Arbitrum’s plan to reinvest its Ethereum treasury into yield-generating opportunities has sparked controversy within its decentralized autonomous organization (DAO).
The Growth Management Committee (GMC) proposed allocating 7,500 ETH to decentralized finance (DeFi) projects, but its decision to prioritize external platforms over Arbitrum-native protocols has drawn criticism from key delegates.
GMC’s investment proposal sparks debate
The GMC recommended investing 5,000 ETH into Lido’s liquid staking protocol, generating wstETH (wrapped staked ETH). It also proposed using the wstETH in Aave V3 on Arbitrum to improve borrowing and take advantage of incentive programs from Lido, Aave, Renzo, and Kelp. Additionally, the committee suggested allocating 2,500 ETH to Fluid’s lending platform on Arbitrum.
After evaluating 45 protocols, including Arbitrum-based platforms Dolomite and GMX, the GMC projected a 4.54% return from wstETH deposits and a 1-2% yield in native ETH from Fluid. Despite the committee’s rationale, some DAO members questioned why more of the treasury was not directed toward Arbitrum-specific projects.
Delegates criticize lack of support for Arbitrum-Based platforms
Several DAO delegates voiced concerns about the GMC’s approach. JoJo, a delegate, argued that a portion of the 7,500 ETH should have been distributed among various Arbitrum-native protocols. He emphasized the importance of supporting developers who build within the Arbitrum ecosystem instead of favoring projects on external platforms.
Another delegate, Ultra, expressed disappointment in the proposal, stating that it lacked ambition and did not instill confidence in Arbitrum’s DeFi landscape. While he did not outright oppose the allocation, he suggested that at least 10% of the funds should have been directed toward native projects. He also pointed to alternative options, such as GMX, Dolomite, and Camelot, which could have been considered despite potential risks.
The GMC defended its decision, explaining that this proposal marks the start of a long-term strategy. Future allocations, it stated, would direct ETH and stablecoin revenue back into Arbitrum’s DeFi ecosystem. However, Ultra argued that the first round of investments was significant for visibility and alignment with Arbitrum’s builders.
Delegates prepare for a critical vote on the proposal
The investment proposal is set to be decided through a Snapshot vote on Thursday, requiring a simple majority and a 3% votable token quorum to pass. Ultra predicted that the proposal would likely be rejected, with many expecting any revised plan to allocate between 5% and 40% of funds to Arbitrum-native projects.
Established last year the GMC and TMC gained their mandates to research safe opportunities for deploying Arbitrum’s ETH holdings. The evaluation portion by Entropy Advisors of the GMC/TMC framework revealed that the DAO should have acted sooner. Staking ETH would have provided the DAO with about 400 ETH but the DAO lost this opportunity due to leaving its ETH without active investment. As the vote draws near the discussion reveals a competition between financial management and ecosystem support within Arbitrum’s leadership structure.