In addition to many of these comments, we’re overall in favor, but also have some questions that we think inevitably need to be worked out over the next few months.
How are we going to set up our legal policy and portrayal going forward. Is there anything we should and shouldn’t market this as to make it legally better?
Overall, the tech comments for implementation are something we think need a little more hashing out, but excited to see this hopefully move forward!
Gauntlet views this proposal as a progressive step toward increasing future optionality in the development of ARB utility and the potential for revenue sharing within the Arbitrum ecosystem.
Alignment For Arbitrum Revenue
While network revenue has decreased significantly following EIP 4844, the potential alignment of ARB holders with network revenue would presumably create a greater focus on optimizing Arbitrum sequencer revenue and fee models. As the leading L2, Arbitrum is uniquely positioned to drive new frameworks for how networks align with token-holders and governance; the stARB experiment is likely worth exploring.
Alignment for Delegation
The potential for voting power distribution is an exciting addition to this proposal. We look forward to participating in future working groups that explore how to allocate the best redelegation for stARB. While we agree that delegate scoring should be closely considered, integration with Karma supports the evolution of Arbitrum’s ongoing experiments in delegate compensation.
Tally as a Governance Partner
Tally is a critical tool for the Arbitrum DAO, and the ability to host ARB governance staking on the same platform where token holders delegate and delegates vote is an added benefit to the scope of this proposal.
Technical Optionality
Gauntlet recognizes that this proposal funds technical research and development toward implementing these contracts. It does not approve the onchain implementation of the stARB contracts, the “turning on” of ARB fee distribution, or the delegation of unused voting power. It also must be subject to technical, code, and design audits prior to implementation, as mentioned by @openzeppelin above.
Cost of Implementation
Compared to recent proposals, $200,000 for a technical development scope that could advance the ARB and governance landscape is a relative deal. There are currently dashboard proposals asking for more than this and the DAO has spent many times this on incentives alone.
Voting for. This proposal enhances Arbitrum’s security and utility aligning incentives for governance and protecting the DAO from governance attacks.
Excited to see Tally be a critical part of the implementation.
Thank you for coming up with this proposal and integrating feedback!
After consideration Treasure’s Arbitrum Representative Council (ARC) would like to share the following feedback on the proposal
The ARC Voted FOR this proposal.
We appreciate the well-structured approach outlined in this proposal, particularly the phased strategy. By simultaneously building the infrastructure necessary to enhance token utility and governance, and launching targeted initiatives for the DAO to define staking rewards and active contributions, we believe Arbitrum is setting a strong foundation for future success.
In the long term, I believe that distributing ARB to stakers may be more effective than linking it to revenue. We found @dk3’s suggestion intriguing and could envision a smaller allocation of ARB being used initially as a trial to gauge market response before adopting a larger, more permanent structure.
Overall, we’re pleased to see this conversation advancing and appreciate the Tally team’s phased approach as the DAO delves into this critical topic.
I voted FOR, I will put my rationale here later.
There is a question about managing votes from DAO.
Who will vote and how with those votes that will be returned to DAO?
I mean, if someone submits a proposal (there is a week to vote), then DAO needs to get their vote done faster. How to organize this?
I’m going to vote in favor of this proposal on Snapshot. I believe the outlined path and the modifications made to the proposal are heading in the right direction. In this regard, many thanks
@Frisson for being very receptive to the feedback and for proposing to lead the new working groups.
However, I think the execution of the proposal will make much more sense once the working groups have completed their tasks and determined the next steps. Therefore, I would like to see these efforts begin before the development of the LST (tARB).
This could finalize the development proposal and allow for the creation of a budget that accounts for all the necessary resources.
The DAO will set the rules for how the voting power is redelegated. A simple example of such a rule would be “redelegate proportionally based on the existing distribution of voting power”. A slightly more advnaced rule would be something like “redelegate proportionally, but only to delegates with less than X% of voting power”. A more complex implementation would be for the DAO to approve multiple rules/strategies and split the redelegated voting power among them.
After reviewing the comments, I’ve decided to support the proposal. The Tally team appears to be a strong fit for this initiative, and I look forward to seeing it move to a vote on Tally.
I give this proposal a greenlight. ARB staking will unlock utility, improve governance, and enhance security for the Arbitrum protocol. It’s a smart way to make ARB more valuable and secure the DAO against potential threats. This is a necessary step to align incentives and strengthen the ecosystem.
It is nice to see how this proposal shaped up, especially with the feedback of the delegates.
I see that we need to get a better sense of the current ETH incoming from the sequencer fees and other items related to treasury management.
