Proposal: Activate ARB Staking (FINAL)

Proposal: Activate ARB Staking (FINAL)

Changes Based on Feedback Since the Temperature Check Version (posted 20th Oct)

  • For simplicity and security reasons, decided to forego the token mint aspect of the proposal entirely and fund staking with a treasury request instead. Using the mint to fund staking was deemed too circular and not a necessary step based on feedback.
  • Added the idea of the ‘Arbitrum Coalition’ as a potential key partner to gather data and monitor the impacts of this staking mechanism over the next 12 months with the end goal of using these insights to refine the ARB staking mechanism further. This is reliant on the Arbitrum Coalition’s conditional funding.
  • Added an additional 1.25% voting option
  • Clarified that voting will be ranked choice voting with five different options

Changes Based on Feedback Since the RFC Version

  • Added several options for voting - 1.75%, 1.5%, and 1%. Examples of APRs at different ARB staking percentages can be found later in the proposal.
  • The maximum lock penalty % has been changed from 80% to 60%.
  • Suggested that the implementation details (selecting a vendor and auditor) will be decided in a further proposal

Abstract
The Arbitrum DAO treasury is growing rapidly, yet that growth is not currently being shared with token holders. The Arbitrum DAO treasury address holds 3,54B ARB tokens, and an unexpected $69,4M of unclaimed individual ARB airdrops were recently returned to the DAO treasury. The treasury is exceptionally well funded, and it’s important to note that the DAO fully controls the usage of the Arbitrum DAO treasury and that all surplus revenues belong to the DAO. This includes sequencer revenues.

We believe that the Arbitrum token needs a staking mechanism. We propose creating a mechanism that distributes ARB to token lockers. A locking mechanism would incentivize long-term token holders and become a fundamental building block for future token utility proposals (e.g., distributing sequencer revenues).

Along with creating a locking mechanism, we propose requesting 1.75%, 1.5%, 1.25% or 1% of the total ARB token supply from the Arbitrum DAO treasury and distributing this over 12 months through the proposed locking mechanism. The final amount would be decided with a Snapshot and that decision cemented on-chain with a Tally vote. We suggest that the ‘Arbitrum Coalition’ gathers data and monitors the impacts of this staking mechanism over the 12-month period and potentially audits the contracts if funded in time. Of course, this relationship is reliant on both proposals passing and the DAO and Coalition Advocate supporting the scope of work for the coalition. The goal is to use these insights to give the DAO the data and tools to refine the ARB staking mechanism further.

It is important to note that this proposal is entirely separate from the ongoing liquidity incentives framework and grant discussion. Both can and should co-exist - Arbitrum should have a functional grants framework and a staking mechanism. The Arbitrum DAO STIP program has recently concluded, and 50M ARB tokens will enter the market over the coming months. As proposed here, a supply sink through staking would benefit the Arbitrum ecosystem as a whole.

In the discussions over the previous months, we’ve seen the legal aspect be a deterrent to sharing value with ARB token holders in the form of revenue. The way we are proposing the staking mechanism through using existing treasury funds to reward lockers in ARB is the most palatable option from a legal perspective, as it does not involve sharing revenues. It also does not rule out the possibility of later moving on to a model that allows for other value accrual methods to the token. Should our proposal pass, when additional value accrual methods are proposed and the legal landscape is more mature and better understood, the process will likely be much quicker since a staking mechanism is already in use with audited contracts in place.

We thank the following delegates and others for their valuable feedback while drafting this proposal.

Westie from Blockworks Research

Coinflipcanada

And several others

Motivation
The Arbitrum ecosystem would benefit in multiple ways from a staking mechanism that is constructed to heavily align incentives with those most aligned with the ecosystem long-term. While staking mechanisms are familiar and a mainstay across DeFi, sustainable models and their impact on the token in question have been scarcely studied. These staking mechanisms are often poorly designed and have rampant inflation that negatively affects the token.

Regarding staking mechanisms, there are few examples to model after in the Layer 2 token space. We propose that the Arbitrum ecosystem takes the first step in this endeavor and leads the way - as it already does in many other verticals. We believe that to construct a long-term staking mechanism that is sustainable, there is first a need to gather actual data that is strictly specific to the Arbitrum ecosystem and the ARB token.

