The DAO Arbitrum approves the ARB stake proposal

Share this article

Arbitrum DAO has adopted a temperature check proposal aimed at increasing the utility of the ARB token and enhancing governance security. The proposal received 91% approval from over 25,000 participants in a chain vote, signaling strong community support for the initiative.

The approved proposal will allow ARB token holders to stake and delegate their tokens in exchange for a liquid ARB token (stARB). This new token will represent their stake and allow for self-computation of future rewards, reset options, and compatibility with decentralized financial applications.

The stake mechanism and governance alignment

The implementation will use Tally’s liquid staking token system, which is based on Unistaker. The system will be customized to suit the governance architecture and fee collection mechanism of Arbitrum. Future surplus sequencing fees will be used to reward ARB token holders who actively stake and delegate their tokens to “active delegates”.

Active delegates will be defined using a Karma score, which combines instant voting statistics, chain voting statistics and forum activity. The DAO Arbitrum will have the power to adjust the Karma Score formula and set the minimum score required for delegates to be eligible for the reward stake.

Addressing token utility and security issues

Supporters argue that the move is necessary due to the ARB token’s poor performance in accumulating value, which they attribute primarily to governance issues. Currently, less than 1% of ARB tokens are actively used in the on-chain ecosystem, and voter participation has steadily declined since the inception of the DAO.

The proposal also seeks to prevent potential governance attacks by addressing concerns about the growing attractiveness of the Arbitrum treasury as a target. With over 16 million ETH in excess fees accrued from Arbitrum One and Nova, the risk of malicious actors attempting to launch governance attacks has increased.

To mitigate these risks, the staking system will return the voting power to the DAO if stARB is deposited in redo, DeFi, or centralized exchange smart contracts that do not maintain a 1:1 delegation relationship. Arbitrum DAO will have sole control over how this voting power is redistributed.

The proposal outlines a modular implementation that allows for future upgrades and integration with other potential Arbitrum staking systems. This flexibility ensures that the staking mechanism can evolve with the needs of the protocol.

Estimated implementation costs total $200,000 in ARB tokens, covering smart contract development, Tally.xyz integration, Karma score implementation, security audits, and funding for working groups focused on reward staking and delegation strategies.

This governance update is a significant step for Arbitrum in addressing the challenges of token utility and ecosystem participation. By encouraging active participation and delegation, the DAO aims to drive greater engagement, improve security, and align the interests of token holders with the long-term success of the protocol.

Earlier this month, the Arbitrum Foundation secured over 75% of the votes for a $215 million fund to support gaming projects on Arbitrum over three years through 225 million ARB tokens.

As Arbitrum maintains its position as one of the top Layer 2 solutions on Ethereum, with a total locked value exceeding $2 billion, this staking initiative could play a crucial role in supporting the growth of the network and ensuring its resilience against potential attacks.

Share this article