Blockworks Advisory has announced that it will gradually phase out its governance role in the Arbitrum DAO. The firm stated that this move is part of a business direction shift and should not be interpreted as a sign of a weakening outlook for Arbitrum.

Will cease proactive governance delegation

In a statement released on June 1, Blockworks said it was withdrawing from active delegated governance to align the company's current business objectives with its resource allocation. The organization also stated that it still supports Arbitrum's long-term development and recommends that existing delegators move to more active governance participants.

Currently, Blockworks remains one of the top-ranked clients in the Arbitrum DAO, second only to Entropy Advisors.

DAO governance structure faces adjustment

The report points out that this change also reflects a shift in the DAO governance model. In the past, many public blockchains or protocols typically operated with a three-layer structure: the development team was responsible for fundraising and building the network, the foundation handled external legal and operational connections, and the DAO was responsible for deciding how the government's funds were used.

This arrangement was once used to maintain decentralized governance structures and reduce regulatory pressure. However, this structure is being challenged as project developers seek to regain more decision-making power.

Regulatory changes weaken the appeal of the old model

The article mentions that changes in the regulatory environment are one of the reasons driving adjustments in governance models. In the United States, several enforcement actions initiated by the SEC during the Biden administration have been withdrawn. At the same time, the CLARITY Act has also introduced clearer rules for the handling of "mature blockchains" and DAOs.

A recent study by the European Central Bank suggests that many DeFi DAOs are less decentralized than commonly perceived. The study states that a small number of voters may control up to 96% of delegated voting power.

Following the announcement, ARB fell by as much as 6%. The report suggests this decline was partly due to the continued pullback in Bitcoin's price action.