Arbitrum (ARB): Transitioning Into a DAO With the ARB Airdrop

A decentralized autonomous organization (DAO) puts control of an entity into the hands of its community members. Unlike a top-down management approach, voting by token holders is used to steer development decisions and other important matters impacting the ecosystem. 

On a blockchain, DAO governance also promotes transparency, because all voting records are posted and are viewable by the community. In March 2023, Arbitrum prepared for a transition to DAO governance, initiated with the airdrop of the long-awaited ARB token

Key Takeaways:

• The Arbitrum Foundation’s much-anticipated ARB token launched on Mar 23, 2023, and was airdropped to eligible users.
• This big event ushered Arbitrum into the world of DAOs, marking a vital milestone in Arbitrum’s journey.
• Looking to trade ARB? Bybit offers ARB/USDT and ARB/USDC Spot trading pairs, as well as ARBUSDT Perpetual Contracts.
• Moreover, Bybit Wallet now supports the Arbitrum Chain, in addition to the ETH, BNB and OP chains.

What Is Arbitrum?

On Ethereum, over 362,000 daily active users complete in excess of 925,000 transactions daily. In addition, Ethereum currently powers over 3,000 DApps, a number that grows regularly. Because Ethereum cannot handle this volume’s projected growth over the long term, scaling via the Arbitrum network is essential. 

Ethereum is a Layer 1 blockchain network, and the Arbitrum network is a Layer 2 solution. As such, Arbitrum is an extension of Ethereum’s Layer 1 network, its functionality supported via smart contracts built on the blockchain. In addition to maintaining the DeFi network, Arbitrum lowers developers’ costs, prevents fraud and optimizes speed.

Arbitrum is often compared to Optimism, another Ethereum Layer 2 solution. Both use optimistic rollups, but they handle fraudulent transactions differently. When Optimism identifies a fraudulent transaction, the entire transaction is sent through the Ethereum virtual machine (EVM). Arbitrum, on the other hand, only sends the questionable aspect of the transaction through the EVM. This results in a much higher transaction capacity.

The Arbitrum ecosystem moved to DAO governance and now functions within the ARB ecosystem. ARB, Arbitrum’s token, was first airdropped to the Arbitrum community on Mar 23, 2023. 

If you have yet to claim your Arbitrum airdrop, check out our detailed guide to trade a suite of ARB products on Bybit today.

History of Arbitrum

Arbitrum launched in 2021, gaining immediate popularity. In fact, a few weeks later its total value locked (TVL) grew over 2,000%. Most of its growth since that time has been organic, as developers have increasingly been drawn to its exceptional benefits.

On Feb 22, 2023, it was revealed that the Arbitrum One network had processed more transactions than Ethereum for the first time ever. The Arbitrum token airdrop was a highly anticipated event, as it not only marked a new chapter for the Arbitrum ecosystem, but also highlighted the potential of its continued growth.

What Does Arbitrum Aim to Achieve?

Arbitrum was created as a Layer 2 solution to support Ethereum’s growth and functionality. Now, this solution has transitioned to a DAO. After the airdrop of the ARB governance token, token holders were granted voting power to influence important management decisions and developmental improvements going forward. By taking this important step, the Arbitrum community gained power over the future of the network, and now have the ability to influence decisions that are in the members’ best interests.

How Does Arbitrum Work?

Arbitrum supports optimized scalability by functioning off of the blockchain. Specifically, transaction validation occurs off-chain by using optimistic rollups and smart contracts. After validation, confirmation is sent to Ethereum, which can process roughly 15 transactions per second (TPS). 

Using an optimistic rollup solution, Arbitrum’s technology can process 40,000 TPS, and all of the Ethereum developer tools are available on the Arbitrum network, including the EVM smart contract. Thus, the design of Arbitrum’s technology allows developers to create and launch DApps on Ethereum faster, easier and with lower fees.

Features of Arbitrum

The advanced functionality and benefits of the Arbitrum ecosystem are rooted in its features. While this solution is relatively new and continues to develop, its features and capabilities have enabled it to remain among the top Ethereum Layer 2 solutions. Let’s look at Arbitrum’s core features.

Arbitrum One

The Arbitrum One optimistic rollup protocol completes bulk transactions off the chain before they’re posted, resulting in lower fees for users and enhanced Layer 1 performance. Arbitrum’s Nitro upgrade was completed in September 2022, enabling the use of standard tools and languages, rather than requiring the use of custom designs. It also reduces transaction costs, is compatible with ETH gas, supports substantially greater throughput and delivers other benefits.