Because of this, we propose that the ‘Arbitrum Coalition’ monitors the effects of this 12-month staking experiment and provides quarterly updates on the impacts of the mechanism through dashboards and qualitative reporting. After the 12-month staking experiment is over, we suggest that the DAO funds the ‘Arbitrum Coalition’ to produce a comprehensive report with results and recommendations on what they believe is the most sustainable way forward in building a staking mechanism and incentive model that is sustainable yet attractive for the ARB token. The expertise of the ‘Arbitrum Coalition’ is perfectly suited for analyzing the results of this experiment, given that Gauntlet is an industry-leading authority in tokenomics design, Blockworks spearheads the industry’s research efforts and Trail of Bits is a top-tier security organization. To read more about the Arbitrum Coalition, please visit their proposal here.

Broader Implications for Arbitrum
This proposal passing would have extremely positive implications for the entire Arbitrum ecosystem. Having a native staking model that the DAO officially approves would be likely to have the following consequences:

  • Significantly increase interest in Arbitrum and the ARB token
  • Allow for composability around an ARB token that can earn yield
  • Reward long-term aligned stakers with yield while penalizing mercenary capital and short-term actors
  • Positively differentiate ARB from any other L2 tokens and bring the spotlight back to Arbitrum
  • Offer a first step and infrastructure towards introducing different forms of revenue sharing in the future

These are some of the benefits that will likely result from having a staking mechanism; however, verifying these predictions’ accuracy by an independent third party such as the ‘Arbitrum Coalition’ is essential. These hypotheses cannot be truly verified without actual data, highlighting the importance of a 12-month trial period for staking.

Benefits for Users
By introducing a staking contract that responsibly distributes the allotted amount of tokens to users who are willing to lock their ARB, the incentives are aligned in a way that rewards those parties most loyal to the Arbitrum ecosystem. This includes long-term holders of ARB and DAOs that have received an airdrop and are willing to lock their tokens.

The figures below detail possible APRs for stakers at different staked percentages if 1.75%, 1.5%, 1.25% or 1% of the total supply was distributed annually. The current circulating supply of ARB is approximately 1.275B.

Specification

  • The ARB staking contract will allow users to lock their ARB for up to 365 calendar days. A user’s weight is proportional to their lock time.
  • Users may increase their lock times.
  • Users may pause their lock times (meaning the time to unlock does not increase - this saves having to relock continuously)
  • Users may have many independent locks.
  • Users will receive and may claim ARB emissions according to their weight.
  • Users may exit their lock for a penalty between 0-60% of their lock amount, linear vs. lock time remaining (365 days remaining would mean a 60% penalty, and 0 days would be a 0% penalty). This penalty is shared between remaining users according to weight.

Example usage: ARB locker

  • The user locks 100 ARB for 365 days.
    • The lock weight formula is (ARB amount locked * lock time / 365)
    • Their ARB lock ‘weight’ is currently 100 (100 ARB * 365/365).
    • All rewards are distributed based on a user’s weight / the total sum of all the users’ weights.
  • After 182.5 days, the user will have a lock ‘weight’ of 50 (100 ARB * 182.5/365).
    • At this point, they may increase their lock time, do nothing, or withdraw.
    • The early exit penalty is (0.6 * lock time / 365)%.
    • For a lock time of 182.5 days, the penalty is, therefore, 30% of the locked amount - if the user were to withdraw now, they would receive back 70 ARB.
  • ARB staked in this contract will still have voting rights and can be delegated - voting power will not be diminished by a shorter lock length

Frequently Asked Questions

1. Why a locking mechanism?

A locking mechanism allows users who are long-term believers in Arbitrum to signal this belief through their actions and get rewarded for it accordingly. Locking for longer is always optional - users may lock for any time period. One year is a reasonable lock time compared to the previously popular 4-year locking model. A one-year lock is not too long to the point of disincentiving locking, as users can choose the lock duration. Not only does this give individuals optionality and a mechanism to earn a native yield on their ARB tokens, but it also gives protocols that were a part of the DAO airdrop or have otherwise accumulated ARB a mechanism to earn on their treasury.

