June 8, 2026, will see the launch of a pivotal on-chain vote within the Arbitrum DAO—one that could shape the future of Layer 2 governance. The Arbitrum Foundation has formally submitted a proposal to the DAO treasury, requesting an operating budget of approximately $43.5 million for fiscal year 2027. The funding mix includes $16 million in stablecoins and real-world assets (RWA), 1,740 ETH (about $3.5 million), and 230 million ARB tokens (roughly $24 million). This proposal is not just a routine budget request; it serves as another stress test for the core question facing Layer 2s: "How should a DAO treasury manage assets worth hundreds of millions?"
Meanwhile, Arbitrum’s competitor, Optimism, is moving from an "experimental DAO" toward a new organizational model, while Coinbase’s Base network announced in February 2026 that it would leave the OP Stack in favor of a unified, self-governed technology and governance architecture. The diverging governance paths of these three major Layer 2 networks reflect a deeper industry tension: Should the sector pursue the ideal of on-chain, decentralized voting, or prioritize the pragmatic efficiency of centralization?
Arbitrum’s $43.5M Budget Proposal: Funding Allocation and Key Controversies
Proposal Background and Voting Timeline
The Arbitrum Foundation published this proposal on the governance forum on May 22, 2026. After a week-long "temperature check," the official on-chain vote is set to begin on June 8. The requested funds are intended to support Arbitrum’s operations, technical infrastructure, and ecosystem growth for fiscal year 2027.
In terms of scale, the Foundation’s $43.5 million request is actually less than its estimated total operating expenses for 2027 (about $27.6 million plus 244.9 million ARB). The difference will be covered by the Foundation’s existing balance sheet. In other words, the Foundation is not seeking full reimbursement but is applying for incremental funding from the DAO while using its own reserves to fill the gap.
Four Main Funding Categories
According to the proposal details, the requested funds break down into four core categories:
Technology and Security Expenses (Approx. $14.81M)
Technology spending is the largest single item, accounting for about 54% of the total budget. This covers core infrastructure maintenance for Arbitrum One and Arbitrum Nova, including security audits, bug bounty programs, block explorers, cloud hosting, technical contributor compensation, simulation tools, analytics platforms, and other supporting systems. The Foundation considers these expenses "essential infrastructure" that cannot be cut.
General and Administrative (Approx. $10.4M)
This budget covers salaries, external contractors, legal and compliance costs, insurance, and external service providers. The proposal makes it clear that these funds are foundational for the Foundation’s role as a "legal shell" and operating entity.
Ecosystem Incentives and Growth Initiatives (Distributed in ARB Tokens)
The 230 million ARB tokens are mainly earmarked for ecosystem growth, not for day-to-day operations. The Foundation lists existing growth programs such as Trailblazer, Audit Subsidy, ArbiFuel, and DRIP, and notes that previously supported projects include Pendle, Ostium, USDAI, Instadapp, CowSwap, and El Dorado.
Variable Marketing Expenses (Approx. $2.38M)
This flexible budget is allocated for brand promotion, community events, and developer relations.
Controversy: The Gap Between Expenses and Revenue
The main controversy centers on the proposal’s funding scale (including the ARB portion), which far exceeds Arbitrum DAO’s on-chain revenue from transaction fees, Timeboost auctions, and expansion programs in 2025. Data shows that Arbitrum’s gross on-chain income in 2025 was $23.49 million, while the proposal’s total value approaches $53 million—about 2.3 times the DAO’s income.
A forum representative (Arbit1) summed up the core concern: "Ecosystem growth itself should not automatically equate to value for token holders." In other words, while the DAO continues to fund ecosystem expansion, token holders lack a direct mechanism to capture returns.
Key accountability demands from representatives include:
- Detailed disclosure of project-level KPIs
- Releasing funds in tranches based on milestones, rather than a lump sum
- Quarterly financial reporting
- Clear policies for ARB spending and the return of unused funds
- Transparent disclosure of potential ARB sales, wallet addresses for fund flows, and quantifiable tracking of grant outcomes
From a DAO governance perspective, these demands reflect token holders’ rational calibration of the "transparency-efficiency-accountability" triangle in treasury management.
Arbitrum Network Growth Metrics
Supporters of the proposal focus on Arbitrum’s growth performance, citing the following key data:
- 4.7 million average daily transactions in February 2026
- Stablecoin supply of about $8.6 billion
- RWA assets totaling approximately $800 million
- Cumulative ecosystem transaction volume exceeding 2.3 billion
These figures confirm that Arbitrum remains one of the leading Ethereum Layer 2 networks by TVL and activity. However, the proposal comes amid renewed scrutiny of governance and security, following the recent vsdCRV cross-chain minting incident that sparked fresh debate over cross-chain token accounting and bridge execution security.
