GovHub: October Update

Governance is critical to the operations of decentralized protocols, and we saw many notable proposals surface throughout the month of October. These proposals were first highlighted in GovHub, but some deserve a deeper look considering the potential impact of the proposed changes on both the protocols themselves and the broader ecosystems in which they operate. Below, we highlight the eight most important proposals across our covered assets and provide our insight on how the protocols may be impacted.

Arbitrum: Activate ARB Staking

Summary: On October 6, 2023, the Arbitrum DAO voted YES to activate ARB staking using funds (100M ARB) from the community treasury. The proposed options included 100M, 125M, 150M, or 175M ARB tokens to be allocated towards staking rewards whereby users could lock tokens for up to 1 year, with a longer lock increasing stake weight. Stakers are allowed to exit their locks prematurely but are subject to a penalty ranging between 0%-60% depending upon the length of time remaining on the lock.

Analyst: Boccaccio
Vote Period: Oct 30, 2023 – Nov 6, 2023
Analyst Position: “For”
Result: “Fund staking with 100M ARB”

Analyst Insight: ARB staking aims to create future utility for ARB. The proposal frames the staking feature as a building block for potential future revenue-sharing initiatives. Following more regulatory clarity, the staking/locking mechanism will be beneficial as staking contracts and reward distribution mechanisms will have been battle-tested and in place. 

In addition, the staking mechanism gives utility to the ARB token and acts as a supply sink. While the Arbitrum STIP is expected to incentivize the use and activity of Arbitrum, it will also result in substantial emission of ARB tokens to users (50M ARB represents approximately 4% of the current circulating supply). The introduction of a staking mechanism could offset this emission, at least during the months in which ARB rewards have to be distributed by protocols (by January 31, 2024).