Flashvote: Arbitrum Treasury Turbulence

The most pertinent issue for the DAO currently is maintaining its treasury and diversifying it for future headwinds. These proposals are novel, but may be a step in the wrong direction for the DAO in its current state. ARB staking is alluring, but the proposal fails to take into account that the Dencun upgrade from earlier this year decreased the surplus fees to 8,000 ETH per year, and this estimate is liberal. During a bear market there is still the prospect that this could go substantially lower, and Arbitrum delegates in a precarious situation.

As for increasing gas, this is a particularly tricky subject that should probably be subject to more research, especially on the elasticity of activity on the network. If fees spike, there might be a net decrease in the network activity, especially for trading bot activity, which may be an especially high elasticity party. At the same time, Arbitrum needs to be careful about how it approaches gas increases in reference to competition. Other networks that are approaching similar gas costs could poach more users or applications while activity decreases. Arbitrum needs to be careful about how it approaches gas increases in reference to competition. Other networks that are approaching similar gas costs could poach more users or applications while activity decreases.

Lastly, we are pleased to see that ArbitrumDAO will have more paths to revenue generation, but there remains a diversification issue in the treasury. While an ARB burn may be beneficial in the possibility that $ARB staking is implemented, then the DAO forgoes bringing more ETH into the treasury, which is key for Arbitrum’s fraudproof security mechanism and for having sustainable diverse yield for the future. With this in mind, we believe that collecting ETH from the Timeboost upgrade is the best possible solution.

These proposals are a step in the right direction for treasury preservation. ArbitrumDAO should carefully review its recent expenditures and prepare to safeguard its treasury against potential risks during a bear market. The DAO has primarily funded ecosystem initiatives to aid in the development of the network. In our view, ArbitrumDAO should slow down on its spending and turn its attention toward treasury sustainability. The recent market downturn and price action of ARB has possibly led to a push for utility to be added to the token. While we agree that the ARB token would benefit from some utility in the long run, we do not think that that is the most pertinent issue at this point. ArbitrumDAO needs to prepare for a possible bear market, and the best way for it to position is through diversifying its treasury with stablecoins and ETH.