Abstract

This proposal seeks funding of $16M in USD (RWAs), 1.7k ETH and 230mn ARB to support the Arbitrum Foundation’s continued operations for an additional year beyond its initial allocation under AIP 1.1.

The Foundation serves as a growth engine and cost center of the Arbitrum ecosystem on behalf of the DAO. It coordinates development of the technology stack, executes strategic partnerships in coordination with other Arbitrum Aligned Entities (“AAEs”), supports and funds ecosystem expansion and facilitates DAO initiatives. Importantly, it also covers all costs associated with Arbitrum One and Arbitrum Nova, with technical costs expected to represent 54% of all anticipated expenses for 2027.

All activities undertaken by the Foundation are focused on working with other AAEs to grow the ecosystem and identify new revenue sources, with the ultimate goal of increasing revenue flowing to the DAO. As all revenue accrues directly to the DAO treasury, the Foundation must periodically return to the DAO and request funding in order to continue our activities.

The medium to long term goal of the Arbitrum Foundation, alongside all other AAEs, is to continue expanding the DAO’s revenue across multiple sources including Arbitrum One and AEP fees, Timeboost, the ATMC endowment, and new business lines that are expected to emerge over the coming months and years. We believe a sustainable future can be achieved via the DAO governance model and will continue focusing our efforts on ensuring its success.

Motivation & Rationale

The Foundation acts as a capital allocator, ecosystem facilitator, and the ArbitrumDAO’s legal wrapper and backstop for DAO proposals.

We identify emerging opportunities and work with other AAEs to bring high-impact initiatives into the Arbitrum ecosystem. As an intentionally structured cost center, the Foundation absorbs the cost of growth and development while enabling the DAO to capture the upside through increased usage, stronger network effects and sustainable revenue generation.

Among the AAEs, the Foundation plays a central role across four key areas:

Strategic Grants and Partnerships. The Foundation supports both emerging crypto-native teams and established institutional partners.

Our ecosystem team is focused on onboarding teams across various verticals, including institutional tokenization, DeFi, Consumer, Payments, AI, and emerging trends. This forms the application layer of Arbitrum and further attracts builders to build on Arbitrum. The Arbitrum ecosystem is one of the most dynamic in the blockchain industry and attracts the interest of developers, retail users and now institutions. In many cases, this is thanks to the relationships and partnerships we have structured to bring users, capital, and strategic collaboration across the ecosystem.

The Foundation has continuously improved its capital allocation over time, and supports ecosystem growth through programs including our grants program, Trailblazer, Audit Subsidy Program, Arbifuel and DRIP. We have reviewed over 3,200 applications with an acceptance rate below 20% for these programs. Key Arbitrum teams that the Foundation directly supported in their early stages are Pendle, Ostium, USDAI, Instadapp, Cow Swap and El Dorado. Key Web3 communities were won over competition, like ApeChain. Institutional partnerships secured through the Foundation include Robinhood, BlackRock, Franklin Templeton, WisdomTree, Circle, Securitize and Paxos.

Technical Advancement and Infrastructure Maintenance. The technical and ecosystem team work hand-in-hand to sponsor core protocol upgrades alongside onboarding new partnerships that enhance the developer experience.

Sponsoring core protocol upgrades is essential for the continued improvement of the Arbitrum technology stack in terms of security, features, developer and end-user experience. Major sponsored upgrades include new execution environments such as Stylus, new revenue streams such as Timeboost and the Arbitrum Expansion Program, reducing fees for all users with Dynamic Gas Pricing, and continuous ArbOS upgrades with general improvements and security enhancements. The majority of research, development, and technical implementation of this work came from our partnership with Offchain Labs. As we mention elsewhere, Offchain Labs will approach the DAO separately to continue funding protocol research work.

Since the Arbitrum technology stack has an ecosystem licence (BSL) and is increasingly adopted as the chain of choice by other projects, we have sought to onboard new partners who can enhance the developer experience. Partnerships include OpenZeppelin to develop a Stylus SDK and audit early Stylus teams, onboarding Nethermind for client diversity, and several top-tier audit firms with the Audit Program for emerging builders alongside many others.

Additionally, the Foundation funds core ecosystem tools and services, such as block explorers, RAAS providers, and transaction simulation and analytics tools which have extensive distribution across developers and users. As a result, Arbitrum offers best-in-class infrastructure support to the ecosystem and the Foundation maintains a strong relationship with infrastructure companies. This directly benefits the Arbitrum ecosystem, for instance, with the $10M grant program launched and funded by Alchemy.

Marketing, Community, and Education. The Arbitrum Foundation is focused on vertical marketing through developer engagement, in-person initiatives, and coordinated media distribution.

