- Arbitrum DAO voted on implementing liquidity staking for ARB holders to motivate users to lock their tokens onchain.
- The liquidity staking will route deposits to governance participants to secure the DAO against governance attacks looking to steal funds from its treasury.
The Arbitrum DAO voted on a proposal to integrate staking utility for the Arbitrum layer-2’s native token ARB. Over 25,000 voted on the proposal, with a staggering 91% in favor of the upgrade.
The proposal explained the need to bring staking utility to ARB to bring value accrual to the token. Presently, less than 1% of the ARB in supply is utilized onchain. Nevertheless, the proposal did not include reward distribution to stakers and delegators, leaving it for a future proposal and voted on accordingly.
What the current proposal did mention was that the staking utility would move away from traditional staking and implement liquid staking powered by the Tally protocol. Users will receive the stARB, a yield-bearing token representing their stake. Its value will gradually increase to depict each user’s accrued rewards through their liquid staking endeavors. Simultaneously, it can be integrated into their DeFi strategies and used across various protocols in the Arbitrum ecosystem and elsewhere.
Arbitrum DAO Looks to Use Liquidity Staking to Secure Its Treasury
The rewards offered to those indulging in the agreed-upon liquid staking utility will come from the sequencer fees collected by Arbitrum. Also, the staking utility looks to boose DAO security by getting ARB holders to delegate their tokens to governance participants. Unlike Ether staking and liquid staking routing assets to network validators, ARB liquid staking will deposit funds with DAO participants.
The proposal read, “We propose to unlock ARB utility and improve the governance and security of the Arbitrum protocol by implementing ARB staking, without yet turning on fee distribution to token holders. Through ARB staking, token holders who delegate to active governance participants will be able to capture value.”
As more value gets added to the DAO ecosystem, it becomes hard for one or a few bad actors to acquire large amounts of ARB to vote on malicious proposals aimed at plundering the funds stored in the DAO treasury. “The potential profit of attacking the DAO treasury is increasing as more ETH accumulates in the treasury, while the cost of attacking the DAO through purchasing ARB for its voting power is not increasing proportionally to defend against attacks,” the proposal added.
