This proposal outlines a sophisticated, multi-pronged strategy for the Arbitrum DAO to initiate a significant $ARB token buyback program. By partnering with a leading institutional asset manager, the DAO can execute this program funded through the issuance of innovative debt instruments, such as zero-coupon convertible bonds. This initiative is designed to not only reduce the circulating supply of $ARB and create sustained buying pressure but also to signal unwavering confidence in the long-term value of the Arbitrum ecosystem to the broader market.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion. While prudent diversification into yield-generating, real-world assets like U.S. Treasury bonds has commenced, a more dynamic and accretive use of capital is warranted to directly enhance the value proposition of the $ARB token.
This proposal advocates for a strategic pivot from passive treasury management to an active, value-enhancing strategy. By issuing convertible bonds, the Arbitrum DAO can raise capital efficiently, without immediate interest payment obligations, and deploy it to systematically acquire $ARB from the open market. This action will have a dual effect: demonstrably reducing the token's circulating supply and creating a powerful signal of institutional conviction in Arbitrum's future. This approach moves beyond simple buyback announcements, which have faced community scrutiny in the past for lacking imagination, and instead presents a structured, sophisticated financial maneuver befitting a market leader.
The core of this proposal lies in the issuance of zero-coupon convertible senior notes. Here's a breakdown of the process:
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
The Arbitrum ecosystem has reached a significant stage of maturity, accompanied by a substantial circulating supply of nearly 5 billion $ARB tokens. In this established environment, proactive and sophisticated capital management is no longer an option but a strategic necessity. The core question for the DAO is how to best deploy its considerable resources to directly enhance the fundamental value and long-term attractiveness of the $ARB token.
Addressing the Scale of Circulating Supply: With a large token float, the market can absorb significant selling pressure. A continuous, structured buyback program introduces a powerful and consistent source of buy-side demand. This acts as a stabilizing force, rewarding long-term holders and creating a more resilient token economy that is less susceptible to market volatility.
Evolving Beyond Passive Treasury Management: While initial steps to earn yield on treasury assets are prudent, the next evolutionary step is to use the treasury as an active tool for value creation. A buyback program directly impacts the core asset of the ecosystem, signaling that the DAO's primary focus is on strengthening the $ARB token itself, rather than solely generating external returns.
A Definitive Signal of Institutional Conviction: In the competitive landscape of Layer 2 solutions, perception and market confidence are paramount. Executing a debt-financed buyback is a decisive and sophisticated maneuver that mirrors the capital allocation strategies of the world's leading technology companies. It sends an unambiguous message to the entire market: the Arbitrum DAO, backed by institutional capital partners, has deep conviction in the network's future growth and undervaluation at current prices.
Cost-Efficient Capital for Maximum Impact: The use of zero-coupon convertible notes is an exceptionally efficient method of funding. It allows the DAO to secure capital for immediate, impactful buybacks without the recurring drain of interest payments. The cost of capital is intrinsically linked to the future success of Arbitrum, aligning the interests of the DAO, its token holders, and its new capital partners in a shared vision of long-term value appreciation.
The implementation of this proposal will yield a multitude of benefits for various stakeholders within the Arbitrum ecosystem:
| Stakeholder | Key Benefits |
|---|---|
| $ARB Holders | Increased token scarcity, potential for price appreciation, and enhanced long-term value proposition. |
| The Arbitrum DAO | More dynamic and efficient use of treasury assets, a powerful tool for managing tokenomics, and a strengthened governance position. |
| Developers & Users | A more stable and robust economic foundation for the ecosystem, fostering greater confidence and encouraging further development and adoption. |
| Institutional Investors | Access to innovative, crypto-native debt instruments with attractive risk-reward profiles, expanding the range of investable assets in the digital economy. |
By pioneering a sophisticated, debt-financed token buyback program, Arbitrum can once again demonstrate its leadership in the Layer 2 space. This initiative would set a new standard for DAOs in treasury management and tokenomic strategy, showcasing a commitment to financial innovation and long-term value creation.
The time for passive treasury management has passed. A proactive, strategic, and well-executed institutional buyback program funded by convertible bond issuance offers a clear path to fortifying the value of the $ARB token, optimizing the efficiency of the DAO's treasury, and signaling unwavering confidence to the market. This proposal provides the blueprint for a landmark initiative that will not only benefit all Arbitrum stakeholders but also solidify Arbitrum's position as a leader in the decentralized economy for years to come.
This proposal outlines a sophisticated, multi-pronged strategy for the Arbitrum DAO to initiate a significant $ARB token buyback program. By partnering with a leading institutional asset manager, the DAO can execute this program funded through the issuance of innovative debt instruments, such as zero-coupon convertible bonds. This initiative is designed to not only reduce the circulating supply of $ARB and create sustained buying pressure but also to signal unwavering confidence in the long-term value of the Arbitrum ecosystem to the broader market.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion. While prudent diversification into yield-generating, real-world assets like U.S. Treasury bonds has commenced, a more dynamic and accretive use of capital is warranted to directly enhance the value proposition of the $ARB token.
This proposal advocates for a strategic pivot from passive treasury management to an active, value-enhancing strategy. By issuing convertible bonds, the Arbitrum DAO can raise capital efficiently, without immediate interest payment obligations, and deploy it to systematically acquire $ARB from the open market. This action will have a dual effect: demonstrably reducing the token's circulating supply and creating a powerful signal of institutional conviction in Arbitrum's future. This approach moves beyond simple buyback announcements, which have faced community scrutiny in the past for lacking imagination, and instead presents a structured, sophisticated financial maneuver befitting a market leader.
The core of this proposal lies in the issuance of zero-coupon convertible senior notes. Here's a breakdown of the process:
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
The Arbitrum ecosystem has reached a significant stage of maturity, accompanied by a substantial circulating supply of nearly 5 billion $ARB tokens. In this established environment, proactive and sophisticated capital management is no longer an option but a strategic necessity. The core question for the DAO is how to best deploy its considerable resources to directly enhance the fundamental value and long-term attractiveness of the $ARB token.
Addressing the Scale of Circulating Supply: With a large token float, the market can absorb significant selling pressure. A continuous, structured buyback program introduces a powerful and consistent source of buy-side demand. This acts as a stabilizing force, rewarding long-term holders and creating a more resilient token economy that is less susceptible to market volatility.
Evolving Beyond Passive Treasury Management: While initial steps to earn yield on treasury assets are prudent, the next evolutionary step is to use the treasury as an active tool for value creation. A buyback program directly impacts the core asset of the ecosystem, signaling that the DAO's primary focus is on strengthening the $ARB token itself, rather than solely generating external returns.
A Definitive Signal of Institutional Conviction: In the competitive landscape of Layer 2 solutions, perception and market confidence are paramount. Executing a debt-financed buyback is a decisive and sophisticated maneuver that mirrors the capital allocation strategies of the world's leading technology companies. It sends an unambiguous message to the entire market: the Arbitrum DAO, backed by institutional capital partners, has deep conviction in the network's future growth and undervaluation at current prices.
Cost-Efficient Capital for Maximum Impact: The use of zero-coupon convertible notes is an exceptionally efficient method of funding. It allows the DAO to secure capital for immediate, impactful buybacks without the recurring drain of interest payments. The cost of capital is intrinsically linked to the future success of Arbitrum, aligning the interests of the DAO, its token holders, and its new capital partners in a shared vision of long-term value appreciation.
