Arbitrum

Arbitrum DAO passes $23M extra budget to fund all grant applicants

The Arbitrum community is expanding its grant program budget to over $70 million, supporting a total of 56 projects.

The Arbitrum DAO has confirmed the disbursement of millions in extra tokens to fund all projects approved on its latest Short-Term Incentive Program (STIP), boosting its budget by $23.4 million.

The proposal, voted by the Arbitrum community between Nov.

The supplementary capital was approved by 216.7 million votes in favor to 73.1 million against, bringing STIP’s total budget to 71.4 million ARB tokens.

ARB holders approved the addition of 21.1 million tokens for funding grant applications. Source: Tally/Arbitrum

Arbitrum is a layer-2 networking designed to scale transactions on the Ethereum blockchain, allowing funds to be transferred more quickly and at a lower cost.

DefiLlama data shows that Arbitrum generated over $180,165 in fees and $43,342 in revenue just on Dec.

Layer-2 Arbitrum generated over $57 million in cumulative transaction fees. Source: DefiLlama

The new budget includes funding for Gains Network (4.5 million ARB), Wormhole (1.8 million ARB), and Stargate Finance (2 million ARB).

The approval of additional funding was not without controversy.

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Ethereum layer 2 bridging up sixfold year-on-year in Q1 — Alchemy

Layer 2s also saw increased development activity, with year-over-year smart contract deployment increasing by 160%.

Ethereum layer 2s, such as Optimism, Arbitrum and Polygon, increased in popularity in the first quarter of 2023, according to a report from Web3 development platform Alchemy. Over 635,000 Ethereum users bridged crypto assets to these networks from January to March, an increase of 44% over the fourth quarter of 2023 and 518% over the first quarter of 2022.

The report, titled simply “Web3 Development Report,” cited Dune Analytics as its source for this data. It showed that only 103,000 users made bridging transactions to layer 2s in the first quarter of 2022, whereas the same three months saw over 635,000 users perform these transactions.

Alchemy suggested that this increased activity may have been reinforced by successful airdrops from Optimism and Arbitrum in Q1, 2023.

In addition to increased asset bridging from users, layer 2s also showed greater activity from developers. Although the deployment of smart contracts related to layer 2s decreased by 30% relative to Q4 2022, it still increased by 160% when compared to Q1, 2022, the report said.

The crypto industry is coming off the back of a steep downturn in trading volume and crypto prices during 2022, with scandals like the UST depegging and FTX collapse causing many investors to shy away. But despite this negative sentiment, users still flocked to these new scalability solutions.

Related: 3 signs Arbitrum price is poised for a new record high in Q2

The Ethereum ecosystem as a whole also showed increased developer interest. Ethereum software development kits (SDKs) such as Ethers.js, Web3.js, Hardhat and Web3.py were downloaded 1.3 million times in Q1 2022. This became 1.9 million in the first quarter of 2023, an 8% increase. In addition, downloads of the MetaMask SDK, a tool used to develop apps that can interact with Ethereum wallet MetaMask, increased in each month of the first quarter.

Ethereum layer 2s have been offered as a solution to Ethereum’s scalability problem, which has been periodically causing high gas fees since as early as 2020. Some experts have argued that sharding the Ethereum network will also help to cut down on gas fees.

This story was updated on April 18 to clarify that the number of users bridging has increased by 518%, not the amount of assets bridged.

Total Arbitrum accounts surpass 5M after airdrop hype: Report

The milestone was accomplished less than one month after a much-anticipated airdrop.

According to statistics compiled by user Henrystats on Dune Analytics, the number of accounts, or wallet addresses, for Ethereum layer-2 scaling solution Arbitrum (ARB) surpassed 5 million on April 17. Aside from individual addresses, there are now more than four million active accounts in the ARB ecosystem, with nearly 200 million transactions having been completed since inception.

back endThe growth has come on the back-end of both a busy development cycle for Arbitrum and the hype surrounding its March 23 airdrop, an event that saw the distribution of 1.275 billion ARB tokens to a total of 625,143 eligible addresses. The number of accounts amounted to 3.4 million after the last ARB airdrop. 

The day after the airdrop, Cointelegraph reported evidence of some consolidating activity, as two individual accounts appeared to consolidate tokens from across nearly 1,500 separate addresses. 

