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A gentle introduction to the Arbitrum DAO


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In a nutshell:

  • Arbitrum Rollup and Arbitrum AnyTrust are protocols that make Ethereum transactions faster and cheaper. Developers use Arbitrum One and Arbitrum Nova, the chains that implement these protocols, respectively, to build user-friendly decentralized apps.
  • The distribution of the $ARB governance token decentralizes governance of these protocols and their respective chains, as well as any future chains the Arbitrum DAO authorizes.
  • $ARB tokens can be used to vote on Arbitrum DAO governance proposals, allowing $ARB holders to shape Arbitrum's future together.
  • Token holders will be able to delegate their voting power to delegates.
  • The $ARB airdrop began on 3/23/2023 and ended on 9/24/2023.
  • You can become an Arbitrum DAO delegate by engaging with the Arbitrum community and convincing $ARB holders to delegate their votes to you, or by holding $ARB yourself.
  • To build decentralized apps on Arbitrum, check out the developer docs.

Hello! What's Arbitrum again?

Arbitrum is a protocol that makes Ethereum transactions faster and cheaper. Developers use Arbitrum to build user-friendly decentralized apps (dApps) that can take advantage of the scalability benefits of the Arbitrum Rollup and AnyTrust protocols.

Arbitrum's flagship chain, Arbitrum One, was launched in 2021. This was quickly followed by the launch of Arbitrum Nova, a separate AnyTrust chain built for ultra low-cost transactions. In August 2022, Arbitrum One was upgraded to the Arbitrum Nitro stack, bringing a 7-10x upgrade to its scaling capabilities.

The distribution of $ARB governance tokens decentralizes governance of Arbitrum One and Arbitrum Nova and their underlying protocols. $ARB tokens can be used to vote on Arbitrum DAO governance proposals, allowing $ARB holders to collectively shape the future of Arbitrum protocols and chains. Token holders can also delegate their voting power to delegates.

What's governance?

Governance is the way that decisions get made. To understand what this means, let's compare traditional web2 governance to web3 governance.

Web2 technologies are traditionally built by corporations governed by a board of directors. This board is usually a small group of people elected by shareholders.

When a corporate decision needs to be made, members of the board meet and vote. The board's decision-making protocols aren't always visible to shareholders. Although the board has a fiduciary duty to its shareholders, shareholders must trust the board. This is a sort of social contract expressed as corporate legalese and enforced by law.

Web3 technologies (like Arbitrum's protocols and chains) are often built initially by corporations governed by a board of directors. Once these technologies achieve product-market fit and a community of users and stakeholders develops, decision-making authority can be gradually decentralized. This is called progressive decentralization, and it's what Arbitrum is doing. Progressive decentralization is usually facilitated by three key ingredients:

  1. DAO formation: The Arbitrum DAO (decentralized autonomous organization) is a new entity with decision-making authority over the Arbitrum One and Arbitrum Nova chains, along with their underlying protocols. This DAO is governed by The Constitution of the Arbitrum DAO, which is a set of rules that describe how the DAO will operate. The Constitution is enshrined within a number of social contracts that are used by the Arbitrum DAO to govern itself and its technologies.
  2. Governance token launch: Ownership of governance tokens represents membership within the DAO. Token holders can vote on DAO proposals. Arbitrum's governance token is $ARB, and will be distributed to eligible wallet addresses via an upcoming airdrop.
  3. Code: DAO governance is usually facilitated by a series of open source smart contracts that enforce a specific decision-making protocol. These trustless smart contracts are used to gradually replace a traditional board's trusted social contract. Arbitrum DAO uses smart contracts to codify the decision-making protocol articulated within The Constitution of the Arbitrum DAO.

So $ARB is a token, kind of like $ETH?

Kind of! Let's compare them:

How $ETH and $ARB are similar:

  • Both are powered by decentralized blockchain technology.
  • Both can be owned by any cryptocurrency wallet that supports $ETH.
  • Both can be bought, sold, and traded.

How $ETH and $ARB are different:

  • $ETH is a transactional token, while $ARB is a governance token.
  • $ETH is used to pay for transaction fees, while $ARB is not.
  • Governance of Arbitrum is facilitated by $ARB and governance smart contracts, while Ethereum's governance is handled socially.
  • Holding $ARB gives you the ability to govern Arbitrum, while holding $ETH doesn't impact your ability to govern Ethereum's protocol.

Why is this important?

Decentralization of Arbitrum's technology governance represents an important step towards community governance of Ethereum's scaling technologies, and further aligns the Arbitrum community's incentives with those of the Ethereum community at large. This is a big deal because it means that the Arbitrum DAO will be able to democratically make decisions that are in the best interest of the Arbitrum and Ethereum communities, rather than having faith in the good will of a small group of people.