The implementation of this proposal will yield a multitude of benefits for various stakeholders within the Arbitrum ecosystem:
| Stakeholder | Key Benefits |
|---|---|
| $ARB Holders | Increased token scarcity, potential for price appreciation, and enhanced long-term value proposition. |
| The Arbitrum DAO | More dynamic and efficient use of treasury assets, a powerful tool for managing tokenomics, and a strengthened governance position. |
| Developers & Users | A more stable and robust economic foundation for the ecosystem, fostering greater confidence and encouraging further development and adoption. |
| Institutional Investors | Access to innovative, crypto-native debt instruments with attractive risk-reward profiles, expanding the range of investable assets in the digital economy. |
By pioneering a sophisticated, debt-financed token buyback program, Arbitrum can once again demonstrate its leadership in the Layer 2 space. This initiative would set a new standard for DAOs in treasury management and tokenomic strategy, showcasing a commitment to financial innovation and long-term value creation.
The time for passive treasury management has passed. A proactive, strategic, and well-executed institutional buyback program funded by convertible bond issuance offers a clear path to fortifying the value of the $ARB token, optimizing the efficiency of the DAO's treasury, and signaling unwavering confidence to the market. This proposal provides the blueprint for a landmark initiative that will not only benefit all Arbitrum stakeholders but also solidify Arbitrum's position as a leader in the decentralized economy for years to come.
While we discuss, competitors are taking action: Sonic DAO is attracting institutional investors
Colleagues, I want to draw your attention to an important precedent that directly relates to our discussion. While we are debating the need to attract institutional capital, the Sonic ecosystem is already taking concrete steps in this direction.
While we discuss, competitors are taking action: Sonic DAO is attracting institutional investors
Colleagues, I want to draw your attention to an important precedent that directly relates to our discussion. While we are debating the need to attract institutional capital, the Sonic ecosystem is already taking concrete steps in this direction.
Just the other day, their DAO approved a partnership with UTXO Management, a firm specializing in working with large-scale capital.
What does this mean for us?
This is a clear signal that the market is not standing still. Leading projects are actively seeking ways to integrate their treasuries with traditional financial markets. Sonic isn't just talking; they are allocating resources from their treasury to build the infrastructure for onboarding institutional investors.
This move by Sonic fully confirms the relevance of my proposal regarding the issuance of bonds to buy back ARB. Creating clear and structured financial instruments is precisely the language that large-scale capital understands.
The question we must ask ourselves is: Are we prepared to concede this initiative to our competitors?
Arbitrum is the leader in the L2 space with enormous potential. We have every opportunity to become pioneers in building a bridge between DeFi and TradFi at the DAO level. My proposal is a concrete, actionable step in this direction.
I urge the community to take another close look at the proposed mechanics and support this idea. Let's act proactively, not play catch-up.
What is the latest here? Learning to read and use the DAO as this is my first one.
Curious how we look to address the ARB token value deficiency. There have been historical proposals but I haven’t yet seen the updates on them!
I’ve asked this on other threads but didn’t get a response… Given governance alone may not sustain long-term demande, what are the DAO’s plans for real ARB utility? Staking is a strong start… Also, there are other use cases like using ARB for gas, fee burns, or revenue sharing? Could the DAO initiate proposals around these ideas?
This is not plagiarism. I am the author in both cases and am invested in the growth of my two favorite projects, AAVE and Arbitrum. I proposed a similar discussion in both DAOs because this approach can be applied to both projects. I slightly adjusted the wording to better suit each specific project, but does that really matter? What matters is the potential outcome of the proposed initiative and the benefits it would bring to the project and its token holders.
Token buyback strategies are used for BTC, SOL, and XRP, but that doesn’t mean the initiative is a bad one. Yes, the idea itself isn’t new, and I didn’t invent it. However, I want to propose that a token-buyback mechanism should also be used for ARB. I'm wholeheartedly in favor of the project and am convinced that it will only benefit from this approach.
Following our proposal to buy back $ARB tokens with the support of an institutional fund, the DAO community expressed interest in seeing evidence that the $ARB token is undervalued. To respond to the community’s request, our team conducted an in-depth study on the undervaluation of $ARB tokens, the results of which you can see below in our article “9 Advantages of Arbitrum Over Other Blockchains.”
Following our proposal to buy back $ARB tokens with the support of an institutional fund, the DAO community expressed interest in seeing evidence that the $ARB token is undervalued. To respond to the community’s request, our team conducted an in-depth study on the undervaluation of $ARB tokens, the results of which you can see below in our article “9 Advantages of Arbitrum Over Other Blockchains.”
Source: Data from DefiLama & Coingecko
TVL to Market Cap ratios for Arbitrum and other Layer-2 networks (higher indicates more TVL per unit of market cap). Arbitrum (blue) significantly outperforms the others.
Arbitrum holds much more money (TVL) on its network than other similar ones, but its token isn't as expensive.
Think of it this way:
This means that for every dollar of Arbitrum's market price, the network is actually holding $1.62 in value.
Compare this to its competitors:
Arbitrum's token ($ARB) is doing a lot more work for its price than other similar tokens. Even if you look at the total possible value of all tokens (fully diluted), Arbitrum still comes out on top.
This suggests that $ARB might be undervalued. Investors are currently paying less for the value stored on Arbitrum compared to other networks.
Source: Data from DefiLama & Coingecko
Moreover, when we expand our view to include all top blockchains by market cap, Arbitrum still stands out! None of the leading chains comes close to its 1.62 TVL-to-market-cap ratio, underscoring just how underappreciated $ARB remains even on a CMC-wide scale.
According to data from L2BEAT, Arbitrum’s closest competitor by TVL is Base. According to our analysis, when Base issues its token, its FDV could reach $30 B or even higher, significantly above Arbitrum’s current FDV of just $3 B.
Total value secured is calculated as the sum of canonically bridged tokens, externally bridged tokens, and native tokens.
Source: Data from L2BEAT
Arbitrum is nearing Stage 2 decentralization, a first for any L2, making it the most secure and mature L2 solution by industry standards. This transition significantly reduces risk for large institutions, assuring them of the network's security, stability, and censorship resistance.
When Arbitrum achieves Stage 2 status and also performs a big token buyback supported by major institutions, it will gain a huge competitive edge over other L2s, including BASE. This will clearly establish Arbitrum as the top choice for both its technology and its financial approach.
Arbitrum shows strong fundamental metrics regarding network activity.
Source: Data from Token Terminal
Arbitrum is very active, but its market value is surprisingly low at just $1.7 billion. It's much cheaper than other big names, and even valued similarly to some competitors, it actually uses more. This means the market might not fully see how good Arbitrum really is yet.
DEX Trading Volume (24h): Arbitrum demonstrates strong leadership in DEX trading volume, reaching around $931.9M per day, significantly outperforming major ecosystems like Sui ($704.8M), Avalanche ($675.4M), Aptos ($188.9M), Polygon ($187.8M), and Tron ($182.8M). This highlights the high level of activity and liquidity within Arbitrum’s DeFi ecosystem. High DEX volume is a strong indicator of genuine DeFi usage, as users are actively trading and investing on Arbitrum. (By contrast, raw transaction counts can be misleading – some chains inflate tx counts via airdrop farms or games – so DEX volume is a more reliable gauge of real activity.)
Source: Data from DefiLama
Importantly, the numbers show Arbitrum is used for real things, not just quick trades. Its high trading volume and large locked value mean people are really using it for lasting transactions and economic activity. As experts say, how much people trade on a blockchain shows how important it is for DeFi. Even though Arbitrum is one of the top five blockchains for daily trading, its market value is much lower – it's only ranked 58th, not even in the top 50.
The chart of the 24-hour DEXs Volume to Fully Diluted Valuation (FDV) ratio is a key indicator of capital efficiency and a token's real-world utility. It shows how much trading activity a token generates relative to its total potential value.