“According to the blockchain analysis platform Lookonchain, one wallet received 1.4 million ARB from 866 addresses. … another wallet received 933,375 ARB from 630 addresses, worth around $1.38 million.” 

On April 15, Arbitrum DAO’s proposal to recall 700 million governing tokens to its treasury was massively outvoted. As Cointelegraph previously reported: “The proposal was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained.”

Despite the massive growth pushing Arbitrum over the 5M account mark, it appears as though weekly user activity has dropped significantly since the March 20 high of 1.38 million to around 333,000 users, a number more in line with Arbitrum’s pre-airdrop activity. While 83.7% of all ARB accounts, according to Dune Analytics, have at least one transaction, extrapolating the data further tells the rest of the story. Of the more than five million total Arbitrum accounts, 24.2% of those accounts have only one transaction, possibly indicating a pool of users who sold their ARB right after receiving the airdrop.

Screenshot of Arbitrum user activity chart. Source: Dune Analytics

Arbitrum proposal to return 700M ARB fails, whale calls it a “power play”

AIP-1.05 was defeated by 118 million votes after the proposal was introduced following the Arbitrum Foundation’s transfer of funds without community approval.

A controversial proposal seeking the return of 700 million ARB governance tokens to Arbitrum’s DAO treasury was rejected by a massive number of votes on April 15. The improvement proposal called AIP-1.05 was introduced after the Arbitrum Foundation transferred funds without community approval in March. 

The proposal was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained. The proposal asked the foundation to return the tokens as a “symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation.”

Screenshot of AIP-1.05: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

On the governance forum, a whale with 4.8 million ARB tokens said the proposal “seems to only serve as a power play” that would add an “unnecessary step” and delay the foundation’s ability “to support the growth of the Arbitrum ecosystem.“

Another whale voting against the proposal with 18 million ARB tokens stated that balance is necessary to promote decentralization and progress in the ecosystem: 

“There is a balance that we need to try to accomplish between advocating for decentralization and preventing progress in the ecosystem. I believe that decentralization on its ideal form is nowhere to be seen in this industry yet.“

Arbitrum’s community and its foundation are engaged in a dispute over the foundation’s governance proposal AIP-1, which called for an investment of nearly $1 billion worth of ARB tokens to fund its operations. After facing community backlash, the foundation later said that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins.

The AIP-1 proposal was Arbitrum’s first attempt at governance after its tokens airdrop in early March. The foundation has already released a new set of improvement proposals to reestablish dialogue with the community.

Magazine: The legal dangers of getting involved with DAOs

Arbitrum proposal to return 700M ARB fails, whale calls it a “power play”

The AIP-1.05 was defeated by 118 million votes. The proposal was introduced after the Arbitrum Foundation transferred funds without community approval.

A controversial proposal seeking the return of 700 million ARB governance tokens to Arbitrum’s DAO Treasury was rejected by a massive number of votes on April 15. The Improvement Proposal AIP-1.05 was introduced after the Arbitrum Foundation transferred funds without community approval in March. 

The AIP-1.05 was defeated by 118 million votes, representing 84% of the total votes received, while 21 million ARB tokens voted for the proposal, nearly 14.5% of the total. Around 2 million ARB tokens abstained. The proposal asked the Foundation to return the tokens as a “symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation.”

Screenshot – AIP-1.05: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

On the governance forum, a whale with 4.8 million ARB tokens said the proposal “seems to only serve as a power play” that would add an “unnecessary step” and delay the Foundation’s ability “to support the growth of the Arbitrum ecosystem.”

Another whale voting against the proposal with 18 million ARB tokens stated that balance is necessary to promote decentralization and progress in the ecosystem: 

“There is a balance that we need to try to accomplish between advocating for decentralization and preventing progress in the ecosystem. I believe that decentralization on its ideal form is nowhere to be seen in this industry yet.”

Arbitrum’s community and its Foundation are engaged in a dispute over the Foundation’s governance proposal AIP-1 — which called for investment of nearly $1 billion worth of ARB tokens to fund its operations. After facing community backlash, the Foundation later said that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins.

