Arbitrum (ARB), one of the most functional Ethereum-based Layer 2 scaling solutions, has shared an insight into its adopted mechanism for managing the fees generated on its platform. Taking to its official Twitter handle, Arbitrum said it is the “only rollup that sends all surplus revenue generated by transaction fees to their respective DAO.”
Fee generation model
According to the insights shared by the protocol, all users on Arbitrum One pay a fee when transacting on the network. This fee is split into two components, including L1 fees for covering transactions on Ethereum and L2 fees for Arbitrum fees. Of these generated fees, it said surplus tokens are accumulated before it is sent to the DAO.
All users on Arbitrum One pay a fee when transacting on the network. The fee is split into two components:
1. L1 fee to pay for costs on Ethereum.
2. L2 fee to pay for costs on Arbitrum.
Surplus L1 fees and all L2 fees accumulate on-chain before it is sent to the DAO.
— Arbitrum (💙,🧡) (@arbitrum) May 10, 2023
While L1 fees are not expended immediately as the Sequencer covers the cost upfront before it is recovered later, a large portion of the L1 fee is reserved for the Sequencer.
At present, Arbitrum revealed that the total funds billed for the Sequencer are pegged at 5,954 ETH worth approximately $10.9 million. The surplus on this comes in at 582 ETH, which can be sent to the DAO.
Arbitrum also revealed that the L2 fees accumulated thus far come in at a total of 2770 ETH. As revealed, a total of 3,352 ETH is billed to be sent to the DAO as a reward after the Sequencer is refunded 5,954 ETH.
How does this Help ARB?
With the Arbitrum protocol promising to trigger a call that will push for the collection of the accumulated Ether tokens by the DAO, the price of ARB recorded a bullish uptick with more than 3% growth to $1.1229 at the time of writing.
Members of the Arbitrum community DAO will be the beneficiaries of this reward distribution when it is finally made. This can notably trigger an intense buy-up of ARB to open access for users to gain good rewards. This event has further extended the positive outlook of Arbitrum as a viable scaling tool on Ethereum.