Arbitrum Foundation wants to fix DAO woes with a new radical proposal

15h ago•

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I’ll be honest: it feels weird to talk about DAOs amid a topsy-turvy global trade war fuelling talk of recession and de-dollarisation.

But that’s been ably covered elsewhere, including by my colleagues at DL News here, here, and here.

And something big happened in the world of decentralised governance and management last week.

The Arbitrum Foundation says the governance of Arbitrum DAO — one of the largest and most active crypto cooperatives — needs an efficiency-minded overhaul.

Last week, the Foundation proposed giving itself, Offchain Labs, and three other “Arbitrum Aligned Entities” soft veto power over proposals and the responsibility for seeing them through.

The Arbitrum Foundation is a nonprofit that supports the ongoing development of the Arbitrum blockchain. Offchain Labs is the for-profit company that built the blockchain. Both have taken a backseat in DAO affairs.

That has caused proposal gridlock, inefficient processes, excessive spending, and a lack of accountability, according to the Foundation.

That’s partly because DAO delegates — experts who make decisions on behalf of other tokenholders — have been buried under an avalanche of proposals.

They don’t have the bandwidth to thoroughly consider everything that comes their way, or provide the management and oversight that proposals need, according to the Foundation.

Its solution is simple: when a proposal hits the DAO’s forum, the five Arbitrum-aligned entities will decide who among them is best suited to handle execution. If the entity doesn’t like the proposal, it will recommend delegates reject it.

The potential changes will make the DAO more efficient, according to the Foundation. And it made clear delegates can still approve proposals that don’t get greenlit by an Arbitrum-aligned entity.

Several prominent voices celebrated the proposal.

Greater participation from the Foundation and Offchain Labs will “undoubtedly” help the DAO overcome operational bottlenecks, Karpatkey, an Arbitrum delegate, wrote in the governance forum.

Arbitrum was one of the only bastions of tokenholder dominance. At some point we should stop calling these things governance tokens. Just call them Limited Partner tokens, because they trend towards zero control, and - if lucky - share in financial upside passively
— PaperImperium (@ImperiumPaper) April 9, 2025

Others were less sanguine.

“Arbitrum was one of the only bastions of tokenholder dominance,” pseudonymous DAO contributor PaperImperium wrote on social media. He works at GFX, a crusading delegate in the Arbitrum DAO and several other crypto cooperatives.

“At some point we should stop calling these things governance tokens. Just call them Limited Partner tokens, because they trend towards zero control, and — if lucky — share in financial upside passively.”

Offchain Labs CEO Steven Goldfeder said people shouldn’t confuse decentralisation with direct democracy. After all, ultimate control of Arbitrum blockchain upgrades and revenue would remain with tokenholders, he said.

“But the fact that the power stems from the DAO doesn’t mean that the DAO should directly vote on what brand of toilet paper is used at Arbitrum events.”

This week in DeFi governance

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PROPOSAL: Aave DAO considers creating yield-bearing version of GHO stablecoin

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