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Arbitrum Announces Distribution of $6.2 Million Worth of Ether to DAO

ARB Token Holders Can Claim Rewards from Generated Funds

Thu, 11 May 2023, 11:02 am UTC

Arbitrum, a popular Ethereum layer-2 blockchain scaling network, has revealed plans to distribute Ether tokens valued at approximately $6.2 million to its decentralized autonomous organization (DAO).

The announcement was made on Twitter on May 9, and ARB token holders will need to claim their rewards to participate in the distribution.

The funds to be distributed are derived from base fees and surplus revenue generated from network transactions. The DAO will collectively receive 3,352 Ether (ETH), which will be owned and managed by its members, as per the protocol.

Arbitrum is widely used by decentralized applications and blockchain developers, with users paying fees for transactions on Arbitrum One.

Currently, the cost of sending ETH on Arbitrum is $0.25, and token swaps cost $0.68. According to Crypto Fees data, Arbitrum users have paid $387,423 in fees over the past seven days.

Arbitrum's protocol splits each fee paid on Arbitrum One into two parts: the L1 fee and the L2 fee. The L1 fee covers the cost of posting a transaction on the Ethereum network, while the L2 fee covers the cost of running the network.

The breakdown of revenue reveals that approximately 582 ETH in surplus funds were generated from the L1 fee, nearly 1,308 ETH from base fees, and 1,462 ETH in surplus from the L2 fee, totaling 3,352 ETH for Arbitrum's DAO.

Arbitrum's governance forum outlined that a mechanism would be implemented for periodic revenue distribution triggered by a smart contract. Only delegated ARB tokens will be eligible for revenue distribution, and holders will need to claim their rewards.

Arbitrum stated that this move aims to "align community incentives and give ARB a purpose beyond a worthless governance token." The majority of community members support the proposal, according to the governance forum.

However, some members have raised concerns that the revenue distribution may further classify the ARB token as a security.

Arbitrum's incentive program was introduced following a disagreement between the protocol team and the community regarding an unauthorized transfer of nearly $1 billion in funds, which was not approved by ARB holders.

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