and online. Our views haven’t changed since our last comment, and we remain committed to participating in any working groups that are spun up to define the source of staking rewards and the definition of an active delegate.
We also want to take the opportunity to link a relative content piece that Delphi Digital, as a member of the ARDC, published two weeks ago.
Voted FOR, this is an interesting experiment, and we should explore options to increase usage of ARB if it makes sense and aligns with long term vision / strategy (we need this too).
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I voted ABSTAIN on this onchain proposal on Tally for the reasons outlined above.
We're voting FOR this proposal. The staking setup cleverly tackles the "DeFi or govern" dilemma by letting folks use their ARB in DeFi without tanking governance participation. I'm particularly impressed by how it handles unused voting power - it's a smart way to keep things decentralized even as ARB gets wrapped up in various protocols. Plus, the Karma score integration isn't just a set-and-forget deal. The DAO can tweak or override it, which keeps us flexible as we figure out what "active governance" really looks like in practice over the next years.
Below are the reflections of the UADP:
We voted For this proposal in both the snapshot and onchain phases.
Our team has been monitoring the continual iterations of this proposal by intaking delegates’ feedback, and it has been great to see the progress towards a more conclusive structure.
Below are the reflections of the UADP:
We voted For this proposal in both the snapshot and onchain phases.
Our team has been monitoring the continual iterations of this proposal by intaking delegates’ feedback, and it has been great to see the progress towards a more conclusive structure.
After the introduction of the unistaker concept, it’s exciting to see the possibilities that can be implemented for introducing some degree of value behind “mere governance tokens”. The initial idea to distribute surplus sequencer fees to stakers is of course difficult since the operating revenue for the DAO is currently limited, and it is an important revenue management decision to consider where and how this capital should be used. We are interested in seeing the new working groups’ research regarding how capital should be directed to stakers. It seems unlikely that the DAO will be able to sustain decent enough yield to stakers from sequencer fees alone. The recent proposal by Karpatkey and Aera regarding “diversifying” the treasury into stables and yield bearing assets would be an interesting way to potentially divert some of this non-operating revenue to stakers. Again, this is a revenue management decision. It could be the case that incorporating this staking setup is good enough for now–and we can in the future turn on this, so to speak, fee switch and begin issuing dividends.
It could also be the case that the yield is turned on for a period of time, like issuing a dividend during a period where we have excess revenue. However, this is difficult since whenever a company issues dividends, investors expect an indefinite dividend. Turning on fees to stakers could also be something that’s implemented during times where we need the price of ARB to perhaps increase to a particular threshold in order to preserve the severity of the treasury. As mentioned, the likelihood and incentive towards conducting a governance attack only increases as the treasury balance sheet is full of more and more non-native tokens.
Deciding who will be eligible for the yield is also a very difficult problem due to the subjectivity surrounding assessment results from groups like Karma. We look forward to seeing the research surrounding this as well.
Overall, this staked governance token setup is very promising in increasing the attractiveness of holding these tokens. I’m sure many large DAOs have seen this and are now contemplating similar practices.
I'm voting "FOR" anything that will bring utility to the token. Price appreciation might not be impacted in the short term, but this is a first step towards building a self-sustainable protocol. However, I'm concerned about the legal risks this could pose to the Arb Foundation and the DAO.
I believe the delegation working group should also focus on creating the right incentive program to prevent delegating more power to whales, which could result in a plutocracy, and instead create incentives for smaller delegates to gain more influence.
I support this proposal on Tally just as I did during the previous phase on Snapshot (https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/107?u=blockworksresearch). I'm still really excited to see the outcomes!
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
Would have been also OK by setting parameters beforehand (i.e. what does an active delegate mean and how to calculate it, and source of staking rewards) but it clearly was an intelligent decision to decompress this idea and start proposing/developing -if approved- at least the structure (which is what this is). It seems at this point that the proposal will pass, having most top delegates voted favourably.
I voted in favour of the on-chain proposal for the reasons specified above.
Interesting to see how this impacts the DAO. Keeping tabs on the implementation.
The following reflects the views of the Lampros Labs DAO governance team, composed of @Blueweb, @Euphoria, and @Nyx, based on our combined research, analysis and ideation.
We're voting FOR this proposal on Tally.
The following reflects the views of the Lampros Labs DAO governance team, composed of @Blueweb, @Euphoria, and @Nyx, based on our combined research, analysis and ideation.
We're voting FOR this proposal on Tally.
What stands out to us is the transparency and level of detail in the proposal. The potential impact of ARB staking appears to fully justify the requested funding. The introduction of ARB staking and stARB provides a valuable way to strengthen governance while allowing token holders to capture value. The data provided highlights the need for stronger governance and DeFi support, and we believe that improving governance participation in this way is a step in the right direction.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We are voting FOR this proposal.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We are voting FOR this proposal.
As we mentioned back when we voted in favor of this proposal during Snapshot, we have discussed this proposal extensively with Frisson and the Tally team both in person and online. Our views haven’t changed since our last comment, and we remain committed to participating in any working groups that are spun up to define the source of staking rewards and the definition of an active delegate.
We also want to take the opportunity to link a relative content piece that Delphi Digital, as a member of the ARDC, published two weeks ago.
Voted FOR, this is an interesting experiment, and we should explore options to increase usage of ARB if it makes sense and aligns with long term vision / strategy (we need this too).
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I voted ABSTAIN on this onchain proposal on Tally for the reasons outlined above.
We're voting FOR this proposal. The staking setup cleverly tackles the "DeFi or govern" dilemma by letting folks use their ARB in DeFi without tanking governance participation. I'm particularly impressed by how it handles unused voting power - it's a smart way to keep things decentralized even as ARB gets wrapped up in various protocols. Plus, the Karma score integration isn't just a set-and-forget deal. The DAO can tweak or override it, which keeps us flexible as we figure out what "active governance" really looks like in practice over the next years.
Below are the reflections of the UADP:
We voted For this proposal in both the snapshot and onchain phases.
Our team has been monitoring the continual iterations of this proposal by intaking delegates’ feedback, and it has been great to see the progress towards a more conclusive structure.
Below are the reflections of the UADP:
We voted For this proposal in both the snapshot and onchain phases.
Our team has been monitoring the continual iterations of this proposal by intaking delegates’ feedback, and it has been great to see the progress towards a more conclusive structure.
After the introduction of the unistaker concept, it’s exciting to see the possibilities that can be implemented for introducing some degree of value behind “mere governance tokens”. The initial idea to distribute surplus sequencer fees to stakers is of course difficult since the operating revenue for the DAO is currently limited, and it is an important revenue management decision to consider where and how this capital should be used. We are interested in seeing the new working groups’ research regarding how capital should be directed to stakers. It seems unlikely that the DAO will be able to sustain decent enough yield to stakers from sequencer fees alone. The recent proposal by Karpatkey and Aera regarding “diversifying” the treasury into stables and yield bearing assets would be an interesting way to potentially divert some of this non-operating revenue to stakers. Again, this is a revenue management decision. It could be the case that incorporating this staking setup is good enough for now–and we can in the future turn on this, so to speak, fee switch and begin issuing dividends.
It could also be the case that the yield is turned on for a period of time, like issuing a dividend during a period where we have excess revenue. However, this is difficult since whenever a company issues dividends, investors expect an indefinite dividend. Turning on fees to stakers could also be something that’s implemented during times where we need the price of ARB to perhaps increase to a particular threshold in order to preserve the severity of the treasury. As mentioned, the likelihood and incentive towards conducting a governance attack only increases as the treasury balance sheet is full of more and more non-native tokens.
Deciding who will be eligible for the yield is also a very difficult problem due to the subjectivity surrounding assessment results from groups like Karma. We look forward to seeing the research surrounding this as well.
Overall, this staked governance token setup is very promising in increasing the attractiveness of holding these tokens. I’m sure many large DAOs have seen this and are now contemplating similar practices.
I'm voting "FOR" anything that will bring utility to the token. Price appreciation might not be impacted in the short term, but this is a first step towards building a self-sustainable protocol. However, I'm concerned about the legal risks this could pose to the Arb Foundation and the DAO.
I believe the delegation working group should also focus on creating the right incentive program to prevent delegating more power to whales, which could result in a plutocracy, and instead create incentives for smaller delegates to gain more influence.
I support this proposal on Tally just as I did during the previous phase on Snapshot (https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/107?u=blockworksresearch). I'm still really excited to see the outcomes!
I voted FOR: I see this proposal as very innovative in the field of governance tokens. Utility of governance tokens is something that all DAOs face and as Arbitrum DAO we need to experiment with different approaches on this. I am excited to see how this proposal will reflect on the market price, open new possibles with stARB, and how will effect governance/delegation.
I voted FOR: I see this proposal as very innovative in the field of governance tokens. Utility of governance tokens is something that all DAOs face and as Arbitrum DAO we need to experiment with different approaches on this. I am excited to see how this proposal will reflect on the market price, open new possibles with stARB, and how will effect governance/delegation.
Blockworks Research will be voting FOR this proposal on Tally.
The proposal has had a substantial rewrite from its original showing, and it reflects the diligence by both Frisson and other DAO members. We would like to remain cautious about simply using inflation and not taking the time to think of other mechanisms for which the DAO may want to explore in incentivizing participation and allowing staking. Additionally, we would like all members to remember the legal implications of staking. We appreciate the high-level summary, but this should be treated with utmost caution, and should be in discussion at all times moving forward.
One of the main problems I face in several DAOs as a self-delegate is that I cannot use my tokens in DeFi. For example, if I move them to AAVE, I lose my delegation power. This is a big problem for a degen like me because it disincentivizes me from delegating all my tokens due to the opportunity costs (I could be generating yield elsewhere).
The introduction of stARB completely fixes this problem; it will finally enable me to maintain my degen addiction while retaining delegation power. For these reasons, I'm voting in favor of this proposal, and I hope it becomes so successful that other DAOs take note and implement similar token utility, as this is clearly aligned with governance and incentives.
this is not totally true. Dolomite allows you to use arb as collateral while delegated to yourself or whoever you prefer; and in my knowledge there are several ways to implement this, just, protocols don't bother too much doing it.
For sure stArb will hopefully allow for new use cases.
Oh wow! This is my first time hearing about Dolomite—thanks for the heads up! I’m already diving in to check it out.
In response to various questions, we wanted to share a high-level summary of our analysis of the application of US securities laws to our proposal to implement ARB staking. The analysis below does not constitute legal or financial advice and should not be relied upon by any delegate. The regulatory framework applicable to crypto, including staking and other yield programs, is currently unclear and subject to ongoing litigation. We therefore encourage every delegate to consult with their own counsel.
ARB staking is not an “investment” intended to yield profit, but rather a cryptoeconomic security mechanism intended to increase the security of the Arbitrum protocol. The “yield” that will be passed through to ARB stakers does not constitute a distribution of the profits of Tally or any other business entity, but rather a programmatic distribution of fees generated at the protocol level. Therefore, ARB stakers should not have any expectation that they are going to be profiting from the efforts of managers of a business entity, nor will ARB stakers be subject to information asymmetries and agency issues that require the application of securities laws.
Thank you for your thoughtful feedback and for all the work you do to contribute to the Arbitrum ecosystem @Camelot.
One thing I’d note is this proposal does not, in and of itself, make any changes to the ARB token. The specific implementation of staking rewards and their integration with governance will be determined via the below process and implemented (if desired by the DAO) via separate governance proposals.
Thank you for your thoughtful feedback and for all the work you do to contribute to the Arbitrum ecosystem @Camelot.
One thing I’d note is this proposal does not, in and of itself, make any changes to the ARB token. The specific implementation of staking rewards and their integration with governance will be determined via the below process and implemented (if desired by the DAO) via separate governance proposals.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
I'd also note that the implementation of Karma for ARB Staking is designed to be modular.
The implementation of Karma for ARB Staking is designed to be modular. If, in the future, the DAO wishes to add additional or alternative providers to define “active delegate”, it can do so.
I voted for on this proposal. It is good to see that it was enhanced by several delegates suggestions/ideas.
I'm really looking forward to the analysis of the working groups to define the adjustments needed before going to Tally.
Thanks for your support and for your thoughtful feedback @JoJo. I agree that protocol representation in DAO governance is important and should not be neglected in the design. I'd love for you to participate in the working groups.
Since arb went live. We have been looking forward to the ARB pledge to bring more opportunities to the ecology, not only just capture the value, but also really let the holder, the pledgee to see the ARB ecology in all aspects of leading the industry at the same time, can be more confident to hold. However, how to strike a balance between pledging and voting rights, and at the same time, the proxy can continue to get the right to vote by proxy, and at the same time, attract more people to participate. I hope frisson can bring more different things, thank you for your proposal!
Before we begin, we would like to express our gratitude to you on behalf of ITU Blockchain for this proposal. The first thing that caught our attention is that the proposal is prepared with great transparency and detail. We believe that the impact of Arbitrum Staking justifies the requested grant. The data presented clearly shows the need to support governance and DeFi. We want to emphasize that we always support improvements in this direction on the governance side.
Thanks for your support and for your feedback @coinflip. I replied to each of your questions in-line below. Happy to discuss further!
will the be any additional cost to the DAO for the distirbution of rewards to through these stARB contracts?
Thanks for your support and for your feedback @BlockworksResearch.
I added a specific timeline for the working group deliverables to the proposal.
My personal view is that both working group topics (staking rewards and delegation) are very important and distinct enough to merit separate groups. We welcome anyone who is interested to participate in both groups.
Thanks for your support and for your feedback @pedrob. stARB is designed to be able to support any implementation recommended by the working groups. My personal view is that waiting for the working groups to conclude before beginning development will add months of delay without significant benefit.
DAOplomats voted FOR this proposal on Snapshot.
ARB staking is an outstanding value add and it unlocks several possibilities, especially aligning incentives between all stakeholders and we are glad to see this come to life. There are still details to work through regarding defining an "active delegate", and reward structure but happy to see this pass the initial temp check. We also commit to participating in the working groups once that is established.
Thank you everyone for your support and valuable feedback.
To help address recent questions raised by delegates in this thread, I added technical detail to the System Architecture section of the proposal and added a specific timeline for the working group deliverables.
Thank you everyone for your support and valuable feedback.
To help address recent questions raised by delegates in this thread, I added technical detail to the System Architecture section of the proposal and added a specific timeline for the working group deliverables.
In addition to updating the proposal text, I created an onchain proposal on Tally to fund development of the staking system. The current onchain proposal is only to fund the development of the staking system. The DAO will vote separately on the implementation of ARB Staking after it has completed development and audit. The DAO will also vote separately on the funding of staking rewards and implementation of delegation based on the recommendations of the working groups. Please note that, while this proposal as a whole is Constitutional, the current onchain proposal targets the Treasury Governor because it controls the ARB treasury.
Voting 'For' this proposal and a fan of this direction but do believe this is a classic devil is in the details situation so hoping for a few more things to be clarified as we progress. The long list below and voting For still, shows how important an idea it is to still move forward and solve.
General Operational Concerns While we’re happy to see the discussion open to exploring other sources of yield we have a couple suggestions that we would like to see addressed prior to being pushed on Tally. Instead of the two separate working groups the proposal calls for, we would like to see one working group considering both are exploring staking as it relates to governance. This also complicates the process for reaching a conclusion in the end, and over-governing is a real issue that can hinder the DAO’s timely decision making. The total funding for these groups is also capped at $20,000 with an unspecified time commitment with an unclear end date.
Our suggestions are to slightly raise the prospects for funding, and then set some amount of time for them to reach a conclusion (maybe in accordance with the incentive detox period for simplicity).
Voting in favor of this proposal. It's actually one of the more interesting proposal in while. I hope in can further incentivize governance participation. Thanks, @Frisson
Thanks for your support and for your feedback @WinVerse. I updated the diagram to 'stARB'.
Thank you for chiming in, always a pleasure to see you in the forum :slight_smile:
Let me quickly clarify a few things.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let’s not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
Blockworks Research will be voting FOR this proposal on Tally.
The proposal has had a substantial rewrite from its original showing, and it reflects the diligence by both Frisson and other DAO members. We would like to remain cautious about simply using inflation and not taking the time to think of other mechanisms for which the DAO may want to explore in incentivizing participation and allowing staking. Additionally, we would like all members to remember the legal implications of staking. We appreciate the high-level summary, but this should be treated with utmost caution, and should be in discussion at all times moving forward.
One of the main problems I face in several DAOs as a self-delegate is that I cannot use my tokens in DeFi. For example, if I move them to AAVE, I lose my delegation power. This is a big problem for a degen like me because it disincentivizes me from delegating all my tokens due to the opportunity costs (I could be generating yield elsewhere).
The introduction of stARB completely fixes this problem; it will finally enable me to maintain my degen addiction while retaining delegation power. For these reasons, I'm voting in favor of this proposal, and I hope it becomes so successful that other DAOs take note and implement similar token utility, as this is clearly aligned with governance and incentives.
this is not totally true. Dolomite allows you to use arb as collateral while delegated to yourself or whoever you prefer; and in my knowledge there are several ways to implement this, just, protocols don't bother too much doing it.
For sure stArb will hopefully allow for new use cases.
Oh wow! This is my first time hearing about Dolomite—thanks for the heads up! I’m already diving in to check it out.
In response to various questions, we wanted to share a high-level summary of our analysis of the application of US securities laws to our proposal to implement ARB staking. The analysis below does not constitute legal or financial advice and should not be relied upon by any delegate. The regulatory framework applicable to crypto, including staking and other yield programs, is currently unclear and subject to ongoing litigation. We therefore encourage every delegate to consult with their own counsel.
ARB staking is not an “investment” intended to yield profit, but rather a cryptoeconomic security mechanism intended to increase the security of the Arbitrum protocol. The “yield” that will be passed through to ARB stakers does not constitute a distribution of the profits of Tally or any other business entity, but rather a programmatic distribution of fees generated at the protocol level. Therefore, ARB stakers should not have any expectation that they are going to be profiting from the efforts of managers of a business entity, nor will ARB stakers be subject to information asymmetries and agency issues that require the application of securities laws.
Thank you for your thoughtful feedback and for all the work you do to contribute to the Arbitrum ecosystem @Camelot.
One thing I’d note is this proposal does not, in and of itself, make any changes to the ARB token. The specific implementation of staking rewards and their integration with governance will be determined via the below process and implemented (if desired by the DAO) via separate governance proposals.
Thank you for your thoughtful feedback and for all the work you do to contribute to the Arbitrum ecosystem @Camelot.
One thing I’d note is this proposal does not, in and of itself, make any changes to the ARB token. The specific implementation of staking rewards and their integration with governance will be determined via the below process and implemented (if desired by the DAO) via separate governance proposals.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
I'd also note that the implementation of Karma for ARB Staking is designed to be modular.
The implementation of Karma for ARB Staking is designed to be modular. If, in the future, the DAO wishes to add additional or alternative providers to define “active delegate”, it can do so.
I voted for on this proposal. It is good to see that it was enhanced by several delegates suggestions/ideas.
I'm really looking forward to the analysis of the working groups to define the adjustments needed before going to Tally.
Thanks for your support and for your thoughtful feedback @JoJo. I agree that protocol representation in DAO governance is important and should not be neglected in the design. I'd love for you to participate in the working groups.
Since arb went live. We have been looking forward to the ARB pledge to bring more opportunities to the ecology, not only just capture the value, but also really let the holder, the pledgee to see the ARB ecology in all aspects of leading the industry at the same time, can be more confident to hold. However, how to strike a balance between pledging and voting rights, and at the same time, the proxy can continue to get the right to vote by proxy, and at the same time, attract more people to participate. I hope frisson can bring more different things, thank you for your proposal!