Arbitrum Nova

Nitro shares its codebase with Arbitrum Nova, and is designed specifically for DApps, social projects and game development. Nova is suitable for high transaction volumes. In addition, its users benefit from fast transactions and low transaction fees. Another advantage is its compatibility with EVM for optimized functionality.

Progressive Decentralization

Arbitrum has benefited from the progressive decentralization of the two chains that are impacted by the DAO transition: Arbitrum One and Nova. Several components impact the status of this decentralization, including chain ownership, validator ownership, Data Availability Committee (DAC) ownership and sequencer ownership.

Creation of New Arbitrum Chains

The Arbitrum Foundation launched Arbitrum Orbit in March 2023. Through this solution, developers can create their own permissionless Layer 3 blockchains. This allows the system's users to make customizations to suit their projects’ needs. More than that, Arbitrum Orbit supports the development of new chains. 

Stylus

Stylus, a development by Offchain Labs, is an innovative upgrade to the Arbitrum tech stack. It expands the programming environment, allowing the deployment of contracts written in a variety of programming languages, such as Rust, C, C++ and others. Existing Ethereum contracts will run the same way on Stylus, with an additional virtual machine for the new languages. This dual system, known as EVM+, results in faster and cheaper operations.

The life of a Stylus contract involves four stages: Coding, compilation, execution and proving. In short, contracts can be coded in any language that can be compiled into WebAssembly (Wasm). The contract is then compiled in two stages, first into Wasm and then into each Arbitrum node's native assembly, which ensures the contract is safe, efficient and fraud-proof.

During execution, Stylus uses a tool called Wasmer to run the compiled native code, which saves on gas fees and computational cost as compared to Ethereum. Importantly, Stylus can handle contracts written in different languages, so developers don't have to change their ways of working.

As for proving, Stylus extends Nitro's Arbitrator, a tool used for proving fraud, and can dissect both Ethereum's history and user programs. Offchain Labs has already created a fraud prover for Stylus, and is now focusing on improving language features and tools.

Soon, Stylus will be available on a testnet, and by year-end the source code will be ready for use on any Arbitrum/Nitro based chain. If you’re interested in joining the Stylus testnet, you can sign up here.

Arbitrum Airdrop

On Mar 16, 2023, it was announced that the Arbitrum Foundation will finally launch its long-awaited token, known as ARB. ARB has an initial supply cap of 10 billion tokens, with a maximum 2% inflation rate per year. The community owns 56% of the tokens, with 12.75% of those having been kept aside for the airdrop to eligible users on Mar 23, 2023. The rest of the community-owned tokens will be distributed to users over time, with the remaining 44% of the total supply allocated to investors and core contributors. 

Offchain Labs, the creator of Arbitrum, used an internal eligibility analysis to determine which of the early users of Arbitrum would receive the airdropped tokens. Past engagement with Arbitrum was taken into account, including bridged funds on Arbitrum One, the number of completed transactions over the last several months and the number of assets deposited into Arbitrum. For every meaningful action that a user had made before the Feb 6, 2023 snapshot captured at block height #58642080, they were awarded one point. 

Based on the number of points earned, they were awarded a corresponding number of tokens, as follows:

Arbitrum’s Transition to a DAO

Other Layer 2 projects have already launched their own native tokens, such as Optimism (OP). According to L2BEAT, Arbitrum currently holds approximately 59.88% of the market share on Ethereum. DAO governance is likely to be a critical aspect of its continued dominance. 

Prior to Arbitrum’s transition to DAO governance and the ARB airdrop, its TVL market share on Ethereum was $3.85 billion. This has since increased to $5.93 billion, following its transition to the Arbitrum DAO, which is widely regarded as being in the best interest of the community and the ecosystem. Increased innovation is expected to be one of the key benefits.

Governance

With the official launch of the ARB token, the Arbitrum Foundation has successfully managed to establish community governance. ARB token holders now have voting rights that give them power over the Arbitrum network’s protocol and development. 

While ARB holders can adjust the code, the changes will be audited. In addition, bugs will be fixed by a security council. While Offchain Labs will no longer maintain governance control, it will continue to develop Arbitrum technology after community members vote on making specific improvements and changes.

