Arbitrum Staking Proposal

There is an open proposal on Arbitrum's forum to discuss the possibility of allocating some ARB tokens for staking. The proposal has been open for more than 4 months and the community cares a lot about the ultimate decision by the team.

Though there are DAO's on the majority of the projects in crypto, the core developer team is the final decision makers. In Arbitrum ecosystem, community members hotly discuss what are the benefits and the risks of staking operations.

According to the details by The Block's news, the community seeks 12 months of rewarding program via treasury funds. Let's discuss the pros and cons of it.

Staking is Adorable in Crypto

Staking is viewed as a way of generating passive income from the coins that may go up 10x in the bull market. As it is one of the sentiments among the crypto investors, there is always a genuine buy pressure to buy and stake coins to generate passive revenue.

This perspective is not flawless but it has yielded incredible returns so far. The early stakers of AVAX, CAKE and several other projects were able to make nice return in the earlier bull markets.

Once staking is activated, those who want to get ARB from treasury will initially go to the centralized exchanges to purchase the tokens before everyone rushes into that. As the demand spikes in the early months, staking always provides an opportunity for holders to make a profit.

The staking operation might be the first step of " revenue sharing " or a way of having more power in the Layer 2 . Besides, the staking may open new doors for future airdrops in Arbitrum. As we saw in Celestia and Solana, the staking of the native token is always a criteria to distribute free money with airdrops.

Staking Necessitates Real Utility

Unless the staking is supported with a real utility, their importance loses value. After a while, stakers only care about selling the monthly / weekly gains to lower the risk they take by locking their coins.

In the case that staking, generally via locking periods, takes a very long time, there might not be a visible or noteworthy change in the dynamics or the price action. If the team is not eager to share their great revenue, then we may see a huge fear and doubt against the sustainability of the governance. This may even bring more fundamental concerns regarding the future of the hottest Layer 2 of Ethereum.

Staking might sound like extreme bullish action. However, it bears a huge risk, too.

Apart from the risk of staking without utility, the community may not favor spending the valuable tokens for that operation. As the newly distributed tokens via smart contract will be in circulation, this can create a stress on the buyer's eagerness to buy more ARB with hopium.

Thus, the team has to take very cautious actions before establishing a native staking mechanism on Arbitrum.

What do you think about staking operations on Layer 2s?

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Posted Using InLeo Alpha