Before we begin, we would like to express our gratitude to you on behalf of ITU Blockchain for this proposal. The first thing that caught our attention is that the proposal is prepared with great transparency and detail. We believe that the impact of Arbitrum Staking justifies the requested grant. The data presented clearly shows the need to support governance and DeFi. We want to emphasize that we always support improvements in this direction on the governance side.
Thanks for your support and for your feedback @coinflip. I replied to each of your questions in-line below. Happy to discuss further!
will the be any additional cost to the DAO for the distirbution of rewards to through these stARB contracts?
Thanks for your support and for your feedback @BlockworksResearch.
I added a specific timeline for the working group deliverables to the proposal.
My personal view is that both working group topics (staking rewards and delegation) are very important and distinct enough to merit separate groups. We welcome anyone who is interested to participate in both groups.
Thanks for your support and for your feedback @pedrob. stARB is designed to be able to support any implementation recommended by the working groups. My personal view is that waiting for the working groups to conclude before beginning development will add months of delay without significant benefit.
DAOplomats voted FOR this proposal on Snapshot.
ARB staking is an outstanding value add and it unlocks several possibilities, especially aligning incentives between all stakeholders and we are glad to see this come to life. There are still details to work through regarding defining an "active delegate", and reward structure but happy to see this pass the initial temp check. We also commit to participating in the working groups once that is established.
Thank you everyone for your support and valuable feedback.
To help address recent questions raised by delegates in this thread, I added technical detail to the System Architecture section of the proposal and added a specific timeline for the working group deliverables.
Thank you everyone for your support and valuable feedback.
To help address recent questions raised by delegates in this thread, I added technical detail to the System Architecture section of the proposal and added a specific timeline for the working group deliverables.
In addition to updating the proposal text, I created an onchain proposal on Tally to fund development of the staking system. The current onchain proposal is only to fund the development of the staking system. The DAO will vote separately on the implementation of ARB Staking after it has completed development and audit. The DAO will also vote separately on the funding of staking rewards and implementation of delegation based on the recommendations of the working groups. Please note that, while this proposal as a whole is Constitutional, the current onchain proposal targets the Treasury Governor because it controls the ARB treasury.
Voting 'For' this proposal and a fan of this direction but do believe this is a classic devil is in the details situation so hoping for a few more things to be clarified as we progress. The long list below and voting For still, shows how important an idea it is to still move forward and solve.
General Operational Concerns While we’re happy to see the discussion open to exploring other sources of yield we have a couple suggestions that we would like to see addressed prior to being pushed on Tally. Instead of the two separate working groups the proposal calls for, we would like to see one working group considering both are exploring staking as it relates to governance. This also complicates the process for reaching a conclusion in the end, and over-governing is a real issue that can hinder the DAO’s timely decision making. The total funding for these groups is also capped at $20,000 with an unspecified time commitment with an unclear end date.
Our suggestions are to slightly raise the prospects for funding, and then set some amount of time for them to reach a conclusion (maybe in accordance with the incentive detox period for simplicity).
Voting in favor of this proposal. It's actually one of the more interesting proposal in while. I hope in can further incentivize governance participation. Thanks, @Frisson
Thanks for your support and for your feedback @WinVerse. I updated the diagram to 'stARB'.
Thank you for chiming in, always a pleasure to see you in the forum :slight_smile:
Let me quickly clarify a few things.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let’s not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
Thanks for your support and for your feedback @coinflip. I replied to each of your questions in-line below. Happy to discuss further!
will the be any additional cost to the DAO for the distirbution of rewards to through these stARB contracts?
while developed through tally, who will have control and any admin keys for the stARB stacking contract (security council?, tally? foundation?)
it would be good to understand the impacts of a depeg of the stARB token and risks to the ecosystem since it will trade seperately
One note is that any stARB withdrawal period will be very short and exist only to prevent people from abusing the reward mechanism (i.e. staking right before a reward, claiming a chunk of it, and immediately unstaking). If there is a price difference, arbitrageurs can quickly unstake stARB and sell it as ARB to close the price difference. This easy arbitrage opportunity minimizes price discrepancies and should make it difficult for any potential governance attacker to acquire ARB at a discount.
will there be a need to additionally support liquidity for this token? will it fragment liquidity and trading for ARB
the idea that if you participate in DeFi your voting power reverts to the DAO for it to deploy seems well a bit counter-intuitive. Would be better for the EVM home of Defi to find a better solution.
DAOplomats voted FOR this proposal on Snapshot.
ARB staking is an outstanding value add and it unlocks several possibilities, especially aligning incentives between all stakeholders and we are glad to see this come to life. There are still details to work through regarding defining an "active delegate", and reward structure but happy to see this pass the initial temp check. We also commit to participating in the working groups once that is established.
I made a couple of minor edits to the proposal, include renaming tARB to stARB
re @Frisson you might want to update the diagram in the original post to 'stARB' before posting on Tally.
Edited to add that we maintained our support on Tally.
Voting 'For' this proposal and a fan of this direction but do believe this is a classic devil is in the details situation so hoping for a few more things to be clarified as we progress. The long list below and voting For still, shows how important an idea it is to still move forward and solve.
Defi Questions
General Operational Concerns While we’re happy to see the discussion open to exploring other sources of yield we have a couple suggestions that we would like to see addressed prior to being pushed on Tally. Instead of the two separate working groups the proposal calls for, we would like to see one working group considering both are exploring staking as it relates to governance. This also complicates the process for reaching a conclusion in the end, and over-governing is a real issue that can hinder the DAO’s timely decision making. The total funding for these groups is also capped at $20,000 with an unspecified time commitment with an unclear end date.
Our suggestions are to slightly raise the prospects for funding, and then set some amount of time for them to reach a conclusion (maybe in accordance with the incentive detox period for simplicity).
Beyond Inflation Moreover, we want to stress that the DAO can explore more options than simply turning on additional inflation for ARB. We at Blockworks don't support pursuing an ARB burn at this point in time. We think an ARB token model should be carefully analyzed and modeled before implementation, and align with key revenue drivers and the long term sustainability of the protocol. While we aren’t beholden to any ideas specifically at this point in time, we would like to hold off on simply increasing inflation right now. It is the simplest solution to bringing value in this mechanism, but it is important to remember the ARB token has large unlocks already, and recent price action has been unfavorable. This solution could also prove to be the most detrimental for setting precedence in the DAO. It might not be best to turn toward inflation when we approach Arbitrum staking or utility accrual for the DAO. There are plenty of granular solutions that can be researched here.
Legal Implications Finally, we just want to remind everyone of the legal implications of this proposal. This proposal uses Uniswap’s fee staker contract design, which is created to be regulatorily-aware in that fee traceability is less obvious. Combining governance rights with value accrual raises concerns under U.S. securities laws. Fee traceability is particularly important, because of noncompliant frontends that are not censored in anyway.If fees are untraceable, then there’s no way to isolate whether tokenholder value came from non-compliant dapps/participants, which may leave the DAO legally liable in some manner. Even if fees can be reasonably traced, then there could be some legal responsibility the DAO faces from not censoring these parties involved with the Arbitrum network. Importantly this may not fully apply to Arbitrum, since Arbitrum is an L2 and not a DeFi application like Uniswap, but it is certainly important to keep in mind.
That said, Blockworks Research will be voting FOR this proposal on Snapshot.
Materials linked: A16z on fee traceability: https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/
Thank you for chiming in, always a pleasure to see you in the forum :slight_smile:
Let me quickly clarify a few things.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let’s not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
suggesting a cap or redirect based on a subjective criteria like “protocol representation” is, in my opinion, not a good idea, and a bad precedent overall.
Also to be clear, this is not what I am suggesting nor what I had in mind. I don't think we should put a cap to what people should get as delegation, nor I ever thought was a valid idea; on the other hand, i think there could be a gamification for which we try to direct the delegation in what we see as the "best" way (could be: decentralization of delegates, activity of delegates, frequency of votes of delegates, etc). This is effectively where single opinions start to matter on the "how" we should do it.
I am quite enjoying this convo: is pretty clear we have some different ideas on the topic, likely because we are in different camps, and I really think you would be a tremendous contributor in the working group for the definition of active delegators. Even if you could not be active day to day in there, async messages like this one can still bring a lot of value to the discussion imho :smile:
I voted "for" on this proposal.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
I voted "for" on this proposal.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
Would have been also OK by setting parameters beforehand (i.e. what does an active delegate mean and how to calculate it, and source of staking rewards) but it clearly was an intelligent decision to decompress this idea and start proposing/developing -if approved- at least the structure (which is what this is). It seems at this point that the proposal will pass, having most top delegates voted favourably.
This could lead to increased governance participation, another new use case to ARB besides governance (no small utility given the size of the DAO and ecosystem anyways), and to keep exploring new ideas. Also, I believe the cost/return is reasonable, at least whe compared to other previous costs incurred by the DAO.
Keen to follow discussions via the working groups to fine tune the details on incentives and participation mechanics.
Feedback for on-chain voting: having not met the proposed estimated timeline, I encourage Frisson and Tally to more granularly present a future roadmap, if possible, to include all relevant and more in-depth milestones.
BUT, I have a big caveat to this: we need to create a definition of active delegates that doesn’t hinder protocol representations. One of the potential byproduct of certain parameters could be, for example, that users might redelegate from protocols to others just because the protocols are active, but not as much for the metrics of the program, to allow users to get the yield.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let's not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
If users redelegate from protocols to individual users or organizations in the sake of pursuing better yield because their protocols are not voting - I do not personally see any issue with that. Protocols have an incentive to revamp their activity.
Except a few whales that delegate to themselves (BTW, also extremely valid) suggesting a cap or redirect based on a subjective criteria like "protocol representation" is, in my opinion, not a good idea, and a bad precedent overall. What's to say someone else will not come along with another criteria and swing votes their way?
Free market, free delegates, free will, free delegations, and decentralized choosing. Token holders are in the end who decide who represents them and why, and they are free to change it.
In any case, thank you @JoJo, comments like yours are what's needed to keep/start discussions and what moves the DAO forward. These are just my initial thoughts, open to more opinions. Cheers!
Thanks for your support and for your feedback @maxlomu. Many of the questions raised by the ARDC will be addressed by the Staking Rewards and Delegation working groups cc @Curia.
Thanks for your support and for your feedback @maxlomu. Many of the questions raised by the ARDC will be addressed by the Staking Rewards and Delegation working groups cc @Curia.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
Camelot is voting ABSTAIN the “ARB Staking” proposal.
We are supportive of finding utility for the ARB token, and consequently do not wish to directly vote "against", but we strongly believe that any proposal for staking should NOT be combined with a specific governance scoring system. Any fundamental changes to the ARB token design, such as staking, should be thoroughly discussed and assessed entirely on its own merit and evaluations, especially before attaching any new (and untested) governance mechanisms to it. Once there is clarity and alignment on the utility of the ARB token, then further applications should be discussed.
Camelot is voting ABSTAIN the “ARB Staking” proposal.
We are supportive of finding utility for the ARB token, and consequently do not wish to directly vote "against", but we strongly believe that any proposal for staking should NOT be combined with a specific governance scoring system. Any fundamental changes to the ARB token design, such as staking, should be thoroughly discussed and assessed entirely on its own merit and evaluations, especially before attaching any new (and untested) governance mechanisms to it. Once there is clarity and alignment on the utility of the ARB token, then further applications should be discussed.
We appreciate the effort and rationale for proposing this use of the Karma points system, or any other system the working group might adopt to define an “active delegate”, and we see how it can be used productively in the context of the proposed plan. But we believe that there should be a more in depth discussion about the necessity to bundle together both the staking and the governance initiatives. At the same time, any system would require further analysis and adaptations to ensure its incentives are well aligned with the DAO.
In conclusion, any proposal for the utility of the ARB token needs to be treated as an entirely separate discussion and should not be combined with a brand-new governance scoring system. A fundamental change to the ARB token creates significant regulatory, incentive, and ecosystem risks that need to be carefully understood and considered. The Karma system, or any other adopted, has the potential to be a useful tool to further active and effective delegations and voting, but this can be critiqued and assessed in the context of its own separate proposal, but they should not be combined.
Voting "For"
Biggest plus for me is I think the idea of having the token being more liquid is a good one. Having to choose between DeFi and governance with your ARB tokens is a problem and this looks to solve that.
I also appreciate the willingness to incorporate feedback into this proposal and believe the feedback provided has been valuable to making this more palatable to the DAO on the whole.
Voting "For"
Biggest plus for me is I think the idea of having the token being more liquid is a good one. Having to choose between DeFi and governance with your ARB tokens is a problem and this looks to solve that.
I also appreciate the willingness to incorporate feedback into this proposal and believe the feedback provided has been valuable to making this more palatable to the DAO on the whole.
@pedrob brings up a good point IMO regarding maybe waiting to developing the LST until the working groups have at least begun their efforts.
Edit: To save forum space, editing comments to note that my rationale has remained unchanged for the Tally vote
We are voting in favor of the ARB Staking proposal. This initiative is both timely and necessary, addressing the critical issue of ARB token value accrual by introducing a mechanism that aligns governance with utility.
Creating two focused working groups is a particularly well-thought-out aspect of this proposal. The Staking Rewards working group’s mandate to explore sustainable reward funding sources will be essential in maintaining the long-term viability of staking. Meanwhile, the ARB Staking & Delegation working group’s focus on defining active contributors and optimizing delegate incentives is crucial for ensuring that governance remains effective and resilient.
We are voting in favor of the ARB Staking proposal. This initiative is both timely and necessary, addressing the critical issue of ARB token value accrual by introducing a mechanism that aligns governance with utility.
Creating two focused working groups is a particularly well-thought-out aspect of this proposal. The Staking Rewards working group’s mandate to explore sustainable reward funding sources will be essential in maintaining the long-term viability of staking. Meanwhile, the ARB Staking & Delegation working group’s focus on defining active contributors and optimizing delegate incentives is crucial for ensuring that governance remains effective and resilient.
By integrating these working groups into the broader governance framework, this proposal strengthens the ARB token's role within the ecosystem and enhances the Arbitrum DAO's overall robustness.
We believe this is a significant step forward in addressing current challenges and look forward to seeing the positive impacts of this proposal.
Castle Capital
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting FOR this proposal during the temperature check.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting FOR this proposal during the temperature check.
We discussed this proposal thoroughly with Frisson and the Tally team both in person and during office hours, and many of our suggestions were incorporated into the final version. We are also following closely the discussion around staking, protocol revenue sharing, and improving governance systems, and we think this proposal is an interesting experiment in that area. If nothing else, we hope it will spur discussion on how we can incentivize better delegation and more engaged delegates, and the activity in this thread as well as outside the forum proves that this is the case.
We like the fact that the proposal does not define the source of staking rewards and the definition of an active delegate at this time. We commit to actively participate in the working groups that will be created if this proposal passes, as we believe that these discussions are likely to be important not only for Arbitrum, but for the entire DAO space in general.
I'm voting "for" on this proposal.
As stated before, I really praise @Frisson for being able to put together this many conflicting feedbacks together: he was able to find the perfect solution by saying: we build the skeleton, let's make the dao fill it (amount of rewards, source of rewards, active delegate definitions etc). I think this will be an initial powerful signal for markets, and also a way to increase governance. While the 2 don't necessary belong together, I am personally fine with that.
I'm voting "for" on this proposal.
As stated before, I really praise @Frisson for being able to put together this many conflicting feedbacks together: he was able to find the perfect solution by saying: we build the skeleton, let's make the dao fill it (amount of rewards, source of rewards, active delegate definitions etc). I think this will be an initial powerful signal for markets, and also a way to increase governance. While the 2 don't necessary belong together, I am personally fine with that.
BUT, I have a big caveat to this: we need to create a definition of active delegates that doesn't hinder protocol representations. One of the potential byproduct of certain parameters could be, for example, that users might redelegate from protocols to others just because the protocols are active, but not as much for the metrics of the program, to allow users to get the yield. This can happen because for example they don't comment too much on the forum, or don't vote all proposals. While we want to obviously incentivise the participation of protocols in governance, we also have to remember that the main job of protocols is making arbitrum a great place for users through developing dapps and other stuff. Let's avoid to kill the representation they currently have.
To be more detailed, this is the current situation.
The current top 4 delegates, making a total of more than 60M votes (or between 33 to 50% of the average amount of votes we have in each proposals) are from non protocol type of entity.
And don't get me wrong: l2beat, gauntlet, olimpio, wintermute, they are all great delegates well aligned with arbitrum. But we can't imho create a system that would lower even more protocols' representation in our governance. It would be a bad outcome.
I'm going to vote in favor of this proposal on Snapshot. I believe the outlined path and the modifications made to the proposal are heading in the right direction. In this regard, many thanks @Frisson for being very receptive to the feedback and for proposing to lead the new working groups.
However, I think the execution of the proposal will make much more sense once the working groups have completed their tasks and determined the next steps. Therefore, I would like to see these efforts begin before the development of the LST (tARB).
I'm going to vote in favor of this proposal on Snapshot. I believe the outlined path and the modifications made to the proposal are heading in the right direction. In this regard, many thanks @Frisson for being very receptive to the feedback and for proposing to lead the new working groups.
However, I think the execution of the proposal will make much more sense once the working groups have completed their tasks and determined the next steps. Therefore, I would like to see these efforts begin before the development of the LST (tARB).
This could finalize the development proposal and allow for the creation of a budget that accounts for all the necessary resources.
It is nice to see how this proposal shaped up, especially with the feedback of the delegates.
I see that we need to get a better sense of the current ETH incoming from the sequencer fees and other items related to treasury management.
I voted for, and I believe that something good can be built for the Tally vote.
We vote FOR the proposal on Snapshot.
We maintain the directional support that was made in our comment and recognize all the changes made by incorporating the feedback from the delegates. We are excited about the power and benefits that Tally Protocol can bring and further improvements to be made on the Arbitrum DAO governance and alignments between stakeholders.
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I give this proposal a greenlight. ARB staking will unlock utility, improve governance, and enhance security for the Arbitrum protocol. It’s a smart way to make ARB more valuable and secure the DAO against potential threats. This is a necessary step to align incentives and strengthen the ecosystem.
After reviewing the comments, I've decided to support the proposal. The Tally team appears to be a strong fit for this initiative, and I look forward to seeing it move to a vote on Tally.
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
Voting for. This proposal enhances Arbitrum's security and utility aligning incentives for governance and protecting the DAO from governance attacks. Excited to see Tally be a critical part of the implementation. Thank you for coming up with this proposal and integrating feedback!
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
I mean, if someone submits a proposal (there is a week to vote), then DAO needs to get their vote done faster. How to organize this?
I voted FOR, I will put my rationale here later.
After consideration Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal
The ARC Voted FOR this proposal.
After consideration Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal
The ARC Voted FOR this proposal.
We appreciate the well-structured approach outlined in this proposal, particularly the phased strategy. By simultaneously building the infrastructure necessary to enhance token utility and governance, and launching targeted initiatives for the DAO to define staking rewards and active contributions, we believe Arbitrum is setting a strong foundation for future success.
In the long term, I believe that distributing ARB to stakers may be more effective than linking it to revenue. We found @dk3's suggestion intriguing and could envision a smaller allocation of ARB being used initially as a trial to gauge market response before adopting a larger, more permanent structure.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
Overall, we’re pleased to see this conversation advancing and appreciate the Tally team's phased approach as the DAO delves into this critical topic.