$ARB tokens represent stake in Arbitrum's - and by proxy, Ethereum's - decentralized future. You can use $ARB to collectively determine how we as a community scale Ethereum's infinite garden into the future.

More generally, possession of $ARB tokens places you at the cutting edge of governance mechanism design. This is a new frontier with society-scale implications, and your voice matters. $ARB tokens give you an immutable voice!

See State of decentralization for a more in-depth overview of Arbitrum's decentralization journey.

Cool beans. Was there an airdrop?

The airdrop ended on 9/24/23; claiming is no longer live. See Airdrop eligibility and token distribution details for more information.

How does Arbitrum's governance work?

Governance of the Arbitrum Rollup protocol is driven by two governing bodies: the Security Council and the Arbitrum DAO.

  • The Security Council is a 12-member council of entities elected by members of the Arbitrum DAO. This council is responsible for ensuring Arbitrum's security and performance through the selective application of emergency actions if/when necessary. See Delegates and delegation for a conceptual overview of Arbitrum DAO's delegation mechanics.
  • The Arbitrum DAO is the worldwide community of $ARB token holders and the delegates that they select. The DAO is responsible for governing Arbitrum and its Security Council. The DAO can use constitutional proposals to modify the Security Council's powers, or even to eliminate the Security Council entirely. The Security Council's powers are delegated to the Security Council by the DAO, and are to be exercised in the best interests of the DAO. See Arbitrum DAO for an introductory overview of the DAO's various components.

What sorts of decisions is Arbitrum’s governance system responsible for making?

Arbitrum's governance system is responsible for making many types of decisions. One important responsibility is upgrading Arbitrum chains’ core contracts, which define and enforce the Arbitrum protocols. An upgrade like this could be motivated by any of the following reasons:

  1. An upgrade could improve the system in some way, like increase its decentralization or optimize its performance and lower fees.
  2. An upgrade could fix a critical vulnerability.
  3. An upgrade could address a non-critical decision that affects the Arbitrum ecosystem at large.

The Arbitrum DAO is also responsible for authorization of the creation of new L2 chains (see New Chains).

Refer to the Constitution for a precise overview of the scope of the DAO's decision-making responsibilities. See Why governance? to learn more about the importance of governance. See Comprehension check to test your understanding of the Constitution's protocol.

Who cares about this stuff?

You can think of Arbitrum stakeholder groups as a stack of layers. The web3 user layer is at the top of the stack. All other layers work together to support the web3 user layer:

  • Web3 user layer: Includes decentralized app (dApp) users - users of web3 applications.
  • Web3 app layer: Includes all of the developers, dreamers, and makers who are building decentralized apps and tooling to support dApp development.
  • Layer 2 (L2): Includes Arbitrum DAO, the Arbitrum community, node operators, sequencers, and other Layer-2 builders (including Offchain Labs) who are working hard to fulfill Ethereum's rollup-centric roadmap.
  • Layer 1 (L1): Includes consensus & execution layers.
    • Consensus layer (CL): Includes Prysm and other consensus-layer teams who support Ethereum's beacon chain with consensus-layer client software.
    • Execution layer (EL): Includes Geth and other execution-layer teams building execution-layer client software.
  • Research layer: Includes researchers and protocol engineers who are working on the cutting edge of cryptography, mechanism design, and governance protocols.

All of these people can govern Arbitrum One and Arbitrum Nova?

Yep! As long as they either hold $ARB or are a delegate.

What's a delegate again?

A delegate is like an elected representative. $ARB token holders can delegate their voting power to delegates.

Why would I want to become a delegate?

There are a lot of people who don't have time to actively participate in protocol governance. Delegates help these people by offering to vote on their behalf.

Delegates are a critical component of Arbitrum's decentralization because they allow token holders to passively participate in the governance of our technology. Although becoming a delegate is a serious responsibility that requires a significant time commitment, it allows you to ensure that Ethereum's values (and those of the delegators who have entrusted you with their voting power) are forever enshrined within the DAO's decisions and decision-making protocols. See How to become a listed delegate to learn more.

I'd like to participate! What are my options?

  1. Select a delegate to vote on your behalf. Choose this option if you're too busy to regularly vote on Arbitrum DAO proposals. See Delegate your voting power for detailed instructions.
  2. Self-delegate to vote directly on DAO proposals. Great for studious fans of direct democracy. See Vote on proposals for detailed instructions.
  3. Become a delegate to vote on behalf of token holders who entrust you with their voting power. Great for the community's most passionate evangelists. See Become a delegate for detailed instructions.
  4. Participate in governance discussions on the Arbitrum DAO governance forum.
  5. Join the community of Arbinauts on Discord.

Where can I learn more?

You're in the right place! The following docs elaborate on the finer details of Arbitrum DAO and its underlying governance mechanisms:

Where can I ask for help?

Welcome to the future of governance!