Arbitrum, a prominent layer-2 blockchain, is set to make another significant move in its ecosystem development. Following a successful Snapshot vote, the decentralized autonomous organization (DAO) is poised to launch a substantial “long-term incentives program.” This initiative, designed to bolster both user engagement and development on the platform, involves a noteworthy allocation of 45.8 million ARB tokens, valued at nearly $90 million.
This decision marks the third financial move in the past five months, highlighting Arbitrum’s aggressive strategy of enhancing its blockchain environment.
The program’s implementation plan includes a five-person council and three advisors. Their roles are critical in pre-screening grant recipients and providing essential feedback on project proposals. However, final ratification awaits a second Tally vote, adding a layer of community validation to the process.
Arbitrum’s previous incentive programs have shown promising results. Projects that received funding generally saw increases in total value locked (TVL), transaction volume, fees, and daily active users (DAUs). Yet, it’s important to note that these improvements coincided with an overall uptrend in the crypto market, necessitating a cautious approach in attributing these successes solely to the funding.
Financial dynamics and market response
The proposed new round of grants represents a strategic shift for Arbitrum. While the number of tokens allocated is less than in the first round, their fiat value is considerably higher, demonstrating Arbitrum’s growing financial strength. This increase aligns with the ARB price surge, which has doubled since October 2023. The heightened interest in ether-related tokens, especially with the anticipated approval of a bitcoin spot ETF, has played a significant role in this uptick.
Arbitrum’s treasury has also seen remarkable growth, now valued at $7 billion, up from $3 billion in October 2023. However, this increase comes with a caveat: ARB’s market depth is insufficient to fully leverage this vast treasury for operational purposes.
Enhanced governance and community participation
This latest funding round introduces significant changes to the governance process. The formation of a council and advisory body aims to streamline the grant vetting process. This move addresses concerns of governance fatigue among Arbitrum delegates and ensures a more efficient and focused grant allocation procedure. The council’s initial role of deciding grant recipients has been adjusted to include community voting following feedback from the DAO.
Despite broad support, some delegates like SEEDLatam expressed concerns over the potential centralization of decision-making power. The overwhelming majority, however, favored the new incentives program, reflecting confidence in the proposed governance structure.