Proposal: Distribution of DAO Revenue to ARB Token Holders
Objective: To distribute a portion of the accumulated revenue from the Arbitrum DAO to ARB token holders. This will align community incentives and give ARB a purpose beyond a “worthless governance token”.
Details:
As stated in recent tweets from Arbitrum, the DAO has accumulated ~3,352 ETH in revenue from L2 base and surplus fees.
The distribution of revenue will be proportional to the amount of ARB tokens delegated by each holder.
The distribution can be triggered periodically in the future to ensure timely rewards for the community.
Benefits:
Distributing DAO revenue to ARB token holders will align community incentives and create a more engaged and committed user base.
This proposal will give ARB a purpose beyond a “worthless governance token”, as token holders will have a direct financial stake in the success of the network.
Implementation:
The Arbitrum team will need to create a mechanism for distributing the revenue.
The distribution can be triggered periodically by a smart contract to ensure timely and fair rewards for the community. ARB holders will need to claim.
The community will need to be informed of the distribution mechanism and timeline to ensure transparency.
Only delegated ARB tokens will be eligible to receive the revenue distribution.
Conclusion:
Distributing DAO revenue to ARB token holders is a logical next step for the network, as it aligns community incentives and gives ARB a purpose beyond a “worthless governance token”. This initiative sets Arbitrum apart from other ecosystems and showcases our commitment to creating a more equitable and prosperous network for all.
I support this proposal. Treasury has already been allocated 42.78% $ARB tokens which can be used to boost the growth of the arbitrum ecosystem. So, incentives for the ecosystem have already been taken care of.
Large no. of $ARB tokens will come into circulation in future, which were allocated to the treasury, DAO, investors, team members. Holders of $ARB token will get diluted. Revenue should be distributed to $ARB holders so that they have other incentives other than governance to hold $ARB tokens.
Economic sustainability is very crucial in the long run for blockchains. Only Ethereum & BSC have managed to get close to being sustainable. Revenue distribution will play a key role in Arbitrum’s economically sustainablity.
Sorry for the cynicism, but I think that distribution simply from holding $ARB is going to be extremely inefficient and a regulatory nightmare.
I’m all for the DAO actually owning the revenue they generate, but turning $ARB into a security (owning the token makes you profit off the work from others) is not a good idea. This revenue could be distributed to people providing important services or stakes to the wider ecosystem instead and allow for sustainable growth. This is especially the case because the OP seems to be suggesting to simply distribute the tokens using disperse, leading to a lot of important revenue potentially being lost for little economic benefit.
$ARB first and foremost is a governance token, and its main role is protocol governance and ownership.. Let’s find a way to direct revenue to the people that create the best value!
I think this could be good for $ARB holders. But the proposal needs to get into further detail on how this should be done. Only token delegation may not be enough to qualify for a revenue share. Perhaps some sort of lockup or staking format could be explored, further incentivizing governance participation.
Also what about actual delegates? Should they be getting a bigger/smaller chunk of the revenue / $ARB they represent? The math needs to be explored and proposed. Happy to collaborate with someone who has experience in this area.
i think the ship has already sailed on the regulatory nightmare stuff. Arbitrum team already runs a centralised sequencer and doesn’t comply with AML or any other law that most probably applies.
why should a DAO/chain act in the interest of 1 countries regulation anyway? I’ve never heard an Ethereum core dev state regulation as a reason for not adding something that benefits ETH holders financially.
Let’s find a way to direct revenue to the people that create the best value!
yeah lets reward people that create the best value!.. with the massive ARB treasury balance we have.
the more valuable ARB is, the more we can reward! we can’t just expect ARB to have a large enough value to let us fund projects if we never put any value back into it.
$ARB first and foremost is a governance token
On the topic of DAO tokens with no value outside of voting, i think Vitalik said it best
"The notion of “governance rights” as a narrative for why a token should be valuable is pathological. You’re literally saying “I’m buying $X because later on someone might buy it from me and a bunch of other people to twist the protocol toward their special interests”
As a regular individual, “pay $500 to get a 0.0001% chance to influence the outcome of some votes” is just not a good trade. The only people for whom it is a good trade are multimillionaires and hedge funds (including attackers)."