The AIP-1 proposal was Arbitrum’s first attempt at governance after its tokens airdrop in early March. The Foundation has already released a new set of improvement proposals aimed at reestablishing dialogue with the community.

Magazine: The legal dangers of getting involved with DAOs

3 signs Arbitrum price is poised for a new record high in Q2

Arbitrum is relatively cheap versus its top Ethereum L2 rival, Optimism, which may lead to a rise in ARB price over the next few months.

Arbitrum’s ARB token has emerged as one of the best-performing cryptocurrencies following Ethereum’s long-awaited Shanghai upgrade.

Notably, ARB price gained 4.28% to hit $1.36 on April 13, its highest level in two weeks. This also amounts to 18% gains from its $1.15 low a day prior when the Shanghai upgrade enabled staking withdrawals on Ethereum.

ARB/USDT daily price chart. Source: TradingView

To summarize, Arbitrum is an Ethereum layer-2 (L2) scaling solution that aims to reduce network transaction congestion and transaction fees. As a result, the market typically perceives Ethereum’s growth as a boon for L2 chains.

Here are three reasons why ARB could continue its bull run in Q2 to retest its record high of $1.60.

More utility for ARB

Arbitrum generated $2.5 million in profits in March 2023 via sequencing, according to Messari.

Arbitrum financial performance in 2023. Source: Messari

Notably, sequencer profits represent the difference in fee revenue generated by the L2 chain and the fee expense paid to the base L1 chain — all calculated in Ethereum’s Ether (ETH) token, not ARB.

These profits will eventually go to Arbitrum’s community-managed DAO, ArbitrumDAO, as it grows to become more decentralized in the future.

Sequencers can create maximal extractable value (MEV) by arranging users’ transaction requests — a feature missing from Arbitrum.

However, ArbitrumDAO may end up monetarizing MEV by auctioning off rights to produce blocks once they launch decentralized sequencing, asserted Kunal Goel, a researcher at Messari. This would open up opportunities for ARB as a staking token.

“The DAO will likely enforce ARB staking for sequencers to economically align incentives and to allow for slashing in case of any misbehavior, similar to validators in Proof-of-Stake networks,” noted Goel, adding:

“This will add value to the token as users demand greater security from the protocol.”

Capturing Optimism’s market share

Arbitrum has outperformed its top Ethereum L2 rival, Optimism, on almost all the key metrics throughout most of 2022 and 2023.

For instance, in 2022, Arbitrum generated $22 million in sequencer revenue and $6 million in profits. Meanwhile, Optimism made $18 million and $4 million in sequencer revenue and profits, respectively.

Similarly, the first quarter of 2023 saw Arbitrum outperforming Optimism’s revenue by $4 million in revenue and $3 million in profits.

Arbitrum vs. Optimism key metrics. Source: Messari

Arbitrum also had a higher total value locked (TVL) through most of 2022 and 2023, with its dominance increasing further after the ARB airdrop in March.

As of April 13, Arbitrum’s TVL was $2.27 billion compared with Optimism’s $930 million.

Optimism versus Arbitrum TVL. Source: Defi Llama

“At current market prices, ARB trades at a discount to OP across all valuation multiples,” Goel noted.

ARB price in descending triangle breakout

The ongoing run-up in Arbitrum price has broken above what appears to be a continuation pattern.

Related: ARB price to $2? Ethereum L2 rival Arbitrum will double in April, fractal suggests

Dubbed descending triangle, the pattern develops when the price consolidates between a falling trendline resistance and horizontal support. It resolves after the price breaks out of the range, pursuing the direction of its previous trend.

ARB entered a similar breakout stage on April 13 after rising above its triangle’s upper trendline with convincing volumes. 

ARB/USD four-hour price chart. Source: TradingView

The ARB/USD pair is now on a run up toward $1.60 in Q2, its best level to date, and up 20% from current price levels. This upside target is measured after adding the maximum distance between the triangle’s trendlines to the breakout point.

Conversely, ARB price risks short-term correction due to its overbought relative strength index on the four-hour chart. In this case, the triangle’s upper trendline will be the likely downside target at around $1.20.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Community wants Arbitrum Foundation to return 700M ARB to DAO Treasury

A new proposal asks the Arbitrum Foundation to return 700 million ARB tokens after community backlash. Voting ends on April 14.

