A governance proposal to create a staking mechanism for the ARB token, native to the Arbitrum One scalability network, has been approved in an initial vote by the project's governance.
The Arbitrum community has voted in favor of the governance proposal Activate ARB Staking, which seeks to activate a staking mechanism that allows ARB holders to obtain rewards with the token for one year.
According to the proposal, the creation of a staking mechanism will incentivize long-term holding of ARB and distribute rewards to token holders from the Arbitrum DAO treasury, which has seen exceptional growth to date, the proposal stated.
“The Arbitrum DAO treasury is growing rapidly, but that growth is not currently shared with token holders.”
As explained in the governance proposal, the Arbitrum DAO administers a treasury of $3.540 billion dollars Currently, to which are added almost $69,5 million dollars of the unclaimed airdrop from ARB, which were transferred to the DAO in September of this year.
The proposal also notes that the activation of an ARB staking mechanism will become a fundamental component for Increase the utility of the token, through future updates.
What does the governance proposal for enabling Arbitrum staking include?
First, the governance proposal proposes to create a staking mechanism that will be funded by the DAO treasury funds.
Initially, the authors of the proposal aimed at minting new tokens to fund these rewards. However, for reasons of simplicity and security, they decided to forego this idea and opt to fund them through the Arbitrum treasury. As stated, DAO members must vote between use 1,75%, 1,5%, 1,25% or 1% of the total supply of ARB tokens in the treasury community, to be used as ARB token staking rewards.
The proposal also calls for the creation of an audited smart contract that will manage and distribute staking rewards among participants over 12 months.
In the initial vote, over 66% of DAO members voted in favor of allocating 1% of the tokens held by the DAO, or 100 million ARB, as staking rewards.
Furthermore, the authors of the governance proposal highlighted that the ARB staking mechanism will be completely independent of the network's subsidy framework and that both can and should coexist.
“We believe that the Arbitrum (ARB) token needs a staking mechanism.”
Similarly, the authors of the proposal pointed out the need to create a coalition, composed of the firms Gauntlet, Blockworks and Trail of Bits, in order to collect real data on the impact and benefits of staking for the development and consolidation of the project. This will help create a complete and detailed report with results and recommendations on staking, which will allow “to advance in the construction of a staking mechanism and an incentive model that is sustainable but attractive for the ARB token.”
Concerns about ARB staking
While the majority of Arbitrum DAO participants voted in favor of creating an ARB staking mechanism, other token holders noted some concerns regarding this mechanism.
SEED Latam user “Cattin” stated that the creation of a staking mechanism could encourage regulators to consider ARB as a security, questioning whether participation in such a mechanism and the rewards generated will give rise to an investment contract.
Regarding this concern, the authors of the governance proposal consider that the way in which the ARB staking mechanism is designed “is the most acceptable from a legal perspective.” Furthermore, they indicated that, even in the future, new mechanisms may be proposed that incentivize the accumulation of additional value for ARB holders, when the regulatory environment is more mature and the potential of the crypto industry is better understood.
Following this initial vote, Arbitrum DAO will release an Arbitrum Improvement Proposal or AIP, outlining the details of the staking mechanism and its implementation, which must also be approved by governance.
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