Arbitrum DAO’s earnings and plans for raising more revenue in the coming months and years
for its network were shared by Entropy Advisors, a platform that monitors decentralized autonomous organization (DAO) development and governance on Arbitrum. This report coincides with an update on Tally, where the DAO’s voting period for a proposal to adopt Timeboost as a revenue source for Arbitrum has been extended to March 29, 2025.
Arbitrum DAO has been operating at a loss every quarter since Q3 2023.
Source: Entropy Advisors
Growth in the midst of losses
In a detailed breakdown shared on X, Entropy Advisors revealed that Arbitrum DAO had spent $231 million while generating $107 million in revenue, with deficits similar to growth-focused startups. To ensure transparency, the advisors shared a series of dashboards outlining revenue generation, expenditures, and overall financial health. These dashboards included insights into income sources, expense categories, an income statement, and a treasury runway projection.
While some view the current losses as a natural phase of Arbitrum’s growth strategy, Entropy Advisors stresses the importance of smart spending to secure sustainable expansion. They also got a projected treasury runway for the DAO, with the platform surviving for 8 years should it run on its lowest income from the past 24 months. The full analysis of Entropy Advisors’ report is available as a dashboard on the on-chain analytics platform, Dune.
L2 base fee is the leading driver of revenue
The income sources are transaction fees on Arbitrum One and Arbitrum Nova, and they are categorized into L1 base fee, L1 surplus fee, L2 base fee and L2 surplus fee. Among these, L2 surplus fee was the major revenue driver according to the data shared by Entropy Advisors. The transaction fees altogether constituted the largest source of revenue, accounting for about 95% of the income breakdown. Given that L2 surplus fee is the leading source of income, its value is projected to skyrocket on the condition that there’s more demand for blockspace.
Arbitrum’s monthly revenue.
Source: Entropy Advisor
While L2 surplus fee increased and is projected to increase further, L1 base fee has decreased by over 90% with blobs. However, the gross profit margin has increased from ~25% to ~80%. According to Entropy Advisors, the gross revenue has decreased and the DAO’s profit has been relatively unchanged as a result of margin expansion.
The DAO also plans to increase its spending by including Timeboost as a revenue stream in the near future, and currently, the DAO is voting on that decision. Timeboost and Nova Fee Sweep have been touted to be income streams for the Arbitrum DAO. Timeboost has been in existence since 2024 and enables auctions for the rights to an express lane on both Arbitrum One and Nova, giving the winner a time advantage for transaction inclusion.
Incentives take the lead
Incentives are the Arbitrum DAO’s biggest expense at $141M (85%). Source: Entropy Advisors
The DAO’s expenses came in the form of blockchain-related costs such as Orbit developer guild payments; DAO operations such as DAO expansion programs, development and consulting services among others; incentive programs; financial management expenses such as treasury management and finance functions; grants such as event sponsorships, technology development, retroactive allocations and structured programs, among others.
According to the data presented by Entropy Advisors, apart from blockchain costs, incentives were the largest expense source, taking up to $141 million (85%). This is followed by grants, which took up to $13 million. Despite running at a loss since 2023, 2025 is expected to be Arbitrum DAO’s most profitable year yet, driven largely by a reduction in incentive spending.
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