I've voted for this proposal. The proposal introduces ARB staking, which can unlock additional utility for the ARB token and align governance incentives more effectively. By experimenting with staking, Arbitrum can gather valuable data to refine the model, potentially leading to a sustainable mechanism that benefits the entire ecosystem.
Gauntlet views this proposal as a progressive step toward increasing future optionality in the development of ARB utility and the potential for revenue sharing within the Arbitrum ecosystem.
Alignment For Arbitrum Revenue While network revenue has decreased significantly following EIP 4844, the potential alignment of ARB holders with network revenue would presumably create a greater focus on optimizing Arbitrum sequencer revenue and fee models. As the leading L2, Arbitrum is uniquely positioned to drive new frameworks for how networks align with token-holders and governance; the stARB experiment is likely worth exploring.
Thanks for your support and for your feedback @coinflip. I replied to each of your questions in-line below. Happy to discuss further!
will the be any additional cost to the DAO for the distirbution of rewards to through these stARB contracts?
while developed through tally, who will have control and any admin keys for the stARB stacking contract (security council?, tally? foundation?)
it would be good to understand the impacts of a depeg of the stARB token and risks to the ecosystem since it will trade seperately
One note is that any stARB withdrawal period will be very short and exist only to prevent people from abusing the reward mechanism (i.e. staking right before a reward, claiming a chunk of it, and immediately unstaking). If there is a price difference, arbitrageurs can quickly unstake stARB and sell it as ARB to close the price difference. This easy arbitrage opportunity minimizes price discrepancies and should make it difficult for any potential governance attacker to acquire ARB at a discount.
will there be a need to additionally support liquidity for this token? will it fragment liquidity and trading for ARB
the idea that if you participate in DeFi your voting power reverts to the DAO for it to deploy seems well a bit counter-intuitive. Would be better for the EVM home of Defi to find a better solution.
DAOplomats voted FOR this proposal on Snapshot.
ARB staking is an outstanding value add and it unlocks several possibilities, especially aligning incentives between all stakeholders and we are glad to see this come to life. There are still details to work through regarding defining an "active delegate", and reward structure but happy to see this pass the initial temp check. We also commit to participating in the working groups once that is established.
I made a couple of minor edits to the proposal, include renaming tARB to stARB
re @Frisson you might want to update the diagram in the original post to 'stARB' before posting on Tally.
Edited to add that we maintained our support on Tally.
Voting 'For' this proposal and a fan of this direction but do believe this is a classic devil is in the details situation so hoping for a few more things to be clarified as we progress. The long list below and voting For still, shows how important an idea it is to still move forward and solve.
Defi Questions
General Operational Concerns While we’re happy to see the discussion open to exploring other sources of yield we have a couple suggestions that we would like to see addressed prior to being pushed on Tally. Instead of the two separate working groups the proposal calls for, we would like to see one working group considering both are exploring staking as it relates to governance. This also complicates the process for reaching a conclusion in the end, and over-governing is a real issue that can hinder the DAO’s timely decision making. The total funding for these groups is also capped at $20,000 with an unspecified time commitment with an unclear end date.
Our suggestions are to slightly raise the prospects for funding, and then set some amount of time for them to reach a conclusion (maybe in accordance with the incentive detox period for simplicity).
Beyond Inflation Moreover, we want to stress that the DAO can explore more options than simply turning on additional inflation for ARB. We at Blockworks don't support pursuing an ARB burn at this point in time. We think an ARB token model should be carefully analyzed and modeled before implementation, and align with key revenue drivers and the long term sustainability of the protocol. While we aren’t beholden to any ideas specifically at this point in time, we would like to hold off on simply increasing inflation right now. It is the simplest solution to bringing value in this mechanism, but it is important to remember the ARB token has large unlocks already, and recent price action has been unfavorable. This solution could also prove to be the most detrimental for setting precedence in the DAO. It might not be best to turn toward inflation when we approach Arbitrum staking or utility accrual for the DAO. There are plenty of granular solutions that can be researched here.
Legal Implications Finally, we just want to remind everyone of the legal implications of this proposal. This proposal uses Uniswap’s fee staker contract design, which is created to be regulatorily-aware in that fee traceability is less obvious. Combining governance rights with value accrual raises concerns under U.S. securities laws. Fee traceability is particularly important, because of noncompliant frontends that are not censored in anyway.If fees are untraceable, then there’s no way to isolate whether tokenholder value came from non-compliant dapps/participants, which may leave the DAO legally liable in some manner. Even if fees can be reasonably traced, then there could be some legal responsibility the DAO faces from not censoring these parties involved with the Arbitrum network. Importantly this may not fully apply to Arbitrum, since Arbitrum is an L2 and not a DeFi application like Uniswap, but it is certainly important to keep in mind.
That said, Blockworks Research will be voting FOR this proposal on Snapshot.
Materials linked: A16z on fee traceability: https://a16zcrypto.com/posts/article/application-tokens-economic-model-cash-flows/
Thank you for chiming in, always a pleasure to see you in the forum :slight_smile:
Let me quickly clarify a few things.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let’s not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
suggesting a cap or redirect based on a subjective criteria like “protocol representation” is, in my opinion, not a good idea, and a bad precedent overall.
Also to be clear, this is not what I am suggesting nor what I had in mind. I don't think we should put a cap to what people should get as delegation, nor I ever thought was a valid idea; on the other hand, i think there could be a gamification for which we try to direct the delegation in what we see as the "best" way (could be: decentralization of delegates, activity of delegates, frequency of votes of delegates, etc). This is effectively where single opinions start to matter on the "how" we should do it.
I am quite enjoying this convo: is pretty clear we have some different ideas on the topic, likely because we are in different camps, and I really think you would be a tremendous contributor in the working group for the definition of active delegators. Even if you could not be active day to day in there, async messages like this one can still bring a lot of value to the discussion imho :smile:
I voted "for" on this proposal.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
I voted "for" on this proposal.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
Would have been also OK by setting parameters beforehand (i.e. what does an active delegate mean and how to calculate it, and source of staking rewards) but it clearly was an intelligent decision to decompress this idea and start proposing/developing -if approved- at least the structure (which is what this is). It seems at this point that the proposal will pass, having most top delegates voted favourably.
This could lead to increased governance participation, another new use case to ARB besides governance (no small utility given the size of the DAO and ecosystem anyways), and to keep exploring new ideas. Also, I believe the cost/return is reasonable, at least whe compared to other previous costs incurred by the DAO.
Keen to follow discussions via the working groups to fine tune the details on incentives and participation mechanics.
Feedback for on-chain voting: having not met the proposed estimated timeline, I encourage Frisson and Tally to more granularly present a future roadmap, if possible, to include all relevant and more in-depth milestones.
BUT, I have a big caveat to this: we need to create a definition of active delegates that doesn’t hinder protocol representations. One of the potential byproduct of certain parameters could be, for example, that users might redelegate from protocols to others just because the protocols are active, but not as much for the metrics of the program, to allow users to get the yield.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let's not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
If users redelegate from protocols to individual users or organizations in the sake of pursuing better yield because their protocols are not voting - I do not personally see any issue with that. Protocols have an incentive to revamp their activity.
Except a few whales that delegate to themselves (BTW, also extremely valid) suggesting a cap or redirect based on a subjective criteria like "protocol representation" is, in my opinion, not a good idea, and a bad precedent overall. What's to say someone else will not come along with another criteria and swing votes their way?
Free market, free delegates, free will, free delegations, and decentralized choosing. Token holders are in the end who decide who represents them and why, and they are free to change it.
In any case, thank you @JoJo, comments like yours are what's needed to keep/start discussions and what moves the DAO forward. These are just my initial thoughts, open to more opinions. Cheers!
Thanks for your support and for your feedback @maxlomu. Many of the questions raised by the ARDC will be addressed by the Staking Rewards and Delegation working groups cc @Curia.
Thanks for your support and for your feedback @maxlomu. Many of the questions raised by the ARDC will be addressed by the Staking Rewards and Delegation working groups cc @Curia.
In parallel with the development of ARB Staking, we will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete.
The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
Camelot is voting ABSTAIN the “ARB Staking” proposal.
We are supportive of finding utility for the ARB token, and consequently do not wish to directly vote "against", but we strongly believe that any proposal for staking should NOT be combined with a specific governance scoring system. Any fundamental changes to the ARB token design, such as staking, should be thoroughly discussed and assessed entirely on its own merit and evaluations, especially before attaching any new (and untested) governance mechanisms to it. Once there is clarity and alignment on the utility of the ARB token, then further applications should be discussed.
Camelot is voting ABSTAIN the “ARB Staking” proposal.
We are supportive of finding utility for the ARB token, and consequently do not wish to directly vote "against", but we strongly believe that any proposal for staking should NOT be combined with a specific governance scoring system. Any fundamental changes to the ARB token design, such as staking, should be thoroughly discussed and assessed entirely on its own merit and evaluations, especially before attaching any new (and untested) governance mechanisms to it. Once there is clarity and alignment on the utility of the ARB token, then further applications should be discussed.
We appreciate the effort and rationale for proposing this use of the Karma points system, or any other system the working group might adopt to define an “active delegate”, and we see how it can be used productively in the context of the proposed plan. But we believe that there should be a more in depth discussion about the necessity to bundle together both the staking and the governance initiatives. At the same time, any system would require further analysis and adaptations to ensure its incentives are well aligned with the DAO.
In conclusion, any proposal for the utility of the ARB token needs to be treated as an entirely separate discussion and should not be combined with a brand-new governance scoring system. A fundamental change to the ARB token creates significant regulatory, incentive, and ecosystem risks that need to be carefully understood and considered. The Karma system, or any other adopted, has the potential to be a useful tool to further active and effective delegations and voting, but this can be critiqued and assessed in the context of its own separate proposal, but they should not be combined.
Voting "For"
Biggest plus for me is I think the idea of having the token being more liquid is a good one. Having to choose between DeFi and governance with your ARB tokens is a problem and this looks to solve that.
I also appreciate the willingness to incorporate feedback into this proposal and believe the feedback provided has been valuable to making this more palatable to the DAO on the whole.
Voting "For"
Biggest plus for me is I think the idea of having the token being more liquid is a good one. Having to choose between DeFi and governance with your ARB tokens is a problem and this looks to solve that.
I also appreciate the willingness to incorporate feedback into this proposal and believe the feedback provided has been valuable to making this more palatable to the DAO on the whole.
@pedrob brings up a good point IMO regarding maybe waiting to developing the LST until the working groups have at least begun their efforts.
Edit: To save forum space, editing comments to note that my rationale has remained unchanged for the Tally vote
We are voting in favor of the ARB Staking proposal. This initiative is both timely and necessary, addressing the critical issue of ARB token value accrual by introducing a mechanism that aligns governance with utility.
Creating two focused working groups is a particularly well-thought-out aspect of this proposal. The Staking Rewards working group’s mandate to explore sustainable reward funding sources will be essential in maintaining the long-term viability of staking. Meanwhile, the ARB Staking & Delegation working group’s focus on defining active contributors and optimizing delegate incentives is crucial for ensuring that governance remains effective and resilient.
We are voting in favor of the ARB Staking proposal. This initiative is both timely and necessary, addressing the critical issue of ARB token value accrual by introducing a mechanism that aligns governance with utility.
Creating two focused working groups is a particularly well-thought-out aspect of this proposal. The Staking Rewards working group’s mandate to explore sustainable reward funding sources will be essential in maintaining the long-term viability of staking. Meanwhile, the ARB Staking & Delegation working group’s focus on defining active contributors and optimizing delegate incentives is crucial for ensuring that governance remains effective and resilient.
By integrating these working groups into the broader governance framework, this proposal strengthens the ARB token's role within the ecosystem and enhances the Arbitrum DAO's overall robustness.
We believe this is a significant step forward in addressing current challenges and look forward to seeing the positive impacts of this proposal.
Castle Capital
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting FOR this proposal during the temperature check.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting FOR this proposal during the temperature check.
We discussed this proposal thoroughly with Frisson and the Tally team both in person and during office hours, and many of our suggestions were incorporated into the final version. We are also following closely the discussion around staking, protocol revenue sharing, and improving governance systems, and we think this proposal is an interesting experiment in that area. If nothing else, we hope it will spur discussion on how we can incentivize better delegation and more engaged delegates, and the activity in this thread as well as outside the forum proves that this is the case.
We like the fact that the proposal does not define the source of staking rewards and the definition of an active delegate at this time. We commit to actively participate in the working groups that will be created if this proposal passes, as we believe that these discussions are likely to be important not only for Arbitrum, but for the entire DAO space in general.
I'm voting "for" on this proposal.
As stated before, I really praise @Frisson for being able to put together this many conflicting feedbacks together: he was able to find the perfect solution by saying: we build the skeleton, let's make the dao fill it (amount of rewards, source of rewards, active delegate definitions etc). I think this will be an initial powerful signal for markets, and also a way to increase governance. While the 2 don't necessary belong together, I am personally fine with that.
I'm voting "for" on this proposal.
As stated before, I really praise @Frisson for being able to put together this many conflicting feedbacks together: he was able to find the perfect solution by saying: we build the skeleton, let's make the dao fill it (amount of rewards, source of rewards, active delegate definitions etc). I think this will be an initial powerful signal for markets, and also a way to increase governance. While the 2 don't necessary belong together, I am personally fine with that.
BUT, I have a big caveat to this: we need to create a definition of active delegates that doesn't hinder protocol representations. One of the potential byproduct of certain parameters could be, for example, that users might redelegate from protocols to others just because the protocols are active, but not as much for the metrics of the program, to allow users to get the yield. This can happen because for example they don't comment too much on the forum, or don't vote all proposals. While we want to obviously incentivise the participation of protocols in governance, we also have to remember that the main job of protocols is making arbitrum a great place for users through developing dapps and other stuff. Let's avoid to kill the representation they currently have.
To be more detailed, this is the current situation.
The current top 4 delegates, making a total of more than 60M votes (or between 33 to 50% of the average amount of votes we have in each proposals) are from non protocol type of entity.
And don't get me wrong: l2beat, gauntlet, olimpio, wintermute, they are all great delegates well aligned with arbitrum. But we can't imho create a system that would lower even more protocols' representation in our governance. It would be a bad outcome.
I'm going to vote in favor of this proposal on Snapshot. I believe the outlined path and the modifications made to the proposal are heading in the right direction. In this regard, many thanks @Frisson for being very receptive to the feedback and for proposing to lead the new working groups.
However, I think the execution of the proposal will make much more sense once the working groups have completed their tasks and determined the next steps. Therefore, I would like to see these efforts begin before the development of the LST (tARB).
I'm going to vote in favor of this proposal on Snapshot. I believe the outlined path and the modifications made to the proposal are heading in the right direction. In this regard, many thanks @Frisson for being very receptive to the feedback and for proposing to lead the new working groups.
However, I think the execution of the proposal will make much more sense once the working groups have completed their tasks and determined the next steps. Therefore, I would like to see these efforts begin before the development of the LST (tARB).
This could finalize the development proposal and allow for the creation of a budget that accounts for all the necessary resources.
It is nice to see how this proposal shaped up, especially with the feedback of the delegates.
I see that we need to get a better sense of the current ETH incoming from the sequencer fees and other items related to treasury management.
I voted for, and I believe that something good can be built for the Tally vote.
We vote FOR the proposal on Snapshot.
We maintain the directional support that was made in our comment and recognize all the changes made by incorporating the feedback from the delegates. We are excited about the power and benefits that Tally Protocol can bring and further improvements to be made on the Arbitrum DAO governance and alignments between stakeholders.
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
I give this proposal a greenlight. ARB staking will unlock utility, improve governance, and enhance security for the Arbitrum protocol. It’s a smart way to make ARB more valuable and secure the DAO against potential threats. This is a necessary step to align incentives and strengthen the ecosystem.
After reviewing the comments, I've decided to support the proposal. The Tally team appears to be a strong fit for this initiative, and I look forward to seeing it move to a vote on Tally.
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
Voting for. This proposal enhances Arbitrum's security and utility aligning incentives for governance and protecting the DAO from governance attacks. Excited to see Tally be a critical part of the implementation. Thank you for coming up with this proposal and integrating feedback!
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
I mean, if someone submits a proposal (there is a week to vote), then DAO needs to get their vote done faster. How to organize this?
I voted FOR, I will put my rationale here later.
After consideration Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal
The ARC Voted FOR this proposal.
After consideration Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal
The ARC Voted FOR this proposal.
We appreciate the well-structured approach outlined in this proposal, particularly the phased strategy. By simultaneously building the infrastructure necessary to enhance token utility and governance, and launching targeted initiatives for the DAO to define staking rewards and active contributions, we believe Arbitrum is setting a strong foundation for future success.
In the long term, I believe that distributing ARB to stakers may be more effective than linking it to revenue. We found @dk3's suggestion intriguing and could envision a smaller allocation of ARB being used initially as a trial to gauge market response before adopting a larger, more permanent structure.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
Overall, we’re pleased to see this conversation advancing and appreciate the Tally team's phased approach as the DAO delves into this critical topic.
I've voted for this proposal. The proposal introduces ARB staking, which can unlock additional utility for the ARB token and align governance incentives more effectively. By experimenting with staking, Arbitrum can gather valuable data to refine the model, potentially leading to a sustainable mechanism that benefits the entire ecosystem.
Gauntlet views this proposal as a progressive step toward increasing future optionality in the development of ARB utility and the potential for revenue sharing within the Arbitrum ecosystem.
Alignment For Arbitrum Revenue While network revenue has decreased significantly following EIP 4844, the potential alignment of ARB holders with network revenue would presumably create a greater focus on optimizing Arbitrum sequencer revenue and fee models. As the leading L2, Arbitrum is uniquely positioned to drive new frameworks for how networks align with token-holders and governance; the stARB experiment is likely worth exploring.
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
The DAO will set the rules for how the voting power is redelegated. A simple example of such a rule would be "redelegate proportionally based on the existing distribution of voting power". A slightly more advnaced rule would be something like "redelegate proportionally, but only to delegates with less than X% of voting power". A more complex implementation would be for the DAO to approve multiple rules/strategies and split the redelegated voting power among them.
Gauntlet views this proposal as a progressive step toward increasing future optionality in the development of ARB utility and the potential for revenue sharing within the Arbitrum ecosystem.
Alignment For Arbitrum Revenue While network revenue has decreased significantly following EIP 4844, the potential alignment of ARB holders with network revenue would presumably create a greater focus on optimizing Arbitrum sequencer revenue and fee models. As the leading L2, Arbitrum is uniquely positioned to drive new frameworks for how networks align with token-holders and governance; the stARB experiment is likely worth exploring.
Alignment for Delegation The potential for voting power distribution is an exciting addition to this proposal. We look forward to participating in future working groups that explore how to allocate the best redelegation for stARB. While we agree that delegate scoring should be closely considered, integration with Karma supports the evolution of Arbitrum’s ongoing experiments in delegate compensation.
Tally as a Governance Partner Tally is a critical tool for the Arbitrum DAO, and the ability to host ARB governance staking on the same platform where token holders delegate and delegates vote is an added benefit to the scope of this proposal.
Technical Optionality Gauntlet recognizes that this proposal funds technical research and development toward implementing these contracts. It does not approve the onchain implementation of the stARB contracts, the “turning on” of ARB fee distribution, or the delegation of unused voting power. It also must be subject to technical, code, and design audits prior to implementation, as mentioned by @openzeppelin above.
