DeFi
Arbitrum DAO has $3 billion and wants to shop from Big Tech’s playbook – DL News
- Arbitrum DAO eyes Big Tech power play.
- By voting to approve a M&A pilot project, the collective hopes to innovate in DeFi.
- But some wonder if crypto is ready for mergers and acquisitions.
Arbitrum DAO, a digital cooperative sitting on over $3 billion in crypto, wants to go shopping.
On Wednesday, co-op members set the stage for Arbitrum DAO to take a page from Big Tech’s playbook by massively crushing approving an eight-week M&A pilot program offered by Bernard Schmid, founding partner of Areta, a company that provides investment banking services to crypto companies.
“In addition to conducting an in-depth strategic study on the added value of mergers and acquisitions,” the proposal states, “the pilot phase should serve as a facilitated platform for in-depth discussions based on data rather than opinions.”
If the pilot project is successful, Schmid plans to move forward with a more ambitious project. proposal: the creation of an M&A unit with a war chest of between $100 and $250 million, and a two-year mandate to identify and acquire potential targets.
Arbitrum DAO runs Arbitrum, the largest layer 2 blockchain on Ethereum. It also has the second largest cash flow of all DeFi projects, according to DefiLlama. data.
Arbitrum is the largest layer 2 blockchain on Ethereum.
A Big Tech movement
While Big Tech giants have long used mergers and acquisitions to fuel their meteoric growth, they are relatively rare in the crypto space.
In Q4 2023, according to GlobalData, there were only seven crypto M&A transactions. Technology at large generated 1,069 transactions.
Acquiring other companies can be particularly tricky in the world of decentralized finance. To begin with, the biggest players are not the companies themselves.
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Financial applications built on blockchains are often owned and managed by digital cooperatives called decentralized autonomous organizations, or DAOs.
A major decision such as an acquisition or sale would require approval from members of a DAO – or at least those with majority voting power – rather than a board of directors or CEO .
“This is a largely untapped opportunity in crypto, explored by only a few different projects in the field; therefore, going deeper into M&A would put Arbitrum ahead of its competitors,” Schmid wrote.
In a March 27 conference call, members of the DAO’s M&A Working Group Underlines Marketing companies, business development, infrastructure providers, stablecoin issuers and zero-knowledge technologies are the most attractive potential acquisition targets.
Schmid also suggested purchasing other layer 2 blockchains “to unify the ecosystem, grow its user base, and reduce competition and fragmentation in the space.”
Not sold
But not everyone is convinced.
“We are not sure that there are enough mergers and acquisitions opportunities for the DAO to be able to execute them on the scale described in the initial proposal,” Krzysztof Urbański, delegate of the DAO Arbitrum L2BEAT, wrote at the governance forum, referring to the larger, two-year proposal, which is expected to follow a successful pilot project. Delegates vote on behalf of other members using loaned tokens.
Nonetheless, L2BEAT voted in favor of the eight-week pilot.
“We are not entirely sure about the potential of an M&A unit within the DAO,” said Urbański, “but we understand that the aim of the pilot proposal is to help us assess the potential and better understand the possibilities that exist in the broader landscape.
Max Lomuscio, another delegate, echoed feeling.
Notable past acquisitions in crypto include Polygon’s purchases of Mir and Hermez, which it used to build a layer 2 blockchain based on zero-knowledge technology, and the company’s acquisition of Prysmatic Labs parent of Arbitrum, Offchain Labs.
In one infamous case, Fei, the issuer of an algorithmic stablecoin, merged with Rari Capital after two votes from their respective DAOs.
Fei and Rari divide in one year, destroyed by an $80 million hack and a fierce debate over how to compensate the victims.
Aleks Gilbert is DL News‘ DeFi correspondent based in New York. You can contact him at aleks@dlnews.com.