Besides airdrops, what new moves does L2 leader Arbitrum have?

Written by: Mary Liu, BitpushNews

One of the most anticipated events in the crypto community -- the Arbitrum airdrop -- has finally arrived. The Arbitrum Foundation announced that it will airdrop ARB governance tokens to its community members on March 23, and launch its Layer 3 development tool Arbitrum Orbit, bringing Arbitrum a step closer to full decentralization.

According to the announcement, with the introduction of ARB, Arbitrum will transform into an automatically executed decentralized autonomous organization (DAO), allowing ARB holders to vote on key decisions governing Arbitrum One and Arbitrum Nova (designed specifically for Web3 games and social media applications). The Arbitrum DAO will control key decisions at the core protocol level, including technical upgrades and revenue distribution for ecosystem support.

The founding team of Arbitrum, Offchain Labs, emphasized that the ARB token will make the Arbitrum ecosystem more decentralized than other scaling chains.

Why is it highly anticipated?

Arbitrum has rapidly risen to become one of the most popular Layer 2 blockchains on Ethereum in less than two years.

In the competitive landscape of Layer 2 blockchains or rollups, Arbitrum has emerged as a leader, holding a 55% market share, and surpassed Ethereum in trading volume for two consecutive days last month. Other star projects include Optimism, Polygon, zkSync, and StarkNet.

According to data from DeFiLlama, the total value locked on the Arbitrum chain is $1.6 billion, nearly double that of its competitor Optimism, another Layer 2 blockchain aimed at making Ethereum transactions faster and cheaper. Optimism has launched its own token OP, which currently has a market cap of about $750 million.

What is ARB and how to claim it?

Arbitrum has partnered with crypto analytics firm Nansen to determine eligibility for claiming ARB tokens based on user activity. Eligible users can claim tokens by visiting the Arbitrum official website, and the team has released documentation regarding which users qualify, with the following key points:

• The airdrop will take place on March 23, and users can check their eligibility at the link https://t.co/RbHMJwfJL6.

• A points system will determine how many tokens each user will receive, with a minimum of three points required for eligibility.

• The maximum score is 15, with some actions including bridging funds to Arbitrum One, trading, etc.

• The maximum allocation per individual address is 10,200 tokens.

• ARB tokens will be used for governance purposes, with an initial supply cap of 10 billion.

• Of this, 11.62% (1.162 billion tokens) will be allocated for the airdrop, and 1.13% will be used to assist DAOs building applications on Arbitrum.

• On-chain activities of eligible users will grant a certain number of points, which will also determine how much airdrop they can receive.

• A single wallet can receive a maximum of 10,200 ARB tokens.

• The snapshot date is February 6, 2023.

• The token is a governance token that will constitute a self-executing DAO, where proposals passed by voting will be executed directly on-chain.

• All investor and team tokens will have a 4-year lock-up period. The first unlock will occur after one year, followed by monthly unlocks thereafter.

Launch of Layer 3 Developer Tool Arbitrum Orbit

In addition to the airdrop announcement, Arbitrum has released a development toolkit for those interested in building Layer 3 solutions on top of Arbitrum: Arbitrum Orbit, which will allow anyone to launch their own L3 on top of the Arbitrum codebase.

Arbitrum uses optimistic rollups to batch transactions onto the Layer 1 Ethereum blockchain. Layer 3 networks built on Arbitrum will use similar rollups to batch transactions to Arbitrum, which will then roll them up to Ethereum, allowing for increased transaction throughput at relatively low costs.

Developers building such Layer 3 networks will be granted a perpetual license to use and modify the Arbitrum source code freely, enabling them to create application-specific chains or general-purpose chains on top of Arbitrum.

This approach differs somewhat from competitor Layer 2 Optimism, which has not focused on Layer 3 networks but encourages the creation of many interconnected Layer 2 networks based on its code stack, with Coinbase's Base being one of its early supporters. That said, Arbitrum is open to supporting other Layer 2 chains that use its code to settle on Ethereum. The Arbitrum DAO will be able to vote on whether to support other Layer 2 chains that use Arbitrum for settlement on Ethereum. If these chains choose to accept Arbitrum's charter, they will be referred to as "governance" chains.

A notable feature is that ARB tokens will not be used to pay any fees on the Arbitrum chain; on-chain fees will still be paid in ETH.

Offchain Labs CEO Steven Goldfeder stated that the Layer 3 announcement is not a reaction to Optimism's partnership with Coinbase: "We have been planning the Layer 3 strategy for a long time."

On-chain Governance

Prior to Thursday's announcement, Offchain Labs was the only entity responsible for making changes or adjustments to scaling technology.

However, with the launch of the ARB token, Goldfeder and his team will hand over this control to the community. This control comes with additional responsibilities, as once the DAO executes a vote, the code will be updated simultaneously.

Typically, most DAOs allow governance token holders to vote through proposals, and then the core team of the project executes the results by changing the network code. The difference with Offchain Labs establishing a DAO is that the codebase will automatically change based on the final outcome, meaning the DAO can directly control the network.

Nonetheless, being a self-executing DAO carries some risks. If malicious actors can change the code through the voting process, it will also be automatically applied to the code. The Beanstalk project is a case in point, where hackers used flash loans to obtain enough tokens to vote and approve the transfer of $182 million in funds to their own wallets.

Goldfeder stated that if a serious, urgent bug is found in the software, a security committee of 12 members will have emergency powers, requiring at least nine signatures to execute any changes.

Although Offchain Labs will relinquish control over Arbitrum, it hopes to continue playing a role as a service provider in the ecosystem. Goldfeder told Fortune Crypto: "The community will have the ability to decide the future of the technology and how it wants to be empowered. One thing is clear: in the Arbitrum ecosystem, open, free use and modification align with the best interests of the community and everyone. I believe this will spark a lot of innovation."