Source: Data from DefiLama & Coingecko
As seen on the chart, Arbitrum (ARB) shows an outstanding result, significantly outpacing all other tokens.
This high ratio for ARB is further compelling evidence that the Arbitrum ecosystem not only attracts significant liquidity but is also actively used for real economic activity. While other projects may have high valuations on paper, Arbitrum proves its value through real-world use and a high velocity of its token, which supports the thesis of its potential undervaluation by the market.
Arbitrum stands out as the most developer-efficient blockchain according to the DEV/MCAP ratio a metric that compares the number of active developers to the project’s market capitalization. With a ratio of 0.00000035117, Arbitrum ranks significantly higher than even major ecosystems like SUI, Solana (SOL), Ethereum (ETH), Hyperliquid (HYPE), and TRON (TRX).
Source: Data from Electric Capital Developer Report
This exceptional efficiency reflects not just the productivity of the Arbitrum ecosystem, but also how undervalued it may be relative to its builder activity.
Arbitrum’s large and active developer community shows that it’s a strong and trusted platform. Developers choose Arbitrum because it has real users, good growth, and lots of opportunities to build. The fact that thousands of developers contribute to Arbitrum shows confidence in the ecosystem. More developers mean more apps and tools, which brings in even more builders and users. Arbitrum has become a developer-friendly blockchain, and that helps it grow faster and stay strong in the long term.
Source: Data from Developer Report by Electric Capital
Full-time developer counts across leading blockchain ecosystems further highlight Arbitrum’s edge. Arbitrum boasts roughly 274 core (full-time) developers – the highest among the chains compared. This surpasses the full-time developer bases of other major platforms such as NEAR (~240), Optimism (~187), and Avalanche (~173), and dwarfs newer ecosystems (some have only ~10 core devs). Arbitrum’s ability to sustain the largest full-time developer team underscores its strong builder appeal and the depth of commitment within its ecosystem.
Data from DeFiLlama provides valuable insights into the distribution of decentralized finance (DeFi) protocols across various blockchain networks, covering both the broader blockchain landscape and the specific segment of Layer 2 (L2) solutions.
As of the latest available data, Arbitrum ranks as the #1 Layer 2 blockchain and #3 overall among all blockchains by the number of hosted DeFi protocols, with 830 active projects. This places Arbitrum among the top blockchain ecosystems, trailing in protocol count only behind industry giants Ethereum and BNB Smart Chain (BSC).
This high concentration of protocols reflects strong developer interest and confidence in Arbitrum’s infrastructure. The large number of active projects is a clear indicator of a vibrant and healthy ecosystem, reinforcing Arbitrum’s position as a leading platform for building decentralized applications.
Source: Data from DefiLama
To assess an ecosystem's efficiency at attracting developers relative to its market valuation, one can analyze the protocol count to FDV ratio. This metric shows how "cheaply" the market gets to support a large number of projects on the network.
Source: Data from DefiLama & Coingecko
And here, Arbitrum once again shows exceptional results. With a ratio of almost 1.85, ARB is significantly ahead of all competitors, including SONIC (≈1.3) and OP (≈1.0). This proves that Arbitrum not only has one of the largest numbers of protocols in absolute terms, but is also the most efficient platform at supporting them relative to its valuation, which again highlights its strong fundamental position.
In today's crypto market, old methods for raising capital aren't as effective as they used to be. This is where smart, new financial strategies come in. Top investment funds like Consensys, Electric Capital, Parafi, and Galaxy Digital have shown a brilliant way to overcome market fatigue and create incredible value. They developed and executed a plan that allowed them to achieve an effective valuation of $16,700 per ETH.
This isn't just a theory; it's a real-world case study that the Arbitrum DAO can adapt to attract $500 million to $5 billion in capital and drive massive growth for the $ARB ecosystem.
Instead of just relying on retail investors in a volatile market, these funds built a multi-step strategy to turn their ETH holdings into a high-growth stock market asset. You can think of it as creating a "MicroStrategy for Ethereum," and it serves as a perfect model for Arbitrum.
Here’s a simple breakdown of how this smart strategy worked:
This strategy is not about market manipulation; it’s about smart financial planning. It's a way to "package" the value of a digital asset into a format that traditional capital understands and wants: a stock in a public company.
How can the Arbitrum DAO do this?
The funds that did this with ETH proved that an asset's price on an exchange is only part of the story. With strategic thinking, you can build much greater value on top of it. They achieved a 6.3x multiplier on the effective value of their assets.
If the Arbitrum DAO adopts this idea, $ARB could see similar or even greater growth. This isn't just a way to increase the price; it's a fundamental step toward integrating Arbitrum into the global financial system, making $ARB a key asset in both the DeFi world and the portfolios of traditional investors. This is a bold idea, worthy of a forward-thinking community like Arbitrum.
The data presented unequivocally demonstrates that Arbitrum is a market leader whose fundamentals significantly outpace its current market valuation. Across all key metrics, Arbitrum shows clear superiority not only over other L2 solutions but also over many of the top blockchains. This gap between the ecosystem’s true strength and its market price represents a clear anomaly.
Whether it’s capital efficiency (TVL‑to‑Market‑Cap ratio), genuine economic activity (leading DEX Volume‑to‑FDV ratio), or the most robust developer and protocol ecosystem among L2s, Arbitrum consistently proves its superiority. While competitors are often valued higher on the strength of marketing, Arbitrum backs its value with real usage and sustained on‑chain activity.
This undervaluation is not a weakness but our greatest opportunity, making $ARB one of the most attractive assets with enormous growth potential. The proposed strategic plan, based on a proven Wall Street model, is the logical next step to close this valuation gap. Executing this plan will not only attract significant capital but also cement Arbitrum’s status as the undisputed industry leader it deserves to be.
For easier review of the analytics, you can view the report in PDF format "Quantitative Proof of Arbitrum Undervalued Token"
While we discuss, competitors are taking action: Sonic DAO is attracting institutional investors
Colleagues, I want to draw your attention to an important precedent that directly relates to our discussion. While we are debating the need to attract institutional capital, the Sonic ecosystem is already taking concrete steps in this direction.
While we discuss, competitors are taking action: Sonic DAO is attracting institutional investors
Colleagues, I want to draw your attention to an important precedent that directly relates to our discussion. While we are debating the need to attract institutional capital, the Sonic ecosystem is already taking concrete steps in this direction.
Just the other day, their DAO approved a partnership with UTXO Management, a firm specializing in working with large-scale capital.
What does this mean for us?
This is a clear signal that the market is not standing still. Leading projects are actively seeking ways to integrate their treasuries with traditional financial markets. Sonic isn't just talking; they are allocating resources from their treasury to build the infrastructure for onboarding institutional investors.
This move by Sonic fully confirms the relevance of my proposal regarding the issuance of bonds to buy back ARB. Creating clear and structured financial instruments is precisely the language that large-scale capital understands.
The question we must ask ourselves is: Are we prepared to concede this initiative to our competitors?
Arbitrum is the leader in the L2 space with enormous potential. We have every opportunity to become pioneers in building a bridge between DeFi and TradFi at the DAO level. My proposal is a concrete, actionable step in this direction.
I urge the community to take another close look at the proposed mechanics and support this idea. Let's act proactively, not play catch-up.
What is the latest here? Learning to read and use the DAO as this is my first one.
Curious how we look to address the ARB token value deficiency. There have been historical proposals but I haven’t yet seen the updates on them!
I’ve asked this on other threads but didn’t get a response… Given governance alone may not sustain long-term demande, what are the DAO’s plans for real ARB utility? Staking is a strong start… Also, there are other use cases like using ARB for gas, fee burns, or revenue sharing? Could the DAO initiate proposals around these ideas?