Comparing Three Major L2 Governance Structures: From "On-Chain Democracy" to "Centralized Efficiency"
To fully grasp the governance core of Arbitrum’s budget proposal, it’s essential to zoom out to the broader Layer 2 landscape. Arbitrum, Optimism, and Base represent three distinct governance philosophies and technical paths, each shaping the underlying logic for treasury management, tokenomics, and community engagement.
Arbitrum DAO: Two-Tier Governance and Delegate System
Arbitrum DAO currently controls about $3 billion in treasury assets, with a "two-tier" governance structure.
Governance Structure: Through the AIP-1 proposal, Arbitrum DAO transferred about 3.527 billion ARB to the DAO treasury, granting the DAO direct on-chain control. The governance process has four stages: forum temperature check, SnapShot off-chain voting, Tally on-chain proposal execution, and a delayed execution period. SnapShot handles roughly 96% of major DAO votes.
Security Council: The Security Council, elected by the DAO every six months, consists of six members and serves as a key safety valve. There are two ways to trigger protocol upgrades: via regular DAO proposals or, in emergencies, direct action by the Security Council. In the March 2026 election, 16 candidates were nominated, and each needed at least 0.2% of the voting supply (about 9.8 million ARB) to advance to the final round. This "dual-track" model aims to balance decentralization with emergency responsiveness.
Professionalization of Delegates: Protocols like Arbitrum, Optimism, Uniswap, and Aave now rely on 30–100 active delegates to wield most voting power, with voting records and policy positions publicly available. This marks a shift from "direct democracy" to a "representative democracy" model. Delegate compensation ranges from several thousand dollars to six-figure annual budgets, and some U.S. organizations (such as Berkeley Blockchain and Michigan Blockchain) now operate full-time DAO delegate teams.
Treasury Management Maturity: Larger DAOs increasingly prefer holding stablecoins or tokenized U.S. Treasuries over more volatile native tokens. Arbitrum DAO’s treasury is custodied via Safe, which manages over $22 billion in DAO assets.
Optimism Collective: Bicameral Governance and a "Non-Company, Non-DAO" Paradigm
Among the three major L2s, Optimism’s governance is the most unique. Its core design addresses the risk of "platform enshittification" in traditional DAOs—where short-term profit-seeking undermines long-term platform viability.
Bicameral Structure: The Optimism Collective consists of the Token House and the Citizens’ House. The Token House, composed of OP holders and their delegates, uses a "one token, one vote" system to manage ecosystem grants, oversee the OP treasury, and set certain network parameters (like sequencer settings). The Citizens’ House represents non-financial stakeholders and uses a reputation system to participate in governance, aiming to prevent capital interests from dominating decisions.
Capital Allocation 2.0: In early 2026, Optimism launched "Capital Allocation 2.0," aiming to restructure capital allocation for more efficient Superchain investment, strengthen OP’s role in the Superchain, and increase accountability for OP Labs. The Foundation plans to establish a legal entity (possibly DUNA) to enable more voting rights and transfer certain assets and governance powers on-chain.
Treasury Scale and Governance Philosophy: The Optimism Collective holds about $2 billion in OP and other assets. Its core philosophy: "The role of governance is not to empower voters to drive progress through capital allocation, but to prevent short-term profiteering that threatens the platform’s long-term survival." This principle is embedded in its decision-making: Protocol Upgrade 2.0 aims to reduce platform risk, while Capital Allocation 2.0 seeks to curb short-term extraction.
From Experiment to Organization: In its Season 9 vision (January 2026), the Optimism Foundation explicitly called for a new organizational model that is "neither a DAO nor a company." This reflects an experimental approach to governance: avoiding the "shareholder value maximization" short-termism of traditional companies, while also sidestepping the inefficiencies of typical DAO capital allocation.
Base: Corporate Governance and the Path to Technical Independence
Base’s governance model is fundamentally different from Arbitrum and Optimism: it is not DAO-governed, but centrally operated by Coinbase. In February 2026, Base announced its migration from the Optimism OP Stack to a proprietary "unified tech stack," fundamentally shifting its governance posture.
