Arbitrum proposal asks DAO to turn on delegate staking rewards for better governance security

Frission, a delegate within the Arbitrum ecosystem and a core team member at Tally, has proposed a mechanism that uses 50% of future surplus sequencer fees to reward ARB token holders who stake and actively delegate their tokens.

The proposal focuses on security concerns regarding the Arbitrum DAO’s growing treasury — which now exceeds $50 million in surplus fees. It claimed that, with only 10% of ARB actively used in governance and voter participation on the decline, the treasury may become an attractive target for potential governance attacks. Frission’s proposal aims to incentivize governance engagement, enhance the DAO’s economic security and reduce the risk of treasury attacks.

By allowing ARB holders to stake and delegate their tokens, the proposal seeks to allocate 50% of future surplus sequencer fees as rewards. This system is expected to offer an estimated 7% annual reward rate for stakers, based on current prices. Importantly, the existing ethet treasury for Arbitrum would remain unchanged — with only future fees being redirected to stakers.

The proposal plans to incorporate Tally’s liquid staking token system to preserve liquidity for staked tokens. This mechanism would enable staked positions to participate in governance while maintaining liquidity.

A preliminary temperature check vote on the proposal is scheduled to take place on Snapshot next month. If approved, smart contract development will begin, with the final on-chain vote potentially occurring in September.

Last year, another proposal recommended the DAO use Arbitrum treasury funds to fund the staking yield and distribute it to stakers through a smart contract over 12 months. It passed the initial temperature check but didn’t move forward to a formal AIP — after receiving pushback over its viability.