This is not plagiarism. I am the author in both cases and am invested in the growth of my two favorite projects, AAVE and Arbitrum. I proposed a similar discussion in both DAOs because this approach can be applied to both projects. I slightly adjusted the wording to better suit each specific project, but does that really matter? What matters is the potential outcome of the proposed initiative and the benefits it would bring to the project and its token holders.
Token buyback strategies are used for BTC, SOL, and XRP, but that doesn’t mean the initiative is a bad one. Yes, the idea itself isn’t new, and I didn’t invent it. However, I want to propose that a token-buyback mechanism should also be used for ARB. I'm wholeheartedly in favor of the project and am convinced that it will only benefit from this approach.
Following our proposal to buy back $ARB tokens with the support of an institutional fund, the DAO community expressed interest in seeing evidence that the $ARB token is undervalued. To respond to the community’s request, our team conducted an in-depth study on the undervaluation of $ARB tokens, the results of which you can see below in our article “9 Advantages of Arbitrum Over Other Blockchains.”
Following our proposal to buy back $ARB tokens with the support of an institutional fund, the DAO community expressed interest in seeing evidence that the $ARB token is undervalued. To respond to the community’s request, our team conducted an in-depth study on the undervaluation of $ARB tokens, the results of which you can see below in our article “9 Advantages of Arbitrum Over Other Blockchains.”
Source: Data from DefiLama & Coingecko
TVL to Market Cap ratios for Arbitrum and other Layer-2 networks (higher indicates more TVL per unit of market cap). Arbitrum (blue) significantly outperforms the others.
Arbitrum holds much more money (TVL) on its network than other similar ones, but its token isn't as expensive.
Think of it this way:
This means that for every dollar of Arbitrum's market price, the network is actually holding $1.62 in value.
Compare this to its competitors:
Arbitrum's token ($ARB) is doing a lot more work for its price than other similar tokens. Even if you look at the total possible value of all tokens (fully diluted), Arbitrum still comes out on top.
This suggests that $ARB might be undervalued. Investors are currently paying less for the value stored on Arbitrum compared to other networks.
Source: Data from DefiLama & Coingecko
Moreover, when we expand our view to include all top blockchains by market cap, Arbitrum still stands out! None of the leading chains comes close to its 1.62 TVL-to-market-cap ratio, underscoring just how underappreciated $ARB remains even on a CMC-wide scale.
According to data from L2BEAT, Arbitrum’s closest competitor by TVL is Base. According to our analysis, when Base issues its token, its FDV could reach $30 B or even higher, significantly above Arbitrum’s current FDV of just $3 B.
Total value secured is calculated as the sum of canonically bridged tokens, externally bridged tokens, and native tokens.
Source: Data from L2BEAT
Arbitrum is nearing Stage 2 decentralization, a first for any L2, making it the most secure and mature L2 solution by industry standards. This transition significantly reduces risk for large institutions, assuring them of the network's security, stability, and censorship resistance.
When Arbitrum achieves Stage 2 status and also performs a big token buyback supported by major institutions, it will gain a huge competitive edge over other L2s, including BASE. This will clearly establish Arbitrum as the top choice for both its technology and its financial approach.
Arbitrum shows strong fundamental metrics regarding network activity.
Source: Data from Token Terminal
Arbitrum is very active, but its market value is surprisingly low at just $1.7 billion. It's much cheaper than other big names, and even valued similarly to some competitors, it actually uses more. This means the market might not fully see how good Arbitrum really is yet.
DEX Trading Volume (24h): Arbitrum demonstrates strong leadership in DEX trading volume, reaching around $931.9M per day, significantly outperforming major ecosystems like Sui ($704.8M), Avalanche ($675.4M), Aptos ($188.9M), Polygon ($187.8M), and Tron ($182.8M). This highlights the high level of activity and liquidity within Arbitrum’s DeFi ecosystem. High DEX volume is a strong indicator of genuine DeFi usage, as users are actively trading and investing on Arbitrum. (By contrast, raw transaction counts can be misleading – some chains inflate tx counts via airdrop farms or games – so DEX volume is a more reliable gauge of real activity.)
Source: Data from DefiLama
Importantly, the numbers show Arbitrum is used for real things, not just quick trades. Its high trading volume and large locked value mean people are really using it for lasting transactions and economic activity. As experts say, how much people trade on a blockchain shows how important it is for DeFi. Even though Arbitrum is one of the top five blockchains for daily trading, its market value is much lower – it's only ranked 58th, not even in the top 50.
The chart of the 24-hour DEXs Volume to Fully Diluted Valuation (FDV) ratio is a key indicator of capital efficiency and a token's real-world utility. It shows how much trading activity a token generates relative to its total potential value.
Source: Data from DefiLama & Coingecko
As seen on the chart, Arbitrum (ARB) shows an outstanding result, significantly outpacing all other tokens.
This high ratio for ARB is further compelling evidence that the Arbitrum ecosystem not only attracts significant liquidity but is also actively used for real economic activity. While other projects may have high valuations on paper, Arbitrum proves its value through real-world use and a high velocity of its token, which supports the thesis of its potential undervaluation by the market.
Arbitrum stands out as the most developer-efficient blockchain according to the DEV/MCAP ratio a metric that compares the number of active developers to the project’s market capitalization. With a ratio of 0.00000035117, Arbitrum ranks significantly higher than even major ecosystems like SUI, Solana (SOL), Ethereum (ETH), Hyperliquid (HYPE), and TRON (TRX).
Source: Data from Electric Capital Developer Report
This exceptional efficiency reflects not just the productivity of the Arbitrum ecosystem, but also how undervalued it may be relative to its builder activity.
Arbitrum’s large and active developer community shows that it’s a strong and trusted platform. Developers choose Arbitrum because it has real users, good growth, and lots of opportunities to build. The fact that thousands of developers contribute to Arbitrum shows confidence in the ecosystem. More developers mean more apps and tools, which brings in even more builders and users. Arbitrum has become a developer-friendly blockchain, and that helps it grow faster and stay strong in the long term.
Source: Data from Developer Report by Electric Capital
Full-time developer counts across leading blockchain ecosystems further highlight Arbitrum’s edge. Arbitrum boasts roughly 274 core (full-time) developers – the highest among the chains compared. This surpasses the full-time developer bases of other major platforms such as NEAR (~240), Optimism (~187), and Avalanche (~173), and dwarfs newer ecosystems (some have only ~10 core devs). Arbitrum’s ability to sustain the largest full-time developer team underscores its strong builder appeal and the depth of commitment within its ecosystem.
Data from DeFiLlama provides valuable insights into the distribution of decentralized finance (DeFi) protocols across various blockchain networks, covering both the broader blockchain landscape and the specific segment of Layer 2 (L2) solutions.
As of the latest available data, Arbitrum ranks as the #1 Layer 2 blockchain and #3 overall among all blockchains by the number of hosted DeFi protocols, with 830 active projects. This places Arbitrum among the top blockchain ecosystems, trailing in protocol count only behind industry giants Ethereum and BNB Smart Chain (BSC).
This high concentration of protocols reflects strong developer interest and confidence in Arbitrum’s infrastructure. The large number of active projects is a clear indicator of a vibrant and healthy ecosystem, reinforcing Arbitrum’s position as a leading platform for building decentralized applications.
Source: Data from DefiLama
To assess an ecosystem's efficiency at attracting developers relative to its market valuation, one can analyze the protocol count to FDV ratio. This metric shows how "cheaply" the market gets to support a large number of projects on the network.
