Proposal: Activate ARB Staking (FINAL)

[AbdullahUmar]

Below is some feedback from the Uniswap DAO’s Arbitrum governance team, composed of @juanbug and @AbdullahUmar:

@AbdullahUmar

Activate ARB Staking

Vote (Ranked Choice Voting):

1. Do not fund staking
2. Fund staking with 100M ARB
3. Fund staking with 125M ARB
4. Fund staking with 150M ARB
5. Fund staking with 175M ARB

Although the premise of this proposal is that it will create long-term ARB token holders, this activity is entirely incentivized by inflation and should therefore be discounted significantly–this is simply how all incentive programs should be viewed, especially this staking initiative. What makes an ecosystem thrive is the quality of the dapps. That’s why we were in favor of the STIP proposal. Driving users to use dapps is a more effective way to distribute treasury funds, as opposed to just paying token holders. Even though the hope is that a handful of the new ARB holders become long-term investors and/or Arbitrum ecosystem participants, stickiness is very difficult to measure. Instead, more sticky demographics should be rewarded, like builders and devoted community members, which is currently being done via the grant and STIP distributions.

Investors should, however, at some point be compensated–but a pure inflation play, without recognizable ARB utility, isn’t the best way to facilitate that goal. Sharing decentralized sequencer revenue with $ARB stakers is much better utility and can be implemented when the time is right. Incentivizing sequencer stakers is real utility, and that’s an example of where the DAO should designate its future incentive allocations.

Plus, the $ARB token will suffer in other ways because of the alluring staking APRs. Who would want to lend $ARB or be a liquidity provider if you can just stake for a better return? If this proposal passes, the DAO should consider ways to prevent an $ARB drain from dapps. This can be addressed, for example, via protocol owned liquidity provision for particular Uniswap pools. As representatives of the Uniswap DAO and delegates in the Arbitrum DAO, we would like to explore this option.