Cost of Implementation Compared to recent proposals, $200,000 for a technical development scope that could advance the ARB and governance landscape is a relative deal. There are currently dashboard proposals asking for more than this and the DAO has spent many times this on incentives alone.
Voting "for" here.
I think @Frisson was able to find the best solution here which is:
Voting "for" here.
I think @Frisson was able to find the best solution here which is:
This is likely the best solution because addresses the different vision everybody might just have about the topics above, especially the part about active delegates that could be seen in very different ways.
I am happy we have a partners as Tally in our dao, with interests alligned with ours, and I am looking forward to see this live and participating to the working groups :)
In addition to many of these comments, we're overall in favor, but also have some questions that we think inevitably need to be worked out over the next few months.
How are we going to set up our legal policy and portrayal going forward. Is there anything we should and shouldn't market this as to make it legally better?
In addition to many of these comments, we're overall in favor, but also have some questions that we think inevitably need to be worked out over the next few months.
How are we going to set up our legal policy and portrayal going forward. Is there anything we should and shouldn't market this as to make it legally better?
Overall, the tech comments for implementation are something we think need a little more hashing out, but excited to see this hopefully move forward!
gm, voting FOR this proposal on Snapshot - Having a liquid version of staked ARB is an attractive value proposition that we can further build upon.
Would be great if before the vote on Tally we can bring more lights on the questions raised by the ARDC.
gm, voting FOR this proposal on Snapshot - Having a liquid version of staked ARB is an attractive value proposition that we can further build upon.
Would be great if before the vote on Tally we can bring more lights on the questions raised by the ARDC.
While staking could be lucrative for DAO governance, ARB holders, and the general perception around ARB and L2 tokens, there needs to be a clear-cut economic roadmap to ensure this isn’t done in a haphazard manner.
@Frisson Thank you so much to coming up with this, We will vote FOR to the ARB Staking proposal because it offers a critical enhancement to the ARB token’s utility, addressing recent challenges with token value and treasury pressure. with the staking, it could stabilize ARB’s price and strengthen governance by incentivizing active participation. We see a lot of potential in this initiative and believe it will provide valuable insights for developing a sustainable model that benefits the entire Arbitrum ecosystem. However, as @maxlomu mentioned, addressing the ADRC's questions in more detail, especially regarding delegate incentives and the economic roadmap, would further strengthen the proposal and ensure a well-rounded approach.
I voted YES. The ARB token is currently lacking utility. This can be seen in the price action, which shouldn't be relevant in first place but because of the negative price action we see a lot initiatives and grants asking for more funds to fill the gap between their initial ask and now. This results in way more token being taken out of the treasury and creating further downside pressure and faster draining of the ARB holdings of the DAO. I do hope this will help to stabilize the token price and basically extend the runway of the DAO.
I made a couple of minor edits to the proposal, include renaming tARB to stARB and clarifying that the Karma integration is modular, and posted a temp check to Snapshot: https://snapshot.org/#/arbitrumfoundation.eth/proposal/0xb581f3aed701ae889c1d79406acdf3d653e6eb4323cb5e46635f729e6313da4d
After gathering more feedback from delegates, I’ve made two important changes to this proposal.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
After gathering more feedback from delegates, I’ve made two important changes to this proposal.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
I added to the cost of the proposal and broke the cost out into separate categories. I added $60,000 USD in ARB for an audit and $20,000 USD in ARB to pay for the working groups. We were originally hoping to work with the ARDC to audit the proposal, but received feedback that this may not be feasible. The final cost of the audit including documentation will be published on this thread. Any leftover funds from the $60,000 audit budget will be returned to the DAO.
I'm kinda late to the party here, but my thoughts from the ARDC post.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
I'm kinda late to the party here, but my thoughts from the ARDC post.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
There are a ton of delegation experiments that existed in the past that should be evaluated such as Holographic Consensus (Push) or Delegation Markets (Pull). This could be an alternative to using dilution as an incentive, although there are obviously other considerations.
Tally tARB is a bit scary from a concentration of power perspective; I think if we do create an incentivized re-delegation program, it should probably be enshrined, vendor agnostic, and upgraded via governance vote. Something that would need to be agreed upon before development begins. Then regardless of how we incentivize via sequencer fees, dilution, etc we have one location that arb holders are expected to stake and receive their pro-rata share, as well as for DeFi integrations.
Hi @Frisson
We would like to share some final thoughts based on the amended proposal and the recent research of the ARDC.
Hi @Frisson
We would like to share some final thoughts based on the amended proposal and the recent research of the ARDC.
In the future, we believe it would make sense to integrate the delegate incentives program with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from DAO revenue. However, delegate incentives are not included in the scope of this proposal. Implementation of delegate incentives into ARB Staking will be decided on at a future date by the DAO.
As we have stated in the ARDC research on the proposal in question:
We would like to mention that from our perspective the Delegate Incentive Program (DIP) focuses on improving participation in governance more qualitatively than quantitatively. This means that in the first instance, one of the main goals of the program is to professionalize delegates so they can keep focusing on building for ArbitrumDAO.
We see the ARB Staking program as a solution to increase the number of delegated tokens, but despite contemplating issues such as the “Karma Score”, it’s hard to consider it as a possible replacement for the DIP because we would be ceding control of the incentives to a mere mathematical formula when today the DIP not only contemplates votes or the number of comments in the forum but also analyzes the impact of the latter, also ensuring that no one can “take advantage” of it.
It should also be mentioned that simply limiting delegate incentives to a mere “commission” of the Arbitrum DAO revenue could take away the predictability of the incentive itself, which defeats the purpose of the DIP. Despite this, we agree that interesting synergies can be generated between both programs: We could implement a mixed model in the future, where for example the top 50 delegates (according to the DIP table) get a fixed monthly amount in ARB as now and then in parallel a commission model like the one you have proposed for all the delegates is applied.
ARB Staking unlocks financial utility and aligns governance by creating a mechanism to stream rewards in the future from DAO-generated sources like sequencer fees, MEV fees, validator fees, token inflation, and treasury diversification to token holders who are delegated to an active governance participant. ARB Staking makes ARB usable in restaking and DeFi by returning voting power locked in contracts to the DAO.
Here we will bring up another related comment we made in that post:
This is good information, extrapolating the new daily average mentioned here we would get about 1,800 ETH per year vs. the 12,000 ETH estimated in Frisson’s original proposal and vs. the 9,200 ETH per year that the DAO obtained in the 100 days pre-blobs.
Assuming that 50% of this revenue is distributed, that would be about 900 ETH ($2,250,000 at $2,500) among about 324,000,000 delegated ARBs ($162,000,000 at $0.5) leaving us with an estimated 1.4% APY.
It seems that further revenue sources could be needed to improve this stream and make the Staking more attractive, we are confident that in the future there will be more DAO-generated streams as proposed about MEV fees, validator fees, token inflation, the gas fee increase, treasury diversification initiatives and Orbit Chains fees.
The information gathered by the ARDC indicates that we should work together to provide sufficient sources of revenue for the Staking program, as in principle the fees obtained from the sequencer may be relatively low compared to the capital staked. While it is true that today those who delegate tokens get 0% APY, it would be important to consider that the initial estimations have changed significantly.
We define an active delegate using Karma Score. The DAO will define the Karma Score requirement for being considered an active delegate. Karma Score is a combination of delegate’s Snapshot voting stats, onchain voting stats and their forum activity. To accurately calculate forum activity score, delegates are required to prove ownership of their forum handle by signing a message with their delegate address and posting on the forum. The current Karma score formula is below, which can be adjusted by the DAO going forward:
((100) * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights times Max Score Setting * 1)
It could be interesting to align the Scoring requirements with the current delegate program, although the process to obtain a Total Participation Score in DIP is different, it is important that as a DAO we are clear about what an active delegate means.
Users can verify Karma score calculations independently.
The DAO will have the ability to block Karma Scores if it believes they are being calculated incorrectly.
If Karma scores fail to arrive or the scores are blocked by the DAO, ARB Staking will distribute rewards to all stakers regardless of whether they are delegated to an active governance participant until the situation is resolved.
Regardless of the score requirements defined by the DAO, it would be good to be able to block any score individually if someone detects a delegate trying to raise his participation score in the forum with comments of little value.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
We agree on the need to create these working groups for the reasons explained above. The proposal in the current format is interesting and we hope that in a joint effort the remaining details can be decided upon. We are aware of the importance of generating mechanisms to provide an additional use case for the token as well as increase the number of delegated ARBs.
Thanks for weighing in @dk3.
I personally am supportive of turning on the 2% annual supply mint and including it in staking/delegate rewards. I think this should be done via a separate proposal (rather than including it in this one), but I'm open to your thoughts here.
Re: tARB
Thanks for weighing in @dk3.
I personally am supportive of turning on the 2% annual supply mint and including it in staking/delegate rewards. I think this should be done via a separate proposal (rather than including it in this one), but I'm open to your thoughts here.
Re: tARB
gm Frisson, thanks for updating the proposal. I have been following it for a while and in general in support of it.
If you wanted to address @Jadmat's liquidity concerns, it could be worth exploring a model where what's staked is an LP token from a DEX, so liquidity <> staking would not be working in opposite directions.
Ex: https://medium.com/balancer-protocol/the-8020-initiative-64a7a6cab976
If utility goes hand in hand with a lock, how would you improve liquidity? You are possibly confusing the possibility of a “liquid token for the user” with the availability of onchain liquidity of ARB; which would be reduced by 1 ARB for every 1 ARB that is part of this initiative.
I personally don't see why introducing ARB staking would inherently decrease ARB liquidity. I anticipate that many ARB tokens will be staked, but not necessarily those tokens which are already being used to make markets onchain. There will still be a use for unstaked ARB. If the ARB LST gains significant adoption in DeFi, it could even create a liquidity tide that lifts all boats. There are many examples of tokens that have a staked version, yet still have strong liquidity for the unstaked version. I could be wrong about this of course and am open to suggestions if folks have strong views on this topic.
Thanks for your kind words as always @JoJo .
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don’t know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
We are very pleased with the changes made for this proposal and are in support. One thing that we would like to contribute to further discussion is that staking does not have to be purely comprised of sequencer revenue, there is a discussion to be had about ArbitrumDAO performing liquidity provision in some capacity and distributing fees accordingly as well. This very likely needs further investigation.
Really wonder how much of an headache was to put together all feedbacks in this way. Nice work.
So, as it is now, the proposal becomes such that Tally will create the infrastructure and the protocol to support a staking arb capable of distributing sequencer fees, with parameters established by the dao.
Really wonder how much of an headache was to put together all feedbacks in this way. Nice work.
So, as it is now, the proposal becomes such that Tally will create the infrastructure and the protocol to support a staking arb capable of distributing sequencer fees, with parameters established by the dao.
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don't know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
Thanks again for all the hard work. We <3 Tally.
Following the updates made to this proposal, I am now in full support of this proposal. It should increase voter participation and is an interesting experiment in the realm of L2 goverance tokens.
Appreciate you weighing in @thedevanshmehta!
I think the issues you highlighted (sequencer fee sharing, delegate rewards, and Karma Score requirement) should be handled by passing a governance proposal that defines the implementation, one proposal for each issue. I plan to help facilitate this process by pulling together a group to work together on each proposal starting with the folks who contributed ideas in this forum thread.
Hey @Jadmat, thanks for sharing your thoughts!
I don’t know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
See the Savvy representative Sandra's proposal above: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/40
And see the Voting Rationale: https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/5
There is a question about managing votes from DAO. Who will vote and how with those votes that will be returned to DAO?
The DAO will set the rules for how the voting power is redelegated. A simple example of such a rule would be "redelegate proportionally based on the existing distribution of voting power". A slightly more advnaced rule would be something like "redelegate proportionally, but only to delegates with less than X% of voting power". A more complex implementation would be for the DAO to approve multiple rules/strategies and split the redelegated voting power among them.
Gauntlet views this proposal as a progressive step toward increasing future optionality in the development of ARB utility and the potential for revenue sharing within the Arbitrum ecosystem.
Alignment For Arbitrum Revenue While network revenue has decreased significantly following EIP 4844, the potential alignment of ARB holders with network revenue would presumably create a greater focus on optimizing Arbitrum sequencer revenue and fee models. As the leading L2, Arbitrum is uniquely positioned to drive new frameworks for how networks align with token-holders and governance; the stARB experiment is likely worth exploring.
Alignment for Delegation The potential for voting power distribution is an exciting addition to this proposal. We look forward to participating in future working groups that explore how to allocate the best redelegation for stARB. While we agree that delegate scoring should be closely considered, integration with Karma supports the evolution of Arbitrum’s ongoing experiments in delegate compensation.
Tally as a Governance Partner Tally is a critical tool for the Arbitrum DAO, and the ability to host ARB governance staking on the same platform where token holders delegate and delegates vote is an added benefit to the scope of this proposal.
Technical Optionality Gauntlet recognizes that this proposal funds technical research and development toward implementing these contracts. It does not approve the onchain implementation of the stARB contracts, the “turning on” of ARB fee distribution, or the delegation of unused voting power. It also must be subject to technical, code, and design audits prior to implementation, as mentioned by @openzeppelin above.
Cost of Implementation Compared to recent proposals, $200,000 for a technical development scope that could advance the ARB and governance landscape is a relative deal. There are currently dashboard proposals asking for more than this and the DAO has spent many times this on incentives alone.
Voting "for" here.
I think @Frisson was able to find the best solution here which is:
Voting "for" here.
I think @Frisson was able to find the best solution here which is:
This is likely the best solution because addresses the different vision everybody might just have about the topics above, especially the part about active delegates that could be seen in very different ways.
I am happy we have a partners as Tally in our dao, with interests alligned with ours, and I am looking forward to see this live and participating to the working groups :)
In addition to many of these comments, we're overall in favor, but also have some questions that we think inevitably need to be worked out over the next few months.
How are we going to set up our legal policy and portrayal going forward. Is there anything we should and shouldn't market this as to make it legally better?
In addition to many of these comments, we're overall in favor, but also have some questions that we think inevitably need to be worked out over the next few months.
How are we going to set up our legal policy and portrayal going forward. Is there anything we should and shouldn't market this as to make it legally better?
Overall, the tech comments for implementation are something we think need a little more hashing out, but excited to see this hopefully move forward!
gm, voting FOR this proposal on Snapshot - Having a liquid version of staked ARB is an attractive value proposition that we can further build upon.
Would be great if before the vote on Tally we can bring more lights on the questions raised by the ARDC.
gm, voting FOR this proposal on Snapshot - Having a liquid version of staked ARB is an attractive value proposition that we can further build upon.
Would be great if before the vote on Tally we can bring more lights on the questions raised by the ARDC.
While staking could be lucrative for DAO governance, ARB holders, and the general perception around ARB and L2 tokens, there needs to be a clear-cut economic roadmap to ensure this isn’t done in a haphazard manner.
@Frisson Thank you so much to coming up with this, We will vote FOR to the ARB Staking proposal because it offers a critical enhancement to the ARB token’s utility, addressing recent challenges with token value and treasury pressure. with the staking, it could stabilize ARB’s price and strengthen governance by incentivizing active participation. We see a lot of potential in this initiative and believe it will provide valuable insights for developing a sustainable model that benefits the entire Arbitrum ecosystem. However, as @maxlomu mentioned, addressing the ADRC's questions in more detail, especially regarding delegate incentives and the economic roadmap, would further strengthen the proposal and ensure a well-rounded approach.
I voted YES. The ARB token is currently lacking utility. This can be seen in the price action, which shouldn't be relevant in first place but because of the negative price action we see a lot initiatives and grants asking for more funds to fill the gap between their initial ask and now. This results in way more token being taken out of the treasury and creating further downside pressure and faster draining of the ARB holdings of the DAO. I do hope this will help to stabilize the token price and basically extend the runway of the DAO.
I made a couple of minor edits to the proposal, include renaming tARB to stARB and clarifying that the Karma integration is modular, and posted a temp check to Snapshot: https://snapshot.org/#/arbitrumfoundation.eth/proposal/0xb581f3aed701ae889c1d79406acdf3d653e6eb4323cb5e46635f729e6313da4d
After gathering more feedback from delegates, I’ve made two important changes to this proposal.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
After gathering more feedback from delegates, I’ve made two important changes to this proposal.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
I added to the cost of the proposal and broke the cost out into separate categories. I added $60,000 USD in ARB for an audit and $20,000 USD in ARB to pay for the working groups. We were originally hoping to work with the ARDC to audit the proposal, but received feedback that this may not be feasible. The final cost of the audit including documentation will be published on this thread. Any leftover funds from the $60,000 audit budget will be returned to the DAO.
I'm kinda late to the party here, but my thoughts from the ARDC post.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
I'm kinda late to the party here, but my thoughts from the ARDC post.
The ARB token has the ability to mint 2% of supply annually, why not use this as a baseline, thus if you do not delegate, you are diluted, thus tokenholders are incentivized to remain engaged with whom they are delegating to. (Split something like 95/5 owner/delegate)
There are a ton of delegation experiments that existed in the past that should be evaluated such as Holographic Consensus (Push) or Delegation Markets (Pull). This could be an alternative to using dilution as an incentive, although there are obviously other considerations.
Tally tARB is a bit scary from a concentration of power perspective; I think if we do create an incentivized re-delegation program, it should probably be enshrined, vendor agnostic, and upgraded via governance vote. Something that would need to be agreed upon before development begins. Then regardless of how we incentivize via sequencer fees, dilution, etc we have one location that arb holders are expected to stake and receive their pro-rata share, as well as for DeFi integrations.
Hi @Frisson
We would like to share some final thoughts based on the amended proposal and the recent research of the ARDC.
Hi @Frisson
We would like to share some final thoughts based on the amended proposal and the recent research of the ARDC.
In the future, we believe it would make sense to integrate the delegate incentives program with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from DAO revenue. However, delegate incentives are not included in the scope of this proposal. Implementation of delegate incentives into ARB Staking will be decided on at a future date by the DAO.
As we have stated in the ARDC research on the proposal in question:
We would like to mention that from our perspective the Delegate Incentive Program (DIP) focuses on improving participation in governance more qualitatively than quantitatively. This means that in the first instance, one of the main goals of the program is to professionalize delegates so they can keep focusing on building for ArbitrumDAO.
We see the ARB Staking program as a solution to increase the number of delegated tokens, but despite contemplating issues such as the “Karma Score”, it’s hard to consider it as a possible replacement for the DIP because we would be ceding control of the incentives to a mere mathematical formula when today the DIP not only contemplates votes or the number of comments in the forum but also analyzes the impact of the latter, also ensuring that no one can “take advantage” of it.
It should also be mentioned that simply limiting delegate incentives to a mere “commission” of the Arbitrum DAO revenue could take away the predictability of the incentive itself, which defeats the purpose of the DIP. Despite this, we agree that interesting synergies can be generated between both programs: We could implement a mixed model in the future, where for example the top 50 delegates (according to the DIP table) get a fixed monthly amount in ARB as now and then in parallel a commission model like the one you have proposed for all the delegates is applied.
ARB Staking unlocks financial utility and aligns governance by creating a mechanism to stream rewards in the future from DAO-generated sources like sequencer fees, MEV fees, validator fees, token inflation, and treasury diversification to token holders who are delegated to an active governance participant. ARB Staking makes ARB usable in restaking and DeFi by returning voting power locked in contracts to the DAO.
Here we will bring up another related comment we made in that post:
This is good information, extrapolating the new daily average mentioned here we would get about 1,800 ETH per year vs. the 12,000 ETH estimated in Frisson’s original proposal and vs. the 9,200 ETH per year that the DAO obtained in the 100 days pre-blobs.