Source: Data from DefiLama & Coingecko
And here, Arbitrum once again shows exceptional results. With a ratio of almost 1.85, ARB is significantly ahead of all competitors, including SONIC (≈1.3) and OP (≈1.0). This proves that Arbitrum not only has one of the largest numbers of protocols in absolute terms, but is also the most efficient platform at supporting them relative to its valuation, which again highlights its strong fundamental position.
In today's crypto market, old methods for raising capital aren't as effective as they used to be. This is where smart, new financial strategies come in. Top investment funds like Consensys, Electric Capital, Parafi, and Galaxy Digital have shown a brilliant way to overcome market fatigue and create incredible value. They developed and executed a plan that allowed them to achieve an effective valuation of $16,700 per ETH.
This isn't just a theory; it's a real-world case study that the Arbitrum DAO can adapt to attract $500 million to $5 billion in capital and drive massive growth for the $ARB ecosystem.
Instead of just relying on retail investors in a volatile market, these funds built a multi-step strategy to turn their ETH holdings into a high-growth stock market asset. You can think of it as creating a "MicroStrategy for Ethereum," and it serves as a perfect model for Arbitrum.
Here’s a simple breakdown of how this smart strategy worked:
This strategy is not about market manipulation; it’s about smart financial planning. It's a way to "package" the value of a digital asset into a format that traditional capital understands and wants: a stock in a public company.
How can the Arbitrum DAO do this?
The funds that did this with ETH proved that an asset's price on an exchange is only part of the story. With strategic thinking, you can build much greater value on top of it. They achieved a 6.3x multiplier on the effective value of their assets.
If the Arbitrum DAO adopts this idea, $ARB could see similar or even greater growth. This isn't just a way to increase the price; it's a fundamental step toward integrating Arbitrum into the global financial system, making $ARB a key asset in both the DeFi world and the portfolios of traditional investors. This is a bold idea, worthy of a forward-thinking community like Arbitrum.
The data presented unequivocally demonstrates that Arbitrum is a market leader whose fundamentals significantly outpace its current market valuation. Across all key metrics, Arbitrum shows clear superiority not only over other L2 solutions but also over many of the top blockchains. This gap between the ecosystem’s true strength and its market price represents a clear anomaly.
Whether it’s capital efficiency (TVL‑to‑Market‑Cap ratio), genuine economic activity (leading DEX Volume‑to‑FDV ratio), or the most robust developer and protocol ecosystem among L2s, Arbitrum consistently proves its superiority. While competitors are often valued higher on the strength of marketing, Arbitrum backs its value with real usage and sustained on‑chain activity.
This undervaluation is not a weakness but our greatest opportunity, making $ARB one of the most attractive assets with enormous growth potential. The proposed strategic plan, based on a proven Wall Street model, is the logical next step to close this valuation gap. Executing this plan will not only attract significant capital but also cement Arbitrum’s status as the undisputed industry leader it deserves to be.
For easier review of the analytics, you can view the report in PDF format "Quantitative Proof of Arbitrum Undervalued Token"
Arnold from Lighthouse Labs. Great to see this conversation happening.
Chiming in here, as one of our focuses has been developing how a trustless bond marketplace could work for DAOs and would love feedback from the community.
We have a hackaton PoC, having recently graduated from the Uniswap Hooks Incubator and won a prize from the Arbitrum Foundation and UF.
In our system:
Arnold from Lighthouse Labs. Great to see this conversation happening.
Chiming in here, as one of our focuses has been developing how a trustless bond marketplace could work for DAOs and would love feedback from the community.
We have a hackaton PoC, having recently graduated from the Uniswap Hooks Incubator and won a prize from the Arbitrum Foundation and UF.
In our system:
This design enables:
Circling back to bond issuance:
We believe bonds can serve as a core DeFi primitive, potentially removing the need for buyback programs entirely.
Instead of selling ARB for stables, the DAO could issue bonds for grants and services that traditionally would warrant a lockup or stream.
We already have clear examples where the DAO needs to sell ARB to fund programs — creating significant sell pressure.
Payments expressed as bonds could offer immediate benefits:
Other thoughts:
Sorry to chime in with a soft sell, but we think there is a lot of overlap here. It's still very early days but would love gather thoughts from others so we can factor it into our design and thinking!
Thank you for taking the time to put together the proposal. There does not yet appear to be a proposal for delegates to vote on and instead it is kickstarting a discussion on the topic. With that in mind, we have moved this to the Governance Discussions category, to enable everyone to continue discussing it.
Arnold from Lighthouse Labs. Great to see this conversation happening.
Chiming in here, as one of our focuses has been developing how a trustless bond marketplace could work for DAOs and would love feedback from the community.
We have a hackaton PoC, having recently graduated from the Uniswap Hooks Incubator and won a prize from the Arbitrum Foundation and UF.
In our system:
Arnold from Lighthouse Labs. Great to see this conversation happening.
Chiming in here, as one of our focuses has been developing how a trustless bond marketplace could work for DAOs and would love feedback from the community.
We have a hackaton PoC, having recently graduated from the Uniswap Hooks Incubator and won a prize from the Arbitrum Foundation and UF.
In our system:
This design enables:
Circling back to bond issuance:
We believe bonds can serve as a core DeFi primitive, potentially removing the need for buyback programs entirely.
Instead of selling ARB for stables, the DAO could issue bonds for grants and services that traditionally would warrant a lockup or stream.
We already have clear examples where the DAO needs to sell ARB to fund programs — creating significant sell pressure.
Payments expressed as bonds could offer immediate benefits:
Other thoughts:
Sorry to chime in with a soft sell, but we think there is a lot of overlap here. It's still very early days but would love gather thoughts from others so we can factor it into our design and thinking!
Thank you for taking the time to put together the proposal. There does not yet appear to be a proposal for delegates to vote on and instead it is kickstarting a discussion on the topic. With that in mind, we have moved this to the Governance Discussions category, to enable everyone to continue discussing it.
Hi, this is Brook from TiD Research. This is a high-level discussion with many details still to be clarified, but I find the exploration quite compelling.
It wouldn’t make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
Hi, this is Brook from TiD Research. This is a high-level discussion with many details still to be clarified, but I find the exploration quite compelling.
It wouldn’t make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
Instead of framing this as a pure ARB buyback, we could view it as a mechanism to offset the persistent ARB sell pressure caused by DAO expenditures. According to the token flow report, the DAO has spent an average of 3.1M ARB per month (~1% of circulating supply) over the past six months—a meaningful amount.
However, I agree with @GFXlabs: if the DAO continues to sell ARB to raise stablecoins for expenses, borrowing stablecoins via bond issuance to then buy back ARB, only to sell it again later, is inefficient. A better approach would be to use stablecoins raised from the bond issuance to directly fund part of the DAO’s expenses , thereby reducing the need to sell ARB.
A better approach would be to begin capping what percentage of expenses may be paid with ARB.
One of the most important factors why Microstrategy can be so successful is that it provides those who are too conservative to hold BTC directly at the moment but still want to be exposed to the potential upside a risk-remote instrument to invest. The bond reduces the risk of capital loss, and the embedded written call option provides upside exposure.
I’m not sure if what you’re proposing would work the same way. Strategy raised funds to buy BTC using bonds that convert into MSTR stock. That creates buy pressure for BTC and eventual sell pressure for MSTR in the future, when bondholders convert their bonds into MSTR shares.
But in your proposal, we’d have both buy and sell pressure on the same asset, the ARB token. Initially, there would be buy pressure from acquiring ARB, but when the bonds mature, there could be a massive sell-off as bondholders dump ARB on the market.