2. What are the consequences of this proposal?

Ultimately, this proposal introduces utility to ARB and gives users more incentive to hold. In addition, long-term believers will be net increasing their network share, which sets up a base from which we can build further proposals for ARB value accrual without worrying about the distribution mechanism.

3. What would this staking mechanism mean for delegation?

From a user standpoint, it’s important to note that the ARB staked in the proposed contract will still have voting rights and can be delegated - voting power will not be diminished by a shorter lock length. The staking contract will be upgradeable and controlled by the DAO - this ensures that the DAO can pause this distribution at any time.

Summary
As it stands today, ARB has no native utility or yield. We propose approving the creation of the staking contract detailed above and distributing an equivalent of 1.75%, 1.5%, 1.25%, or 1% of the total ARB supply from the DAO treasury to the staking contract. These tokens would be distributed over a 12-month period, during which the ‘Arbitrum Coalition’ could - pending their proposal passing - monitor the impacts of the proposed staking mechanism and draft a report and recommendations by the end of the period. Note that the Arbitrum Coalition proposal is entirely separate yet synergistic to this proposal. The passing of either proposal is not conditional on the other proposal’s performance.

It’s important to highlight that to move toward a final and refined version of value accrual to the ARB token, trial and experimentation is required. We believe there is a strong need for actual data from a live staking mechanism, such as the one suggested in this proposal, from the unique context of Arbitrum’s growing ecosystem to make more informed decisions on what the ultimate mechanism for ARB staking and value accrual might look like.

Innovation has always been Arbitrum’s forte in both technical advancements and building a vibrant community - we believe that the approach to building a cutting-edge staking model for ARB through trial and experimentation is a logical way forward.

Timeline
This proposal will follow the official lifecycle of an AIP detailed here. Please note that this proposal is a non-constitutional proposal.

The suggested timeline can be found below.

Week 36-37 - Forum post, request for comments and feedback (Complete)

Week 42-43 - Temperature check forum post & Snapshot poll (1 week)

Week 43 - Formal AIP and call-for-voting (3 days)

Week 43-45 - On-chain DAO vote on Tally (14 days)

Week 46 onwards - Implementation phase

If the proposal passes, a draft of the implementation phase is detailed below in “Suggested Steps to Implement.” The final implementation schedule depends on the result of the vendor decision proposal, community review, audit schedules, and subsequent findings. A concrete schedule for the implementation stage will thus be locked in at a later stage.

Voting Options on Snapshot
When this proposal moves to Snapshot, there will be five voting options. The voting method will be ranked choice voting. To read more about ranked choice voting, please visit this article from Snapshot.

  1. Fund staking with 1.75% of the total ARB supply (175M ARB tokens)
  2. Fund staking with 1.5% of the total ARB supply (150M ARB tokens)
  3. Fund staking with 1.25% of the total ARB supply (125M ARB tokens)
  4. Fund staking with 1% of the total ARB supply (100M ARB tokens)
  5. Do not fund staking

Suggested Steps to Implement

  1. The Arbitrum DAO will receive another proposal concerning implementation, which will aim to decide the vendor of the implementation and associated contracts and an auditor.
  2. After the contracts and audits are finished, they will be provided to the community for review for two weeks.
  3. After the community review period, the contracts will be deployed to Arbitrum, and the ownership will be transferred to the DAO.
  4. Ratification of reimbursement of costs as illustrated in the Cost sections below and disbursement of such reimbursements to applicable service providers

Costs
The costs of this proposal are mainly related to the implementation process, during which a vendor and auditor will be decided. The true extent of these costs can only be estimated after these decisions are made.

19 Likes

In favor, for those who argue all token inflation = bad, you have bear market PTSD.

6 Likes

The below response 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.

Having read the proposal, as well as the entire discussion under it, we have some questions to ask as well as some concerns to raise before fully forming an opinion on whether or not such a proposal would be useful at this time. More specifically:

  1. Since the ability to inflate the supply of ARB is optional for the DAO, why should we introduce a staking mechanism to mitigate the effect such an inflation would have? It seems that simply not executing the mint function is a more direct approach. Are we missing something?
  2. Also, even if we had to inflate the token because of altering market conditions, and even if the staking would mitigate the effect the newly minted tokens would have on the market — why expedite the process? It seems that we should rather observe and react, rather than try to predict.
  3. Introducing a staking mechanism could be interesting but the rewards don’t have to come from inflation. We could dedicate a budget from treasury for a pilot and in the future those rewards can come from other sources like the ETH accrued by the sequencer, or other DAO income streams.

