Arbitrum DAO members debate potential clawback of funds allocated to build a gaming ecosystem on the network

Members of Arbitrum's decentralized autonomous organization (DAO) are discussing a potential clawback of funds allocated to build a gaming ecosystem on the network

Members of Arbitrum’s decentralized autonomous organization (DAO) are discussing a potential clawback of funds allocated to build a gaming ecosystem on the network, citing a lack of progress and transparency.

On March 24, DAO member Ethan van der Heyden submitted a proposal to recover unused funds from the Arbitrum Gaming Catalyst Program (GCP). The program, which launched in 2024, aimed to position Arbitrum as a leading platform for onchain gaming development.

According to van der Heyden, the GCP was approved when projections were “exceptionally optimistic” and had become “proved unsustainable.”

“We must wind down GCP activities and secure all possible funds in order to safeguard the DAO’s funds and restore investor confidence in the ability of this DAO to allocate capital,” he wrote in the proposal on the governance forum.

The community member added that the GCP had been reluctant to document its activities and that the program was not delivering on its promises.

Another DAO member seconded the proposal, saying that the community must secure what is left of the funds:

While many others agreed to an immediate clawback of the funds, some said it may be counterproductive. One DAO member said that while the motivation may be valid, they favored a more constructive approach.

“The desire to protect DAO funds and ensure transparency is burning bright, but immediately resorting to a complete clawback seems overly harsh and potentially counterproductive,” they wrote.

The DAO member suggested phased clawbacks instead of immediately taking the program’s funding back and proposed flexible reporting standards to allow a more streamlined approach for the GCP.

Arbitrum token declined 81% since the GCP launch

The GCP was introduced on March 12, 2024, as a way to fuel the growth of Web3 gaming within the Arbitrum ecosystem.

It allocated about 225 Arbitrum (ARB) tokens to invest in promising studios and games for network development and establish Arbitrum as a leader for onchain gaming.

However, the program coincided with a $2.2 billion token unlock, which may have caused the token’s price to drop. By June 2024, the tokens allocated to the program were only worth about $215 million, more than 50% less than their original value.

At the time of writing, ARB tokens are trading at $0.38, 81% down from its price during the GCP launch.

Arbitrum token’s decline since the GCP launch. Source: CoinGecko

Another project has also begun implementing a plan to navigate the bearish market. On March 14, ZKsync sunset its liquidity rewards program ZKsync Ignite, saying that current market conditions had influenced the decision to end the program.

Related: Axie Infinity teases new Web3 game as NFT outlook turns positive

Broader decline Web3 gaming funding

The Arbitrum DAO proposal also comes amid a decline in Web3 gaming investments. Toshiyuki Otsuka, the founder of GameFi platform Snpit, told ChainShot that factors like market volatility and oversaturation of low-quality projects are slowing investment in Web3 gaming.

“Many investors are taking a more cautious approach, waiting to see which projects can demonstrate long-term viability before committing capital,” Otsuka said.

Otsuka added that the speculative rush of the past few years has given way to a more sustainable investment landscape for Web3 gaming, where only the most promising players are able to secure funding.