Ideally, if we can really structure the bond to set coupon rate at 0%, we can use the fund raised to cover the DAO monthly spending and at maturity use the yields earned by TMC to repay. The arrangement might be able to reduce selling of ARB.
Overall I think this is a very meaningful discussion, but there's a lot to be confirmed.
Convertible Bond Terms & Option Design Would it be possible to share a set of example terms for the convertible bond? For instance:
Sizing & Buyback Schedule Is there a target issuance size under consideration? If the primary goal is to support the ARB price, one reasonable framing might be to offset ARB emissions (~180–200M ARB over 12–18 months). This could help define:
Underwriting & Demand Discovery
Not in favour
While I respect the effort to look at alternatives means for how the DAO manages its finances, at this moment this proposal probably just doesn't achieve any material goal.
Despite its relative size Arbitrum as a platform is still very much a startup with a need for reinvestment to continue scaling and adding debt to support buybacks doesn't feel the best way to allocate capital.
Okay, this is now a different proposal from what you wrote in your first post in this thread. The original post didn’t mention a publicly traded company being involved.
Okay, this is now a different proposal from what you wrote in your first post in this thread. The original post didn’t mention a publicly traded company being involved.
With this approach (via a public company), the whole treasury vehicle idea could potentially work. The main question is: is there enough TradFi interest in ARB? Because this company would need to raise TradFi money (e.g., through bonds) to buy ARB tokens.
Another issue is: who in the Arbitrum ecosystem could actually do this? The Arbitrum DAO itself is just a DAO, not a legal entity. The DAO recently launched a legal entity called OpCo to handle matters that require a legal structure, but OpCo isn’t operational yet. It’s still in the process of hiring its first employees, including the CEO and other executives.
That basically leaves us with two options for the kind of entity that could lead this process (not as the treasury vehicle itself, but to set it up): a) Offchain Labs, or b) a third party with strong TradFi reputation and experience.
Once such an entity steps forward and shows clear interest in creating a public treasury company for ARB, it could put forward a proposal to the Arbitrum DAO and request an initial (seed) allocation of ARB tokens for the treasury company.
So the main challenge here isn’t convincing the DAO to allocate ARB tokens (that’s actually the easy part). The real challenge is finding an entity willing and able to spearhead the process of launching and running an ARB treasury vehicle as a publicly traded company.
Thank you for the thorough analysis. I believe the core issue in the comparison is the use of the ARB token — currently, it has no utility:
This is copy pasta. There is literally exactly the same proposal posted on the Aave DAO forum.
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
Good point regarding buying and selling pressure.
It might be worth adding a token buyback mechanism to this strategy in case the ARB price drops, for example, more than 10% below the bond sale price. We could also consider how much to allocate for the buyback — the full amount raised from the bond issuance, or a fixed amount of ARB. In the latter case, any leftover USDC could be returned to the treasury and the ATMC accordingly.
Good point regarding buying and selling pressure.
It might be worth adding a token buyback mechanism to this strategy in case the ARB price drops, for example, more than 10% below the bond sale price. We could also consider how much to allocate for the buyback — the full amount raised from the bond issuance, or a fixed amount of ARB. In the latter case, any leftover USDC could be returned to the treasury and the ATMC accordingly.
This way, we would ensure at least a 10% profit margin for the strategy in the event of a price decline.
This interesting and creative proposal demonstrates a growing sophistication in how DAOs might think about capital structure and treasury strategy.
That said, we believe that buybacks should not be pursued in isolation, but rather as part of a broader financial strategy. Specifically, we recommend that the DAO first engage in comprehensive financial planning to evaluate whether there is room for buybacks. This is especially important in Arbitrum's case, given that revenues are generated solely from ETH-denominated transaction fees. While efforts to diversify into non-operating revenues are underway via the Treasury Management Council (TMC), the committed amounts are still too small to be impactful. Additionally, expenses continue to be denominated in ARB, underscoring the need for a holistic approach.
We are not ready to support the buyback today. Like @GFXlabs, @Michigan_Blockchain, @cp0x, @karpatkey and @BlockworksResearch, we need evidence that ARB is undervalued, a full cost schedule, and a clear plan showing how debt service, bond liquidity and possible sell pressure at conversion fit within the Treasury Management Committee mandate and the DAO’s monthly outflow of about 3.1 million ARB. We also ask for a competitive request for proposals to choose underwriters, a public framework for bond size and pacing, and draft terms that spell out conversion price, dilution impact and safeguards if market price falls below the issue price. MicroStrategy’s February 2025 raise shows debt-funded buybacks are feasible only when predictable revenue exists in a different asset, underscoring the need for cash-flow planning here. Unless these details are provided we will vote AGAINST, but we will revisit our stance if a revised proposal answers these questions.
It wouldn't make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
A better approach would be to begin capping what percentage of expenses may be paid with ARB. Perhaps start with 90-95% and ratchet that down on a pre-determined schedule over time. Other financing sources -- interest on the stable assets and sequencer ETH -- are available to fill that gap. And it's always possible a third or fourth source of revenue materializes as well.
We tend to agree with GFX here in that a buyback doesn't make a lot of sense with the way ARB is used today. In fact, it would require the DAO to do serious rethinking of how ARB is issued and form a stricter policy around financing, i.e., limiting ARB dilution and selling sequencer ETH instead, quarterly budgeting, etc.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion.
Hi, this is Brook from TiD Research. This is a high-level discussion with many details still to be clarified, but I find the exploration quite compelling.
It wouldn’t make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
Hi, this is Brook from TiD Research. This is a high-level discussion with many details still to be clarified, but I find the exploration quite compelling.
It wouldn’t make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
Instead of framing this as a pure ARB buyback, we could view it as a mechanism to offset the persistent ARB sell pressure caused by DAO expenditures. According to the token flow report, the DAO has spent an average of 3.1M ARB per month (~1% of circulating supply) over the past six months—a meaningful amount.
However, I agree with @GFXlabs: if the DAO continues to sell ARB to raise stablecoins for expenses, borrowing stablecoins via bond issuance to then buy back ARB, only to sell it again later, is inefficient. A better approach would be to use stablecoins raised from the bond issuance to directly fund part of the DAO’s expenses , thereby reducing the need to sell ARB.
A better approach would be to begin capping what percentage of expenses may be paid with ARB.
One of the most important factors why Microstrategy can be so successful is that it provides those who are too conservative to hold BTC directly at the moment but still want to be exposed to the potential upside a risk-remote instrument to invest. The bond reduces the risk of capital loss, and the embedded written call option provides upside exposure.
I’m not sure if what you’re proposing would work the same way. Strategy raised funds to buy BTC using bonds that convert into MSTR stock. That creates buy pressure for BTC and eventual sell pressure for MSTR in the future, when bondholders convert their bonds into MSTR shares.
But in your proposal, we’d have both buy and sell pressure on the same asset, the ARB token. Initially, there would be buy pressure from acquiring ARB, but when the bonds mature, there could be a massive sell-off as bondholders dump ARB on the market.
Ideally, if we can really structure the bond to set coupon rate at 0%, we can use the fund raised to cover the DAO monthly spending and at maturity use the yields earned by TMC to repay. The arrangement might be able to reduce selling of ARB.
Overall I think this is a very meaningful discussion, but there's a lot to be confirmed.
Convertible Bond Terms & Option Design Would it be possible to share a set of example terms for the convertible bond? For instance:
Sizing & Buyback Schedule Is there a target issuance size under consideration? If the primary goal is to support the ARB price, one reasonable framing might be to offset ARB emissions (~180–200M ARB over 12–18 months). This could help define:
Underwriting & Demand Discovery
Not in favour
While I respect the effort to look at alternatives means for how the DAO manages its finances, at this moment this proposal probably just doesn't achieve any material goal.