I voted for, and I believe that something good can be built for the Tally vote.
We vote FOR the proposal on Snapshot.
We maintain the directional support that was made in our comment and recognize all the changes made by incorporating the feedback from the delegates. We are excited about the power and benefits that Tally Protocol can bring and further improvements to be made on the Arbitrum DAO governance and alignments between stakeholders.
Voting “For”
Biggest plus for me is I think the idea of having the token being more liquid is a good one. Having to choose between DeFi and governance with your ARB tokens is a problem and this looks to solve that.
I also appreciate the willingness to incorporate feedback into this proposal and believe the feedback provided has been valuable to making this more palatable to the DAO on the whole.
@pedrob brings up a good point IMO regarding maybe waiting to developing the LST until the working groups have at least begun their efforts.
Edit: To save forum space, editing comments to note that my rationale has remained unchanged for the Tally vote
I’m voting “for” on this proposal.
As stated before, I really praise @Frisson for being able to put together this many conflicting feedbacks together: he was able to find the perfect solution by saying: we build the skeleton, let’s make the dao fill it (amount of rewards, source of rewards, active delegate definitions etc).
I think this will be an initial powerful signal for markets, and also a way to increase governance. While the 2 don’t necessary belong together, I am personally fine with that.
BUT, I have a big caveat to this: we need to create a definition of active delegates that doesn’t hinder protocol representations. One of the potential byproduct of certain parameters could be, for example, that users might redelegate from protocols to others just because the protocols are active, but not as much for the metrics of the program, to allow users to get the yield. This can happen because for example they don’t comment too much on the forum, or don’t vote all proposals.
While we want to obviously incentivise the participation of protocols in governance, we also have to remember that the main job of protocols is making arbitrum a great place for users through developing dapps and other stuff. Let’s avoid to kill the representation they currently have.
To be more detailed, this is the current situation.
The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.
We’ll be voting FOR this proposal during the temperature check.
We discussed this proposal thoroughly with Frisson and the Tally team both in person and during office hours, and many of our suggestions were incorporated into the final version. We are also following closely the discussion around staking, protocol revenue sharing, and improving governance systems, and we think this proposal is an interesting experiment in that area. If nothing else, we hope it will spur discussion on how we can incentivize better delegation and more engaged delegates, and the activity in this thread as well as outside the forum proves that this is the case.
We like the fact that the proposal does not define the source of staking rewards and the definition of an active delegate at this time. We commit to actively participate in the working groups that will be created if this proposal passes, as we believe that these discussions are likely to be important not only for Arbitrum, but for the entire DAO space in general.
We are voting in favor of the ARB Staking proposal. This initiative is both timely and necessary, addressing the critical issue of ARB token value accrual by introducing a mechanism that aligns governance with utility.
Creating two focused working groups is a particularly well-thought-out aspect of this proposal. The Staking Rewards working group’s mandate to explore sustainable reward funding sources will be essential in maintaining the long-term viability of staking. Meanwhile, the ARB Staking & Delegation working group’s focus on defining active contributors and optimizing delegate incentives is crucial for ensuring that governance remains effective and resilient.
By integrating these working groups into the broader governance framework, this proposal strengthens the ARB token’s role within the ecosystem and enhances the Arbitrum DAO’s overall robustness.
We believe this is a significant step forward in addressing current challenges and look forward to seeing the positive impacts of this proposal.
Castle Capital
General Operational Concerns
While we’re happy to see the discussion open to exploring other sources of yield we have a couple suggestions that we would like to see addressed prior to being pushed on Tally. Instead of the two separate working groups the proposal calls for, we would like to see one working group considering both are exploring staking as it relates to governance. This also complicates the process for reaching a conclusion in the end, and over-governing is a real issue that can hinder the DAO’s timely decision making. The total funding for these groups is also capped at $20,000 with an unspecified time commitment with an unclear end date.
Our suggestions are to slightly raise the prospects for funding, and then set some amount of time for them to reach a conclusion (maybe in accordance with the incentive detox period for simplicity).
Beyond Inflation
Moreover, we want to stress that the DAO can explore more options than simply turning on additional inflation for ARB. We at Blockworks don’t support pursuing an ARB burn at this point in time. We think an ARB token model should be carefully analyzed and modeled before implementation, and align with key revenue drivers and the long term sustainability of the protocol. While we aren’t beholden to any ideas specifically at this point in time, we would like to hold off on simply increasing inflation right now. It is the simplest solution to bringing value in this mechanism, but it is important to remember the ARB token has large unlocks already, and recent price action has been unfavorable. This solution could also prove to be the most detrimental for setting precedence in the DAO. It might not be best to turn toward inflation when we approach Arbitrum staking or utility accrual for the DAO. There are plenty of granular solutions that can be researched here.
