From Governance Token to Utility Token: Evolving ARB Beyond Governance

General
1

Context

Since launch, ARB has primarily served as a governance token, enabling holders to vote and participate in DAO decision-making.

However, as the Arbitrum ecosystem expands—with over 500+ active dApps, multiple Layer3 rollups, and emerging staking proposals—the current governance-only model no longer fully captures the economic activity, network usage, or user contribution that sustains Arbitrum’s growth.

Meanwhile, several ecosystems (e.g., recently ZKsync, Starknet) are experimenting with hybrid token models—where the native token functions not just as a vote, but also as a network utility token used for fees, staking, and protocol-level coordination.

This post aims to open a community-wide discussion on evolving ARB from a pure governance asset into a utility token that powers the Arbitrum economy.

The Problem

  • Governance-only tokens tend to concentrate power in large holders and leave most users unengaged.
  • No direct linkage between protocol usage and token demand (e.g., transaction volume, DA fees, sequencing activity).
  • Staking initiatives (like the current ARB staking proposal) focus on redistribution rather than real protocol integration.
  • Treasury value leakage: ecosystem grants and incentives are denominated in ARB but not tied to sustained token utility.

The Opportunity: Turning ARB Into a Utility Layer

We can envision a phased transition where ARB evolves into a utility token underpinning both Arbitrum One and Orbit ecosystem activity, while preserving DAO governance.

Potential directions include:

  1. Gas or Fee Abstraction: Allow ARB to be optionally used for gas on Arbitrum chains or Orbit L3s .
  2. Protocol Staking Layer: Validators, sequencers, or verifiers stake ARB to secure rollup operation or shared DA layers.
  3. Economic Alignment with Orbit Builders: Require or incentivize L3s and Orbit chains to hold or utilize ARB as part of their bootstrapping, liquidity, or fee models.
  4. Network Resource Pricing: Introduce mechanisms where certain protocol resources (bandwidth, DA quota, inclusion priority) are denominated in ARB.
  5. Cross-ecosystem integrations: Enable cross-chain usage of ARB as collateral or settlement token for DeFi, bridging, or restaking frameworks.

Why Now

  • The DAO is actively discussing staking and emission mechanisms—this is the right time to anchor these discussions in utility, not just yield.
  • Emerging Layer3 and Orbit ecosystems need a common economic anchor; ARB can play that role.
  • Competitors (ZKsync, Starknet) are aligning token utility with ecosystem growth—Arbitrum should not lag behind.

Open Questions for Discussion

  1. Which layer should first integrate ARB utility—Arbitrum One, Nova, or Orbit builders?
  2. Should ARB be optionally or mandatorily used for gas or staking?
  3. How can we transition governance holders to utility participation without disrupting DAO voting power?
  4. Should the DAO define a utility roadmap or delegate it to an appointed working group?
  5. How to balance token utility with regulatory clarity (i.e., ensuring ARB remains compliant as a utility token)?

Call to Action

This post is not a formal proposal—rather, an invitation to start structuring a long-term token utility roadmap for ARB.

If the community agrees, we can later form a “ARB Utility Task Force” to research models, evaluate technical feasibility, and draft a DIP.

Let’s make ARB not just a token for governance, but a token that drives the network forward.

2 Likes
2

Hey, the debate around giving premium/utility to the ARB token has been part of the SOS discussions, for example here, here, and here. Might be worth checking those out and dropping your thoughts in those threads.

If adding utility to ARB makes it into the final SOS proposal, I think we’ll start seeing more concrete steps in that direction, and it could be a great chance for you to get involved if that’s something you’re excited about.

3 Likes
3

@TempeTechie I appreciate you always providing feedback to these types of discussions. Is there an estimated time of completion on when the final SOS will be completed?

1 Like
4

No official estimated time, but I expect the SOS proposal draft coming out by the end of the year, and then put on vote at the beginning of the next year.

2 Likes
5

Thanks! I really hope we see a utility proposal introduced for the ARB token in the final SOS proposal, and that it is passed through the vote.

With the recent news from Uniswap CEO moving towards a utility-based tokenomics (if approved), I would like for Arbitrum to follow along early enough given how they are pioneering the tokenization phase. It seems pure governance tokens are slowly fading.

1 Like
6

@crypfuto I’ll put my thoughts on your question sometime tomorrow.

7

Gas fee and staking options using ARB would be great.

I know a lot of users mistakenly buy ARB for Arbitrum gas fees or ETH on Ethereum instead of on Arbitrum. I’ve had to do extra tech support because of this confusion aspect for onboarding new users to Arbitrum, including people used to using Ethereum, Solana, or Bitcoin.

Staking incentivizes holding and growing reserves of a token, the main issue I could see is people with already massive amounts just growing their ownership…which may cause issues on the governance side?

2 Likes
8

My 2 cents on your questions:

  1. Arbitrum One, Orbit, and then Nova. Arbitrum One should be the first to integrate ARB utility because it has the deepest liquidity and highest transaction activity, making utility experimentation more meaningful and measurable.
  2. ARB should be mandatory for staking but optional for gas. Keeping it optional for gas allows a flexible experience for current and new users who currently use ETH. I personally not a fan of making ARB mandatory for gas.
  3. I would say some sort of preservation model that allows ARB holders to stake their tokens to gain utility benefits without loser their governance rights.
  4. I think the DAO should set the high level roadmap while the working group handles the technical design and execution.
1 Like
9

As i Read this, it felt like someone finally said out loud what a lotof us have been sensing for months. ARB has been carrying the weight of a growing ecosystem while standing on a single leg: governance. That worked in the early days when the DAO’s priority was setting direction, but as the network matures, the gap between how Arbitrum is used and what ARB actually does has become too wide to ignore.

