Proposal: Activate ARB Staking (FINAL)

[brandonkumar]

We at Layer3 are in full support of the proposed ARB staking activation. It’s evident that thorough consideration has been given to community feedback, especially with decisions such as forgoing the token mint and focusing on treasury funding for staking.

The involvement of the ‘Arbitrum Coalition’ in monitoring the staking mechanism’s impact over a year promises informed refinements in the future.

The proposal’s approach to utilize trial and data-driven insights to optimize ARB staking aligns perfectly with the DAO’s innovative spirit. We’re excited to see the positive impacts this will bring to the Arbitrum ecosystem.

[stonecoldpat]

Hey all,

Lets keep all discussion focused on the proposal and not the authors. Activating ARB staking is a large topic that deserves extensive discussion. We will moderate along these lines.

[aj_eth]

I’m in favour of supporting an ARB staking mechanism, Plutus have been on Arbitrum since the beginning and in my opinion have the best interests of the chain in mind. I echo @krst thoughts around starting with a pilot version then iterating from there!

[strategicreserve]

Interesting proposal. It’s appropriate to go with a trial period to see how this staking mechanism works in the grand scheme. We would support trialing the 1% option.

[EynSoph]

I support experiments like this to push the innovation needle forward. As mentioned by others, the addition of the Arbitrum Coalition to oversee this is a nice touch, and this proposal should only move forward if the funding for the Coalition passes. I would also err on the side of caution and see the 1% option used for this.

[pedrob]

Hi, thank you very much for setting up this proposal.

I have a couple of questions/comments.

Why do you believe the experimental time frame should be 1 year? And what would the follow-up plan would be if this is considered to be successful? In this regard, what would the “success” metrics be?

I believe that something that is missing in this proposal is to mention the main reason for ARB token to exist at all: It is a governance token that allows its holders to participate in the Arbitrum DAO’s on-chain governance protocol. It is not just a financial token meant to earn yield.

Since governance tokens also function as financial products, I generally support providing financial incentives to their holders for retaining them as long as they utilize them for their intended purpose. With this approach, you can effectively compete against the incentives that encourage using ARB for leverage or other financial gains.

In my view, our strategy should not merely involve distributing the DAO funds to ARB holders. Instead, we should leverage such mechanisms to encourage and incentivize active participation in governance

Currently, Arbitrum DAO has a very active governance, primarily because of the vast amount of capital available for funding proposals. However, as the supply of this capital decreases, the incentives to participate in governance will also diminish. I believe that now is the time to introduce long-term proposals and mechanisms that will sustain participation in governance and benefit the holders and governance participants in the long run.

One alternative to this is to establish a mechanism that allows only those users whose ARB is delegated to be part of this staking system. This approach will direct rewards towards long-term holders as opposed to yield farmers who are not aligned with the protocol. I believe that this goal should hold more significance than merely increasing the number of individuals farming the token.

In doing this, a mechanism could be established that promotes decentralization. For instance, by directing more yield rewards to holders who delegate their ARB voting power to active delegates outside of the top 10 or 20 in voting power. These are just a few ideas to consider openly.

I believe that the focus of our discussion should be on determining how to allocate funds in a way that ensures sustained participation in future governance. We should not merely concentrate on a method of funds distribution.

*I am a member of SEED Latam, but this opinion is my own personal view and does not reflect that of the Arbitrum’s delegation.

[OB1]

I fully support this especially with a lock up. It will show who is committed to the project long term and could also be a valuable indicator for any future airdrops. Meaning, if there is a future airdrop staking could be beneficial for farmers. This would help decrease token sales and keep token price up. Keeping token price up brings perceived value to the network.

[Darius]

Staking and value accrual to the ARB token is essential if the DAO and the token are to maintain stability in the coming months and years. It benefits and aligns long term holders whilst disincentivising short term thinking.

Look forward to seeing further debate on this subject.

[mhiztasolid]

Wonder why the post was hidden. Sorry about that man

[mhiztasolid]

I think you might be right on this too

[Scalene]

As a blockchain developer, I’m still in support of healthy inflation tactics (see reply)

[LodestarFinanceDAO]

The Lodestar DAO recognizes the continuous efforts made by various contributors, including our friends at PlutusDAO, to enhance the utility of the Arbitrum DAO Governance token, $ARB. Our collective vision has always revolved around strengthening the Arbitrum ecosystem in the most sustainable and beneficial manner possible.

We are aware that the topic of inflationary yield can be a point of contention in many DeFi circles. Yet, it’s worth noting that when approached with caution, it can serve as a powerful tool to alleviate sell pressure and incentivise participation. In that spirit, while the Lodestar DAO remains hopeful for a future where $ARB staking yields are distributed from the DAO’s or Sequencer’s organic revenues, we believe that the current Plutus Proposal serves as an interim measure that aligns with our shared goal.

The Lodestar DAO supports this proposal.

[englandzz]

I have thoroughly reviewed the “Activate ARB Staking” proposal and would like to share my thoughts and opinions, hoping to contribute constructively to the ongoing discussion.

1. Commendable Innovation and Community Involvement

Firstly, I commend the team for their innovative approach and the effort put into creating a comprehensive proposal that aims to enhance the utility of ARB tokens and further align the interests of token holders with the long-term success of the Arbitrum ecosystem. The inclusion of a robust governance structure and the use of ranked choice voting are particularly noteworthy, as they ensure a democratic and inclusive decision-making process.