Legal Implications
Finally, we just want to remind everyone of the legal implications of this proposal. This proposal uses Uniswap’s fee staker contract design, which is created to be regulatorily-aware in that fee traceability is less obvious. Combining governance rights with value accrual raises concerns under U.S. securities laws. Fee traceability is particularly important, because of noncompliant frontends that are not censored in anyway.If fees are untraceable, then there’s no way to isolate whether tokenholder value came from non-compliant dapps/participants, which may leave the DAO legally liable in some manner. Even if fees can be reasonably traced, then there could be some legal responsibility the DAO faces from not censoring these parties involved with the Arbitrum network. Importantly this may not fully apply to Arbitrum, since Arbitrum is an L2 and not a DeFi application like Uniswap, but it is certainly important to keep in mind.
That said, Blockworks Research will be voting FOR this proposal on Snapshot.
Materials linked:
A16z on fee traceability: A new financial model for app tokens: How to generate cash flows - a16z crypto
I voted ABSTAIN on this proposal at the temp check stage. Although the DAO does not have a formal COI policy at this time, I tend not to vote FOR proposals that I have a significant personal interest in. ARB Staking is an important initiative for me personally in my capacity as CRO of Tally.
Camelot is voting ABSTAIN the “ARB Staking” proposal.
We are supportive of finding utility for the ARB token, and consequently do not wish to directly vote “against”, but we strongly believe that any proposal for staking should NOT be combined with a specific governance scoring system. Any fundamental changes to the ARB token design, such as staking, should be thoroughly discussed and assessed entirely on its own merit and evaluations, especially before attaching any new (and untested) governance mechanisms to it. Once there is clarity and alignment on the utility of the ARB token, then further applications should be discussed.
We appreciate the effort and rationale for proposing this use of the Karma points system, or any other system the working group might adopt to define an “active delegate”, and we see how it can be used productively in the context of the proposed plan. But we believe that there should be a more in depth discussion about the necessity to bundle together both the staking and the governance initiatives. At the same time, any system would require further analysis and adaptations to ensure its incentives are well aligned with the DAO.
In conclusion, any proposal for the utility of the ARB token needs to be treated as an entirely separate discussion and should not be combined with a brand-new governance scoring system. A fundamental change to the ARB token creates significant regulatory, incentive, and ecosystem risks that need to be carefully understood and considered. The Karma system, or any other adopted, has the potential to be a useful tool to further active and effective delegations and voting, but this can be critiqued and assessed in the context of its own separate proposal, but they should not be combined.
I voted “for” on this proposal.
There was notably a very big effort put in place to condense and equalize all feedback received by delegates on this proposal. It had unsuccessfully been attempted before by Plutus.
Would have been also OK by setting parameters beforehand (i.e. what does an active delegate mean and how to calculate it, and source of staking rewards) but it clearly was an intelligent decision to decompress this idea and start proposing/developing -if approved- at least the structure (which is what this is). It seems at this point that the proposal will pass, having most top delegates voted favourably.
This could lead to increased governance participation, another new use case to ARB besides governance (no small utility given the size of the DAO and ecosystem anyways), and to keep exploring new ideas. Also, I believe the cost/return is reasonable, at least whe compared to other previous costs incurred by the DAO.
Keen to follow discussions via the working groups to fine tune the details on incentives and participation mechanics.
Feedback for on-chain voting: having not met the proposed estimated timeline, I encourage Frisson and Tally to more granularly present a future roadmap, if possible, to include all relevant and more in-depth milestones.
This is natural selection. Current delegate voting power representation is a direct reflection of what Arbitrum users want. Let’s not forget that voting power comes directly from holders who choose whom they want to represent them, and that (most) delegates are getting votes this way.
If users redelegate from protocols to individual users or organizations in the sake of pursuing better yield because their protocols are not voting - I do not personally see any issue with that. Protocols have an incentive to revamp their activity.
Except a few whales that delegate to themselves (BTW, also extremely valid) suggesting a cap or redirect based on a subjective criteria like “protocol representation” is, in my opinion, not a good idea, and a bad precedent overall. What’s to say someone else will not come along with another criteria and swing votes their way?
Free market, free delegates, free will, free delegations, and decentralized choosing. Token holders are in the end who decide who represents them and why, and they are free to change it.
In any case, thank you @JoJo, comments like yours are what’s needed to keep/start discussions and what moves the DAO forward. These are just my initial thoughts, open to more opinions. Cheers!