What you’ve outlined speaks to a deeper question that every serious ecosystem eventually confronts: how do you build a token that reflects real participation rather than just voting power? From a legal and governance perspective, the shift from a pure governance token to a hybrid utility asset is not something you approach casually. You need clarity, predictability, and a structure that doesn’t undermine the legitimacy of current governance processes. Still, the direction you are pointing toward makes sense. A healthy ecosystem usually has a token that mirrors the activity running through it, not one that sits at the edges of the system.

The problems you highlighted are familiar to anyone who has worked inside DAOs. A governance-only token often ends up with a quiet majority and a loud minority. It encourages observation rather than involvement, and it rarely captures the everyday use of the network. That disconnect shows up in the way ARB incentives are treated: helpful for bootstrapping, but quickly sold because the token doesn’t play a direct role in the system’s machinery.

The potential paths you listed feel grounded rather than speculative. Optional gas usage, staking where the token actually anchors operational security, and a deeper relationship between ARB and Orbit builders all point to a model where ARB earns its relevance through function, not just allocation. These ideas don’t need to replace current mechanisms; they simply give ARB a wider surface area in the ecosystem, which is long overdue.

Your timing point is also spot on. With the DAO already debating staking and emissions, it would be short-sighted not to pair those discussions with a conversation about utility. If we build staking around redistribution alone, we will recreate the same issues we see today. However, if staking is tied to genuine protocol roles, then we move closer to a token that stands on economic reality instead of circular incentives.

The regulatory angle you mentioned is important, and it is one reason this transition must be deliberate. Expanding utility does not need to create legal complexity, but it does require thoughtful framing and line-by-line clarity about what each mechanism actually accomplishes. That is exactly where a dedicated working group could help, both on feasibility and on sound design.

I support the call for an “ARB Utility Task Force.” It gives us a structured way to test ideas without rushing into changes that could unintentionally reshape governance or contradict the principles that made Arbitrum strong in the first place. The DAO has matured to a point where this conversation is not just useful; it is necessary.

Thank you for opening the door. Happy to contribute as this takes shape.

2 Likes
10

It is clear that more and more community members want to see a real utility for the ARB token, beyond pure governance. There’s been a lot of posts around this since 2023, but I think we need to figure out how to move this from form discussions into implementations.

Some open questions:

  1. Who is willing to help shape this into a formal proposal or multiple proposals?
  2. Any delegates, workings groups that could help with drafting and designing this work?

If you are a delegate, contributor, working group, etc. interested in pushing ARB utility forward, please comment. It feels the community is ready for this conversation to evolve from threads into an actionable path.

11

Hey @Arbit1, it’s great that you’re taking initiative here. I suggest that before making any governance proposal, you first organize some brainstorming sessions (e.g. video calls) on ideas around giving ARB a premium/utility.

I’d also suggest that you either create a google doc or a topic on this forum with a list of all ideas in one place (and you regularly update it). Because right now these ideas are scattered among multiple topics and replies, but it would be good to have everything summarized in one document or topic.

Some of the ideas are very technical and suggest changes at the protocol/blockchain level - it’s important to discuss them with people who are actually working on protocol upgrades to see if they are viable or not.

Also note that such upgrades take quite long time from idea to actual implementation. On the other hand, ideas that don’t require any chain upgrades can move much faster, so it may make sense to focus more on them.

Looking forward to the next steps!

12

@TempeTechie Appreciate the suggestions, and will definitely follow them up.

Do you know who would be the appropriate ponts of contact to involve for the more technical discussions that may require protocol and/or blockhain upgrades? From what I’ve seen, many of the conversations on this topic don’t appear to directly engage those working on the protocol itself.

I’d like to ensure this effort receives feedback from the right technical folks, rather than relying on people like myself (lol) who may not have the expertise in it.

13

Hey, I don’t. But I think that’s not needed for the initial phase (brainstorming ideas and organizing them in one place). Let’s take it step-by-step :slight_smile:

14

Here’s a great X post on this topic by @Insomniac: https://x.com/insomniac988/status/1993308609921556841

Btw, there are two topics on the forum rn (the other one is this) that cover basically the same debate around ARB. @Arbit1 & @Obitrum et al, My suggestion is that you join forces in an ad-hoc informal working group to synthesize all the ideas, brainstorm new ones, and develop an actionable (and realistic) plan going forward.

15

Thanks for sharing. I had actually read it earlier today while scrolling on X.

I’m currently going through the forum looking at some of the ideas previously discussed, and consolidating them into one document. I plan on finalizing it sometime in December. Im hoping the SOS is finalized around the same time and we see a path forward on giving a utility/premium to ARB to be voted on next year.

Speaking of SOS, is that still on track by EOY?

Interestingly, I did see a staking proposal was passed last year and a staking contract was actually completed but never implemented. ( ARB Staking: Unlock ARB Utility and Align Governance - #199 by cliffton.eth? )

2 Likes
16

happy to chip in where i can. if needed, you know where to find me

3 Likes
17

Hi everyone, and thanks for the valuable contributions shared throughout this thread.
And thank you @TempeTechie for pointing out the connection between these discussions.

I think there’s real value in bringing together the different perspectives on ARB utility and organizing them more clearly. If an informal effort to structure or synthesize ideas takes shape, I’d be happy to take part and contribute wherever it’s useful.

I’ll also keep following the consolidation work that @Arbit1 is doing and can add comments or targeted contributions as the conversation evolves.

Looking forward to collaborating with you all.

4 Likes
18

Great! I will tag you once here once shared to gather your input/feedback. It will likely be mid to late December.

1 Like
19

Replying to bring this topic back to the top of the list in case any delegate, organization or community member wants to comment and share their feedback on this topic.

I’ve privately messaged a few delegates to obtain their feedback and perspectives on this topic as well.