The Arbitrum Decentralized Autonomous Organization (DAO) has passed a proposal to introduce ARB staking to the largest Ethereum Layer 2 network.
Staking Initiative
The proposal, which received overwhelming support from the community, aims to launch ARB staking to increase token utility and governance participation.
The effort aims to protect the DAO's treasury from potential attacks.The DAO currently holds around $1.9 billion in assets across Arbitrum and Ethereum, according to Tally's Arbitrum data.
This significant holding makes the DAO an attractive target for malicious actors, as the cost of purchasing ARB to gain voting power does not rise proportionately to the defense against attacks.
To counter this risk, the proposal proposes ARB staking to unlock utility and regulate governance. It plans to create a mechanism to allow future rewards from sources generated by the DAO, such as sequencer fees, MEV fees, validator fees, token inflation, and treasury diversification, to flow to token holders delegated to active governance participants.
The initiative will introduce ARB staking using the Tally governance system and launch a liquid staking token, stARB, although fee distribution to token holders will not begin immediately.
Staking also allows token holders to capture the value of their assets, and stARB’s Tally Protocol system supports automatic compounding and re-staking of future rewards while remaining compatible with DeFi.
Unlocking Tokens
The approval coincides with the network's planned release of more than 92 million ARB tokens (representing 2.77% of the circulating supply) later today. The project will execute a “cliff unlock” to release the tokens simultaneously. At current prices, these tokens are worth more than $50 million, according to data from Token Unlocks.
Typically, token unlocking can cause significant volatility in the market for a digital asset as it can lead to a supply shock and potential price declines. This possibility has fueled speculation that many holders may take short positions on the tokens.
Already, the expected unlock appears to have a negative impact on ARB’s price, which has fallen by more than 2% in the past 24 hours to $0.60 at press time, according to data from CryptoSlate.
Mentioned in this article
