Arbitrum DAO proposes to allocate funds to Lido, Aave, and Fluid

A couple of days ago, the Growth Management Committee (GMC) of Arbitrum DAO proposed to distribute 7,500 ETH to Lido, Aave, and Fluid.

These are three decentralized finance protocols not native to Arbitrum, and for this reason, the proposal has sparked some discontent within the community.

The proposal of Arbitrum DAO: 7,500 ETH allocated to Lido, Aave, and Fluid

The proposal in fact shares the preferred choices of GMC for the distribution of 7,500 ETH.

On December 21, 2024, the Arbitrum DAO voted in favor of establishing two committees, the Treasury Management Committee (TMC) and the Growth Management Committee (GMC). These two new committees have been tasked with developing suggestions for the DAO’s treasury, where 25 million ARB and 7,500 ETH are deposited.

The GMC committee has proposed to allocate 5,000 ETH on Lido to obtain 5,000 wstETH to deposit on Aave V3, based on Arbitrum, with the goal of serving as liquidity for the LST/LRT looping.

He also proposed to lend 2,500 ETH to Fluid to support an ETH-based DEX and liquidity lending.

The purpose of this initiative would be to provide a path for the Arbitrum Foundation to distribute 7,500 ETH from the DAO treasury to achieve two distinct objectives, namely generating low-risk returns on Ethereum otherwise inactive, and stimulating the growth of the ecosystem.

Since this is the first tranche of funds from the DAO, GMC wanted to ensure that the DAO started from a solid and stable base, while also securing key partnerships from the beginning. 

They write. 

“Therefore, we focused on selecting partners of the highest quality with low-risk strategies that allowed the DAO’s funds to maximize their reach and impact within the Arbitrum ecosystem”.

The proposal will be put to a vote on Thursday on Snapshot. 

The reaction of the community

First of all, it must be said that, as of now, it is still just a proposal, and if it were to fail, the GMC will present a new proposal to the DAO of Arbitrum. 

The Growth Management Committee is composed of only three members, so it is more than obvious that its proposals may not be appreciated by everyone. In fact, some delegates have opposed these recommendations. 

The fact is that the recipients of these funds have effectively excluded the native protocols of Arbitrum. In fact, such recommendations have been met with various criticisms from some members of the DAO. 

In particular, what surprised many is not the destinations themselves, but the very fact that among them there is no native protocol on Arbitrum. According to some, this would be a signal that the DAO is not ready to support developers on Arbitrum, or that it does not consider any native project on Arbitrum to be good enough. 

The GMC is accused of having opted for the simplest and laziest allocation, which is not wrong but excessively prudent and conservative, as well as somehow offensive towards those who are developing on Arbitrum. 

In fact, the committee has opted for a solid and conservative solution, even though there are those who argue, for example, that there are many projects on Arbitrum with a risk lower or similar to that of Fluid. 

The justifications 

The first justification of the GMC is precisely that, being the first tranche of fund allocation by the DAO, the committee wanted to ensure a solid and stable solution. 

Furthermore, the proposal specifies that this is hopefully the first round of many future allocations, and that the idea is to continuously reinvest the revenues in ETH and stablecoin from these allocations directly within the DeFi ecosystem on Arbitrum. 

The fact, however, is that the very first round of financing is the one under everyone’s eyes, so such a conservative choice risks being perceived as a decidedly timid choice. 

Note that the committee selected those three protocols after reviewing as many as 45 proposals, including some native protocols of Arbitrum such as Dolomite, GMX, and Camelot. 

In the proposal, they wrote that they would also like to venture along the risk curve to increase yield, help to launch emerging protocols, and strengthen native/aligned protocols to Arbitrum, but they focused their attention on a solid/conservative basis for the DAO’s treasury strategy, as it makes more sense until the DAO itself becomes more capable of actively managing positions.