Frission, an ARB delegate, has come up with a new proposal that will allocate 50% of surplus sequencer fees to ARB holders who participate in staking and delegating ARB tokens. The new proposal aims to encourage ARB holders to participate more actively in governance.
The goal of the proposal is to improve the security of the Abitrum DAO treasury, which has accumulated a large amount of ETH. As of June 21, the treasury has accumulated $50 million worth of ETH, according to Frission.
Frission also notes that the DAO treasury is becoming vulnerable to attack due to the low active participation and declining voter engagement. Only 10% of ARB tokens in circulation are being used for voting on proposals while the number of people actually voting has been consistently dropping since the DAO launched.
Pushing Engagement
With the new proposal, Frission expects to encourage ARB holders to participate more actively in governance. The solution aims to implement an ARB staking mechanism where users who stake and delegate their tokens earn rewards from surplus sequencer fees.
Specifically, 50% of future surplus sequencer fees will be allocated to stakers, estimated at a 7% annual reward rate. An additional 1% of surplus fees will be distributed proportionally to delegates based on their Karma Score.
As noted, the change will only apply to future fees generated by the network; the current ETH reserves in the treasury will not be affected.
In addition to redirecting a portion of future network fees to compensate stakers, the new proposal also seeks to incorporate Tally’s liquid staking token system to maintain the liquidity of staked tokens.
The new proposal will request a one-time retroactive payment of 100,000 ARB to cover development costs. If approved, a snapshot temperature check will start in July with developments in place. The target launch is in December.
The new proposal follows a separate proposal last year, which Arbitrum DAO suggested to use funds from the Arbitrum treasury to reward staking.
At the time of writing, ARB is trading at around $0.81, up 3% in the last 24 hours, per CoinGecko’s data. The token experienced a flash dump yesterday, similar to other tokens as bearish momentum took charge Bitcoin plunged below $59,000 on Monday, currently trading at around $60,000.
Community Controversy
Arbitrum DAO recently faced community backlash over its proposed Gaming Catalyst Program (GCP). Proposed in May, the GCP sought to allocate 225 million ARB, worth around $250 million at the time, to the growth of Web3 gaming on the Arbitrum ecosystem over three years.
The GCP aims to increase the number of game developers using Arbitrum technologies, attract and retain talent, expand the use cases of Arbitrum, and support the development of high-quality, long-term vision games.
The huge budget, however, raised concerns among community members. Many questioned the necessity of such a high allocation. The community raised concerns about the allocation of 25 million ARB for operational expenses, which was increased from 10 million ARB in the initial proposal.
Some critics argue that the total fund size of 225 million ARB is excessive, particularly considering the current state of Web3 gaming. Moreover, concerns were also raised about the quality of existing Web3 games. The proposed large investment may not be justified, according to some community members.
Despite controversy, the proposal was approved with 76% of votes in favor of the proposal earlier this month.
“Arbitrum is the home of gaming – this includes all of the games, the gaming chains, and all of the builders within its orbit,” Treasure DAO commented on the approval.
According to the voting results, a number of major entities supported the proposal, including L2beat, Wintermute, and Treasure DAO. On the other hand, Blockworks Research and Camelot DAO opposed the proposal.
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