Entropy is supportive of the Arbitrum Foundation’s proposal to lower the constitutional quorum threshold to 4.5% of votable tokens. As the ARDC’s research highlighted, the current quorum margin is quite thin for constitutional proposals with the current requirement now exceeding the average turnout rate. It is particularly concerning to consider that at the current threshold of ~218.6m ARB, the only proposal to even meet this threshold in the history of the Arbitrum DAO is the recent vote to adopt Timeboost (~243.9m ARB). Similar to the Arbitrum Foundation and many other delegates, we feel it is prudent to address this issue before a legitimate proposal fails to pass due to quorum requirements. Moreso, a proposal to reduce quorum is a constitutional proposal in itself, making the risk of not getting ahead of the problem all that much greater.
Adding some additional context to the current state of delegated ARB and votable supply, since the ARDC posted its research on governance attack risks, total delegated votes has rebounded back to ~364m ARB and is close to its sustained peak of ~372m ARB back in late 2023.
While the recent uptick shows the efforts of the Arbitrum Foundation and top delegates to activate non-delegated ARB have been mildly successful, the unfortunate truth is that the resulting delegations from this work are not keeping pace with the rate of increase of the quorum threshold. In Q4 of 2023, the percentage of delegated tokens out of votable tokens peaked at around 15% with non-delegated votable ARB sitting at around ~2.05B. Since then the amount of non-delegated ARB has nearly doubled to ~4B, while the amount of delegated tokens has remained relatively flat, pushing the ratio down to almost 8.3% today.
@cupojoseph makes an interesting suggestion to delegate ARB from the DAO treasury, something members of our team have previously proposed. In reality though, a number much larger than 22m would be required to make a substantial difference given the current rate of quorum’s increase we would be faced with a similar situation in just a few months. This rate of increase is primarily why Entropy is in favor of lowering the calculation from 5% to 4.5%. Such a change not only immediately reduces constitutional quorum, but it will also slightly slow the rate of quorum increase in the future (~500k ARB per month based solely on ARB unlocks). Additionally, after a lot of collective thought from our team on this matter, we do not believe delegating treasury ARB is an ideal solution given that ARB governance power is one of the core value propositions of holding ARB today. We hope to return value to token holders in the future, but we want to ensure the voter base that shapes our path to value accrual has “skin in the game” rather than receiving delegation with no monetary stake. We are open to changing our opinions on this matter, but for now, we view the decrease in quorum as the most sensible near-term solution. It is worth noting that reducing quorum comes with its own tradeoff, increasing the likelihood of a governance attack, but Entropy still views it as a necessary step to take today.
Overall, we acknowledge the concerns around governance resiliency, but at this point in time lowering the constitutional threshold is warranted and provides the DAO a short-term solution while it continues to make improvements to its operational efficiency that make organic engagement from large token holders more appealing.