Assuming that 50% of this revenue is distributed, that would be about 900 ETH ($2,250,000 at $2,500) among about 324,000,000 delegated ARBs ($162,000,000 at $0.5) leaving us with an estimated 1.4% APY.
It seems that further revenue sources could be needed to improve this stream and make the Staking more attractive, we are confident that in the future there will be more DAO-generated streams as proposed about MEV fees, validator fees, token inflation, the gas fee increase, treasury diversification initiatives and Orbit Chains fees.
The information gathered by the ARDC indicates that we should work together to provide sufficient sources of revenue for the Staking program, as in principle the fees obtained from the sequencer may be relatively low compared to the capital staked. While it is true that today those who delegate tokens get 0% APY, it would be important to consider that the initial estimations have changed significantly.
We define an active delegate using Karma Score. The DAO will define the Karma Score requirement for being considered an active delegate. Karma Score is a combination of delegate’s Snapshot voting stats, onchain voting stats and their forum activity. To accurately calculate forum activity score, delegates are required to prove ownership of their forum handle by signing a message with their delegate address and posting on the forum. The current Karma score formula is below, which can be adjusted by the DAO going forward:
((100) * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights times Max Score Setting * 1)
It could be interesting to align the Scoring requirements with the current delegate program, although the process to obtain a Total Participation Score in DIP is different, it is important that as a DAO we are clear about what an active delegate means.
Users can verify Karma score calculations independently.
The DAO will have the ability to block Karma Scores if it believes they are being calculated incorrectly.
If Karma scores fail to arrive or the scores are blocked by the DAO, ARB Staking will distribute rewards to all stakers regardless of whether they are delegated to an active governance participant until the situation is resolved.
Regardless of the score requirements defined by the DAO, it would be good to be able to block any score individually if someone detects a delegate trying to raise his participation score in the forum with comments of little value.
I explicitly clarified that, in parallel with the development of ARB Staking, Tally will lead two separate DAO working groups that are focused on aspects of the system that will be implemented after development is complete. The working groups will be formed via an open call for contributors that will be posted after this proposal passes the temp check stage. Each working group will deliver their recommendations in October, so that the recommendations can be turned into DAO proposals and created following the implementation of ARB Staking.
We agree on the need to create these working groups for the reasons explained above. The proposal in the current format is interesting and we hope that in a joint effort the remaining details can be decided upon. We are aware of the importance of generating mechanisms to provide an additional use case for the token as well as increase the number of delegated ARBs.
Thanks for weighing in @dk3.
I personally am supportive of turning on the 2% annual supply mint and including it in staking/delegate rewards. I think this should be done via a separate proposal (rather than including it in this one), but I'm open to your thoughts here.
Re: tARB
Thanks for weighing in @dk3.
I personally am supportive of turning on the 2% annual supply mint and including it in staking/delegate rewards. I think this should be done via a separate proposal (rather than including it in this one), but I'm open to your thoughts here.
Re: tARB
gm Frisson, thanks for updating the proposal. I have been following it for a while and in general in support of it.
If you wanted to address @Jadmat's liquidity concerns, it could be worth exploring a model where what's staked is an LP token from a DEX, so liquidity <> staking would not be working in opposite directions.
Ex: https://medium.com/balancer-protocol/the-8020-initiative-64a7a6cab976
If utility goes hand in hand with a lock, how would you improve liquidity? You are possibly confusing the possibility of a “liquid token for the user” with the availability of onchain liquidity of ARB; which would be reduced by 1 ARB for every 1 ARB that is part of this initiative.
I personally don't see why introducing ARB staking would inherently decrease ARB liquidity. I anticipate that many ARB tokens will be staked, but not necessarily those tokens which are already being used to make markets onchain. There will still be a use for unstaked ARB. If the ARB LST gains significant adoption in DeFi, it could even create a liquidity tide that lifts all boats. There are many examples of tokens that have a staked version, yet still have strong liquidity for the unstaked version. I could be wrong about this of course and am open to suggestions if folks have strong views on this topic.
Thanks for your kind words as always @JoJo .
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don’t know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
We are very pleased with the changes made for this proposal and are in support. One thing that we would like to contribute to further discussion is that staking does not have to be purely comprised of sequencer revenue, there is a discussion to be had about ArbitrumDAO performing liquidity provision in some capacity and distributing fees accordingly as well. This very likely needs further investigation.
Really wonder how much of an headache was to put together all feedbacks in this way. Nice work.
So, as it is now, the proposal becomes such that Tally will create the infrastructure and the protocol to support a staking arb capable of distributing sequencer fees, with parameters established by the dao.
Really wonder how much of an headache was to put together all feedbacks in this way. Nice work.
So, as it is now, the proposal becomes such that Tally will create the infrastructure and the protocol to support a staking arb capable of distributing sequencer fees, with parameters established by the dao.
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don't know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
Thanks again for all the hard work. We <3 Tally.
Following the updates made to this proposal, I am now in full support of this proposal. It should increase voter participation and is an interesting experiment in the realm of L2 goverance tokens.
Appreciate you weighing in @thedevanshmehta!
I think the issues you highlighted (sequencer fee sharing, delegate rewards, and Karma Score requirement) should be handled by passing a governance proposal that defines the implementation, one proposal for each issue. I plan to help facilitate this process by pulling together a group to work together on each proposal starting with the folks who contributed ideas in this forum thread.
Hey @Jadmat, thanks for sharing your thoughts!
I don’t know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
See the Savvy representative Sandra's proposal above: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/40
And see the Voting Rationale: https://forum.arbitrum.foundation/t/alex-lumley-savvy-dao-delegate-communication-thread/26147/5
Thanks for your kind words as always @JoJo .
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don’t know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
Yes, this is the plan. I'll make it explicit in the proposal.
I add some detailed information that may be useful for this proposal. While it is true that the number of voters decreased, we should note that most of the decrease is among the 0-10k VP voters. As can be seen in the table, most of the 0-100 VP voters decreased, we can interpret that some of them were farmers.
However as @pedrob mentions in overall VP remains stable. I think this proposal is interesting and can help the VP distribution among the delegates.

Hey @Jadmat, thanks for sharing your thoughts!
I don’t know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
This is up to the DAO to determine. I would say that we are still in the process of determining what the objective should be. I personally think it's essential that we eventually share the value created by the protocols the DAO controls with token holders. I've pulled this decision out of this proposal so that it can be decided on separately by the DAO as outlined here: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/69?u=frisson
Resolving voter apathy is key; I also find that making them participate in the income is the way to align both the staker and the voter; but a stake module has complexities that I do not read that have been mentioned, for example, the decrease in the onchain liquidity of ARB; there were efforts by the DAO to achieve depth, the proposed mechanism would reduce liquidity, eliminating depth; and derived problems such as the decrease in the quality of ARB, and the impact on its parameters in lending markets, or even the delisting of these; as well as the increase in volatility, due to decreased onchain liquidity.
Less than 1% of ARB is currently used onchain. I personally think this proposal is likely to improve overall onchain liquidity of ARB by increasing its utility and making voting power compatible with restaking and DeFi. It would be hard to make the current situation worse IMO.
I like this proposal because sharing revenue with tokenholders is the endgame and we need to take leadership on this front. Even uniswap for example had to delay their revenue sharing program after legal and VCs objected, so we might see objections crop up from legal when we go about implementing the proposal. That makes it all the more urgent that we get a headstart with some nonzero amount of revenue sharing with tokenholders, to clear up any roadblocks.
I like this proposal because sharing revenue with tokenholders is the endgame and we need to take leadership on this front. Even uniswap for example had to delay their revenue sharing program after legal and VCs objected, so we might see objections crop up from legal when we go about implementing the proposal. That makes it all the more urgent that we get a headstart with some nonzero amount of revenue sharing with tokenholders, to clear up any roadblocks.
I see a lot of "leave the DAO to decide" which is kicking the can down the road. What is the process by which the DAO will come to consensus on these issues? I'd like to see more thought into the process by which we'll come up with informed decisions on these questions before it moves for a vote.
Thanks Frission,
While i commend the impulse to take all feedback, I still wonder if you could have passed this with some amount as the starting amount to return. It's still a cool proposal that I support, I think you may be over-correcting as I did not see any large delegates listed in your reasoning.
Maybe @coinflip @Pepperoni_Jo3 @krst @olimpio @gauntlet @dk3 could chime in here as well.
Hello Arbitrum delegates,
I edited the original post, as well as the title of this thread, to reflect our updated proposal.
We received three major categories of constructive feedback on this proposal.
Hello Arbitrum delegates,
I edited the original post, as well as the title of this thread, to reflect our updated proposal.
We received three major categories of constructive feedback on this proposal.
We’ve rewritten the proposal to account for this feedback by making the following changes.
We plan to contribute actively to all of these work streams in the future (deciding how to fund rewards, deciding how to incentivize delegates via staking, deciding on Karma Score requirement and formula). In the meantime, we will implement the staking system so that it can be funded in the future. We will also implement an ARB LST (tARB) via the Tally Protocol so that ARB can be used in restaking and defi while returning voting power to the DAO.
In addition to the above changes based on delegate feedback, we made a change to the overall cost. Previously, we proposed to fund the work via a retroactive payment of 100,000 ARB to help cover the cost of development. Instead, we propose to fund the work at the beginning via an onchain proposal for $120,000 USD in ARB. We priced the ARB in USD to account for price volatility. We increased the cost slightly to account for the development of Karma decentralization guardrails. We shifted to requesting funding at the start of the development process because we think it is important for the DAO to have some skin in the game if it approves development, especially given the proposal no longer includes a decision to distribute 50% of surplus sequencer fees to stakers.
The first post in this thread contains the latest version of the proposal.
Thank you very much for your feedback and contributions to the proposal so far. Looking forward to continuing the conversation!
Thanks Joe!
Based on many conversations with delegates both on the forum and in other venues, my personal view is that this updated version of the proposal is better aligned with the DAO's preferences at this time. I'm happy to revisit as additional feedback emerges.
I'd really love to see this move forward.
Agree with @cupojoseph that reward amounts should be separate from the desire to set it up. ARDC is made for this type of analysis.
Can you elaborate on what exactly you're saying for your first point(s)? Are you asking if there are enough current incentives for users to participate in governance for (a) and for (b), what exactly are you asking to be calculated? Are you saying that initiatives should be readjusted according in conjunction?
Sure, Arbitrum is not literally losing 5,134 ETH, but fraudproof validation systems do not have high levels of capital efficiency, and we would prefer not to make ourselves dependent on a random interval of time where the DAO is waiting on bootstrapping funds to be returned. In fact, considering how high the bootstrapping cost is for one validator, it is logical to assume that it may take longer to bootstrap other validators. Based on the fact that 400 of the ETH is being used to reimburse honest parties on the gas costs for 3 years, it can be assumed that the fraudproof validator will be up and running and have the 3600 ETH deposited in the validator contract.
We're glad that we can agree that the current Arbitrum infrastructure would not be able to support this.
Okay, let's go in order.
Ecosystem profit. There are two questions here: a) is it worth participating in voting and holding ARB in order to give these users a part of the profit? b) it is necessary to consider for what purposes resources are required. Specifically, let's give some team this task. Let them calculate how much money is needed and for which Arbitrum initiatives.
Arbitrum did not lose 5,134 ETH, I think this is required at the start of the update, and after some time I believe that we will be able to return this money to the Treasury.
And yes, I agree that this is a very important step for the Arbitrum and many issues need to be worked out. But to do this, you need to work out specific issues.
Okay, let's go in order.
Ecosystem profit. There are two questions here: a) is it worth participating in voting and holding ARB in order to give these users a part of the profit? b) it is necessary to consider for what purposes resources are required. Specifically, let's give some team this task. Let them calculate how much money is needed and for which Arbitrum initiatives.
Arbitrum did not lose 5,134 ETH, I think this is required at the start of the update, and after some time I believe that we will be able to return this money to the Treasury.
And yes, I agree that this is a very important step for the Arbitrum and many issues need to be worked out. But to do this, you need to work out specific issues.
Overall: it might be worth making a separate proposal and allocating a small amount for research on all these issues. I think a small team will be able to produce a clear report quite quickly, and our discussions, unfortunately, will not lead to any results.
The problems outlined in our response show the following:
The problems outlined in our response show the following:
Again, we are losing half of our ETH from the treasury. Another 50% taken from the sequencer this year could be a very risky move. For reference, we're currently at 14,000 ETH.
It's also not just about profit, the goal of the post is to incentivize activity within the DAO. There are plenty of incentive misalignments that could possibly occur if we enact this too soon. And then there's the question if our current reputation/karma metrics good enough to handle an event like this? These are all questions that need be answered prior to pursuing this. Retroactive changes are prevalent in this DAO, and for the future we would like to minimize those events.
And finally, there's the question if our current reputation system would be able to handle this without retroactive changes in the future. Because of the incentive misalignments we have outlined are possible, we would need a better reputation scoring metric for the future to rate delegate performance. The equation outlined in the proposal is not satisfying.
(100 * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights * Max Score Setting * 1)
With this equation, there exists some possibility where users are rewarded for being consistent voters and not on the quality of their voting and decision making. We need to incentivize cooperation, not just saying "yes" or "no" to various proposals. The weighting in the equation is skewed toward offchain and onchain voting. Furthermore, the Forum Activity score that we currently use does not take into account other granularities.
Again, it's not just about the profit, it is about the opportunity cost, the timing, our current infrastructure, AND the decrease in surplus fees due to Dencun.
What exactly is the problem? We now have a lot of ARB on wallets that lie like dead weight. If it is possible to make even a small profit with it, this is a plus for the token. But it must be done, as in the Uniswap proposal, which obliges not only to stake, but also to delegate these tokens, and only then make a profit.
At Blockworks, we find this proposal to be a novel solution to boosting participation and incentivizing delegate performance, but we do not believe accounts for the Dencun upgrade, which has decreased the surplus fees, and thus the estimates given appear liberal. As we've stated publicly, during a bear market, surplus fees could potentially fall further, which might negatively impact both delegates and ARB stakers.
While increasing the number of active voters is positive, it is important to ensure that this also enhances the quality of governance. The focus should remain on meaningful participation rather than solely capturing sequencer revenues. Concentrated staking among the top delegates could lead to perverse incentives from parties that have large delegations. There is a possibility that a group of delegates may exhibit high participation and voting rates, but deliver mediocre quality responses, incentivized by delegate incentives and ARB staking to secure positive value. This is especially possible since the proposal recommends that onchain voting and offchain voting be weighted as higher than delegate forum participation. Currently, delegate forum participation is the best proxy we have for cooperation amongst delegates. It also might be worth noting that in the lifetime of a delegate, priorities change, and thus we may need to make this more dynamic in some manner for both the end of a delegation and the beginning.
At Blockworks, we find this proposal to be a novel solution to boosting participation and incentivizing delegate performance, but we do not believe accounts for the Dencun upgrade, which has decreased the surplus fees, and thus the estimates given appear liberal. As we've stated publicly, during a bear market, surplus fees could potentially fall further, which might negatively impact both delegates and ARB stakers.
While increasing the number of active voters is positive, it is important to ensure that this also enhances the quality of governance. The focus should remain on meaningful participation rather than solely capturing sequencer revenues. Concentrated staking among the top delegates could lead to perverse incentives from parties that have large delegations. There is a possibility that a group of delegates may exhibit high participation and voting rates, but deliver mediocre quality responses, incentivized by delegate incentives and ARB staking to secure positive value. This is especially possible since the proposal recommends that onchain voting and offchain voting be weighted as higher than delegate forum participation. Currently, delegate forum participation is the best proxy we have for cooperation amongst delegates. It also might be worth noting that in the lifetime of a delegate, priorities change, and thus we may need to make this more dynamic in some manner for both the end of a delegation and the beginning.
Ultimately -- and most importantly --- enforcing a proposal like this too soon might detract from treasury improvement as the DAO would begin to lose one of the only other tokens it holds: ETH. The DAO is already questionably positioned here since it is losing a half of its Ethereum in bootstrapping BoLD for its fraudproof validator. While we think the proposal is novel, it might be best to push back a proposal like this until some clarity is achieved on treasury sustainability.
Additionally, if the Timeboost proposal is accepted
then you can also give 50% of this income to stakers, it can significantly increase profitability.
At SEEDGov, we find this proposal interesting. Activating a Staking protocol aligned with increasing participation in governance is a great idea. We share the idea that with Quorum lowering down we are facing a potential attack to our DAO and it’s our job to prevent that by having robust and solid governance. With that said, we believe there is a fundamental problem being addressed indirectly rather than directly.
Arbitrum DAO has been generating significant selling pressure on the ARB, which, as we all know, has had a strong negative impact on the governance token's price. Therefore, creating utility for the token while reducing selling pressure could be an effective mechanism to prevent its devaluation.
The proposal suggests using 50% of surplus sequencer fees for ARB staking to enhance governance. This would incentivize ARB holders to stake and delegate their governance power, aligning their interests with the ecosystem's success and ensuring productive use of surplus fees for community benefit.
It's worth revisiting Ben's post :) ^
The highest yield is given to those with the lowest ARB delegates
Lower ARB ranges receive a higher yield
Hey @Frisson ,After discussing with you on the governance call, here are the full details of what I'm thinking:
I suggest that the yield for delegates with a lower number of ARB but meeting the active delegate criteria should be higher than for those with many delegates. Currently, there's an incentive program for those with at least 50k ARB. This adjustment will support active delegates who contribute meaningfully to Arbitrum and encourage low ARB delegates to be active. It would also help distribute voting power more fairly and enhance DAO security. The proposal mainly benefits delegators, so this change would also compensate active delegates.
This is a great proposal, and the subsequent discussion was also insightful.
The benefits I see here are:
This is a great proposal, and the subsequent discussion was also insightful.
The benefits I see here are:
However, I want to express my concern regarding the Karma calculations of 80, as others have mentioned this. There is a risk of voting power centralization tied to a small number of delegates. Clearly, just a UI warning would not be enough to help with VP decentralization. There need to be incentives to delegate VP to smaller delegates at the smart contract level. As a small delegate, I would be more incentivized to participate in the DAO discussions then.
Regarding timing and attack incentives, @bendi raised great points. Things can change quickly, especially after ETH ETF approvals. Generally, asset prices move sideways 80% of the times and form strong trends 20% of the time. A rising trend in $ETH prices could justify an attack on Arbitrum DAO now that there is a clear conviction that ETH is long-term bullish due to the ETF. Attackers can also be sophisticated actors by borrowing some ARB tokens on DeFi protocols and hedging their position on PERP markets, making it easier to attack the DAO than we might think. Therefore, we need a plan to avoid possible black swan events.
I also want to point out some positive effects and sentiment around $ARB holders when Arbitrum chains get congested and fees start to increase due to a Most anticipated event such as LayerZero TGE. In such events, $ARB holders will feel more satisfaction as they benefit directly from the earned revenue. I experienced the same feelings after the implementation of EIP-1559 when the $Shiba memecoin congested the Ethereum network and burned a notable amount of ETH.
This is my favorite proposal. I'm ecstatic to see ARB utility taken seriously, but especially to see it for this use case. Similar to my Timeboost comment, I'd like to see the option for the DAO to regularly vote to update how much is paid out.
I also see the potential to update our governor to decay voting power if it isn't redelegated at least once every x months or years. Really any creative solution to get people into a regular cadence ritual of updating their delegation.