The Arbitrum community has initiated a new proposal requesting the Arbitrum Foundation to return 700 million ARB tokens to its DAO Treasury. The move comes after the Arbitrum Foundation transferred the funds without receiving the community’s approval in March. 

According to the proposal, the foundation should proceed with its budget plan only after returning the tokens. “This is a symbolic gesture to demonstrate that the governance holders ultimately control the DAO, not the Arbitrum service provider nor the Foundation,” said a community member.

Voting will end on April 14. At the time of writing, 55% of voters supported the proposal, 42% opposed it, and 2% abstained.

Screenshot: AIP 1.05: Return 700M ARB to the DAO Treasury. Source: Arbitrum’s DAO.

The dispute between Arbitrum’s foundation and its community started at the end of March, following the foundation’s first governance proposal (AIP-1), which called for funding its operations with 750 million ARB tokens — worth nearly $1 billion.

Following backlash from community members, the foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It added that some of the tokens were already sold for stablecoins. At that time, the foundation noted that its symbolic first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly.”

A few days later, the Arbitrum Foundation released a set of new improvement proposals aimed at restoring community dialogue. The new proposals include AIP-1.1, which covers a smart contract lockup schedule, spending, budget and transparency. The other, AIP-1.2, tackles amendments to current founding documents and lowers the proposal threshold from 5 million ARB tokens to 1 million ARB “to make governance more accessible.”

The efforts, however, did not resolve the issues with ARB holders. “The foundation has unilaterally been allocated $750M tokens from the DAO that was not approved by the governance tokenholders. Any funds must be returned until it has been properly allocated by the DAO and the DAO only,” the proposal says.

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Arbitrum poses new governance proposals after community furor

The Arbitrum Foundation has made a couple of new governance proposals following the fracas that occurred over its first attempt.

The Arbitrum Foundation has released a raft of new improvement proposals following the fracas that ensued after its first failed attempt at governance.

On April 5, Ethereum layer-2 solutions provider Arbitrum posted new Arbitrum Improvement Proposals (AIPs) for the governance of the network.

The new proposals include AIP-1.1, which covers a smart contract lockup schedule, spending, budget and transparency. The other, AIP-1.2, tackles amendments to current founding documents and lowers the proposal threshold from 5 million Arbitrum (ARB) tokens to 1 million ARB “to make governance more accessible.”

In an April 5 tweet, it confirmed the Arbitrum DAO came to a consensus against its first proposal, AIP-1.

On April 2, the Arbitrum Foundation stated AIP-1 “likely will not pass” due to community backlash. Tokenholders objected to the proposal, arguing that it encompassed too many topics, and decried granting around $1 billion worth of ARB tokens to the foundation.

The foundation then backtracked, stating in an April 5 tweet that it would not take control of the tokens:

“The Foundation will not move any of the remaining 700M tokens in the Administrative Budget Wallet until an acceptable budget and smart contract lockup schedule have been approved by the DAO.”

The foundation also issued a transparency report that “describes actions taken to get the DAO up and running.”

“We have heard the feedback,” it stated, before adding that it has “worked diligently to address it and make sure the Foundation can represent, and serve the DAO’s best interests with their support.”

The two new AIPs were posted on the Arbitrum community forum and will be available for feedback for at least 72 hours before a planned week-long snapshot vote.

Related: Arbitrum to break up governance votes after community backlash

ARB prices have dropped 4% over the past 24 hours, falling to $1.22. The layer-2 token was dumped heavily following its airdrop on March 23 and is down 86% from its peak price of over $8.50 on that day.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Arbitrum to break up governance votes after community backlash

The Arbitrum Foundation has backtracked on a controversial proposal and ratification vote that gave it control of a huge chunk of tokens.

Ethereum layer 2 solutions provider Arbitrum has backtracked on its governance voting system following community backlash from token holders.

On April 2, the Arbitrum Foundation tweeted that its first governance proposal, AIP-1, “likely will not pass” and added its “committed to addressing the feedback received from the community.”

The move will break up the debatable governance package into smaller segments. The team noted:

“AIP-1 is too large and covers too many topics. We will follow the DAO’s advice and split the AIP into parts. This will allow the community to discuss and vote on the different subsections.”