2. Duration of the Locking Period

The choice of a one-year locking period appears to be a balanced and thoughtful decision. It provides a meaningful commitment from token holders while avoiding the potential drawbacks of longer lock periods. However, I would appreciate more clarity on how this specific duration was determined and whether shorter or variable lock periods were considered.

3. Regulatory Compliance and Security Concerns

The proposal’s design, which avoids revenue sharing and funds staking rewards from the Treasury, seems to be a prudent approach to addressing potential security concerns and ensuring regulatory compliance. Nonetheless, I believe it is crucial to seek expert legal advice to navigate the complexities of securities laws and mitigate any potential risks associated with token classification.

4. Impact on the Ecosystem and Token Utility

Introducing a staking mechanism has the potential to significantly boost interest in the Arbitrum ecosystem and enhance the utility of ARB tokens. By rewarding long-term holders and aligning incentives, we can foster a more engaged and committed community. However, I urge the community and proposal authors to continuously monitor and assess the impact of these changes to ensure they yield the desired benefits and do not inadvertently create imbalances or vulnerabilities.

While I support the initiative to introduce a staking mechanism and believe it has the potential to bring significant benefits to the Arbitrum ecosystem, it is paramount to proceed with caution, ensuring legal compliance, and maintaining a keen eye on the mechanism’s long-term impact. I look forward to continued discussions and am eager to see how this proposal evolves in response to community feedback.

[Goodo]

I think this is a bad idea. If we want staking, it should be counted from the revenues or profits from the protocol and not from the total ARB token supply.
The Arbitrum DAO treasury should be used for building and development, not for paying “interest” on locking. It is always better to spend on investments than consumption.
The number of ARBs is limited and this solution has no future. Paying out a percentage of earned profits in the form of staking is another matter.

[ameeth]

We at Timeswap are supportive of the ARB staking mechanism mentioned above post feedback from temperature check & RFC. As a leading layer 2 ecosystem, this proposal further cements Arbitrum as the hub for innovative experiments. We appreciate the efforts put in by the Plutus team into this proposal and for patiently engaging with the community. We believe this proposal is a net positive for the Arbitrum ecosystem.

[Goodo]

OK, but staking rewards should come from revenues and not from ARB token supply. This is a complete wrong concept with no way to continue in the future.

[raho]

Hello @Plutus,

First, I’d like to note that I appreciate the effort and thought you’ve dedicated to crafting this proposal. I think it’s vital for the DAO to recognize and appreciate members who initiate and engage in meaningful discussions such as these.

That said, I’d like to provide some constructive feedback on some areas where I believe this proposal could be improved:

@dk3

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.

Echoing @dk3 and others, I’d like to see more depth regarding the potential impacts of implementing this proposal. The staking mechanism for the ARB token, as currently proposed, seems to lack substantial ‘utility’. I might be overlooking something, but the best interpretation I can find is that it could potentially offer an alternative method for ARB distribution. However, even if the DAO decides that staking in the locker is a viable distribution strategy, I still question its necessity, given the recent STIP distribution.

@Plutus

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.

This image suggests APRs ranging from 15%-27% for staking with half of the circulating supply locked. While these rates seem competitive, I urge the DAO to consider the broader implications of locking such a substantial portion of ARB’s circulating supply. Should liquidity become an issue, with staking incentives out-competing LP fees/incentives, the repercussions could be significantly adverse for ARB and the broader initiative.

[keone]

I think that Cobie’s 2022 post on timelock staking (i.e. staking that doesn’t secure a network or receive a portion of network fees) is absolutely worth reviewing here.

[Goodo]

Why do you calculate the amount of $ARB for staking from total ARB supply and not from revenue? This makes absolutely no sense because total supply is growing rapidly and this is spending funds that should be allocated to development and investments.
ARB for staking should be calculated as a percentage of current revenues/profits.

[Michigan_Blockchain]

Michigan Blockchain Does Not Support this proposal to fund the addition of an ARB staking mechanism. While we believe that the Arbitrum DAO should continue to experiment with various mechanisms to provide utility to $ARB, this proposal in its current design will result in overall negative consequences to the ecosystem and token. There are currently 1.275 billion $ARB tokens in circulation. This proposal, therefore aims to introduce an additional 7.8-13.7% more tokens via a staking module. A minimum of 7.8% APR for users to passively accrue will certainly appeal to nearly all token holders. This will result in the draining of liquidity for $ARB across exchanges, reduce usage as collateral on money markets such as Radiant, and set a precedent for the $ARB token that is not sustainable.

While this opens the door to future developments of $ARB utility via staking, we should be striving to provide opportunities to make $ARB more sustainably integrated with the ecosystem, and this proposal will remove it entirely. We recognize it is important to reward long-term holders of $ARB. This is an intriguing experiment and we believe a similar staking mechanism - with reduced allocation so it does not offer the highest APRs across DeFi - that is paired with a revenue-generating mechanism - such as Protocol-owned-liquidity with Uniswap and Camelot - that can all be monitored and analyzed by the Arbitrum Coalition would set the framework for further sustainable experimentation in $ARB utility.

Given this, we will be voting Against this proposal in the temperature check with our 2nd through 5th choices being allocating 100MM, 125MM, 150MM, and 175MM, respectively.