Despite its relative size Arbitrum as a platform is still very much a startup with a need for reinvestment to continue scaling and adding debt to support buybacks doesn't feel the best way to allocate capital.
Okay, this is now a different proposal from what you wrote in your first post in this thread. The original post didn’t mention a publicly traded company being involved.
Okay, this is now a different proposal from what you wrote in your first post in this thread. The original post didn’t mention a publicly traded company being involved.
With this approach (via a public company), the whole treasury vehicle idea could potentially work. The main question is: is there enough TradFi interest in ARB? Because this company would need to raise TradFi money (e.g., through bonds) to buy ARB tokens.
Another issue is: who in the Arbitrum ecosystem could actually do this? The Arbitrum DAO itself is just a DAO, not a legal entity. The DAO recently launched a legal entity called OpCo to handle matters that require a legal structure, but OpCo isn’t operational yet. It’s still in the process of hiring its first employees, including the CEO and other executives.
That basically leaves us with two options for the kind of entity that could lead this process (not as the treasury vehicle itself, but to set it up): a) Offchain Labs, or b) a third party with strong TradFi reputation and experience.
Once such an entity steps forward and shows clear interest in creating a public treasury company for ARB, it could put forward a proposal to the Arbitrum DAO and request an initial (seed) allocation of ARB tokens for the treasury company.
So the main challenge here isn’t convincing the DAO to allocate ARB tokens (that’s actually the easy part). The real challenge is finding an entity willing and able to spearhead the process of launching and running an ARB treasury vehicle as a publicly traded company.
Thank you for the thorough analysis. I believe the core issue in the comparison is the use of the ARB token — currently, it has no utility:
This is copy pasta. There is literally exactly the same proposal posted on the Aave DAO forum.
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
Good point regarding buying and selling pressure.
It might be worth adding a token buyback mechanism to this strategy in case the ARB price drops, for example, more than 10% below the bond sale price. We could also consider how much to allocate for the buyback — the full amount raised from the bond issuance, or a fixed amount of ARB. In the latter case, any leftover USDC could be returned to the treasury and the ATMC accordingly.
Good point regarding buying and selling pressure.
It might be worth adding a token buyback mechanism to this strategy in case the ARB price drops, for example, more than 10% below the bond sale price. We could also consider how much to allocate for the buyback — the full amount raised from the bond issuance, or a fixed amount of ARB. In the latter case, any leftover USDC could be returned to the treasury and the ATMC accordingly.
This way, we would ensure at least a 10% profit margin for the strategy in the event of a price decline.
This interesting and creative proposal demonstrates a growing sophistication in how DAOs might think about capital structure and treasury strategy.
That said, we believe that buybacks should not be pursued in isolation, but rather as part of a broader financial strategy. Specifically, we recommend that the DAO first engage in comprehensive financial planning to evaluate whether there is room for buybacks. This is especially important in Arbitrum's case, given that revenues are generated solely from ETH-denominated transaction fees. While efforts to diversify into non-operating revenues are underway via the Treasury Management Council (TMC), the committed amounts are still too small to be impactful. Additionally, expenses continue to be denominated in ARB, underscoring the need for a holistic approach.
We are not ready to support the buyback today. Like @GFXlabs, @Michigan_Blockchain, @cp0x, @karpatkey and @BlockworksResearch, we need evidence that ARB is undervalued, a full cost schedule, and a clear plan showing how debt service, bond liquidity and possible sell pressure at conversion fit within the Treasury Management Committee mandate and the DAO’s monthly outflow of about 3.1 million ARB. We also ask for a competitive request for proposals to choose underwriters, a public framework for bond size and pacing, and draft terms that spell out conversion price, dilution impact and safeguards if market price falls below the issue price. MicroStrategy’s February 2025 raise shows debt-funded buybacks are feasible only when predictable revenue exists in a different asset, underscoring the need for cash-flow planning here. Unless these details are provided we will vote AGAINST, but we will revisit our stance if a revised proposal answers these questions.
It wouldn't make a ton of sense to do a buyback when ARB is still used as the primary method of financing DAO activities.
A better approach would be to begin capping what percentage of expenses may be paid with ARB. Perhaps start with 90-95% and ratchet that down on a pre-determined schedule over time. Other financing sources -- interest on the stable assets and sequencer ETH -- are available to fill that gap. And it's always possible a third or fourth source of revenue materializes as well.
We tend to agree with GFX here in that a buyback doesn't make a lot of sense with the way ARB is used today. In fact, it would require the DAO to do serious rethinking of how ARB is issued and form a stricter policy around financing, i.e., limiting ARB dilution and selling sequencer ETH instead, quarterly budgeting, etc.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion.
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
I'm not sure if what you're proposing would work the same way. Strategy raised funds to buy BTC using bonds that convert into MSTR stock. That creates buy pressure for BTC and eventual sell pressure for MSTR in the future, when bondholders convert their bonds into MSTR shares.
But in your proposal, we'd have both buy and sell pressure on the same asset, the ARB token. Initially, there would be buy pressure from acquiring ARB, but when the bonds mature, there could be a massive sell-off as bondholders dump ARB on the market.
It feels too risky to me, and I don't see how it brings real value to the Arbitrum network. It seems more like a pump-and-dump scheme, just spread out over a longer timeframe.
This interesting and creative proposal demonstrates a growing sophistication in how DAOs might think about capital structure and treasury strategy.
That said, we believe that buybacks should not be pursued in isolation, but rather as part of a broader financial strategy. Specifically, we recommend that the DAO first engage in comprehensive financial planning to evaluate whether there is room for buybacks. This is especially important in Arbitrum's case, given that revenues are generated solely from ETH-denominated transaction fees. While efforts to diversify into non-operating revenues are underway via the Treasury Management Council (TMC), the committed amounts are still too small to be impactful. Additionally, expenses continue to be denominated in ARB, underscoring the need for a holistic approach.
In our view, this initiative should fall under the purview of the Arbitrum Treasury Management Committee and, if approved, be executed under the oversight of Entropy Advisors as part of the consolidated treasury program. Buybacks, revenues, and expenses are fundamentally interlinked and should be coordinated through a unified governance and execution framework to ensure strategic alignment and accountability.
As kpk, we’ve executed buyback programs for multiple DAOs and are very familiar with the opportunities and risks involved. From experience, it’s critical that such programs are designed with the DAO’s long-term financial sustainability in mind, particularly when future revenue streams are still nascent or volatile.
Lastly, we share @cp0x’s interest in better understanding the mechanics of the proposed plan, and would like to echo the following important questions:
We tend to agree with GFX here in that a buyback doesn't make a lot of sense with the way ARB is used today. In fact, it would require the DAO to do serious rethinking of how ARB is issued and form a stricter policy around financing, i.e., limiting ARB dilution and selling sequencer ETH instead, quarterly budgeting, etc.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion.
This is a falsehood. Does the DAO hold assets that are currently valued at $1.3B? Sure, but this changes substantially as they are issued out. It would be more apt to treat these as unissued shares like in a traditional company. It's very similar actually, these tokens are in private circulation, have no active governance rights, and can dilute existing token holders, and while this may be reductive the similarities remain.
Also, it seems like a false equivalence to recycle the MicroStrategy structure, use it for Arbitrum DAO, and call it a day like we've solved DAO-token-equity relationship. What worked for MicroStrategy won't necessarily work for Arbitrum, and in fact we'd say it is less likely to work for Arbitrum. As others have said Strategy has a bit of a cyclical relationship with BTC. This would be extremely unbalanced for Arbitrum because we finance with ARB so we would likely always have more sell pressure than buy pressure unless a strict financial plan is in place. Honestly, we'd need the DAO to first nail:
I have many questions, especially since I’ve been thinking about a buyback program and how it could be implemented. You're proposing a different approach that doesn't require free capital in the treasury for execution — that’s a major advantage.