Delegation of Voting Power

ARB token holders will vote for delegates who represent their interests and goals. The elected delegates will review and vote on the DAO’s proposals, and the Arbitrum DAO makes decisions on how revenue is used, steers technological upgrades and makes other key decisions. As a self-executing governance organization, its voters directly impact on-chain decisions. No intermediary is required. Notably, Arbitrum is the first Layer 2 solution to use self-executing governance.

Arbitrum Road Map

Arbitrum came online in 2021 as an Ethereum Layer 2 solution, quickly gaining traction by providing developers with a faster, easier way to create with minimized fees. In March 2023, the Arbitrum DAO was introduced with the release of the long-awaited ARB token. This governance token puts important decisions in the hands of the community, rather than Offchain Labs. 

The Stylus solution will soon be available as well, further adding to developers’ functionality by supporting additional programming languages. Another planned upgrade gives developers the ability to create their own Layer 3 solutions.

ARB Tokenomics

Arbitrum’s native token, ARB, was launched on Arbitrum One. Token holders can vote on the Arbitrum One chain. As mentioned, the token has a maximum inflation rate of 2% annually, and it can only be claimed and minted on Arbitrum One. 

ARB Price Prediction

ARB launched on Mar 23, 2023 at the price of $1.35. This was followed by a slight decline before its price surged to a high of $1.69 on Apr 17, 2023. This was momentary, however, as ARB’s price soon decreased over the following weeks, reaching its all-time low of $0.912886 on Jun 15, 2023.

On Jun 20, 2023, ARB saw a sharp increase in value, pushing above $1 once again. This increase in price was attributed to the surge in Bitcoin’s price from $26,000 to $30,000. ARB peaked at $1.23 on Jun 28, 2023, and continues to fluctuate. The Arbitrum token is currently trading at $1.15 (as of Jul 5, 2023).

Experts from PricePrediction believe that ARB will close 2023 at $1.53. Its price is expected to then double to $3.24 by 2025, reach $6.95 by 2027 and triple to $21.64 by 2030. This positive growth is substantiated by analysts from DigitalCoinPrice, who believe that ARB’s price will hit $2.58 by the end of 2023, double to $4.27 by 2025, increase to $5.34 by 2027 and reach $12.24 by 2030.

Where to Buy ARB

The Arbitrum token is available for trading on Bybit, one of the world’s leading exchanges. Simply sign up for a Bybit account and fund it with cryptocurrency or fiat currency to start trading. The available ARB products on Bybit include:

• Spot*: ARB/USDT, ARB/USDC (trade up to 5X leverage on Spot with 60% collateral ratio value)
• Derivatives: ARBUSDT
• Leveraged Token: ARB3L/USDT
• DCA Bot: ARB/USDT, ARB/USDC
• Spot Grid Bot: ARB/USDT
• Copy Trading: ARBUSDT
• Futures Grid Bot: ARBUSDT

In addition to these products, Bybit is also proud to announce that Bybit Wallet now supports the Arbitrum Chain, along with the ETH, BNB and OP chains.

Arbitrum Ecosystem on Bybit

If you’re interested in trading other tokens within the Arbitrum ecosystem, you’ll be glad to know that Bybit also supports the ecosystem by offering these Spot Trading pairs: DPX/USDT, GMX/USDT, GNS/USDT, MAGIC/USDT and RDNT/USDT.

Will ARB Be a Good Investment?

As a solution that enhances the developer experience with Ethereum, Arbitrum has quickly become the top Ethereum Layer 2 solution. While its history is relatively short, it has a track record of progressive improvements, such as Arbitrum Nitro and Arbitrum Orbit. In addition to the release of the long-awaited ARB token and the move toward community governance, Arbitrum plans to release Stylus soon. 

With Arbitrum’s utility and the likelihood of continued growth, ARB could be a solid investment. This is, however, not financial advice, and you are strongly encouraged to do your own research before investing.

Closing Thoughts

Arbitrum is the leading Ethereum Layer 2 solution, providing an essential service to developers. With its combination of planned improvements and current utility, it’s on track to maintain and even expand its popularity and utility in the months and years to come. Now that the Arbitrum DAO has come online, and with more positive changes scheduled for the near future, this is a solution to start taking advantage of — and to keep watching.

#Bybit #TheCryptoArk