Autonomous Governance Structure: After the migration, Base will introduce its own governance framework, Security Council signers, and fee mechanisms. The Security Council will now consist of independent signers, replacing those previously tied to Optimism, to limit any single external organization’s influence over protocol decisions.
Technical Roadmap: Base plans to implement up to six hard forks per year—about twice the previous upgrade pace. It will also introduce multi-proof systems to speed up withdrawals and deploy TEE and ZK proof mechanisms. Currently classified as a Stage 1 rollup in terms of decentralization, the team believes the new unified architecture will accelerate progress toward Stage 2.
Sequencer Revenue Flow Changes: Previously, Base shared a portion of sequencer revenue with the Optimism Collective. With its shift to independent operations, Base may retain a larger share of sequencer revenue internally, impacting long-term returns for OP token holders. After the announcement, OP’s price dropped about 7%, reflecting market concerns over Base’s reduced participation in the OP Stack Superchain ecosystem.
Base’s governance path makes it clear: for L2 networks tied to centralized exchanges, "governance" is closer to "corporate strategic decision-making" than to "community consensus mechanisms." This model delivers clear advantages in decision-making speed and execution, but its decentralization is under constant scrutiny.
Comparative Summary of the Three Models
| Dimension | Arbitrum DAO | Optimism Collective | Base |
|---|---|---|---|
| Governance Structure | Two-tier (DAO + Security Council) | Bicameral (Token House + Citizens’ House) | Corporate governance (Coinbase-led) |
| Token Weight | Voting power based on ARB holdings | OP tokens + reputation system | No governance token |
| Treasury Management | Direct on-chain DAO control (~$3B assets) | Token House oversight (~$2B assets) | Managed at the company level by Coinbase |
| Security Mechanisms | 6-member Security Council, elected every 6 months | Protocol upgrade framework + capital allocation mechanisms | Stage 1 rollup, moving toward Stage 2 |
| Decision Efficiency | Four-stage governance, longer cycles | Experimental bicameral, continuous iteration | Centralized, highest efficiency |
| Delegate Professionalization | 30–100 active delegates, delegated voting | Token House delegation + Citizens’ House reputation | Not applicable |
| Core Philosophy | Community-driven on-chain governance | New organizational model to prevent platform enshittification | Enterprise-grade L2 infrastructure |
Deeper Challenges in DAO Treasury Management
Delegate Centralization and Voter Participation
While the delegate system addresses low participation in direct voting, new challenges have emerged. Currently, only about 10% of ARB is actively used in governance, and voter turnout is declining. This means real governance power is concentrated among a handful of active delegates, creating tension with the original vision of "decentralized autonomy."
Token Price and Governance Incentive Mismatch
When governance token prices fall sharply (ARB is down about 76% over the past year), holders’ willingness to participate in governance tends to drop as well. This creates a negative feedback loop: lower participation → concerns over decision quality → token price discount → further reduced engagement. The criticism from delegates in the $43.5M Arbitrum proposal—that "ecosystem growth is decoupled from token holder value"—is a microcosm of this mismatch.
Legal and Regulatory Uncertainty
DAO legal status made some progress in 2026, but uncertainty remains. U.S. courts have begun issuing preliminary rulings on DAOs’ legal standing, but issues like tax frameworks, limited liability, and cross-border compliance are unresolved. There are now over 13,000 DAOs globally, with about $40 billion in assets under management, but only around 220 hold more than $1 million in treasury, and fewer than 80 have governance activity recognized as healthy by institutional observers. This "pyramid structure" shows that only a minority of DAOs possess truly mature governance capabilities.
Conclusion
The $43.5M Arbitrum budget proposal will enter on-chain voting on June 8, 2026. Its outcome is not just a resource allocation decision for Arbitrum DAO—it’s a collective test of treasury management models across the entire Layer 2 sector. The ongoing push by delegates for KPI quantification, milestone-based fund releases, and robust accountability mechanisms is fundamentally the DAO’s journey from "narrative-driven" to "data-driven" governance.
At the same time, Arbitrum, Optimism, and Base each represent a distinct path for L2 governance: Arbitrum upholds delegated on-chain representative democracy, Optimism experiments with a bicameral "neither company nor DAO" model, and Base prioritizes efficiency through corporate-style operations. None of these models is inherently superior; rather, they reflect different technical strategies, founding philosophies, and community cultures in addressing the core challenge of "decentralized efficiency." For investors, developers, and ecosystem participants, understanding these governance structures is becoming a prerequisite—not just an option—for engaging in the L2 ecosystem.
