Arbitrum, a leading Layer 2 scaling solution for Ethereum, is back in the spotlight with new governance activities and technical upgrades.
The Timeboost mechanism, which grants users additional time for submitting on-chain transactions, is progressing to the next phase of its economic design—one that will be overseen by the Arbitrum DAO (Decentralized Autonomous Organization).
On May 3, 2025, the Arbitrum DAO revealed its approval of several key proposals, resulting in significant revenue generation. Let’s take a closer look at what’s driving this excitement and what it means for the future of decentralized governance.
By engaging with institutional governance, increasing smart contract revenues, and aligning with Ethereum’s latest standards, Arbitrum is solidifying its position as a highly sophisticated and financially sustainable Layer 2 blockchain ecosystem.
Enhanced Governance through Five Proposals and Watchdog Program
In May, the Arbitrum DAO confirmed five proposals—two of which were passed through on-chain voting on Tally, while three others were approved via Snapshot. A total of 3,422 unique wallet addresses participated in this voting, showcasing the vibrancy of the network’s governance.
A notable proposal was the introduction of the “Watchdog Program,” aimed at enhancing fund oversight within the DAO. This initiative received overwhelming backing, with 99.94% of votes supporting it—totaling over 211 million ARB, far exceeding the quorum requirement of around 131 million ARB. Leading participants included reputable institutions such as Entropy Advisors, L2BEAT, Gauntlet, and Wintermute, which collectively contributed over half of the necessary quorum.
The Watchdog Program introduces decentralized bounties, privacy-centric reporting mechanisms, and external audits—all designed to ensure transparency, compliance, and security for the DAO’s managed assets. This move positions Arbitrum at the forefront of governance in the Layer 2 sector, where operational transparency and accountability are increasingly crucial.
Timeboost Revenue Increases with Growing Usage
Launched in mid-April, Arbitrum’s Timeboost mechanism, an auction-based model for transaction block ordering rights, quickly became a substantial revenue source. By early June, it had generated approximately 593.58 WETH (around $1.43 million), with 575.769 WETH (approximately $1.39 million) going directly to the DAO as profit. Additionally, the total value locked in the contract reached 692.05 WETH (roughly $1.74 million).
The Timeboost design allocates 97% of revenues to the DAO and 3% to the Developer Guild, creating a balanced incentive structure that benefits both governance and development communities. The revenue patterns from Timeboost closely resemble those observed in decentralized exchange (DEX) activities, with noticeable spikes during weekdays (Monday to Thursday) and a drop of 5% to 17% over the weekends.
The strong demand across auction rounds, coupled with noticeable volatility, shows that on-chain transaction prioritization provided by Timeboost is increasingly sought after by both traders and developers.
Strategic Enhancements and Adaptive Governance Shape Prospects
Alongside its progress in correcting previous governance and economic errors, Arbitrum has also made strides in technical development by introducing ArbOS 40 “Callisto.” This upgrade is significant as it ensures full compatibility of Arbitrum One and Nova with Ethereum’s recent Pectra hard fork. Callisto not only implements vital Ethereum Improvement Proposals (EIPs) that enhance Ethereum’s functionality but also brings major performance improvements.
Maintaining a close alignment with Ethereum mainnet development is increasingly essential for welcoming developers to Arbitrum and supporting applications migrating from Ethereum. The overall implementation boosts performance, enhances compatibility, and reduces friction for builders deploying across chains.
At the same time, the DAO is considering a proposed amendment to the quorum in its constitution—that is, how many participants need to be present for a vote to be valid. Given the fundamental role of quorum in governance, this was a soft proposal that quickly transformed into a hard suggestion, facing divided opinions within the DAO, indicating that governance within the Constitution DAO remains somewhat unstable, with varying arguments about establishing a quorum.
Arbitrum is well-positioned to maintain its leadership among Layer 2 networks moving forward. The successful integration of the Watchdog Program, rising Timeboost revenues, and a commitment to stay aligned with Ethereum’s core development all suggest that the Arbitrum ecosystem is poised for secure and efficient scaling.