Ethereum layer-2 blockchain Arbitrum will distribute Ether (ETH) worth nearly $6.2 million to its decentralized autonomous organization (DAO), the project announced on May 9 on Twitter. 

The funds to be collected are base fees and surplus revenue generated from network transactions. According to Arbitrum’s tweet, a total of 3,352 ETH will be collected by its DAO. As internet-native organizations, DAOs are collectively owned and managed by their members. They have treasuries and make decisions through proposals voted on by the group.

Arbitrum is a popular scaling network used by many decentralized applications and blockchain developers. All users pay a fee during transactions on Arbitrum One.

The cost of sending ETH on Arbitrum is currently $0.25, and swapping tokens is $0.68 at the time of writing. Data from Crypto Fees shows that Arbitrum's users paid $387,423 in fees over the past seven days.

Each fee paid on Arbitrum One is divided into two sections — the L1 fee and L2 fee. According to the protocol, the L1 fee covers the cost of posting a transaction on the Ethereum network and the L2 fee covers the cost of running the network.

"All revenue from the Arbitrum Network is sent to the DAO treasury and it is up to the DAO on how to spend it", told Cointelegraph the Arbitrum Foundation. 

A revenue breakdown reveals around 582 ETH of surplus funds generated from the L1 fee, nearly 1,308 ETH from base fees and a 1,462 ETH surplus from the L2 fee. Combined, this represents revenue of 3,352 ETH for Arbitrum's DAO.

A related proposal from an anonymous member of Arbitrum's governance forum urges the protocol to create a mechanism for revenue distribution that would be triggered periodically by a smart contract. According to the proposal, delegated ARB tokens would be eligible for revenue distribution. The DAO hasn't voted on the proposal.

The proposal claims it would "align community incentives and give ARB a purpose beyond a worthless governance token." Most community members support the proposal, according to the governance forum. Some members, however, highlighted that the revenue distribution might further serve to classify the ARB token as a security.

Community member comments on Arbitrum’s "Distribution of DAO Revenue to ARB token holders” proposal. Source: Arbitrum DAO.

Arbitrum's revenue distribution comes after the protocol team clashed with its community over a nearly $1 billion fund transfer that wasn't approved by ARB holders.

Update (May 17, 2023 at 14:48 UTC): This article has been updated to clarify that the proposal on Arbitrum's governance forum was submitted by an anonymous member, not by the Arbitrum Foundation. The anonymous member has no relationship with the Arbitrum Foundation. The DAO has not voted to approve the proposal nor is it implemented.

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