Plutus abandoned their project after they messed up with their PLSARB asset. They switched their project to a DAO and now nobody is really taking care. Maybe some community member will pick it up though. But the proposal is definitely dead now.
Thanks for coming up with this proposal, I'm a big fan of your work! However, I still have a concern about the karma points, similar to JoJo's concern:
Thanks for your kind words as always @JoJo .
I have an additional request if possible. Could it be build in a way that, if we have a certain asset in treasury, it could be plugged in? Would it be possible, and feasible with the current budget? Dao is moving in a way that we will have potentially a lot of revenue streams in several years. We don’t know which one is gonna generate the most, and in which currency. Adding this optionality could be something useful in future.
Yes, this is the plan. I'll make it explicit in the proposal.
I add some detailed information that may be useful for this proposal. While it is true that the number of voters decreased, we should note that most of the decrease is among the 0-10k VP voters. As can be seen in the table, most of the 0-100 VP voters decreased, we can interpret that some of them were farmers.
However as @pedrob mentions in overall VP remains stable. I think this proposal is interesting and can help the VP distribution among the delegates.

Hey @Jadmat, thanks for sharing your thoughts!
I don’t know if it corresponds to the DAO, the foundation or the Lab; have they established any usage objective for the ETH received? I find it strange to think that there is no previously defined roadmap for the use of the income.
This is up to the DAO to determine. I would say that we are still in the process of determining what the objective should be. I personally think it's essential that we eventually share the value created by the protocols the DAO controls with token holders. I've pulled this decision out of this proposal so that it can be decided on separately by the DAO as outlined here: https://forum.arbitrum.foundation/t/arb-staking-unlock-arb-utility-and-align-governance/25084/69?u=frisson
Resolving voter apathy is key; I also find that making them participate in the income is the way to align both the staker and the voter; but a stake module has complexities that I do not read that have been mentioned, for example, the decrease in the onchain liquidity of ARB; there were efforts by the DAO to achieve depth, the proposed mechanism would reduce liquidity, eliminating depth; and derived problems such as the decrease in the quality of ARB, and the impact on its parameters in lending markets, or even the delisting of these; as well as the increase in volatility, due to decreased onchain liquidity.
Less than 1% of ARB is currently used onchain. I personally think this proposal is likely to improve overall onchain liquidity of ARB by increasing its utility and making voting power compatible with restaking and DeFi. It would be hard to make the current situation worse IMO.
I like this proposal because sharing revenue with tokenholders is the endgame and we need to take leadership on this front. Even uniswap for example had to delay their revenue sharing program after legal and VCs objected, so we might see objections crop up from legal when we go about implementing the proposal. That makes it all the more urgent that we get a headstart with some nonzero amount of revenue sharing with tokenholders, to clear up any roadblocks.
I like this proposal because sharing revenue with tokenholders is the endgame and we need to take leadership on this front. Even uniswap for example had to delay their revenue sharing program after legal and VCs objected, so we might see objections crop up from legal when we go about implementing the proposal. That makes it all the more urgent that we get a headstart with some nonzero amount of revenue sharing with tokenholders, to clear up any roadblocks.
I see a lot of "leave the DAO to decide" which is kicking the can down the road. What is the process by which the DAO will come to consensus on these issues? I'd like to see more thought into the process by which we'll come up with informed decisions on these questions before it moves for a vote.
Thanks Frission,
While i commend the impulse to take all feedback, I still wonder if you could have passed this with some amount as the starting amount to return. It's still a cool proposal that I support, I think you may be over-correcting as I did not see any large delegates listed in your reasoning.
Maybe @coinflip @Pepperoni_Jo3 @krst @olimpio @gauntlet @dk3 could chime in here as well.
Hello Arbitrum delegates,
I edited the original post, as well as the title of this thread, to reflect our updated proposal.
We received three major categories of constructive feedback on this proposal.
Hello Arbitrum delegates,
I edited the original post, as well as the title of this thread, to reflect our updated proposal.
We received three major categories of constructive feedback on this proposal.
We’ve rewritten the proposal to account for this feedback by making the following changes.
We plan to contribute actively to all of these work streams in the future (deciding how to fund rewards, deciding how to incentivize delegates via staking, deciding on Karma Score requirement and formula). In the meantime, we will implement the staking system so that it can be funded in the future. We will also implement an ARB LST (tARB) via the Tally Protocol so that ARB can be used in restaking and defi while returning voting power to the DAO.
In addition to the above changes based on delegate feedback, we made a change to the overall cost. Previously, we proposed to fund the work via a retroactive payment of 100,000 ARB to help cover the cost of development. Instead, we propose to fund the work at the beginning via an onchain proposal for $120,000 USD in ARB. We priced the ARB in USD to account for price volatility. We increased the cost slightly to account for the development of Karma decentralization guardrails. We shifted to requesting funding at the start of the development process because we think it is important for the DAO to have some skin in the game if it approves development, especially given the proposal no longer includes a decision to distribute 50% of surplus sequencer fees to stakers.
The first post in this thread contains the latest version of the proposal.
Thank you very much for your feedback and contributions to the proposal so far. Looking forward to continuing the conversation!
Thanks Joe!
Based on many conversations with delegates both on the forum and in other venues, my personal view is that this updated version of the proposal is better aligned with the DAO's preferences at this time. I'm happy to revisit as additional feedback emerges.
I'd really love to see this move forward.
Agree with @cupojoseph that reward amounts should be separate from the desire to set it up. ARDC is made for this type of analysis.
Can you elaborate on what exactly you're saying for your first point(s)? Are you asking if there are enough current incentives for users to participate in governance for (a) and for (b), what exactly are you asking to be calculated? Are you saying that initiatives should be readjusted according in conjunction?
Sure, Arbitrum is not literally losing 5,134 ETH, but fraudproof validation systems do not have high levels of capital efficiency, and we would prefer not to make ourselves dependent on a random interval of time where the DAO is waiting on bootstrapping funds to be returned. In fact, considering how high the bootstrapping cost is for one validator, it is logical to assume that it may take longer to bootstrap other validators. Based on the fact that 400 of the ETH is being used to reimburse honest parties on the gas costs for 3 years, it can be assumed that the fraudproof validator will be up and running and have the 3600 ETH deposited in the validator contract.
We're glad that we can agree that the current Arbitrum infrastructure would not be able to support this.
Okay, let's go in order.
Ecosystem profit. There are two questions here: a) is it worth participating in voting and holding ARB in order to give these users a part of the profit? b) it is necessary to consider for what purposes resources are required. Specifically, let's give some team this task. Let them calculate how much money is needed and for which Arbitrum initiatives.
Arbitrum did not lose 5,134 ETH, I think this is required at the start of the update, and after some time I believe that we will be able to return this money to the Treasury.
And yes, I agree that this is a very important step for the Arbitrum and many issues need to be worked out. But to do this, you need to work out specific issues.
Okay, let's go in order.
Ecosystem profit. There are two questions here: a) is it worth participating in voting and holding ARB in order to give these users a part of the profit? b) it is necessary to consider for what purposes resources are required. Specifically, let's give some team this task. Let them calculate how much money is needed and for which Arbitrum initiatives.
Arbitrum did not lose 5,134 ETH, I think this is required at the start of the update, and after some time I believe that we will be able to return this money to the Treasury.
And yes, I agree that this is a very important step for the Arbitrum and many issues need to be worked out. But to do this, you need to work out specific issues.
Overall: it might be worth making a separate proposal and allocating a small amount for research on all these issues. I think a small team will be able to produce a clear report quite quickly, and our discussions, unfortunately, will not lead to any results.
The problems outlined in our response show the following:
The problems outlined in our response show the following:
Again, we are losing half of our ETH from the treasury. Another 50% taken from the sequencer this year could be a very risky move. For reference, we're currently at 14,000 ETH.
It's also not just about profit, the goal of the post is to incentivize activity within the DAO. There are plenty of incentive misalignments that could possibly occur if we enact this too soon. And then there's the question if our current reputation/karma metrics good enough to handle an event like this? These are all questions that need be answered prior to pursuing this. Retroactive changes are prevalent in this DAO, and for the future we would like to minimize those events.
And finally, there's the question if our current reputation system would be able to handle this without retroactive changes in the future. Because of the incentive misalignments we have outlined are possible, we would need a better reputation scoring metric for the future to rate delegate performance. The equation outlined in the proposal is not satisfying.
(100 * ((Forum Activity Score * 1) + (Off-chain Votes % * 3) + (On-chain Votes % * 5))) / (Sum of Weights * Max Score Setting * 1)
With this equation, there exists some possibility where users are rewarded for being consistent voters and not on the quality of their voting and decision making. We need to incentivize cooperation, not just saying "yes" or "no" to various proposals. The weighting in the equation is skewed toward offchain and onchain voting. Furthermore, the Forum Activity score that we currently use does not take into account other granularities.
Again, it's not just about the profit, it is about the opportunity cost, the timing, our current infrastructure, AND the decrease in surplus fees due to Dencun.
What exactly is the problem? We now have a lot of ARB on wallets that lie like dead weight. If it is possible to make even a small profit with it, this is a plus for the token. But it must be done, as in the Uniswap proposal, which obliges not only to stake, but also to delegate these tokens, and only then make a profit.
At Blockworks, we find this proposal to be a novel solution to boosting participation and incentivizing delegate performance, but we do not believe accounts for the Dencun upgrade, which has decreased the surplus fees, and thus the estimates given appear liberal. As we've stated publicly, during a bear market, surplus fees could potentially fall further, which might negatively impact both delegates and ARB stakers.
While increasing the number of active voters is positive, it is important to ensure that this also enhances the quality of governance. The focus should remain on meaningful participation rather than solely capturing sequencer revenues. Concentrated staking among the top delegates could lead to perverse incentives from parties that have large delegations. There is a possibility that a group of delegates may exhibit high participation and voting rates, but deliver mediocre quality responses, incentivized by delegate incentives and ARB staking to secure positive value. This is especially possible since the proposal recommends that onchain voting and offchain voting be weighted as higher than delegate forum participation. Currently, delegate forum participation is the best proxy we have for cooperation amongst delegates. It also might be worth noting that in the lifetime of a delegate, priorities change, and thus we may need to make this more dynamic in some manner for both the end of a delegation and the beginning.
At Blockworks, we find this proposal to be a novel solution to boosting participation and incentivizing delegate performance, but we do not believe accounts for the Dencun upgrade, which has decreased the surplus fees, and thus the estimates given appear liberal. As we've stated publicly, during a bear market, surplus fees could potentially fall further, which might negatively impact both delegates and ARB stakers.
While increasing the number of active voters is positive, it is important to ensure that this also enhances the quality of governance. The focus should remain on meaningful participation rather than solely capturing sequencer revenues. Concentrated staking among the top delegates could lead to perverse incentives from parties that have large delegations. There is a possibility that a group of delegates may exhibit high participation and voting rates, but deliver mediocre quality responses, incentivized by delegate incentives and ARB staking to secure positive value. This is especially possible since the proposal recommends that onchain voting and offchain voting be weighted as higher than delegate forum participation. Currently, delegate forum participation is the best proxy we have for cooperation amongst delegates. It also might be worth noting that in the lifetime of a delegate, priorities change, and thus we may need to make this more dynamic in some manner for both the end of a delegation and the beginning.
Ultimately -- and most importantly --- enforcing a proposal like this too soon might detract from treasury improvement as the DAO would begin to lose one of the only other tokens it holds: ETH. The DAO is already questionably positioned here since it is losing a half of its Ethereum in bootstrapping BoLD for its fraudproof validator. While we think the proposal is novel, it might be best to push back a proposal like this until some clarity is achieved on treasury sustainability.
Additionally, if the Timeboost proposal is accepted
then you can also give 50% of this income to stakers, it can significantly increase profitability.
At SEEDGov, we find this proposal interesting. Activating a Staking protocol aligned with increasing participation in governance is a great idea. We share the idea that with Quorum lowering down we are facing a potential attack to our DAO and it’s our job to prevent that by having robust and solid governance. With that said, we believe there is a fundamental problem being addressed indirectly rather than directly.
Arbitrum DAO has been generating significant selling pressure on the ARB, which, as we all know, has had a strong negative impact on the governance token's price. Therefore, creating utility for the token while reducing selling pressure could be an effective mechanism to prevent its devaluation.
The proposal suggests using 50% of surplus sequencer fees for ARB staking to enhance governance. This would incentivize ARB holders to stake and delegate their governance power, aligning their interests with the ecosystem's success and ensuring productive use of surplus fees for community benefit.
It's worth revisiting Ben's post :) ^
The highest yield is given to those with the lowest ARB delegates
Lower ARB ranges receive a higher yield
Hey @Frisson ,After discussing with you on the governance call, here are the full details of what I'm thinking:
I suggest that the yield for delegates with a lower number of ARB but meeting the active delegate criteria should be higher than for those with many delegates. Currently, there's an incentive program for those with at least 50k ARB. This adjustment will support active delegates who contribute meaningfully to Arbitrum and encourage low ARB delegates to be active. It would also help distribute voting power more fairly and enhance DAO security. The proposal mainly benefits delegators, so this change would also compensate active delegates.
This is a great proposal, and the subsequent discussion was also insightful.
The benefits I see here are:
This is a great proposal, and the subsequent discussion was also insightful.
The benefits I see here are:
However, I want to express my concern regarding the Karma calculations of 80, as others have mentioned this. There is a risk of voting power centralization tied to a small number of delegates. Clearly, just a UI warning would not be enough to help with VP decentralization. There need to be incentives to delegate VP to smaller delegates at the smart contract level. As a small delegate, I would be more incentivized to participate in the DAO discussions then.
Regarding timing and attack incentives, @bendi raised great points. Things can change quickly, especially after ETH ETF approvals. Generally, asset prices move sideways 80% of the times and form strong trends 20% of the time. A rising trend in $ETH prices could justify an attack on Arbitrum DAO now that there is a clear conviction that ETH is long-term bullish due to the ETF. Attackers can also be sophisticated actors by borrowing some ARB tokens on DeFi protocols and hedging their position on PERP markets, making it easier to attack the DAO than we might think. Therefore, we need a plan to avoid possible black swan events.
I also want to point out some positive effects and sentiment around $ARB holders when Arbitrum chains get congested and fees start to increase due to a Most anticipated event such as LayerZero TGE. In such events, $ARB holders will feel more satisfaction as they benefit directly from the earned revenue. I experienced the same feelings after the implementation of EIP-1559 when the $Shiba memecoin congested the Ethereum network and burned a notable amount of ETH.
This is my favorite proposal. I'm ecstatic to see ARB utility taken seriously, but especially to see it for this use case. Similar to my Timeboost comment, I'd like to see the option for the DAO to regularly vote to update how much is paid out.
I also see the potential to update our governor to decay voting power if it isn't redelegated at least once every x months or years. Really any creative solution to get people into a regular cadence ritual of updating their delegation.
Plutus abandoned their project after they messed up with their PLSARB asset. They switched their project to a DAO and now nobody is really taking care. Maybe some community member will pick it up though. But the proposal is definitely dead now.
Thanks for coming up with this proposal, I'm a big fan of your work! However, I still have a concern about the karma points, similar to JoJo's concern:
At SEEDGov, we find this proposal interesting. Activating a Staking protocol aligned with increasing participation in governance is a great idea. We share the idea that with Quorum lowering down we are facing a potential attack to our DAO and it’s our job to prevent that by having robust and solid governance. With that said, we believe there is a fundamental problem being addressed indirectly rather than directly.
Arbitrum DAO has been generating significant selling pressure on the ARB, which, as we all know, has had a strong negative impact on the governance token's price. Therefore, creating utility for the token while reducing selling pressure could be an effective mechanism to prevent its devaluation.
The idea of an LST is attractive and can bring positive effects such as increased competitiveness of our token. However, we believe that before moving forward, it would be responsible to obtain more precise data on how staking would impact the on-chain liquidity of the token. Also, on the opportunity cost of locking up a large percentage of the tokens and how it would affect a treasury that is mostly in ARB.
It would also be good to have data from an outcome analysis perspective. Considering the hypothetical returns that were calculated, how much do you expect to be staked? Do you think the current percentage of revenue is attractive enough to achieve the desired objectives?
Also, as a mention, with the Treasury Management proposal being discussed it would be wise to do some impact calculations and possible overlaps. (Considering that although both proposals can coexist, the STMG's motivation is to generate the necessary yield to cover the gap between the DAO's income and outflows, so that any direct allocation of income affects the STMG's objectives in the long term.)
Our staking implementation directs 1% of surplus fees to delegates to sustain the ongoing growth and development of Arbitrum, a large portion of which is driven by the DAO. In its current form, ARB staking is not meant to replace the delegate incentives program , but rather to complement it with a smaller source of incentives that are programmatically tied to ongoing network operations. In the future, we believe it could make sense to integrate the delegate incentives program with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from DAO revenue.
We strongly support the idea of using the surplus fees to enhance governance within our community, but yet we think the mechanism could be improved and be more meritocratic based on real contributions. Thinking loudly considering the idea to avoid overlap, start working on a framework that allows us to merge criterias and create a horizontal scoring system that works both for the Delegate Incentive Program and this proposal is the way to go for this.
In this way, mechanisms can be established to direct incentives in favor of those who delegate voting power to members of the community who make significant contributions. It would also be interesting to encourage delegation to actors with little VP but who still actively contribute to Arbitrum DAO. This is aligned with what the Foundation proposed with the (Re)delegation Week.
The proposal suggests using 50% of surplus sequencer fees for ARB staking to enhance governance. This would incentivize ARB holders to stake and delegate their governance power, aligning their interests with the ecosystem's success and ensuring productive use of surplus fees for community benefit.
I support this proposal as it strengthens Arbitrum's economic security and governance, encouraging active participation and aligning token holders' interests with the ecosystem’s long-term health.
The highest yield is given to those with the lowest ARB delegates
Likewise, this will lead to the dominance of the sybils
Hey @Frisson ,After discussing with you on the governance call, here are the full details of what I'm thinking:
I suggest that the yield for delegates with a lower number of ARB but meeting the active delegate criteria should be higher than for those with many delegates. Currently, there's an incentive program for those with at least 50k ARB. This adjustment will support active delegates who contribute meaningfully to Arbitrum and encourage low ARB delegates to be active. It would also help distribute voting power more fairly and enhance DAO security. The proposal mainly benefits delegators, so this change would also compensate active delegates.
Here is an example of categorized model that I could think of right now:
The Tier-based approach divides delegates with Karma scores above 80 into tiers based on their ARB delegates. The highest yield is given to those with the lowest ARB delegates. This method is fair because it rewards active delegates, even if they hold fewer ARB. It encourages smaller delegates to participate more in the DAO to build a reputation and have a chance to participate in the delegate incentive program. It is also simple and easy to understand. However, defining tiers can be difficult and may lead to disagreements. Additionally, some delegates might try to adjust their ARB holdings to fit into a more favorable tier.
Example:
Tier delegate Criteria: Delegate with the lowest amount of ARB holdings with a Karma Score > 80.
The Voting Power Ranges approach groups delegates based on their ARB holdings. Lower ARB ranges receive a higher yield. This method provides more detail by dividing delegates into different groups, ensuring fair distribution. It balances rewards between active participants with a low number of delegates and those with a larger number of delegates. However, this approach is more complex and involves more calculations. Determining the exact ranges can also be contentious.