Our developer relations and ecosystem teams focus on supporting builders through technical education, tutorials, hackathons, and ecosystem showcases. Complementing this, in-person initiatives such as OpenHouse and ArbiLink bring together founders, developers, and institutional partners, facilitating collaboration and onboarding to the ecosystem.

This combined approach of online engagement alongside real-world activations helps to equip teams with the knowledge to build on Arbitrum while connecting them to high-value partners. Together, these efforts reinforce Arbitrum’s position as a highly attractive ecosystem for builders.

Finally, to ensure Arbitrum is well positioned within broader industry narratives, alongside promoting teams building on Arbitrum, we actively engage with the media across both crypto-native and traditional financial outlets. Some outlets include Unchained, Decrypt, CoinDesk, The Block, Bankless, and Messari, as well as traditional financial media such as Fortune, Bloomberg, Financial Times, and CNBC.

Tokenholder Relations, Governance and DAO Wrapper. The Arbitrum Foundation has begun to actively engage with new prospective tokenholders alongside facilitating governance for existing tokenholders.

On the capital markets side, the investment strategy team has broadened engagement with investment firms, research houses, and asset managers to introduce the Arbitrum ecosystem and the role of the ARB token. This includes building relationships with selective capital market participants exploring the ecosystem’s growth trajectory and supporting initiatives that extend Arbitrum’s reach into institutional and/or investment communities. Additionally, we have facilitated several institutional roundtables and prospective token holder roadshows across key markets such as the US, EMEA and Asia.

Governance, specifically DAO relations, will begin to converge with institutional relationship building as we work to bring more long term token holders into the governance process.

On the governance front, the governance team has played both a strategic and operational role since the DAO’s inception. They have facilitated six Security Council election cycles, as well as the implementation of many DAO-approved initiatives including liquidity programs (e.g. ATMC, STEP I and II), third-party grant providers (e.g. Plurality Labs, Questbook), DAO-mandated research initiatives (e.g. ARDC), and recovery of misused funds (e.g. Watchdog, other independent actions), among many others. More recently, they have supported the establishment and enablement of several Arbitrum Aligned Entities including OpCo, Entropy Advisors, and AGV.

Importantly, the Arbitrum Foundation serves as the legal wrapper for the DAO and has committed $10M to establish the Captive Insurance Product, designed to act as a backstop to safeguard participation within the DAO.

Use of Funds and the Reinvestment Flywheel

The Foundation operates at the intersection of the ecosystem’s core participants among AAEs, builders, institutions, and governance, where we coordinate efforts to drive adoption and growth.

All activities are ultimately focused on improving key metrics across Arbitrum One and Arbitrum Chains which directly translates into revenue for the ArbitrumDAO.

The impact of this model is best illustrated by the ecosystem’s growth to date.

In March 2023 (at the Foundation’s launch):

• 1.28M daily transactions,

• $1.9B in stablecoins,

• $6.15M revenue for that month, with $3.52M paid to Ethereum L1 data costs,

• No meaningful real-world asset (RWA) presence.

By February 2026:

• 4.7M+ daily transactions (up 270% from March 2023)

• $8.6B stablecoin supply (up 320% from March 2023)

• ~$800M in RWAs, top 6th network by value and ranks #1 globally by total assets issued,

• $23.49M in gross profit generated in 2025 across transaction fees, Timeboost, and the Arbitrum Expansion Program, all accruing to the DAO treasury.

Going further, Arbitrum has developed one of the deepest liquidity layers across L2s, with peak TVL of ~$21B and over 2.3B total transactions processed, with the second billion completed in just 13 months. Most importantly, network fees paid by users have drastically decreased while maintaining a significant revenue stream for the DAO.

This growth reflects a reinforcing economic flywheel. More teams building on Arbitrum drives more onchain activity; increased activity generates DAO revenue through fees, Timeboost, the Arbitrum Expansion program, and native yields available on Arbitrum chains; that revenue is reinvested into grants, programs, technology improvements, and ultimately attracts the next wave of teams to build on Arbitrum.

This flywheel is already established and accelerating. This proposal funds the work that continues to compound it with the Foundation’s efforts focused on ecosystem growth, increasing DAO revenue, and ensuring our own continued future funding.

We recommend viewing the following dashboards that reflect the on-chain transaction data, total stablecoin supply, and total RWAs on Arbitrum.

Projected Foundation Expenses (2027)

	USD	ARB
Operating Expenses	$27.6M
Ecosystem Growth Expenses & Investments		244.9M
Total Projected 2027 Expenses	$27.6M	244.9M

Table 1: Total expected operating and ecosystem growth related expenses in fiat and ARB for 2027

Table 1 presents our current best estimate of total 2027 expenses. The annualized expense is below the annual costs outlined in the Foundation’s 2025 transparency report. This reflects a combination of cost efficiencies undertaken by the Foundation, our treasury management efforts, and the absence of funding for Offchain Labs.