Love it! Let’s make sure the rewards go through mechanism of users stake > earn rewards. This is solely for tax purposes. If it were airdropped, it is taxed upon receipt at full value and then again at sale. If it is given for staking, it’s earned as interest income. The latter being much more favorable from a tax perspective.
Thank you for getting this conversation started! I agree with the notion that only tokens active in governance should be considered for sequencer revenue distributions if we go down this path. Potentially, these wallets should be required to reach other KPIs as well, such as transacting on chain, bridging in value, and maybe other barometers too.
In my opinion, an in-depth broader conversation is required before something like this goes up for vote. My main question, can sequencer revenue be better utilized reinvested into Arbitrum’s future? Given the treasury’s substantial value + foundation + grants program (soon), returning some protocol revenue to token holders is likely fine. That being said we should have a conversation and I’m sure many disagree with me on this topic.
Additionally, $8M is probably not a substantial enough sum of money to return to token holders. 166.93M ARB is currently delegated. That means less than 5c in ETH per ARB, assuming no more tokens get delegated, which they would if something like this passes given over 1b are in circulation. Assuming the number of ARB delegate reaches half of the circulating supply, this would mean 1.25 cents per arb.
I also think it is important we take into account regulatory scrutiny. There are many novel techniques utilized by other DAOs that attempt to achieve regulatory arbitrage and i think a significant amount of research on this topic is required before we consider implementations. For example buy and burn, gas rebates for ARB token holders, or many other potential mechanisms to give token holders value without bringing as much attention in the US.
I have always wondered how the DAO could incentivize governance participation. It seems unfair to expect
delegates to spend so much time discussing proposals & voting,
community to come in and passionately share their thoughts for/against proposals as well as buy governance power off the secodary market with their hard-earned money, and
core contributors to develop & implement those proposals in addtion to regular product management (for which they are paid separately but still).
Even if we set aside the distribution to ARB token holders matter, what would be the use case for this revenue? Especially considering the DAO already has 700m ARB earmarked for operational & ecosystem growth purposes? Perhaps its better to discuss and get clarity on current plans for this revenue before figuring out if/how to give it to ARB holders.
thanks for the well thought-out response, i agree with your points but just wanted to add to this
Additionally, $8M is probably not a substantial enough sum of money to return to token holders. 166.93M ARB is currently delegated. That means less than 5c in ETH per ARB, assuming no more tokens get delegated, which they would if something like this passes given over 1b are in circulation. Assuming the number of ARB delegate reaches half of the circulating supply, this would mean 1.25 cents per arb.
A 1% “dividend” is not so insignificant imo but more importantly it sends out a strong message. We don’t have the credibility of the stock market so the number one question that gets brought up when talking about ARB is “why would i hold a governance token?”, even if they’re bullish on the network. Doing revenue sharing straightens out the incentives and allows people to invest in the network if they expect transaction volume to increase in the future.
Which is what we want because at the end of the day, its investors buying ARB that give us our huge treasury balance allowing us to fund ecosystem improvements.
im against giving a bigger chunk to delegates as it gives a financial incentive for voting on what will be seen a popular and get you more voting power, rather than whats best for the network.
Delegates represent the community, and entities like @BlockworksResearch and @PlutusDAO invest a lot of resources & thought while engaging with proposals. Someone should compensate them for their time.
Whether they vote for or against a proposal should have ZERO impact on their revenue, what matters is participation. They can vote against each & every proposal for all I care as long as they have a rational opinion and a valid suggestion to back their vote.
I agree. This is a complex topic that should be discussed in detail with entire community and some actual legal & financial experts involved to ensure a safe, valuable & sustainable path forward.
I don’t think focusing on the current revenue is important, that number changes literally every passing minute. What’s important is to ensure a reasonable path forward for the utilization of that revenue, be it distribution to holders/stakers, reinvestment into the ecosystem, buybacks, or any combination of these.
I believe @Westie was quite interested in this discussion in an older thread, so perhaps a good start to pull him in for suggestions/thoughts.