Example:
Voting Power Ranges:
The Weight Distribution method assigns weights to different ARB holding ranges. Yield is distributed based on these weights, with lower ARB ranges having higher base weights. This ensures a proportional distribution. This method is flexible and easy to adjust. Smaller ones receive a higher yield. However, the calculations are more complex and require precise formulas.
Example:
Weight Distribution
This is my favorite proposal. I'm ecstatic to see ARB utility taken seriously, but especially to see it for this use case. Similar to my Timeboost comment, I'd like to see the option for the DAO to regularly vote to update how much is paid out.
I also see the potential to update our governor to decay voting power if it isn't redelegated at least once every x months or years. Really any creative solution to get people into a regular cadence ritual of updating their delegation.
I realize that some would argue that you would like to delegate and forget it. You trust that person you delegated to and don't expect that to change. And you don't want to have to pay attention. In that case, even as a holder, wouldn't you want people actively involved to be driving the ship of your investment 3 years later? You could always reactivate your delegation if a hot topic came up.
Thanks for coming up with this proposal, I'm a big fan of your work! However, I still have a concern about the karma points, similar to JoJo's concern:
I would like to learn more about what could be the best scenario for this issue, and why 80? How did you come up with this number?
Additionally, I noticed that we also have a staking proposal on Arbitrum: Activate ARB Staking. There haven't been any updates on their side recently. Does anyone know what's happening with this proposal?
Thanks for the proposal tally team. Generally I do believe that this is a great way to align incentives between all stakeholders.
I want to reflag the concerns highlighted by @tane. UI games will be insufficient to align short term APY seeking behaviour from stakers towards long term decentralisation maximising goal of the DAO. Many delegation UI solutions have tried and failed at incentivising decentralisation with simple UI games.
Thanks for the proposal tally team. Generally I do believe that this is a great way to align incentives between all stakeholders.
I want to reflag the concerns highlighted by @tane. UI games will be insufficient to align short term APY seeking behaviour from stakers towards long term decentralisation maximising goal of the DAO. Many delegation UI solutions have tried and failed at incentivising decentralisation with simple UI games.
introduce smart contract mechanisms that amplify or reduce rewards based on voting power concentration
This is a great solution and should definitely be implemented from the get go. Another way is to identify a max. cap for a delegate and all excess VP can automatically be redelegated to a pool controlled by a DAO led delegation program.
This is an interesting proposal, but it needs more discussion. In my opinion, the timing is not right yet.
I echo the concern raised by other delegates about this proposal, as this is possibly the only source of revenue for the DAO currently, and the current ETH "warchest" will be depleted by the BoLD validator proposal (if it passes Tally).
This is an interesting proposal, but it needs more discussion. In my opinion, the timing is not right yet.
I echo the concern raised by other delegates about this proposal, as this is possibly the only source of revenue for the DAO currently, and the current ETH "warchest" will be depleted by the BoLD validator proposal (if it passes Tally).
We propose that 50% of surplus sequencer fees be allocated to ARB stakers. The existing DAO treasury of ETH from surplus sequencer fees would be unchanged, only future fees would be affected.
As we see increased awareness about having a "DAO Budget" or some type of treasury management, my position is that we should have those initiatives in place before committing to this staking model.
Is it possible to try storing this data on a blockchain? Firstly, it would be impossible to change them (which is important). Secondly, this data will always be available
I think Karma's scoring works to filter out spam. In either case though it would be pretty easy to build in something like ChatGPT to evaluate quality for forum submissions to screen for low value responses.
Overall, I think this is a solid strategy that enhances economic security and encourages more participation in Arbitrum DAO governance.
edit: Just voted 'FOR' because of the reasons already outlined.
Sounds interesting... This mechanism not only rewards stakeholders but also addresses the issue of declining voter participation, thereby strengthening the DAO’s defense against potential attacks and promoting long-term ecosystem health.
I wanted to give everyone a heads up that I'm going to be away from my keyboard Sunday afternoon through Wednesday afternoon MST of this upcoming week. If I don't respond to a forum comment or Telegram message promptly, I will get to it on Wednesday. Please also feel free to reach out to @dennison of Tally, who has full context on the proposal. Thanks Arbitrum fam, I appreciate all of you.
Something that is really exciting to me about this proposal is that it allows us to start building the infrastructure that can let other people reuse the security of the ARB token for other applications.
When paired with Symbiotic for example, we can create a collateral type from ARB that can now be used in Vaults for restaking.
This allows people to build really cool things:
Something that is really exciting to me about this proposal is that it allows us to start building the infrastructure that can let other people reuse the security of the ARB token for other applications.
When paired with Symbiotic for example, we can create a collateral type from ARB that can now be used in Vaults for restaking.
This allows people to build really cool things:
Personally, I'm not so worried about the cost to the ARB DAO, as noted, currently the income from the sequencer is quite low (but I expect we will probably want to reevaluate this because we're far far cheaper than Base at the moment). Also, this would be for revenue going forward, I don't think this proposal suggests using half of the ETH the DAO already has.
This system helps get ARB holders to lock their tokens up for a long term productive use. This is positive for ARB holders, and the ecosystem, as our supply is expanding too fast, IMHO, and this is a net positive method for withdrawing ARB from the market.
As a builder, I'm personally most excited about creating an entirely new infrastructure layer on which to build tooling on Arbitrum. I see it more an investment in expansion of the Arb tech stack and market reach than a cost.
I agree here, having it onchain makes most sense. Right now I am not sure if it can be played somehow.
I really like pairing the idea of pairing the staking mechanism with an increase in governance participation. Governance attacks are rarely considered but this is a great way to get some of that voting power back from dead governance participants and increase Arbitrum security.
Although I believe the fees that Arbitrum made so far do not represent an incredibly large sum of money and yields on redistribution may not be very attractive at first its good to start planning a method of distribution which does more than just rewarding pure staking. (Hopefully with fee increase we will see a much bigger fee intake)
I really like pairing the idea of pairing the staking mechanism with an increase in governance participation. Governance attacks are rarely considered but this is a great way to get some of that voting power back from dead governance participants and increase Arbitrum security.
Although I believe the fees that Arbitrum made so far do not represent an incredibly large sum of money and yields on redistribution may not be very attractive at first its good to start planning a method of distribution which does more than just rewarding pure staking. (Hopefully with fee increase we will see a much bigger fee intake)
I'm not sure using karma score for cutoff is the best way to cut off non-active delegates as it greatly favours older active participants and could mean an even greater concentration of power amongst the few already top delegates. The formula should be revised a bit to skew the score towards active participation in a shorter time span (prev 6 months?)
Thank you for your thoughtful analysis, @pedrob
I addressed a few relevant points in my response to Sam here: https://forum.arbitrum.foundation/t/arb-staking-use-surplus-fees-to-align-governance/25084/12?u=frisson
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn’t prevent token holders from staking their tokens into “popular” ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
Appreciate the thoughtful response, Sam. A few follow up notes:
I believe that if this system is to be an integral part helping secure Arbitrum’s governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
Thanks for your thoughtful comments (as always) JoJo.
Thanks @Frisson for the proposal. We are very excited to have this discussion around potential solutions to tackle the lack of the delegated tokens even for one of the most active governance-equipped DAOs.
We are aware of some issues pointed out by other delegates, but overall, in favor of improving it to be a feasible proposal for the DAO to experiment on. The most important thing that we believe we should try is to introduce a mechanism aligned with the values, effective to work for the price appreciation and governance participation and hard to game on.
This opinion is solely my own and does not represent the views of SEEDGov, with whom I collaborate as an Advisor for LTIPP.
hey @Frisson thank you very much for the proposal. Overall, I like it and agree with the general principle that using DAO revenue to incentivize participation in governance is an excellent idea and should be implemented.
The upside of attacking the DAO treasury is increasing (more ETH in the treasury), while the cost of attacking the DAO is not increasing proportionally to defend against attacks.
The long-awaited proposal, thanks! I think it should be possible to earn a commission regardless of the base commission. Let me explain: This creates a conflict of interest:
At SEEDGov, we find this proposal interesting. Activating a Staking protocol aligned with increasing participation in governance is a great idea. We share the idea that with Quorum lowering down we are facing a potential attack to our DAO and it’s our job to prevent that by having robust and solid governance. With that said, we believe there is a fundamental problem being addressed indirectly rather than directly.
Arbitrum DAO has been generating significant selling pressure on the ARB, which, as we all know, has had a strong negative impact on the governance token's price. Therefore, creating utility for the token while reducing selling pressure could be an effective mechanism to prevent its devaluation.
The idea of an LST is attractive and can bring positive effects such as increased competitiveness of our token. However, we believe that before moving forward, it would be responsible to obtain more precise data on how staking would impact the on-chain liquidity of the token. Also, on the opportunity cost of locking up a large percentage of the tokens and how it would affect a treasury that is mostly in ARB.
It would also be good to have data from an outcome analysis perspective. Considering the hypothetical returns that were calculated, how much do you expect to be staked? Do you think the current percentage of revenue is attractive enough to achieve the desired objectives?
Also, as a mention, with the Treasury Management proposal being discussed it would be wise to do some impact calculations and possible overlaps. (Considering that although both proposals can coexist, the STMG's motivation is to generate the necessary yield to cover the gap between the DAO's income and outflows, so that any direct allocation of income affects the STMG's objectives in the long term.)
Our staking implementation directs 1% of surplus fees to delegates to sustain the ongoing growth and development of Arbitrum, a large portion of which is driven by the DAO. In its current form, ARB staking is not meant to replace the delegate incentives program , but rather to complement it with a smaller source of incentives that are programmatically tied to ongoing network operations. In the future, we believe it could make sense to integrate the delegate incentives program with ARB staking so that, instead of getting delegate incentive funds from the ARB treasury, they come directly from DAO revenue.
We strongly support the idea of using the surplus fees to enhance governance within our community, but yet we think the mechanism could be improved and be more meritocratic based on real contributions. Thinking loudly considering the idea to avoid overlap, start working on a framework that allows us to merge criterias and create a horizontal scoring system that works both for the Delegate Incentive Program and this proposal is the way to go for this.
In this way, mechanisms can be established to direct incentives in favor of those who delegate voting power to members of the community who make significant contributions. It would also be interesting to encourage delegation to actors with little VP but who still actively contribute to Arbitrum DAO. This is aligned with what the Foundation proposed with the (Re)delegation Week.
The proposal suggests using 50% of surplus sequencer fees for ARB staking to enhance governance. This would incentivize ARB holders to stake and delegate their governance power, aligning their interests with the ecosystem's success and ensuring productive use of surplus fees for community benefit.
I support this proposal as it strengthens Arbitrum's economic security and governance, encouraging active participation and aligning token holders' interests with the ecosystem’s long-term health.
The highest yield is given to those with the lowest ARB delegates
Likewise, this will lead to the dominance of the sybils
Hey @Frisson ,After discussing with you on the governance call, here are the full details of what I'm thinking:
I suggest that the yield for delegates with a lower number of ARB but meeting the active delegate criteria should be higher than for those with many delegates. Currently, there's an incentive program for those with at least 50k ARB. This adjustment will support active delegates who contribute meaningfully to Arbitrum and encourage low ARB delegates to be active. It would also help distribute voting power more fairly and enhance DAO security. The proposal mainly benefits delegators, so this change would also compensate active delegates.
Here is an example of categorized model that I could think of right now:
The Tier-based approach divides delegates with Karma scores above 80 into tiers based on their ARB delegates. The highest yield is given to those with the lowest ARB delegates. This method is fair because it rewards active delegates, even if they hold fewer ARB. It encourages smaller delegates to participate more in the DAO to build a reputation and have a chance to participate in the delegate incentive program. It is also simple and easy to understand. However, defining tiers can be difficult and may lead to disagreements. Additionally, some delegates might try to adjust their ARB holdings to fit into a more favorable tier.
Example:
Tier delegate Criteria: Delegate with the lowest amount of ARB holdings with a Karma Score > 80.
The Voting Power Ranges approach groups delegates based on their ARB holdings. Lower ARB ranges receive a higher yield. This method provides more detail by dividing delegates into different groups, ensuring fair distribution. It balances rewards between active participants with a low number of delegates and those with a larger number of delegates. However, this approach is more complex and involves more calculations. Determining the exact ranges can also be contentious.
Example:
Voting Power Ranges:
The Weight Distribution method assigns weights to different ARB holding ranges. Yield is distributed based on these weights, with lower ARB ranges having higher base weights. This ensures a proportional distribution. This method is flexible and easy to adjust. Smaller ones receive a higher yield. However, the calculations are more complex and require precise formulas.
Example:
Weight Distribution
This is my favorite proposal. I'm ecstatic to see ARB utility taken seriously, but especially to see it for this use case. Similar to my Timeboost comment, I'd like to see the option for the DAO to regularly vote to update how much is paid out.
I also see the potential to update our governor to decay voting power if it isn't redelegated at least once every x months or years. Really any creative solution to get people into a regular cadence ritual of updating their delegation.
I realize that some would argue that you would like to delegate and forget it. You trust that person you delegated to and don't expect that to change. And you don't want to have to pay attention. In that case, even as a holder, wouldn't you want people actively involved to be driving the ship of your investment 3 years later? You could always reactivate your delegation if a hot topic came up.
Thanks for coming up with this proposal, I'm a big fan of your work! However, I still have a concern about the karma points, similar to JoJo's concern:
I would like to learn more about what could be the best scenario for this issue, and why 80? How did you come up with this number?
Additionally, I noticed that we also have a staking proposal on Arbitrum: Activate ARB Staking. There haven't been any updates on their side recently. Does anyone know what's happening with this proposal?
Thanks for the proposal tally team. Generally I do believe that this is a great way to align incentives between all stakeholders.
I want to reflag the concerns highlighted by @tane. UI games will be insufficient to align short term APY seeking behaviour from stakers towards long term decentralisation maximising goal of the DAO. Many delegation UI solutions have tried and failed at incentivising decentralisation with simple UI games.
Thanks for the proposal tally team. Generally I do believe that this is a great way to align incentives between all stakeholders.
I want to reflag the concerns highlighted by @tane. UI games will be insufficient to align short term APY seeking behaviour from stakers towards long term decentralisation maximising goal of the DAO. Many delegation UI solutions have tried and failed at incentivising decentralisation with simple UI games.
introduce smart contract mechanisms that amplify or reduce rewards based on voting power concentration
This is a great solution and should definitely be implemented from the get go. Another way is to identify a max. cap for a delegate and all excess VP can automatically be redelegated to a pool controlled by a DAO led delegation program.
This is an interesting proposal, but it needs more discussion. In my opinion, the timing is not right yet.
I echo the concern raised by other delegates about this proposal, as this is possibly the only source of revenue for the DAO currently, and the current ETH "warchest" will be depleted by the BoLD validator proposal (if it passes Tally).
This is an interesting proposal, but it needs more discussion. In my opinion, the timing is not right yet.
I echo the concern raised by other delegates about this proposal, as this is possibly the only source of revenue for the DAO currently, and the current ETH "warchest" will be depleted by the BoLD validator proposal (if it passes Tally).
We propose that 50% of surplus sequencer fees be allocated to ARB stakers. The existing DAO treasury of ETH from surplus sequencer fees would be unchanged, only future fees would be affected.
As we see increased awareness about having a "DAO Budget" or some type of treasury management, my position is that we should have those initiatives in place before committing to this staking model.
Is it possible to try storing this data on a blockchain? Firstly, it would be impossible to change them (which is important). Secondly, this data will always be available
I think Karma's scoring works to filter out spam. In either case though it would be pretty easy to build in something like ChatGPT to evaluate quality for forum submissions to screen for low value responses.
Overall, I think this is a solid strategy that enhances economic security and encourages more participation in Arbitrum DAO governance.
edit: Just voted 'FOR' because of the reasons already outlined.
Sounds interesting... This mechanism not only rewards stakeholders but also addresses the issue of declining voter participation, thereby strengthening the DAO’s defense against potential attacks and promoting long-term ecosystem health.
I wanted to give everyone a heads up that I'm going to be away from my keyboard Sunday afternoon through Wednesday afternoon MST of this upcoming week. If I don't respond to a forum comment or Telegram message promptly, I will get to it on Wednesday. Please also feel free to reach out to @dennison of Tally, who has full context on the proposal. Thanks Arbitrum fam, I appreciate all of you.
Something that is really exciting to me about this proposal is that it allows us to start building the infrastructure that can let other people reuse the security of the ARB token for other applications.
When paired with Symbiotic for example, we can create a collateral type from ARB that can now be used in Vaults for restaking.
This allows people to build really cool things:
Something that is really exciting to me about this proposal is that it allows us to start building the infrastructure that can let other people reuse the security of the ARB token for other applications.
When paired with Symbiotic for example, we can create a collateral type from ARB that can now be used in Vaults for restaking.
This allows people to build really cool things:
Personally, I'm not so worried about the cost to the ARB DAO, as noted, currently the income from the sequencer is quite low (but I expect we will probably want to reevaluate this because we're far far cheaper than Base at the moment). Also, this would be for revenue going forward, I don't think this proposal suggests using half of the ETH the DAO already has.
This system helps get ARB holders to lock their tokens up for a long term productive use. This is positive for ARB holders, and the ecosystem, as our supply is expanding too fast, IMHO, and this is a net positive method for withdrawing ARB from the market.
As a builder, I'm personally most excited about creating an entirely new infrastructure layer on which to build tooling on Arbitrum. I see it more an investment in expansion of the Arb tech stack and market reach than a cost.
I agree here, having it onchain makes most sense. Right now I am not sure if it can be played somehow.
I really like pairing the idea of pairing the staking mechanism with an increase in governance participation. Governance attacks are rarely considered but this is a great way to get some of that voting power back from dead governance participants and increase Arbitrum security.
Although I believe the fees that Arbitrum made so far do not represent an incredibly large sum of money and yields on redistribution may not be very attractive at first its good to start planning a method of distribution which does more than just rewarding pure staking. (Hopefully with fee increase we will see a much bigger fee intake)
I really like pairing the idea of pairing the staking mechanism with an increase in governance participation. Governance attacks are rarely considered but this is a great way to get some of that voting power back from dead governance participants and increase Arbitrum security.
Although I believe the fees that Arbitrum made so far do not represent an incredibly large sum of money and yields on redistribution may not be very attractive at first its good to start planning a method of distribution which does more than just rewarding pure staking. (Hopefully with fee increase we will see a much bigger fee intake)
I'm not sure using karma score for cutoff is the best way to cut off non-active delegates as it greatly favours older active participants and could mean an even greater concentration of power amongst the few already top delegates. The formula should be revised a bit to skew the score towards active participation in a shorter time span (prev 6 months?)
Thank you for your thoughtful analysis, @pedrob
I addressed a few relevant points in my response to Sam here: https://forum.arbitrum.foundation/t/arb-staking-use-surplus-fees-to-align-governance/25084/12?u=frisson
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn’t prevent token holders from staking their tokens into “popular” ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
Appreciate the thoughtful response, Sam. A few follow up notes:
I believe that if this system is to be an integral part helping secure Arbitrum’s governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
Thanks for your thoughtful comments (as always) JoJo.
Thanks @Frisson for the proposal. We are very excited to have this discussion around potential solutions to tackle the lack of the delegated tokens even for one of the most active governance-equipped DAOs.
We are aware of some issues pointed out by other delegates, but overall, in favor of improving it to be a feasible proposal for the DAO to experiment on. The most important thing that we believe we should try is to introduce a mechanism aligned with the values, effective to work for the price appreciation and governance participation and hard to game on.
