- The plan to spend 225 million ARB tokens from the treasury of Arbitrum DAO, which includes Bitcoin pioneer Eric Wall, GFX Labs, Michigan Blockchain, and Camelot, was opposed by 23.7% of all votes cast in the onchain referendum.
The Arbitrum ecosystem is about to welcome a $237 million initiative aimed at promoting gaming—or is it?
An onchain proposal that permits the distribution of 225 million ARB tokens was approved by the layer 2 blockchain community on Friday with the goal of increasing the usage of Arbitrum by developers and participants in the gaming sector. Some, nevertheless, favor a repeal or a second vote.
The gaming plan faced strong opposition despite receiving majority support during both its onchain vote on Friday and its temperature check in March. Ultimately, 23.7% of respondents were against the gaming budget.
Bitcoin pioneer and co-founder of the NFT project Taproot Wizards, Eric Wall, voted against the motion, claiming that the 225 million ARB budget allotment for the onchain plan is just excessive. Funds from the gaming ecosystem that other chains receive are much smaller.
ARB Market Diluting
GFX Labs, the group that created the Uniswap front-end interface Oku, cast a no vote on Arbitrum over the gaming proposal. A number of GFXLabs’ concerns over the proposal were raised in the forum debate, including potential market effects from the 225 million token inflow.
The native token of Arbitrum has underperformed over the last 12 months, declining 4.3%. On the other hand, according to CoinGecko, Optimism’s OP has grown 83% to $2.51 and Ethereum’s ETH has increased 105% to $3,780 in the same timeframe.
In dissenting comments on the proposal, GFX Labs stated that although Arbitrum has good fundamentals, its trailing price performance is a result of the token’s constant dilution caused by Arbitrum’s wasteful activities.
Arbitrum has a spending problem, and it is poor financial stewardship to invest 8% of the chain’s total TVL in a highly risky endeavor.
The release of 225,000,000 additional ARBs is highly dilutive and will impact your luggage. Dilution isn’t always bad, but it should be used carefully, effectively, and in comparison to other possible uses for the money, according to GFX Labs.
Insufficient Clarity
Despite having an interest in expanding Arbitrum’s gaming ecosystem, risk management company Karpatkey voted against the proposal for a number of reasons, including the unclear legal framework to be applied to these investments, the high operational costs, and the fact that the management of the funds appears to be given to the Arbitrum Foundation without any assets or ringfencing, among other reasons.
Karpetkey noted, “This proposal represents a significant disbursement for the Arbitrum DAO, which will be added to the Treasury’s already high annual spending.”
Voters Who Made a U-turn
Voters only switched their support at the very end of the governance cycle, having previously in the cycle approved the seven-figure gaming allocation. Some changed their minds because, following revisions, the proposal’s initial request for 200 million ARB from the DAO’s treasury was revised to 225 million tokens.
A University of Michigan student club called Michigan Blockchain revised its vote, citing GFX Labs’ justification due to the higher operating costs.
According to GFX Labs, the rise is not negligible. Simply adding a discretionary $25 million is a mistake and goes against the concept of open governance, according to GFX Labs, which also called it “a very bad look” that alarmed some investors and community members.
Like Michigan Blockchain, Camelot is a decentralized exchange that is native to Arbitrum and has a total value locked of over $112 million. It backed the idea at the Snapshot but then opposed it onchain.
Camelot cited in its criticism the lack of clarity surrounding the legal structures and the DAO’s ability to manage assets from companies it invests in, despite the increased reward package of 25 million ARB tokens.
Individuals Endorsing Arbitrum’s Gaming Catalyst Initiative
With formally approved funds designated to target the gaming vertical at the closing of voting on Friday, Arbitrum joined other blockchain networks competing to draw capital-rich gaming developers.
For instance, the nonprofit organization that supports the layer 2 network Starknet, the Starknet Foundation, announced in March 2024 the establishment of its Gaming Committee.
With a 50 million STRK budget, or $66 million, this committee will be able to fund ideas. Immutable, King River Capital, and Polygon Labs established the $100 million Inevitable Games Fund in March as well, with the goal of finding opportunities for investment in the video game sector.
In the Arbitrum onchain vote, a wallet belonging to TreasureDAO—a company established in 2021 with the goal of building a decentralized video gaming ecosystem—had the most voting power and cast a vote in favor.
The risk management company Gauntlet, the Ethereum analytics company L2Beat, Wintermute Governance, the Princeton Blockchain Club, and @OlimpioCrypto on X all voted in favor.
This is one of the first projects of this scope and magnitude. Nine days ago, Krzysztof Urbański from L2Beat commented in a forum debate on Arbitrum that it’s also one of the first efforts of its sort with a major focus on investment, rather than just divisive grant distribution. We anticipate that this proposal—as well as the supporting legal framework—will serve as a model for future initiatives of a similar nature.
Cast another ballot? Reverse?
With 162.41 million votes in favor and 50.48 million votes against, the governance proposal was approved. On the other hand, some have stated they will focus their efforts on a repeal, while others favor a re-vote.
In order to address the issues raised by other delegates and ourselves, Camelot expects that this proposal will either be re-voted on or subject to specific subproposals.
“This proposal should fail on its merits due to the high certainty of dilution by minting 225,000,000 ARB, the low certainty of returns on investment, and the high operating costs,” GFX Labs stated. If it succeeds by some lucky break or just by default, we and other interested parties will think about taking urgent action to repeal it if it stays in place.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
