Arbitrum DAO’s launch teaches some painful lessons
Yesterday, Arbitrum officially launched its DAO by airdropping the ARB token to the wallets of users who have been active in using Arbitrum. As done by similar DAOs in the past, more tokens will go to projects built on Arbitrum to encourage active DAO and ecosystem participation. Arbitrum wants the community to play a leading role in developing a whole range of dApps on top of their L2 network (which is so active it at one point even eclipsed the number of transactions on Ethereum).
Will the launch of Arbitrum’s DAO be the push the DAO world has been waiting for to usher in more effective and greater member participation? We can now observe Arbitrum’s first steps and subsequent growth to get the answers.
As for the token drop itself, it did not go smoothly.
Arbitrum who?
Even before token launch, Arbitrum was the biggest Ethereum L2 network by TVL, surpassing Optimism, dYdX, et al.
Its $4.23B TVL is more than double that of its nearest competitor, Optimism. And its market domination of 58.41% is staggering. But these numbers may have been skewed by airdrop farmers using Arbitrum in hopes of getting a large amount of ARB tokens to claim. So how did the drop go?
ARB airdrop: D-day
The drop began “as advertised” at the promised block of the Arbitrum L2 network. Price predictions varied, with some consensus forming around $.60 — $1.50 range.
When the airdrop claiming started, the initial price shown on CoinGecko’s terminal was a surprisingly high $5. Even more surprisingly, the price immediately started climbing almost to $9.
However, there was one small problem — almost nobody could claim the token since Arbiscan wasn’t working, likely from a DDoS attack that the Arbitrum team failed to prevent.
Even with a custom RPC to avoid Arbitrum One RPC’s overload, no one could claim. Yet some clearly did since there was market selling and (much less frequently) buying. Only bots and skilled developers could’ve been doing that. Not great for Arbitrum’s DAO community whose members flooded Twitter, Telegram, and Discord with desperate pleas for help claiming and all sorts of disappointment. It took hours for claiming to start working, and even then people would often have to retry the claim transaction dozens of times before it worked.
What it means for Arbitrum
It’s hard to tell about a DAO’s future just from the first hours. Pricewise, ARB has settled around the $1.25 — $1.45 range for the hours after most people could finally claim and trade the token.
It’s not a secret that many of the over 600,000 wallets eligible for claiming ARB belonged to airdrop farmers (with one person often holding many eligible wallets) who generally look to dump the token onto the market ASAP. This is what almost always drives a new token’s price down immediately after launch.
The bigger question is what upsetting DAO members at the airdrop stage does for Arbitrum’s DAO long-term. Will they be reluctant to govern? Will they dump their tokens along with the airdrop farmers? Or will they ignore the short-term price volatility and focus on building? Arbitrum DAO hopes they will do the latter.
Optimistic Case
For the answers to the above questions, we could look to Optimism Collective as a very similar example. Having done their drop less than a year ago, Optimism has a lot of member activity. Its Snapshot has 124,000+ members voting both on- and off-chain. Not all voting is near-unanimous or procedural, indicating healthy competition between ideas.
Optimism did a surprise second drop directly into the wallets of those active in the DAO. Perhaps Arbitrum will go the same way? More importantly, both the Optimism Collective and the Arbitrum DAO have a detailed roadmap for community governance and a whole ecosystem beyond being simply an L2 for Ethereum.
Anything but Arbitrary
In fact, Arbitrum put a spotlight on decentralization from the get-go, claiming to be the first to reach Stage 1 decentralization. They also want to make it easy to launch L3 chains on top of Arbitrum. Nearly 43% of the tokens will remain in the Arbitrum DAO’s treasury — so the incentives to participate are strong. And Arbitrum laid out an ambitious plan to match. If Optimism is any indication, Arbitrum will have a robust community actively governing and building projects in the Arbitrum ecosystem. After all, being a DAO is less about the initial token distribution and more about the builders who stick around to build.
Stay tuned!
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