Not a bet against Arbitrum' — Blockworks exits its DAO role

Blockworks Advisory announced it would wind down its Arbitrum governance role. The move highlights how DAO-run firms are shifting their governance models. In a statement on the 1st of June, the firm framed the exit as a realignment rather than a vote of no confidence in the Layer 2 (L2) chain.

"Stepping back from active delegation is, for Blockworks, a way to align with the current business goals of our organization, and should not be read as a lack of appreciation for Arbitrum nor a bet against the Arbitrum DAO itself."

Blockworks said it believes the DAO has a "bright future" and urged delegators to seek out active contributors as alternatives. The polite version of "good luck, you're on your own."

DAOs represent community token holders and vote on proposals affecting the chain. Token holders can pick their preferred delegate to air grievances. Currently, Blockworks sits as the second-largest Arbitrum delegate after Entropy Advisors.

Historically, DAOs were the third leg of a tidy three-layered approach for blockchains. First, Labs companies raise capital and build the network — Aave Labs for Aave or Offchain Labs for Arbitrum are examples.

The Foundation acts as the legal bridge between the chain and the outside world. It funds operations from the treasury reserve, dominated by the chain's native tokens. That's where the Arbitrum Foundation fits in.

Finally, the DAO — or governors — decides how the treasury is spent to improve the network. The original pitch: nobody in charge, nothing to regulate.

This setup was the cleanest way to dodge regulatory issues and claim "decentralized." But the Aave-DAO governance conflict showed how the three-layered framework is losing its shine.

Labs and the original chain builders now want a bigger seat at the table. The Aave spat has already pushed a key delegate and builders out of the protocol, leaving AAVE holders to absorb the losses.

One reason for the shift is increased regulatory clarity. Several Biden-era SEC enforcement actions have been dropped, and the CLARITY Act sets out rules for a "mature blockchain" and DAO treatment.

A recent European Central Bank (ECB) study went further, finding that most DeFi DAOs aren't as decentralized as they claim — few voters control up to 96% of delegated power. Decentralization theater, fully intact.

Joseph Axisa, a specialist in legal advisory and managing partner at Axis Group, echoed the changes and noted: "As DAOs continue to die (get killed by Labs Co's), this is a decision that will become more common amongst several professional delegates."

Following the update, ARB dropped 6%, a move partly accelerated by Bitcoin's extended pullback.