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Will Arbitrum DAO Governance Token Airdrop Help It Thrive Amid a ZK Surge?

2 mins
Updated by Ryan James
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In Brief

  • Arbitrum will airdrop its new ARB governance token on March 23, 2023.
  • The airdrop will mark the network's transition from a centralized entity to a decentralized autonomous organization.
  • Several zero-knowledge rollups are also picking up steam by trying to attract Ethereum developers.
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Layer two rollup Arbitrum will airdrop its new ARB governance token to users amid a shift towards decentralized governance in a crowded rollup market.

The Arbitrum Foundation will launch a new token allowing holders to vote on changes to the Arbitrum protocol.

Arbitrum Transitions to Decentralized Governance Through ARB Token

The Foundation will airdrop 44% of the new ARB token to investors and core contributors, and 56% to the Arbitrum community in roughly seven days.

ARB Distribution
ARB Token Distribution | Source: Arbitrum Foundation

The token distribution means Offchain Labs will no longer control Arbitrum, the company former Princeton lecturer Ed Felten and two grad students co-founded. Instead, it will become a decentralized autonomous organization (DAO).

Arbitrum tapped analytics firm Nansen to distribute tokens commensurate with a user’s transactions, dapp usage, and time spent. There will be a total of 10 billion tokens distributed.

Holders of ARB can change the code directly, subject to a delay used to audit the change. On the other hand, a security council can fix bugs more quickly. 

Arbitrum’s One network is a rollup on Ethereum that processes bulk transactions off the main chain and posts the results to the base layer. 

When a user signs a digital transaction, it gets sent to an Arbitrum node. The Arbitrum node will forward the transaction automatically onto the Arbitrum sequencer. The sequencer will take the transaction and others that happened around the same time and put them all into a batch. It will compress that batch using a common compression algorithm and post it as Ethereum call data on-chain.

Using a rollup increases Ethereum’s performance and lowers transaction fees for smart contract users.

ZK Rollups Need Rapid Developer Adoption to Challenge

Rollups are crucial to Ethereum’s scaling roadmap after the network transitioned to proof-of-stake in September 2022.

Ethereum co-founder Vitalik Buterin has said that rollups will precede another scaling strategy called sharding in short to medium term.

Generally, rollups come in two flavors, zero-knowledge rollups, like the ones recently released by Polygon Labs and ConsenSys, and optimistic rollups, like Arbitrum and Optimism.

Arbitrum’s One network is an optimistic rollup that assumes all transactions are valid without computation. There is a challenge window where anyone can question the validity of transactions using a fraud-proof. 

With the transition to a DAO, Arbitrum looks to build on its $1.67 billion in total value-locked Ethereum market share. The smart contract language of its Arbitrum Virtual Machine is compatible with Ethereum, making it easy for developers to migrate.

Arbitrum TVL
Arbitrum Total-Value-Locked | Source: DeFiLlama

On the other hand, zero-knowledge rollups use cryptography to prove the validity of transaction data without revealing the data. 

Ethereum infrastructure developer ConsenSys is in the early stages of developing its zero-knowledge rollup ecosystem. While no numbers are readily available on its developer community, ConsenSys offers Ethereum developers a five-minute onboarding time to start creating on its rollup.

Sidechain developer Polygon Labs has reached several zk rollup milestones, including over 5,000 smart contracts and 75,000 zk proofs. It has $1.03 billion locked in its entire ecosystem, with its zero-knowledge rollup mainnet beta set for a March 27, 2023, release. It also seeks to attract Ethereum dApp developers by requiring minimal smart contract changes.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...