It’s important to highlight the fact that we want to encourage such proposals. However, we would prefer to start with a pilot version of the staking mechanism, funded from the treasury, to test its effects before making any major decisions regarding token inflation or other sources of funding.

We’d like to invite PlutusDAO to the next Open Governance call taking place on November 22nd at 4pm UTC / 12pm EST so their proposal can be discussed live with other delegates. We are also available each Thursday at 3pm UTC / 11pm EST for Arbitrum L2BEAT Office Hours.

12 Likes

L.S.,

I, much like L2BEAT, find myself pondering the proposed minting and subsequent staking mechanism aimed at alleviating some of the inflation. I contend that fostering scarcity, achieved through burning ARB, as opposed to minting additional ARB, represents a more favorable approach for long-term holders.

The minting of 200 million ARB tokens for rewards would lead to a supply increase of approximately 15.69%, as calculated by [(1,475,000,000 - 1,275,000,000) / 1,275,000,000] * 100. Such inflation rates are notably high, even when considering the conservative 1% proposal, which would still result in an inflation rate of 7.85%.

To provide context, in traditional finance, developed countries typically experience an average inflation rate of around 2%. Additionally, when examining other crypto projects, one can find numerous unfortunate examples where excessive token issuance has had detrimental effects.

It is my assumption that, due to the expedited timeline and what appears to be a lack of long-term vision, the PlutusDAO has crafted this proposal primarily to fulfill their commitments to PlutusDAO investors who converted their ARB into plsArb with the expectation of native yield, only to find themselves in a challenging position.

O/T: I also ponder whether the Plutus Team should have the ability to vote on any Governance proposals with the ARB acquired through their plsArb offering. PlutusDAO is merely a “DAO in name” as there is no governance module in the project itself. Nevertheless, they did acquire over 9 million ARB through this plsArb offering, which they can use for voting.

7 Likes

Why so hurry about that? why don’t we wait until there?

2 Likes

I know this is a long shot, but it would be unique and awesome if Arbitrum could become the community that holds each other accountable.

In this case, Plutus DAO is infamous for their misleading advertising during the airdrop that tricked millions of arb into locking and then spending the next several months gaslighting retail investors who felt misled. This caused immeasurable damage to the ecosystem’s reputation and countless people have been turned off to investing in arbitrum because of it. We should not reward people who act in this manner.

There is no strategic ecosystem advantage to this proposal. While the token needs utility is doesnt need inflation for inflation’s sake. Thats all this is. Printing more ARB in the hope that certain lockers can disproportionately benefit.

The only group this helps is people who launched a “governance blackhole” and now need an excuse to lock tokens to prevent people getting their money out of their protocol. I do not think we should turn up the inflation just so the Plutus team can justify holding 10 million arb hostage from unwitting retail investors.

7 Likes

Hey,

Plutus does not have the power to hide any posts under this discussion (or any discussion for that matter). If your post was removed, it was by a moderator on this forum and likely because you broke the rules of the forum or were spreading blatant misinformation.

5 Likes

Hey guys,

Thank you for the thoughtful feedback - much appreciated!

5 Likes

Just because a function can be called doesn’t mean it has to be called.
Arbitrum has a lot of ways to utilize within the ecosystem. GMX, Premia, Silo, etc.

Think the inflation just through the grant process in 2023-24 will be sufficient in terms of what stakeholders have an appetite for. But as a first step, maybe preparing a pitch with some quantitative metrics and like-for-like comparable numbers to other protocols that have successfully established a voting escrow model with irregular inflation, what percent of outstanding issuance is locked, any other projects that have a mint function they regularly call, how successful those projects have been, etc. The governance call L2BEAT runs now has a good mix of diverse attendees, so you should be able to get solid feedback on that call.

8 Likes

plutus are just trying to get $arb holders to pay for fixing their failed broken product

why should $arb holders have to pay for plutus’s failure?

