Arbitrum DAO may dip into $3.9B treasury, approves staking

Arbitrum is slated to distribute more than $100 million in its native ARB token to anyone willing to to lock their tokens with the protocol’s DAO. 

The staking mechanism passed a governance vote early Monday morning. Supporters say the payouts will put Arbitrum’s inflated treasury to use by rewarding long-term token holders. However, detractors argued that high yield would create sell pressure, and the staking proposal could make ARB appear to be a security.

Under the proposal, users will receive greater returns the longer they keep their tokens held by Arbitrum DAO. The maximum locking length will be one year.

Arbitrum DAO’s “timelock” staking differs from proof of stake network staking in that the funds committed are not utilized for network security purposes.

In the proposal, Plutus makes the case that Arbitrum’s treasury — the largest among all DAOs at $3.9 billion and denominated mainly in ARB, according to DeepDAO — should be shared with ARB holders. And Arbitrum would benefit in the long run from token sharing, Plutus argues.

Staking would “[r]eward long-term aligned stakers with yield while penalizing mercenary capital and short-term actors,” Plutus wrote.

But not everyone in the Arbitrum community is bullish on staking in its current form. Several forum posters expressed qualms that issuing ARB from the treasury would create sell pressure on the token. Others had regulatory concerns.

“[M]y main concern is that it could open the doors for regulators to potentially question if Arbitrum’s staking could be an investment contract and therefore a security,” the pseudonymous Cattin from SEED Latam, which voted against the proposal, told Blockworks in a Telegram message.

The DAO now awaits a second proposal concerning implementation of the staking program. 

A plurality of support went to spending 100 million ARB on staking, worth around $111 million at the time of publication. ARB’s price has risen over 40% since nearly matching its all-time low on Oct. 20.

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