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…
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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.
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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.
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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).
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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.
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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.