4 Likes

My primary concern here is that we’re creating a problem (inflation) then creating a staking mechanism to combat the problem we introduced. Once this is approved one time, it will be that percent inflation or higher until the DAO is out of ARB, so we should definitely make sure there is ample time for all the smartest people involved in Arbitrum to weigh in and get this right (the first time).

Past that, a secondary concern is why now? Pushing this to vote before we’ve seen the effects of the STIP and before we have all the data seems ineffective at best, but will also add sell pressure on top of the funds we’ve already approved. Minting becomes officially available in March and I don’t see sufficient reasoning to start distribution before that time.

We also have 50m tokens from STIP plus the undecided amount for round two entering the market over the next few months. If we add another 25m (3 months of 100m) will we be able to see the full effect of the STIP? Can we reliably separate the two?

I also don’t understand the narrative of ARB token needing utility (right now) as several projects have it included already, with even more on the way. Radiant, GMX, Plutus, Lodestar all currently have options for yield on ARB and Notional is currently voting to add ARB to their project when it’s fully launched as well. These are just off the top of my head and I’m sure I’m missing a lot.

7 Likes

I would support a floating staking mechanism based on block fees, similar to Ethereum. As the chain becomes more utilized and adopted, the participants of the network are rewarded for their hard work in this endeavor.

Staking reward equal to block fees up to a maximum threshold of 2% annually. It would likely start quite low % APY, but would have the potential to grow as the participants increase.

4 Likes

plutus want $ARB holders to fix their incompetence, aside from their broken product:

-they couldn’t even organise themselves to submit for round 1 STIP
-they can’t even distribute their own token rewards correctly and had to pause emissions

the proposal is dressed up as beneficial to the arbitrum ecosystem, make no mistake it’s sole purpose is to bail out the plutus team of their atrocious centralized decisions

3 Likes

Hi all,

All comments that relate to the proposal at hand are important, but it should be done in a manner that is civil and respectful to all parties. Comments like “bad reputation”, “scam”, or “bad actors” will be deleted.

6 Likes

Hey, great read!

I think it’s important to note that there’s no indication that Arbitrum’s leader election mechanism to decentralize the sequencer will rely on Proof of Stake. This suggests that if/when Arbitrum introduces new sequencers, they might not necessarily be required to stake ARB to engage in the network’s sequencing operations.

With that in mind, one can envision the DAO holding a vote to elect new sequencers and determine the allocation of sequencer revenues. Options might include a) allocating a portion to infrastructure providers and b) reserving the remaining funds for the DAO itself.

In the case of Arbitrum (i.e active and opinionated governance), such a model seems more logical than any other PoS systems in terms of both governance and revenue distribution. Thus, I don’t really see the link between ARB staking and the sequencer decentralization.

I am not sure this is a very orginal way to differentiate ARB from other L2 tokens. That’s why it’s worth considering other possibilities e.g if during a year, inflationary rewards are directed to the operators managing the sequencer, and a significant portion of the sequencer’s revenues are utilized to burn ARB, the token would result in net deflation by year-end. Under the assumption of a stable market cap, this would likely lead to an increase in the ARB’s price.

Giving power to the the DAO with decisions on sequencer revenues (i.e both fees and MEV) paves the way for different possibilities. These might range from (as mentioned) burning the funds, redirecting them to the treasury, supporting public goods, and so on.

I don’t think it would leave any party out and imho this model should be taken into consideration for this proposal.

5 Likes

After reading the proposal, I’d probably have to agree with others that I’m not sure I fully understand how the lock combats inflation by funding the project through minting more ARB. It will eventually catchup. I’d also add I’d be against effectively using the treasury funds to pseudo-access the minted funds before March 15th, 2024.

I’m not sure I’d support the proposal in it’s current form, as I think this is creating ‘yield’ through temporary supply-side tricks instead of creating a true yield-bearing asset through organic use within the ecosystem. Using the treasury over minting coins would be a more appealing option of the two if I had to choose, but this brings up the issue of how to maximize the value of the funds we have due to opportunity cost.