We are not entirely opposed to this proposal, but we have several questions and concerns:
We are unsure whether an ARB buyback program demonstrates confidence. On one hand, if the DAO believes ARB is undervalued, then a buyback program has the potential to realize its intrinsic value while signaling to the broader industry that we believe in the token. While the DAO (ourselves very much included) is generally bullish on ARB and its potential, is there consensus at this moment that the token is undervalued? We would need to see research to that effect before determining that not only is ARB undervalued, but it is so undervalued that we must engage in price manipulation in order for it to realize its intrinsic value.
We want clarity on what will occur procedurally if this proposal passes: a.) Will the DAO commit to the program before finding a capital partner? b.) Will the costs be presented only after the proposal is passed?
We are not entirely opposed to this proposal, but we have several questions and concerns:
We are unsure whether an ARB buyback program demonstrates confidence. On one hand, if the DAO believes ARB is undervalued, then a buyback program has the potential to realize its intrinsic value while signaling to the broader industry that we believe in the token. While the DAO (ourselves very much included) is generally bullish on ARB and its potential, is there consensus at this moment that the token is undervalued? We would need to see research to that effect before determining that not only is ARB undervalued, but it is so undervalued that we must engage in price manipulation in order for it to realize its intrinsic value.
We want clarity on what will occur procedurally if this proposal passes: a.) Will the DAO commit to the program before finding a capital partner? b.) Will the costs be presented only after the proposal is passed?
These are critical questions that should be decided (or at least discussed) prior to voting on the proposal.
To summarize, we are not necessarily opposed to this proposal. But before giving our support, we would like to see research indicating that ARB is currently underpriced, a plan for how this buyback program will work (list of potential capital partners, costs, etc.) and discussions about the precedent this sets for price manipulation as a tool for ARB.
With that being said, this is an interesting proposal, and we are intrigued by the proposition of merging traditional finance with DeFi.
Michigan Blockchain | Jack Verrill | TG @JackVerrill
This model is inspired by Strategy (formerly MicroStrategy), which in February 2025 raised $1.99 billion via zero-coupon convertible notes to acquire 20,356 BTC - boosting market confidence through transparent, debt-backed purchases.
I'm not sure if what you're proposing would work the same way. Strategy raised funds to buy BTC using bonds that convert into MSTR stock. That creates buy pressure for BTC and eventual sell pressure for MSTR in the future, when bondholders convert their bonds into MSTR shares.
But in your proposal, we'd have both buy and sell pressure on the same asset, the ARB token. Initially, there would be buy pressure from acquiring ARB, but when the bonds mature, there could be a massive sell-off as bondholders dump ARB on the market.
It feels too risky to me, and I don't see how it brings real value to the Arbitrum network. It seems more like a pump-and-dump scheme, just spread out over a longer timeframe.
This interesting and creative proposal demonstrates a growing sophistication in how DAOs might think about capital structure and treasury strategy.
That said, we believe that buybacks should not be pursued in isolation, but rather as part of a broader financial strategy. Specifically, we recommend that the DAO first engage in comprehensive financial planning to evaluate whether there is room for buybacks. This is especially important in Arbitrum's case, given that revenues are generated solely from ETH-denominated transaction fees. While efforts to diversify into non-operating revenues are underway via the Treasury Management Council (TMC), the committed amounts are still too small to be impactful. Additionally, expenses continue to be denominated in ARB, underscoring the need for a holistic approach.
In our view, this initiative should fall under the purview of the Arbitrum Treasury Management Committee and, if approved, be executed under the oversight of Entropy Advisors as part of the consolidated treasury program. Buybacks, revenues, and expenses are fundamentally interlinked and should be coordinated through a unified governance and execution framework to ensure strategic alignment and accountability.
As kpk, we’ve executed buyback programs for multiple DAOs and are very familiar with the opportunities and risks involved. From experience, it’s critical that such programs are designed with the DAO’s long-term financial sustainability in mind, particularly when future revenue streams are still nascent or volatile.
Lastly, we share @cp0x’s interest in better understanding the mechanics of the proposed plan, and would like to echo the following important questions:
We tend to agree with GFX here in that a buyback doesn't make a lot of sense with the way ARB is used today. In fact, it would require the DAO to do serious rethinking of how ARB is issued and form a stricter policy around financing, i.e., limiting ARB dilution and selling sequencer ETH instead, quarterly budgeting, etc.
The Arbitrum DAO currently oversees a substantial treasury, with assets recently reported to exceed $1.3 billion.
This is a falsehood. Does the DAO hold assets that are currently valued at $1.3B? Sure, but this changes substantially as they are issued out. It would be more apt to treat these as unissued shares like in a traditional company. It's very similar actually, these tokens are in private circulation, have no active governance rights, and can dilute existing token holders, and while this may be reductive the similarities remain.
Also, it seems like a false equivalence to recycle the MicroStrategy structure, use it for Arbitrum DAO, and call it a day like we've solved DAO-token-equity relationship. What worked for MicroStrategy won't necessarily work for Arbitrum, and in fact we'd say it is less likely to work for Arbitrum. As others have said Strategy has a bit of a cyclical relationship with BTC. This would be extremely unbalanced for Arbitrum because we finance with ARB so we would likely always have more sell pressure than buy pressure unless a strict financial plan is in place. Honestly, we'd need the DAO to first nail:
I have many questions, especially since I’ve been thinking about a buyback program and how it could be implemented. You're proposing a different approach that doesn't require free capital in the treasury for execution — that’s a major advantage.
We are not entirely opposed to this proposal, but we have several questions and concerns:
We are unsure whether an ARB buyback program demonstrates confidence. On one hand, if the DAO believes ARB is undervalued, then a buyback program has the potential to realize its intrinsic value while signaling to the broader industry that we believe in the token. While the DAO (ourselves very much included) is generally bullish on ARB and its potential, is there consensus at this moment that the token is undervalued? We would need to see research to that effect before determining that not only is ARB undervalued, but it is so undervalued that we must engage in price manipulation in order for it to realize its intrinsic value.
We want clarity on what will occur procedurally if this proposal passes: a.) Will the DAO commit to the program before finding a capital partner? b.) Will the costs be presented only after the proposal is passed?
We are not entirely opposed to this proposal, but we have several questions and concerns:
We are unsure whether an ARB buyback program demonstrates confidence. On one hand, if the DAO believes ARB is undervalued, then a buyback program has the potential to realize its intrinsic value while signaling to the broader industry that we believe in the token. While the DAO (ourselves very much included) is generally bullish on ARB and its potential, is there consensus at this moment that the token is undervalued? We would need to see research to that effect before determining that not only is ARB undervalued, but it is so undervalued that we must engage in price manipulation in order for it to realize its intrinsic value.
We want clarity on what will occur procedurally if this proposal passes: a.) Will the DAO commit to the program before finding a capital partner? b.) Will the costs be presented only after the proposal is passed?
These are critical questions that should be decided (or at least discussed) prior to voting on the proposal.
To summarize, we are not necessarily opposed to this proposal. But before giving our support, we would like to see research indicating that ARB is currently underpriced, a plan for how this buyback program will work (list of potential capital partners, costs, etc.) and discussions about the precedent this sets for price manipulation as a tool for ARB.
With that being said, this is an interesting proposal, and we are intrigued by the proposition of merging traditional finance with DeFi.
Michigan Blockchain | Jack Verrill | TG @JackVerrill
