Managing the 1.6 Million Arbitrum Tokens – What Options Does Stargate DAO Have?

03/30/2023 00:26 • Blockchain Briefs • 113 views

On March 30th, members of the Stargate DAO discussed how to handle the expected allocation of 1.6 million Arbitrum (ARB) tokens worth less than $2 million during a community conference call on Wednesday. MaxPower, an employee at LayerZero Labs, said that these tokens had not yet been received, but when received, it would be necessary to decide whether to hold, sell, deploy, or commission these tokens.

Stargate DAO members discuss how to handle the upcoming 1.6 million ARBs at a community meeting

As the Stargate DAO members geared up for their community conference call on March 30th, the focus was on the allocation of 1.6 million Arbitrum (ARB) tokens that were expected to be received soon. MaxPower, an employee at LayerZero Labs, who was among the attendees, acknowledged that the tokens had not yet been received but shed some light on the concerns related to their management. The biggest decision looming over the DAO was whether to hold, sell, deploy, or commission the tokens.

The Options Available to the Stargate DAO

The 1.6 million ARB tokens that the Stargate DAO anticipates receiving, amounting to less than $2 million, put members in a tricky position of deciding the best course of action for the tokens. Holding onto the tokens as a long-term investment could be an option, given the volatile nature of the crypto market. However, with looming uncertainties about Arbitrum’s future performance, selling the tokens for quick liquidity could be a safer alternative.
Moreover, deploying the tokens in a liquidity pool or using them as collateral could lead to attractive yields for the DAO. This is because the Arbitrum network enables fast and secure transactions, meaning that its native token has the potential of proliferating. Commissioning the tokens, on the other hand, means delegating them to a trusted party to manage on behalf of the DAO, guaranteeing them some predictable returns.

The Pros and Cons of Each Option

Holding

Holding the tokens would mean that the DAO would bet on Arbitrum as a promising network whose token value could rise steadily in the future. It would also allow the members to have a greater say in the network’s governance, potentially leading to higher returns. However, the downside to holding the tokens is the market’s unpredictability, which could significantly impact the token’s value.

Selling

Selling the tokens offers the most immediate payout and provides fast liquidity to the DAO. The members can avoid risks of the token’s value declining in the future. However, the instant payout comes at the cost of losing any future value appreciation that may occur.

Deploying

Deploying the tokens in a liquidity pool could offer the DAO attractive yields through providing reserves to a lending protocol such as Aave or Uniswap. Having a stable and balanced pool of tokens will enable the DAO to have higher yields from the transaction fees levied on every trade. However, deploying in a liquidity pool does not entirely eliminate market risks, and losses could still occur.

Commissioning

Commissioning the tokens means entrusting them to an investment firm, decentralized autonomous organization (DAO), or individual with a proven track record of delivering predictable returns. It would minimize the decision-making process for the DAO and mitigate risks that trading in the crypto market inherently possesses. The downside is that entrusting the tokens to a third-party could result in lower potential returns than other options.

Conclusion

The decision on how to manage the 1.6 million ARB tokens will ultimately lie with the Stargate DAO members. They face a delicate balance between short-term liquidity and long-term growth. While holding onto the tokens could offer attractive future returns, it also presents the risk of market volatility. Selling the tokens would offer instant liquidity but could prevent any potential value appreciation. Deploying the tokens would provide a stable pool and higher-yield transaction fees, but it cannot eliminate market risks entirely. Commissioning the tokens could reduce decision-making efforts and provide better overall protection, but it could also result in lower returns. Ultimately, the DAO members must weigh the pros and cons of each option before making a decision.

FAQs

Q: What is the expected date for the Stargate DAO to receive the 1.6 million ARB tokens?
A: The date for the tokens’ receipt is currently unknown, but the members discussed the decision-making process in anticipation of the tokens.
Q: What are the risks to consider when holding onto the ARB tokens?
A: The main risk is the volatility of the market, which could significantly affect the token’s value.
Q: How can deploying the tokens lead to higher yields for the DAO?
A: Deploying the tokens to a liquidity pool could enable the DAO to earn transaction fees from every trade that occurs in the pool or by providing reserves to a lending protocol.

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