The question I think to ask is if incentivizing ARB holders to lock their ARB is going to provide value to the network over other methods of growth - grants to attract developers, payments to groups who are actively help Arbitrum succeed, etc. As this is essentially what a proposal like this is doing - paying people to not sell their tokens for a year.

4 Likes

Hey all, I spoke to @stonecoldpat in the DMs about why my previous post was hidden. He explained to me so I am reposting with the requested changes. Please do not hide this one. I have also tried to change my name on the forum so the word SCAM doesn’t appear anywhere. Sorry if that was wrong.

I have removed all opinions in the post and below is only facts


Plutus tell users that plsARB is not pegged because the arbitrum dao gives no yields to the underlying arb, so nobody has a reason to buy it. They are making this proposal so plsARB can have demand as they have forced 9M arb holders to lock forever.

MY OPINION: The Arbitrum DAO should not give them more ARB until they have made due on liabilities to their own users. It is our duty to help the plsARB holders escape this hostage situation as our incentives got used to enable it. We should not do it by giving out ARB yields but by holding plutus responsible for their own problems before we give them more money and yields.

Here is some needed history, backed by facts, without calling plutus a scam. The reader can decide for themselves if the arbitrum dao should consider proposals from this actor.

  1. The original airdrop enabled them to collect 9M $ARB tokens from regular airdrop participants. These participants have spent the past few months held hostage, and are now forced to accept less than 0.45 ARB for every ARB they deposited. This is how they did it:
  • Created a UI to “claim your arb airdrop”. By using the entire flow of this UI, users were not given $ARB tokens after claiming their airdrop, but instead plsARB tokens. The users ARB went into the pls treasury. It wasn’t until later that they added the disclaimer which explained ARB would be forever locked in the plutus treasury, but plsARB would be swappable for arb via an AMM at a market determined rate.

  • Then, if this UI wasn’t enough the plutus dao told users that plsARB is better than ARB because it would earn 2 things. 200% APR in PLS emissions and part of the ARB airdrop that the plutus dao itself got. This is tricky because they used the money the arbitrum dao gave them to entice users into giving them their own arb under the promise of getting paid extra arb tokens.

Today plsARB holders get 2% in PLS, not 200%, and they get 0 ARB yields unless we pass this proposal.

image
Opinion: saying “stake your ARB airdrop” is very different than the truth which would’ve been “forever lock your ARB airdrop and compete with 9M other ARB to exit in a $100k liquidity pool”

  • This exciting offer, coupled with the promise of liquidity if users wanted out, allowed them to suck in over 9 million arb tokens. This would be a great offering and not an issue if these users were happy and didn’t feel that they’d been tricked. But the truth is, thousands of small to large $ARB holders are stuck and begging to get out, but cant. Today these 9M arb are forced to accept less than 0.45 ARB per plsARB because the plutus dao is not doing anything to ensure good liquidity, despite having 100% of the 9M arb sitting in a wallet, fully able to provide deep liquidity at 1.

  • Here is their attempt to damage control the situation, please read the responses from real users to see evidence that users have been tricked and want out. This is just the comments on twitter. It is a fact, not an opinion. Every single day multiple users come into the plutus discord and ask how to get out, only to be met with the team saying something like “too bad you should have read the docs”. Many end up banned and silenced with their arb trapped in the dao treasury: https://twitter.com/PlutusDAO_io/status/1694726055926571071
    image
    image
    image

  1. The team promised deep and well incentivized liquidity. Instead they added $100k of liquidity themselves (this is less than 1% of all the plsARB in existence) and incentivized a 0-1 LP pool which ultimately ensures the price is… not 1 ARB per plsARB. Even if users knew they would have to swap out in the AMM, they would assume deep liquidity would mean far far more than 1%.

  2. No voting: plsARB holders have no rights to use the underlying ARB to vote. plsARB holders cannot vote for themselves to be freed, they cant even lobby for pls holders to free them as plutus advertises itself as a dao but has no voting.

The team just decides how to wield the DAO arb, and uses it how they please (https://twitter.com/PlutusDAO_io/status/1702666102285963596).

