Arbitrum DAO Faces Backlash Over DeFi Investment Proposal
The Arbitrum DAO is facing internal controversy over a governance proposal from its Growth Management Committee (GMC), which recommends allocating 7,500 ETH to decentralized finance (DeFi) investments.
| Key Takeaways: – Arbitrum DAO’s Growth Management Committee (GMC) proposed investing 7,500 ETH in DeFi projects, sparking criticism for prioritizing non-Arbitrum protocols. – The plan aims for a 4.54% yield, but DAO members question the lack of transparency and limited focus on Arbitrum-native projects. |
The GMC, a three-member committee formed to identify investment opportunities for Arbitrum’s Treasury, has proposed investing 5,000 ETH in Lido, a liquid staking protocol, to generate 5,000 wrapped staked ETH (wstETH) tokens.
These tokens would then be deployed in Aave V3 on Arbitrum to support borrowing and leverage incentive programs involving Lido, Aave, Renzo, and Kelp. The remaining 2,500 ETH is earmarked for Fluid’s lending protocol on Arbitrum.
While the GMC reviewed proposals from 45 protocols, including Arbitrum-native options like Dolomite and GMX, its final selection has sparked criticism.
Detractors argue that prioritizing non-Arbitrum projects contradicts the Arbitrum DAO’s mission of fostering ecosystem growth. Concerns have also been raised over the lack of engagement with DAO members, as requests for comments from the GMC have reportedly gone unanswered.
Supporters of the proposal highlight its potential benefits, including an expected 4.54% yield from wstETH deposits and an estimated 1-2% return on the Fluid investment. The GMC maintains that its strategy balances risk and reward while laying a foundation for a sustainable Treasury. Entropy Advisors, which analyzed the proposal, emphasized the need for a conservative approach until the Arbitrum DAO can manage investments more actively.
The GMC and Treasury Management Committee (TMC) were established in 2024 to optimize the DAO’s Treasury management. Their creation was driven by concerns over idle ETH holdings, with reports indicating the Arbitrum DAO missed out on approximately 400 ETH in potential staking rewards due to inaction.
The proposal is set for a Snapshot vote on Thursday, requiring majority approval and at least 3% of the DAO’s voting tokens to pass.
| Disclaimer: The information on this website is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets are volatile, and investing involves risk. Always do your own research and consult a financial advisor. |
