Arbitrum DAO Proposal: A Heated Debate Over ETH Allocation
The Arbitrum decentralized autonomous organization (DAO) is currently in the midst of a heated debate following a new proposal introduced by its Growth Management Committee (GMC). The proposal, which suggests allocating 7,500 Ethereum (ETH) to external DeFi projects, has sparked a wave of criticism from the community. Some see it as a smart diversification strategy, while others argue that it undermines Arbitrum’s native ecosystem.
The Proposal: Diversifying Treasury Holdings?
The proposal outlines an investment strategy where 7,500 ETH from the Arbitrum DAO’s treasury would be allocated to established DeFi protocols outside the Arbitrum ecosystem. According to the GMC’s plan, 5,000 ETH would be invested in Lido, a leading liquid staking protocol, in exchange for 5,000 wstETH (wrapped staked ETH). The remaining 2,500 ETH would be directed to Fluid, a lending platform within the Arbitrum ecosystem, to help increase liquidity and support ecosystem growth.
The GMC’s strategy aims to generate stable returns from these investments. Here’s a breakdown of the expected yields:
- 5,000 ETH investment in Lido: 3.10% from Lido staking rewards, 0.62% from Aave protocol yield, and 0.82% from wstETH deposit incentives (totaling 4.54% yield).
- 2,500 ETH investment in Fluid: A projected 1-2% native ETH yield while providing liquidity for the Arbitrum ecosystem.
The proposal was approved in an earlier vote on Tally and is set for a Snapshot vote on February 27, 2025. Token holders will vote to approve or abstain, with a simple majority required for approval. If the vote does not pass, the GMC will adjust the proposal based on community feedback.
Community Backlash: Why Not Invest in Arbitrum Itself?
The proposal has ignited frustration among many members of the Arbitrum community, who argue that some portion of the 7,500 ETH should be invested in Arbitrum-native projects. Critics believe that investing in external DeFi protocols might undermine the long-term growth and development of Arbitrum itself.
Entropy Advisors, for example, criticized the DAO for failing to maximize its ETH holdings to drive growth within its own ecosystem. The advisors argue that Arbitrum should be focusing on internal projects to generate yield and foster partnerships.
Delegate JoJo voiced concerns about the proposal, stating that even a small allocation to Arbitrum-native projects could have been a powerful gesture to attract developers to the ecosystem. JoJo emphasized:
“Our DAO is at an inflection point. I personally expect all participants of the DAO, especially the ones in active roles, in knowing how bad the perception of Arbitrum is out there.”
Similarly, another delegate known as ultra expressed disappointment on X, criticizing the lack of Arbitrum-native projects in the proposal. Ultra pointed out the irony, stating:
“With all the debate about ‘EF not having skin in the game,’ Arbitrum had a proposal to allocate 7,500 ETH from its treasury to its DeFi ecosystem. The results are out, guess what? None of the selected projects are Arbitrum-native.”
In defense of the GMC’s decision, the committee argued that the proposal was driven by a desire for stable returns and security, which could help build a solid foundation for future growth.
Impact on Arbitrum’s Native Token (ARB)
Despite the proposal’s intentions, the reaction from the community comes at a time when Arbitrum’s native token, ARB, has been struggling in the market. Over the past month, ARB has lost 35.5% of its value, and in the last seven days, it has dropped another 9.1%, currently trading at $0.4501.
However, despite the price decline, ARB’s trading volume has surged by 57% in the last 24 hours, reaching $186 million. This increase in trading volume indicates heightened market activity and renewed interest in the token, even as the price struggles.
Conclusion: A Pivotal Moment for Arbitrum DAO
The ongoing debate surrounding the proposal to allocate 7,500 ETH to external DeFi projects highlights the tension between pursuing stable returns and prioritizing the growth of Arbitrum’s own ecosystem. While some argue that investing in outside projects could strengthen Arbitrum’s position in the broader DeFi landscape, others feel that it’s crucial to invest in internal projects to foster a thriving and sustainable ecosystem.
The outcome of the February 27 Snapshot vote will be a pivotal moment for the Arbitrum DAO. If the proposal is rejected, the GMC will need to reconsider its approach and potentially reallocate funds to Arbitrum-native projects. How the community responds could shape the future direction of Arbitrum and its role in the rapidly evolving DeFi space.
Ecosystem
Research
News Network
About