Arbitrum DAO Approves Staking Proposal to Boost Token Utility and Security

The Arbitrum DAO has approved a proposal designed to increase the utility of the ARB token and enhance governance security. The proposal, which received 91% approval from over 25,000 participants, demonstrates strong backing from the Arbitrum community.

Introducing Liquid Staking for ARB Tokens

Under the new plan, ARB token holders will have the option to stake and delegate their tokens in exchange for a liquid staked ARB token, known as stARB. This stARB token will represent their stake and offer features such as auto-compounding rewards, restaking opportunities, and compatibility with various decentralised finance (DeFi) applications.

Staking System and Governance Structure

The staking mechanism will be implemented using Tally’s liquid staking token system, customised to fit Arbitrum’s governance framework. Future surplus sequencer fees will be channelled to ARB token holders who stake and actively delegate their tokens to designated "active delegates."

Active delegates will be selected based on a Karma Score, which aggregates Snapshot voting stats, on-chain voting data, and forum activity. The Arbitrum DAO will have the authority to adjust the Karma Score formula and set the minimum score required for delegates to earn staking rewards.

Addressing Governance and Security Concerns

Supporters of the proposal argue that it addresses key issues related to the ARB token’s underutilisation and the need for stronger governance. Currently, less than 1% of ARB tokens are actively engaged in the on-chain ecosystem, and voter participation has been declining since the DAO’s formation.

The new staking mechanism also seeks to mitigate the risk of governance attacks, particularly given the significant amount of surplus fees—over 16 million ETH—held by Arbitrum One and Nova. By reclaiming voting power when stARB is deposited into certain smart contracts, the DAO aims to prevent potential attacks and ensure that voting power remains aligned with the community's interests.

Modular Implementation and Future Upgrades

The proposal includes a modular design that allows for future upgrades and integration with other staking systems. This flexibility ensures that the staking mechanism can evolve to meet the protocol’s needs.

The estimated cost for implementing the proposal is $200,000 in ARB tokens. This budget will cover smart contract development, integration with Tally.xyz, Karma Score implementation, security audits, and the funding of working groups dedicated to staking rewards and delegation strategies.

Significance for Arbitrum’s Growth

This governance update marks a crucial step for Arbitrum in addressing challenges related to token utility and ecosystem participation. By incentivising staking and active delegation, the DAO hopes to foster greater engagement, strengthen security, and better align token holder interests with the protocol’s long-term success.