The Foundation’s current payments to Offchain Labs for technical services will run through January 2027, but after that OCL will no longer be paid by the Foundation. They may approach the DAO separately for funding in the future.

In relation to our expected ecosystem growth expenses & investments, the Foundation works with other AAEs to allocate this funding. We view this as an important part of creating a sustainable flywheel for the DAO. As mentioned previously, key Arbitrum teams that the Foundation directly supported in their early stages are Pendle, Ostium, USDAI, Instadapp, Cow Swap and El Dorado. The 2027 budget includes funding for both new and existing ecosystem growth commitments.

	2027 (Forecast)
Variable Marketing Expenses	$2.38M
General & Administrative (G&A)	$10.40M
Technical	$14.81M
Total Operating Expenses	$27.6M

Table 2: Anticipated expenses forecast for 2027 by the Arbitrum Foundation

Table 2 provides an overview of the Foundation’s projected expenses as it relates to General & Administrative, Variable Marketing, and Technical costs.

It is important to note that the Arbitrum Foundation largely operates as a cost center for the DAO. While the chain revenue occurs to the DAO, the Foundation pays the operational expenses to keep Arbitrum One and Arbitrum Nova running.

In regards to the General and Administrative category, it primarily relates to personnel, contractors, external service providers, legal and insurance costs, and other operating expenses.

The Technical category alone accounts for approximately 54% of all expenses for the Arbitrum Foundation for next year. Let’s explore the technical expenses in more detail.

	2027 (Forecast)
Security	$4.63M
Infrastructure & Tooling	$4.38M
Hosting & Support	$5.80M
Total Technical Expenses	$14.81M
Table 3: Breakdown of Technical Expenses

In Table 3, we present a breakdown of the Technical category which includes Security, Hosting & Support, and Infrastructure & Tooling. This covers a range of costs including block explorers, bug bounties, auditing spend, cloud service providers, external technical contributors, third party software tools and many other items that are required to keep the Arbitrum network running with high uptime.

We have worked with Offchain Labs to optimize technical costs and are targeting an 8% reduction in 2026 vs. 2025 despite higher expected transaction volume and network traffic. This reduction is accounted for in the request for funding.

The Foundation has reduced expected variable marketing expenses in 2026 and going forward versus prior years. This reduction reflects a change in the Arbitrum Foundation’s approach to marketing. The Foundation is now focused on vertical marketing across capital markets and developer relations, with the objective of attracting high-quality founders to build on Arbitrum and to attract capital to participate in the ecosystem. This change in approach was necessary to contain cost while focusing our marketing efforts on the highest impact areas.

Proposed Funding Ask

Asset Type	Quantity
RWA & Stablecoins	$16M
ETH	1,740
ARB	230M
Table 4: Requested funding for the Arbitrum Foundation

Table 4 outlines the Foundation’s funding request of, where most funding will be used to cover technical costs of the network, G&A, and ecosystem growth for an additional year beyond its initial allocation under AIP 1.1.

We request funding in RWAs, ETH and ARB to better align the Foundation’s assets with its liabilities. Our operating expenses are largely USD-denominated while ecosystem growth expenses can be denominated in ARB. This approach would improve balance sheet flexibility and support future operational and strategic needs while reducing the need to sell tokens to fund operations.

Additionally, we are requesting 230mn ARB to increase our treasury of ARB. This will be used primarily for ecosystem growth initiatives, including onboarding new strategic partners, and other operating expenses.

It is worth highlighting that in Table 1, our total estimated operating expenses will be approximately $27.6M and 244.9mn ARB while the proposal is only requesting $16M in RWAs,1,740 ETH, and 230mn ARB. Our RWA ask is ~$11.6M lower than our estimated operating expenses and our ARB ask is ~14.9mn lower. We are comfortable with this short-fall as we can accommodate the difference from our current balance sheet and from the ETH requested.

We request the RWA / Stablecoins, ETH, and ARB be released to the Foundation upon passage of the proposal, with the ATMC and OAT determining the appropriate DAO bucket for each allocation.

The proposed funding timeline reflects a deliberate approach to treasury management to ensure continuity of core functions and sustained support for the ecosystem while minimizing the near-term impact on the DAO’s treasury. The Arbitrum Foundation expects to come back to the DAO in 2027 to discuss future funding.

The Foundation has published Biannual and Annual Transparency Reports since inception, without interruption. This proposal commits to maintaining that cadence.

Timeline

We encourage all delegates to provide feedback on the forum and to attend the following governance call:

• Tuesday, 26th May 2026, at 2pm UTC

Throughout the governance process, feedback will be collected and integrated with the proposal.

We aim to have a temperature check vote on 28th May 2026, which will run for one week. If the temperature check passes, then the on-chain vote will be initiated on 8th June 2026. Please note that these dates are subject to change based on feedback from delegates.