Additionally, in the recent STIP grants votes for the arbitrum DAO the team used the ARB underlying the user owned plsARB to vote yes for teams they like. PLS holders had no say, plsARB holders had no say. The plutus team just voted to give their friends more ARB tokens using tokens that belong to ARB airdrop participants. (opinion: this is poor governance for our dao)

  1. Discord users have made suggestions to repeg plsARB but the team will not accept any solution that involves redemptions. (opinion: many of these solutions are reasonable and would work. They are not short term minded)

  2. To make matters worse, the team stole a significant amount of the last ARB airdrop from the PLS DAO.

  • There was NO dao vote to give the team this supply
  • This was over $700,000 USD which they gave to themselves (already completed and sent to their own wallets)
  • the entire 9M of plsARB/ARB that they took from users got LESS of the airdrop than the team took for themselves

  1. Opinion/question: Ask yourself, why is there even a “liquid locker” for $ARB when $ARB cant be locked anywhere? They need to get us to do this because they don’t want to be responsible for the plsARB/ARB peg issues they created, and could easily solve.

Overall the plutus dao used the last airdrop to enrich themselves, trick users, and steal governance power in arbitrum. Tons of ARB airdrop holders are trapped and have no voice or vote to help themselves. Its time we help them or at least ensure we don’t enable more of this.

The plutus dao will likely give poor responses such as:

  • “PLS holders can vote to allow plsARB holders to redeem” (answer: pls holders would never do this as they want to keep all the arb underlying governance for themselves. But if even if they wanted to, there is no voting)
  • “We always said leaving would be at a market determined rate” (answer: this is a technicality they use to wash their hands of this scheme. Reality is they said you could swap out with deep liquidity but that’s non existent and mispriced.)
  • “We paid pls and arb emissions to get this arb, why would we give it back?” (answer: they could easily add a small redemption fee to cover that cost, as highlighted in discord by many)

Plsarb
0x7a5D193fE4ED9098F7EAdC99797087C96b002907

Arb underlying plsarb
0x180Bb71666C4de074b4daA17Ed579aFcB8eB2C25

8 Likes

Blockworks Research supports adding an ARB staking mechanism funding the trial to the tune of 1% of the treasury. We believe this will create a worthwhile supply sink and source of demand for the token. We do have two questions:

  1. How might this impact ARB liquidity in exchange and lending markets?
  2. Is 12 months the right trial period?

While we objectively support the proposal without prior knowledge of the plsARB situation, we do believe it pertinent for the team to address the comment above.

6 Likes

The reply here is far from factual and we’re extremely disappointed to see misinformation and malicious targeting of individual projects spread on public governance forums, especially when the reply is not in any way related to the actual proposal that is supposed to be discussed. This proposal is not about Plutus or plsARB - it’s about creating an ARB staking mechanism beneficial to everyone.

That said, accusations of this calibre are not a matter we take lightly, so to avoid further confusion and misunderstanding we’ve prepared a response with all the facts below. For a truthful account of what has happened so far with plsARB, we recommend everyone reads the thread linked here.

To add more context for those interested, the below is a long-form response to a previous forum post that was targeting plsARB and Plutus. That post has long since been deleted for misinformation and false claims, but our original reply below is still relevant since the topics introduced are very similar. The quotations are text from the original forum post and the replies below them largely address all the accusations in the reply above.

This is the only reply we will give related to plsARB. plsARB has nothing to do with this proposal, and we encourage everyone to focus on the proposal at hand instead.

“To illustrate, Plutus has locked up various tokens such as $DPX and $JONES. The precise method of generating revenue from this arrangement remains unclear. Plutus is granting users rewards in the form of $PLS tokens to incentivize deposits. Once a user has contributed to a Plutus token, the conversion is permanent. The sole exit route involves selling the wrapped token on a DEX. These wrapped tokens, on average, are trading at less than 60 cents on the dollar.”

We are extremely clear and upfront about how plsAssets function in our docs. plsARB functions exactly the same as any other plsAsset. The ratio between an asset and a plsAsset varies, predominantly according to the user’s collective demand for the yield of the underlying asset.

“When Arbitrum introduced its token, Plutus swiftly seized the opportunity. The network encountered difficulties handling the surge of users seeking to claim tokens simultaneously, prompting Plutus to establish its own external app page for users to claim through.”

