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Friday, March 1, 2024

Arbitrum’s DAO to receive over 3,350 ETH revenue from transaction fees

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Ethereum layer-2 blockchain Arbitrum will distribute ETH (ETH) tokens worth nearly $6.2 million to its decentralized autonomous organization (DAO), the project announced May 9 on Twitter. ARB holders must claim the rewards.

The funds to be collected are base fees and surplus revenue generated from network transactions. According to Arbitrum’s tweet, a total of 3,352 ETH will be collected by its DAO. As internet-native organizations, DAOs are collectively owned and managed by their members. They have treasuries and make decisions through proposals voted on by the group.

Arbitrum is a popular scaling network used by many decentralized applications (dApps) and blockchain developers. All users pay a fee during transactions on Arbitrum One.

The cost of sending ETH on Arbitrum is currently at $0.25 and swapping tokens is $0.68 at the time of writing. Data from CryptoFees shows that Arbitrum’s users paid $387,423 in fees over the past seven days.

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Each fee paid on Arbitrum One is divided into two sections — L1 fee and L2 fee. According to the protocol, the L1 fee covers the cost of posting a transaction on the Ethereum network and the L2 fee covers the cost of running the network.

A revenue breakdown reveals around 582 ETH of surplus funds generated from the L1 fee, nearly 1,308 ETH from base fees and 1,462 ETH surplus from the L2 fee. Combined, this represents revenue of 3,352 ETH for Arbitrum’s DAO.

According to the proposal discussion on Arbitrum’s governance forum, the protocol will create a mechanism for revenue distribution that will be triggered periodically by a smart contract. Only delegated ARB tokens will be eligible for revenue distribution, and holders must claim their rewards.

Arbitrum says the move will “align community incentives and give ARB a purpose beyond a worthless governance token.” Most community members support the proposal, according to the governance forum. Some members, however, highlighted that the revenue distribution might further serve to classify the ARB token as a security.

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Community member comments on Arbitrum’s “Distribution of DAO Revenue to ARB token holders” proposal. Source: Arbitrum Foundation.

Arbitrum’s incentive program was launched after the protocol team clashed with its community over a nearly $1 billion fund transfer that wasn’t approved by ARB holders.

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