The U-turn follows a weekend of community backlash over the foundation’s “ratification” vote for decisions it had already undertaken. The proposal would have given the foundation, a centralized company, control over 750 million Arbitrum (ARB) tokens worth around $1 billion.

Critics, such as decentralized finance and decentralization advocate Chris Blec, argued the proposal was “decentralization theatre.”

The foundation stated that the 750 million tokens received would be voted on in its own AIP. “We’re working on options to add more accountability,” it stated, adding, “for example, a vesting period of 4 years. Furthermore, tokens held by the Foundation cannot be used to vote.”

There will also be a budgeting proposal, in which the foundation will propose transparency reports “to make the community aware of how the funds are spent over time.”

The Special Grants program is vague and lacks DAO involvement, the foundation stated. It will be renamed “Ecosystem Development Fund” with context provided on how the funds will be used to benefit the Arbitrum ecosystem.

Related: Arbitrum’s first governance proposal sparks controversy with $1B at stake

The new Arbitrum Improvement Proposals will be issued “early this week,” the foundation concluded.

ARB token prices took a massive hit over the weekend, slumping 18% from an April 1 high of $1.40 to a low of $1.15 in the April 3 morning Asian trading session, according to CoinGecko.

ARB has seen an 86% price decline since its airdrop on March 23.

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Arbitrum’s first governance proposal sparks controversy with $1B at stake

The Arbitrum Foundation announced that it was only ratifying an existing decision when it proposed a 750 million ARB tokens budget.

A proposal to fund the Arbitrum Foundation with 750 million ARB tokens — nearly $1 billion — raised controversy in the ARB community over the weekend after the foundation announced that the vote was only to ratify a decision that had already been made. 

The conflict comes after a few days the layer-2 protocol airdropped its governance token.

According to the AIP-1 proposal on Arbitrum’s DAO, the 750 million tokens would be used to cover “Special Grants, reimbursing applicable service providers […] and covering ongoing administrative and operational costs of The Arbitrum Foundation.” Over 70% of tokens taking place in the vote had been cast against the move at the time of writing:

Screenshot: AIP-1: Arbitrum Improvement Proposal Framework. Source: Arbitrum DAO. 

After facing backlash from community members, the foundation said in a forum post on April 2 that AIP-1 was a ratification, not a proposal. It added that somof the tokens were already sold for stablecoins. In other words, its billionaire budget and allocations would not be subject to an on-chain governance process. 

Nearly 50 million ARB tokens were moved on-chain in the past few days. The foundation said 40 million tokens had been allocated as a loan to a sophisticated actor in the financial markets space, while 10 million tokens have been converted to fiat currency for operational costs. 

The Arbitrum Foundation said the symbolic first governance attempt failed due to communication problems and decisions that were “clearly not articulated correctly,” writing:

“One of the mistakes in the drafting of AIP-1 was a failure to note at the outset that this proposal was intended to act as a ratification of the initial setup of both the Arbitrum DAO and the Foundation that has been created to serve the DAO. […] the point of AIP-1 was to inform the community of all of the decisions that were made in advance.”

Commenting on the governance forum, members of the community pointed out that Arbitrum’s team “has been dumping tokens that were initially informed to the community as locked tokens,” claiming that “all tokenomics page shows only User airdrop + DAO airdrop tokens as unlocked” with remaining “tokens to unlock in March 2024.”

Others highlighted that under the United States securities laws, the anticipated sale would be considered fraud and that U.S. citizens who have bought ARB tokens or claimed the airdrop “are eligible for legal remedies.”

“I will be pursuing this with my lawyers and expect to file a securities fraud lawsuit in the next few days. […] Immediately, the Arbitrum Foundation is advised to halt all illegal sales of the token that are being done without any authorization and against the provisions of the law,” said a community member.

Arbitrum’s blockchain holds 65% of the Ethereum layer 2 market share, according to data from the layer-2 analytics site L2Beat. The highly anticipated launch and airdrop of its native governance token took place on March 23, with hundreds of thousands of eligible users and DAOs claiming ARB. Overwhelming user demand led the airdrop claim page to crash shortly after its launch, Cointelegraph reported. 

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Update (April 2, at 21:03 UTC): This article has been updated to insert information about 50 million ARB tokens moved on-chain.