Arbitrum: Pioneering the Future of Decentralization

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Wen Token?

Now! (Well, OK, technically next Thursday).

After years of development and nearly 18 months running on mainnet, The Arbitrum Foundation is extremely excited to announce the launch of DAO governance for the Arbitrum One and Arbitrum Nova networks. This is a massive leap forward in the decentralization of the two networks. The future of Arbitrum belongs to the DAO community, and this post will give more details about why today’s decentralization milestone is so important, and the role of the $ARB token for enabling community-driven DAO governance.

Why Token?

The guiding mission when building Arbitrum has always been to securely scale Ethereum, and this security-first mindset is the guiding force behind decentralizing the chain as security and decentralization are closely intertwined. Building a secure and decentralized L2 requires removing any centralized points of chain control so that the chain can operate trustlessly.

So how does one remove centralized control? The first prerequisite is to build the core technology that allows the chain to operate without any centralized actors, and key to this are the fraud proofs that empower Ethereum to enforce the chain’s correctness. Arbitrum fraud proofs have been live from the earliest days of its first testnet launch, and they’re critical to both security and decentralization.

So can you just throw out the keys? Not so fast.

While a fully built-out rollup can in theory operate without any centralized intervention, an important question arises around upgrading the rollup. If you throw out the keys, it becomes impossible to upgrade, but upgrading is important to introduce improved technology as it becomes available. Late last summer, Arbitrum was upgraded to the Nitro stack which included improved compression, lower fees, and massively increased throughput. Upgradeability is also critical in order to patch the software in the event of a discovered vulnerability.

So we can’t give up upgradeability but we want to remove central points of control. But then who controls upgradeability? The Arbitrum DAO does, and the $ARB token is essential for distributing this power to the community. That’s why a token is necessary for securely scaling Ethereum.

Why Now?

Today’s launch is the logical next step in Arbitrum’s decentralization roadmap. In August, Arbitrum One was upgraded to Nitro, and just a few months ago, it was announced that 10 independent institutional validators had signed up to validate Arbitrum One. With the tech mature and validation expanded, the next step toward decentralization is today’s launch: giving The Arbitrum Foundation and DAO ownership of the chain and the responsibility to foster and grow the Arbitrum ecosystem.

Today’s launch isn’t only a milestone for Arbitrum; it’s a historic day for Ethereum scaling more broadly. The Ethereum community has been working for years towards building a secure and decentralized L2, and late last year, Vitalik Buterin proposed a three-stage schema for classifying the maturity of rollups. With today’s announcement, Arbitrum has become the first EVM rollup ever to achieve the second of the three stages. And that’s a reason to celebrate — but not yet. Finish reading the post first.

Self-executing DAO Governance

The Arbitrum Constitution specifies the governance process and how proposals are presented and voted on. Arbitrum’s DAO governance is self-executing, meaning that the DAO’s votes about on-chain actions will directly have the power to effect and execute its on-chain decisions, without relying on an intermediary to carry out those decisions. Self-executing governance is a critical milestone for decentralization, and Arbitrum is leading the way as the first L2 to launch self-executing governance. To make sure that proposals are carefully deliberated, voted on, and that users have time to react to any upcoming changes, the voting process requires a minimum of 21–37 days (depending on the nature of the proposal) to pass before a proposal can be executed.

While DAO proposals do not have the ability to quickly push changes to the protocol, in emergency situations (e.g., to patch a vulnerability) it can be necessary to swiftly push an upgrade. Moreover, depending on the nature of the emergency, it will generally be ill-advised to publish the details of the situation in the governance forum before it has been rectified. For these reasons, The Arbitrum Foundation also established the Arbitrum Security Council, a 12-member multisig of highly regarded community representatives designed to ensure the security of the chains and be able to act quickly in the event of a security vulnerability. In case of emergency, the Arbitrum Security Council will be able to act swiftly, but this will require participation from 9 of the 12 members.

The Arbitrum DAO will be the ultimate governing body over the Arbitrum Security Council, with elections for the Council being held twice annually. The DAO also has the power to retire the Security Council should it at some point decide that it is no longer required to protect the chain.

Arbitrum Orbit and Community Governed Licensing

The Arbitrum technology is the most advanced rollup stack to date, and an exciting facet of today’s announcement is Arbitrum Orbit, which will allow developers to easily and permissionlessly launch their own Layer 3 (L3) blockchain in the Arbitrum ecosystem. Developers launching L3s on Arbitrum One and Nova are automatically granted a free and perpetual license allowing them to use, modify, and customize Arbitrum’s best-in-class technology for their L3 chains. Arbitrum Orbit L3 chains will also support the upcoming release of Arbitrum Stylus, which will allow developers to use the C, C++, and Rust programming languages for their chains, in addition to Solidity and other EVM languages.

The Arbitrum DAO will have the ability to authorize additional Layer 2 chains on Ethereum, irrespective of whether the chain is governed by $ARB, ensuring that the community is in full control over the future of Arbitrum and its technology. For developers that want to use the Arbitrum stack to launch L2 chains directly on Ethereum (as opposed to L3s), they can submit a DAO proposal and the DAO has full discretion to grant these licenses. In this way, the community has significant control over the future of not only the Arbitrum One and Nova chains but of the underlying technology itself.

$ARB Airdrop: Users

We’ve talked a lot about what governance is and why it’s important, but equally important is how that responsibility gets distributed to the community. The Arbitrum token is majority community-owned (~56%). Of that community allocation, 12.75% will be distributed in the Arbitrum Airdrop next Thursday, March 23, based upon data taken on a snapshot on February 6, 2023.

Determining the eligibility criteria for receipt of the airdrop was a complex process. There are hundreds of thousands of weekly users of the Arbitrum platform, and the protocol has been operational for nearly 18 months. There’s a sensitive balance that needs to be struck between:

  • Making sure to include a wide array of Arbitrum users
  • Ensuring that individual airdrop recipients receive a meaningful distribution
  • Reserving tokens for future DAO grants

Over the course of the past many months, The Arbitrum Foundation and Offchain Labs worked closely with Nansen to design eligibility criteria that would fairly distribute the $ARB tokens to a large cross-section of real Arbitrum users. Together, we developed a point system that took into account a variety of metrics of network usage, but also deducted points from users who engaged in sybil-linked usage patterns. Points were awarded for usage on both Arbitrum One and Arbitrum Nova and early users of Arbitrum One (before Nitro) were given more points for early usage. Any user with three or more points is eligible for the airdrop.

For the sake of transparency, we are publishing not only the full list of airdrop recipients but also the underlying criteria and data set so that users can themselves verify the fairness and correctness of the process. You can find that data here.

$ARB Airdrop: DAOs

While we did our absolute best to include a wide variety of genuine Arbitrum users in the airdrop, invariably some recent or infrequent users were not included in the user airdrop (and indeed discerning between a new user and an airdrop farmer was generally very difficult). To capture these users, we included a second mechanism as well by which we granted tokens to the community: the DAO airdrop.

The ultimate goal is the localization of community governance. While The Arbitrum Foundation can try its best to properly distribute governance, it is impractical to optimize within every subcommunity on Arbitrum (there are many!). Accordingly, only Arbitrum projects with DAO treasuries were eligible. While there are many amazing teams and companies contributing to the ecosystem, the goal here is not to reward projects for their contributions, but to really allow all sub-communities within the Arbit