We had an external app page setup for claiming prior to the airdrop that had been prepared for launch over the weeks leading up to the airdrop. It was not created as a reaction to the network surge. This page was created as a courtesy for Plutus users who were interested in converting to plsARB, as a reaction to the surge and people being unable to claim through Arbitrums native airdrop claim page our page was disseminated on Twitter.

“Additionally, Plutus introduced its wrapped version of $ARB, namely $plsARB. Details about plsARB remain scarce, including how its value will accrue and how the Plutus team will utilize user voting power in governance, among other aspects.”

We have clearly stated in our Discord that we are preparing a proposal that will introduce native value accrual to the ARB token and thus directly benefit the entire Arbitrum ecosystem, plsARB and all ARB token holders. In addition, sequencer fee distribution has been long talked about as a potential value accrual mechanism for the ARB token, even being discussed before the token itself was released. We’ve also made it abundantly clear that the voting power of all assets will be transferred to bPLS holders. Until then we will vote in the best interest of Plutus. Once bPLS governance goes live users will have the ability to put forth a proposal that disbands or changes the mechanics around plsARB.

“In the course of the airdrop claiming process, Plutus enabled users to “stake” their ARB tokens for immediate conversion to plsARB. No warnings or disclaimers were provided about the irreversible nature of this process (although the site has been updated since, there are several screenshots captured during the original airdrop that prove it, I will allow the community to validate these claims too).”

Users had the option to only “Claim” their airdrop as well as the option to claim and convert to plsARB with ample disclaimers - with even more added after taking in initial feedback. These were two distinctly different functions as can be seen in the image below. Key to note that 7.5M ARB were added after the additional disclaimers were added.

“Users were enticed with appealing rewards for converting their tokens, without any indication that this would result in irreversible locking. This manoeuvre allowed Plutus to lock more than 10 million $ARB tokens. Plutus has not taken steps to introduce any form of community voting on Arbitrum proposals.

The fact that converting in to plsAssets is irreversible is detailed both in our docs and on the plsARB Convert UI, as seen in the images below.


“Consequently, Plutus retains full control over the allocation of the 12 million ARB tokens. It’s worth noting that Plutus has ‘used’ 45% of their DAO airdrop, predominantly to compensate the team.”

This is patently false - all the 10 million ARB that have been converted to plsARB are in a smart contract, and will be max-locked for ARB staking or another similar mechanism once it’s live. This mechanism is identical to any other plsAsset.

As for the DAO airdrop, Plutus has not used 45% of the DAO airdrop to compensate the team. Plutus has used 18% to compensate the team, with the majority of the DAO airdrop going to incentivize platform use. Most recently Plutus used 300K ARB to buy back plsARB from the official plsARB/ARB LP to distribute to lockers. This is all confirmable on-chain.

“Presently, Plutus started liquidity for plsARB, but the token is trading at a 65% discount compared to ARB. The team has decreased incentives for plsARB holders and has continually offered new assurances about making users whole. Users have incurred substantial losses while the Plutus team has amassed voting power. The team has yet to clarify its internal governance process. Users have no say in how Plutus votes with tokens that aren’t theres.”

The reward structure was clearly laid out prior to plsARB being introduced in launch materials. Plutus does not - and has never guaranteed - that plsAssets will trade at a 1:1 peg. This has been always readily available in our documentation.

5 Likes

As someone who believes in the importance of being open to new ideas and experimentation, I find this proposal both intriguing and promising. The planned staking mechanism could offer significant benefits for long-term ARB token holders, creating a positive feedback loop for those involved in Arbitrum.

The innovative nature of this proposal is particularly appealing. It acknowledges the current gaps in knowledge around sustainable staking mechanisms and suggests a structured way to gather the necessary data to address those. The 12-month experimental phase seems a well-thought-out approach to collect specific and relevant data, which will aid in refining the staking model, ultimately leading to a more stable incentive system.

I view the involvement of the Arbitrum Coalition as another notable element that brings credence to this venture. I would lean on the expertise of Gauntlet, Blockworks, and Trail of Bits to help me understand the long term ramifications of this change.

All in all, I am eager to see how this initiative unfolds and am prepared to support this measured yet forward-thinking approach. This proposal aligns with the spirit of exploration that is among Arbitrum DAO’s best qualities.

6 Likes