This opinion is solely my own and does not represent the views of SEEDGov, with whom I collaborate as an Advisor for LTIPP.
hey @Frisson thank you very much for the proposal. Overall, I like it and agree with the general principle that using DAO revenue to incentivize participation in governance is an excellent idea and should be implemented.
The upside of attacking the DAO treasury is increasing (more ETH in the treasury), while the cost of attacking the DAO is not increasing proportionally to defend against attacks.
The long-awaited proposal, thanks! I think it should be possible to earn a commission regardless of the base commission. Let me explain: This creates a conflict of interest:
Thank you for your thoughtful analysis, @pedrob
I addressed a few relevant points in my response to Sam here: https://forum.arbitrum.foundation/t/arb-staking-use-surplus-fees-to-align-governance/25084/12?u=frisson
So, if we take that recent vote, the threshold someone would need to consider to attack the DAO is 213M $ARB (and I believe a realistic estimate would indicate that the value is higher, as in the event of an attack on the DAO, more $ARB that is usually not active in governance would likely vote).
Finally, I know this is not the main point, but I disagree with this narrative. I do agree that using the revenue to incentivize participation in governance is positive and will increase the security of the DAO. However, I disagree with the notion that there are no incentives to delegate the ARB token. In fact, the only incentive that exists today for holding it is to participate in governance or delegate that participation. I believe we need to strengthen this aspect.
I'm not sure I understand this point. Where does the current incentive to delegate come from? Delegating your ARB tokens does not come with any rewards that I'm aware of. On the other hand, it does take time (especially if you are doing it productively and pay some attention to what your delegate is doing).
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn’t prevent token holders from staking their tokens into “popular” ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
Thanks, Tane. We could certainly implement something like this in the UI layer on Tally. That's a great idea. An additional option would be to introduce smart contract mechanisms that amplify or reduce rewards based on voting power concentration, which I think could be powerful but are more complex to predict and get right.
I believe that if this system is to be an integral part helping secure Arbitrum’s governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
To all delegates regardless of criteria? ie all addresses that have tokens delegated to them? I assume proportionally given the amount of tokens delegated?
Thanks for your thoughtful comments (as always) JoJo.
I personally haven't thought a lot about this yet. My first instinct is to say that, with the Delegate Incentives Program, it should be possible to hire folks to help with this. I feel like Treasure is doing a great job with this, for example.
I like this thought. I think there is a lot of opportunity to tweak the mechanism to optimize governance, especially after it has been on for awhile and we have some historical data to work with.
Thanks @Frisson for the proposal. We are very excited to have this discussion around potential solutions to tackle the lack of the delegated tokens even for one of the most active governance-equipped DAOs.
We are aware of some issues pointed out by other delegates, but overall, in favor of improving it to be a feasible proposal for the DAO to experiment on. The most important thing that we believe we should try is to introduce a mechanism aligned with the values, effective to work for the price appreciation and governance participation and hard to game on.
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn't prevent token holders from staking their tokens into "popular" ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
This opinion is solely my own and does not represent the views of SEEDGov, with whom I collaborate as an Advisor for LTIPP.
hey @Frisson thank you very much for the proposal. Overall, I like it and agree with the general principle that using DAO revenue to incentivize participation in governance is an excellent idea and should be implemented.
The problem I see, and I agree with all the points raised by @swmartin , is one of timing. It seems a bit premature, as the DAO is not yet mature and does not have a clear revenue flow to distribute.
I think it hits the mark in pointing out:
We are about to “spend” half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
As shown in the graph shared by Entropy, the revenue from the sequencer has dramatically declined since the approval of EIP-4844 (note that the spike at the end is due to the LZO airdrop):

At this moment, the DAO does not have a defined plan on how to spend the ARB and revenue to maintain a healthy treasury for the medium and long term. Therefore, I believe the DAO should stop approving large expenditures (in this case, 50% of the profit is being requested) until a treasury manager is appointed or a treasury management strategy is defined.
On the other hand,
The number of unique voters participating in the DAO has been steadily declining since DAO launch. As a result, it is becoming economically attractive to attack the DAO treasury.
Although it is true that the number of unique voters has declined, the amount of $ARB delegated for voting has remained stable. I don't say this is positive, as the supply has increased significantly in recent months, so the expectation would be that $ARB participating in governance should increase by the same percentage.
However, I disagree that it is urgent or that it has become “economically attractive” to attack the DAO's treasury. In the latest tally proposal, which was relatively controversial (due to heated last-minute discussions), 213M $ARB and approximately 15,900 addresses voted.
So, if we take that recent vote, the threshold someone would need to consider to attack the DAO is 213M $ARB (and I believe a realistic estimate would indicate that the value is higher, as in the event of an attack on the DAO, more $ARB that is usually not active in governance would likely vote).
What I mean by this: I agree with the proposed value and the idea of using sequencer revenue to encourage participation in governance. In the medium term, this should be something implemented. However, I don't think it is urgent, and the DAO is not yet mature enough to handle this expenditure.
Currently, there is no direct incentive to delegate ARB tokens. ARB staking introduces a direct incentive to stake and delegate.
Finally, I know this is not the main point, but I disagree with this narrative. I do agree that using the revenue to incentivize participation in governance is positive and will increase the security of the DAO. However, I disagree with the notion that there are no incentives to delegate the ARB token. In fact, the only incentive that exists today for holding it is to participate in governance or delegate that participation. I believe we need to strengthen this aspect.
The upside of attacking the DAO treasury is increasing (more ETH in the treasury), while the cost of attacking the DAO is not increasing proportionally to defend against attacks.
^This should be terrifying for anyone who cares about Arbitrum succeeding long term. The treasury grows, but the cost to capture it is rapidly going down. Something is drastically wrong here and Frisson has the right solution. Right now every ARB holder has to decide: participate in governance or participate in the economy of the network. We desperately need a way to combine these things. I think there are other avenues to pursue as well, such as custom vaults on lending, AMM, or CDP protocols like Open Dollar, where users can still delegate their tokens when they are deposited and take loans against delegated ARB.
That said, myself and the team at Open Dollar are strongly in favor of this proposal and the proposed timeline.
I would suggest the rewards math and calculations go through ARDC and be voted on separately from the rest of the process.
The long-awaited proposal, thanks! I think it should be possible to earn a commission regardless of the base commission. Let me explain: This creates a conflict of interest:
Also, I support JoJo’s questions (although point 3 is controversial, which could lead to all users going to one delegate, this needs to be discussed, but the impulse itself is true)
This is quite interesting, and exactly how I thought Uni should have approached the fee switch problem, which is: you get a yield if you delegate to an active party. I really love this proposal.
I have a few questions here, that could be idiotic but maybe are worth exploring:
This is quite interesting, and exactly how I thought Uni should have approached the fee switch problem, which is: you get a yield if you delegate to an active party. I really love this proposal.
I have a few questions here, that could be idiotic but maybe are worth exploring:
This is a very very interesting proposal thank you Frisson!
I really like the underlying goal of trying to fend off governance attacks, increase ARB utility, and encouraging active participation in governance. However, I see some problems...
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples. We see this in the perps landscape, with governance tokens that share revenue trading in line with the yield they generate. Even if we ignore the drastic decrease in DAO revenue since ArbOS Atlas 20 / 4844, $25M (50% of last years revenue, which is still overstating it because Base fees made up a significant portion of revenue over that period) on an $8B FDV token doesn't look great... I understand it's only on delegated ARB so it would look more attractive, but these dynamics will change quickly if there is yield attached to delegating tokens. If we do see price come down as a result of this proposal, it could actually make it cheaper to conduct a governance attack while also hurting the value of the DAO treasury.
Is it actually a good idea in practice to tie delegators/delegates yield to sequencer revenue? This could misalign incentives - fees will likely creep higher and higher over time as voters/governors/delegates look to increase their yield by increasing fees, which could lead to a worse UX and developer experience on Arbitrum.
We are about to "spend" half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
Are we sure the Karma score can't be gamed in any way? We need to be 100% sure on this one, as it will become an integral part of Arbitrum governance if implemented and is very novel in nature.
In general, DAO expenses are growing while revenue declines. We need non-native assets to weather a bear market to ensure we aren't forced into selling ARB at depressed prices.
I really like the underlying goal of trying to fend off governance attacks, increase ARB utility, and encouraging active participation in governance. However, I see some problems...
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples. We see this in the perps landscape, with governance tokens that share revenue trading in line with the yield they generate. Even if we ignore the drastic decrease in DAO revenue since ArbOS Atlas 20 / 4844, $25M (50% of last years revenue, which is still overstating it because Base fees made up a significant portion of revenue over that period) on an $8B FDV token doesn't look great... I understand it's only on delegated ARB so it would look more attractive, but these dynamics will change quickly if there is yield attached to delegating tokens. If we do see price come down as a result of this proposal, it could actually make it cheaper to conduct a governance attack while also hurting the value of the DAO treasury.
Is it actually a good idea in practice to tie delegators/delegates yield to sequencer revenue? This could misalign incentives - fees will likely creep higher and higher over time as voters/governors/delegates look to increase their yield by increasing fees, which could lead to a worse UX and developer experience on Arbitrum.
We are about to "spend" half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
Are we sure the Karma score can't be gamed in any way? We need to be 100% sure on this one, as it will become an integral part of Arbitrum governance if implemented and is very novel in nature.
In general, DAO expenses are growing while revenue declines. We need non-native assets to weather a bear market to ensure we aren't forced into selling ARB at depressed prices.
I think this proposal is just too ahead of its time. If we had $200M of stables and ETH in the treasury, I'd be all for this. However, I believe that Arbitrum is still too early in its growth stage to consider revenue share with token holders / delegators.
Thank you for your thoughtful analysis, @pedrob
I addressed a few relevant points in my response to Sam here: https://forum.arbitrum.foundation/t/arb-staking-use-surplus-fees-to-align-governance/25084/12?u=frisson
So, if we take that recent vote, the threshold someone would need to consider to attack the DAO is 213M $ARB (and I believe a realistic estimate would indicate that the value is higher, as in the event of an attack on the DAO, more $ARB that is usually not active in governance would likely vote).
Finally, I know this is not the main point, but I disagree with this narrative. I do agree that using the revenue to incentivize participation in governance is positive and will increase the security of the DAO. However, I disagree with the notion that there are no incentives to delegate the ARB token. In fact, the only incentive that exists today for holding it is to participate in governance or delegate that participation. I believe we need to strengthen this aspect.
I'm not sure I understand this point. Where does the current incentive to delegate come from? Delegating your ARB tokens does not come with any rewards that I'm aware of. On the other hand, it does take time (especially if you are doing it productively and pay some attention to what your delegate is doing).
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn’t prevent token holders from staking their tokens into “popular” ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
Thanks, Tane. We could certainly implement something like this in the UI layer on Tally. That's a great idea. An additional option would be to introduce smart contract mechanisms that amplify or reduce rewards based on voting power concentration, which I think could be powerful but are more complex to predict and get right.
I believe that if this system is to be an integral part helping secure Arbitrum’s governance, it is important that it is easily verifiable, secure and decentralised. Is it possible for me to easily recalculate Karma Scores locally in my own machine to ensure that rewards are being distributed according to the specification? This would require software. What oracle will be used to relay these scores to the staking system? Will there be some economic backing to this oracle? Will it be slashable? What if it goes offline?
To all delegates regardless of criteria? ie all addresses that have tokens delegated to them? I assume proportionally given the amount of tokens delegated?
Thanks for your thoughtful comments (as always) JoJo.
I personally haven't thought a lot about this yet. My first instinct is to say that, with the Delegate Incentives Program, it should be possible to hire folks to help with this. I feel like Treasure is doing a great job with this, for example.
I like this thought. I think there is a lot of opportunity to tweak the mechanism to optimize governance, especially after it has been on for awhile and we have some historical data to work with.
Thanks @Frisson for the proposal. We are very excited to have this discussion around potential solutions to tackle the lack of the delegated tokens even for one of the most active governance-equipped DAOs.
We are aware of some issues pointed out by other delegates, but overall, in favor of improving it to be a feasible proposal for the DAO to experiment on. The most important thing that we believe we should try is to introduce a mechanism aligned with the values, effective to work for the price appreciation and governance participation and hard to game on.
We are curious how we can avoid having centralized delegates get staked too much. Just relying on Karma Score over 80 wouldn't prevent token holders from staking their tokens into "popular" ones. For example, on popular explorers like Keplr for Cosmos DPoS, their UX suggests to avoid delegating tokens to Top X validators. Can we consider introducing such an improvement for more decentralization?
This opinion is solely my own and does not represent the views of SEEDGov, with whom I collaborate as an Advisor for LTIPP.
hey @Frisson thank you very much for the proposal. Overall, I like it and agree with the general principle that using DAO revenue to incentivize participation in governance is an excellent idea and should be implemented.
The problem I see, and I agree with all the points raised by @swmartin , is one of timing. It seems a bit premature, as the DAO is not yet mature and does not have a clear revenue flow to distribute.
I think it hits the mark in pointing out:
We are about to “spend” half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
As shown in the graph shared by Entropy, the revenue from the sequencer has dramatically declined since the approval of EIP-4844 (note that the spike at the end is due to the LZO airdrop):

At this moment, the DAO does not have a defined plan on how to spend the ARB and revenue to maintain a healthy treasury for the medium and long term. Therefore, I believe the DAO should stop approving large expenditures (in this case, 50% of the profit is being requested) until a treasury manager is appointed or a treasury management strategy is defined.
On the other hand,
The number of unique voters participating in the DAO has been steadily declining since DAO launch. As a result, it is becoming economically attractive to attack the DAO treasury.
Although it is true that the number of unique voters has declined, the amount of $ARB delegated for voting has remained stable. I don't say this is positive, as the supply has increased significantly in recent months, so the expectation would be that $ARB participating in governance should increase by the same percentage.
However, I disagree that it is urgent or that it has become “economically attractive” to attack the DAO's treasury. In the latest tally proposal, which was relatively controversial (due to heated last-minute discussions), 213M $ARB and approximately 15,900 addresses voted.
So, if we take that recent vote, the threshold someone would need to consider to attack the DAO is 213M $ARB (and I believe a realistic estimate would indicate that the value is higher, as in the event of an attack on the DAO, more $ARB that is usually not active in governance would likely vote).
What I mean by this: I agree with the proposed value and the idea of using sequencer revenue to encourage participation in governance. In the medium term, this should be something implemented. However, I don't think it is urgent, and the DAO is not yet mature enough to handle this expenditure.
Currently, there is no direct incentive to delegate ARB tokens. ARB staking introduces a direct incentive to stake and delegate.
Finally, I know this is not the main point, but I disagree with this narrative. I do agree that using the revenue to incentivize participation in governance is positive and will increase the security of the DAO. However, I disagree with the notion that there are no incentives to delegate the ARB token. In fact, the only incentive that exists today for holding it is to participate in governance or delegate that participation. I believe we need to strengthen this aspect.
The upside of attacking the DAO treasury is increasing (more ETH in the treasury), while the cost of attacking the DAO is not increasing proportionally to defend against attacks.
^This should be terrifying for anyone who cares about Arbitrum succeeding long term. The treasury grows, but the cost to capture it is rapidly going down. Something is drastically wrong here and Frisson has the right solution. Right now every ARB holder has to decide: participate in governance or participate in the economy of the network. We desperately need a way to combine these things. I think there are other avenues to pursue as well, such as custom vaults on lending, AMM, or CDP protocols like Open Dollar, where users can still delegate their tokens when they are deposited and take loans against delegated ARB.
That said, myself and the team at Open Dollar are strongly in favor of this proposal and the proposed timeline.
I would suggest the rewards math and calculations go through ARDC and be voted on separately from the rest of the process.
The long-awaited proposal, thanks! I think it should be possible to earn a commission regardless of the base commission. Let me explain: This creates a conflict of interest:
Also, I support JoJo’s questions (although point 3 is controversial, which could lead to all users going to one delegate, this needs to be discussed, but the impulse itself is true)
This is quite interesting, and exactly how I thought Uni should have approached the fee switch problem, which is: you get a yield if you delegate to an active party. I really love this proposal.
I have a few questions here, that could be idiotic but maybe are worth exploring:
This is quite interesting, and exactly how I thought Uni should have approached the fee switch problem, which is: you get a yield if you delegate to an active party. I really love this proposal.
I have a few questions here, that could be idiotic but maybe are worth exploring:
This is a very very interesting proposal thank you Frisson!
I really like the underlying goal of trying to fend off governance attacks, increase ARB utility, and encouraging active participation in governance. However, I see some problems...
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples. We see this in the perps landscape, with governance tokens that share revenue trading in line with the yield they generate. Even if we ignore the drastic decrease in DAO revenue since ArbOS Atlas 20 / 4844, $25M (50% of last years revenue, which is still overstating it because Base fees made up a significant portion of revenue over that period) on an $8B FDV token doesn't look great... I understand it's only on delegated ARB so it would look more attractive, but these dynamics will change quickly if there is yield attached to delegating tokens. If we do see price come down as a result of this proposal, it could actually make it cheaper to conduct a governance attack while also hurting the value of the DAO treasury.
Is it actually a good idea in practice to tie delegators/delegates yield to sequencer revenue? This could misalign incentives - fees will likely creep higher and higher over time as voters/governors/delegates look to increase their yield by increasing fees, which could lead to a worse UX and developer experience on Arbitrum.
We are about to "spend" half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
Are we sure the Karma score can't be gamed in any way? We need to be 100% sure on this one, as it will become an integral part of Arbitrum governance if implemented and is very novel in nature.
In general, DAO expenses are growing while revenue declines. We need non-native assets to weather a bear market to ensure we aren't forced into selling ARB at depressed prices.
I really like the underlying goal of trying to fend off governance attacks, increase ARB utility, and encouraging active participation in governance. However, I see some problems...
If we tie the token to insignificant revenue values, we introduce the risk of people valuing ARB relative to its revenue generation and could face compression of multiples. We see this in the perps landscape, with governance tokens that share revenue trading in line with the yield they generate. Even if we ignore the drastic decrease in DAO revenue since ArbOS Atlas 20 / 4844, $25M (50% of last years revenue, which is still overstating it because Base fees made up a significant portion of revenue over that period) on an $8B FDV token doesn't look great... I understand it's only on delegated ARB so it would look more attractive, but these dynamics will change quickly if there is yield attached to delegating tokens. If we do see price come down as a result of this proposal, it could actually make it cheaper to conduct a governance attack while also hurting the value of the DAO treasury.
Is it actually a good idea in practice to tie delegators/delegates yield to sequencer revenue? This could misalign incentives - fees will likely creep higher and higher over time as voters/governors/delegates look to increase their yield by increasing fees, which could lead to a worse UX and developer experience on Arbitrum.
We are about to "spend" half our ETH holdings on BoLD validator bootstrapping, which will also require a 4% yield on 3600 ETH bonds into perpetuity. Additionally, we need a treasury management program to generate passive yield on DAO holdings to achieve long term sustainability, and this proposal does the opposite. It continues to drain the DAO of its resources rather than build it up over time (Mantle is an example of an L2 that has done a superb job on this front).
Are we sure the Karma score can't be gamed in any way? We need to be 100% sure on this one, as it will become an integral part of Arbitrum governance if implemented and is very novel in nature.
In general, DAO expenses are growing while revenue declines. We need non-native assets to weather a bear market to ensure we aren't forced into selling ARB at depressed prices.
I think this proposal is just too ahead of its time. If we had $200M of stables and ETH in the treasury, I'd be all for this. However, I believe that Arbitrum is still too early in its growth stage to consider revenue share with token holders / delegators.