A brief discussion of Arbitrum’s token economic model

Source: Liu Jiaolian

As we all know, Arbitrum is the Ethereum second-layer network (L2) as famous as Optimism, the leader of the second-layer network, and a representative of the optimistic Rollup technology school.

Originally, Arbitrum, with an academic background, was a direct competitor and another optimistic co-founded by Karl Floersch, a good friend who played closer to Ethereum founder Vitalik Buterin and peed in his pants. Optimism, the leader of Rollup, was not optimistic at first, at least, not as optimistic as the latter Optimism.

However, by mistake, because in the speed race to grab L2 in 2021, Optimism did not achieve full EVM compatibility at the beginning, resulting in a series of important DApps such as Karl Floersch’s good friend Hayden Adams. Uniswap, the established DEX leader, was unable to seamlessly migrate to Optimism, allowing Arbitrum to unexpectedly lose a position.

In just a few months, the ecological landscape has been completely transformed. For example, Uniswap, which has the strongest connections, also had to give up the idea of ​​"relations first" under the pressure of DAO, and decided not to wait for Optimism to make EVM fully compatible, but to go to Arbitrum first. As you can imagine, other ecological applications have also launched Arbitrum.

If you are confused by the complex relationships above, then it will be clear by looking at the photo below. On the far left of the photo is Karl Floersch, the technical leader of L2 Network Optimism, in the middle is Vitalik Buterin, the founder of Ethereum, and on the right is Hayden Adams, the founder of DEX leader Uniswap.

As the saying goes, one step is fast, and every step is fast. Since then, Arbitrum has always been ahead of Optimism in the track of optimistic rollup. In the L2 technology track, optimistic rollup is significantly better than the more awesome-sounding zero-knowledge rollup in terms of practicality and implementation. This is one of those thousands of cases where pragmatism trumps perfectionism.

For some reason, Jiaolian used Arbitrum more when playing DEX in 2021.

In this way, when Arbitrum finally issued a coin airdrop in late March last year (2023), the teaching chain was also exposed to rain and dew and received some.

Considering that the recovery process of the entire market has begun, in order to maximize airdrop profits, there is no rush to sell and clear positions as soon as possible. So we decided to reduce our holdings in batches on highs, which is the reverse eight-character formula. In the past year, there have been two waves of reductions. One wave was when I first got on the exchange (later it fell below $1 in the middle of the year and came back again), and the other wave was before it hit a new high some time ago.

So I started to pay attention to the token economic model (tokenomics) of Arbitrum (ARB).

Previously, the author has briefly compared the economic models of Arbitrum (ARB) and Uniswap (UNI):

“From a tokenomics perspective, Uniswap will be better today and tomorrow. It was unlocked in 2016, and Arbitrum has just started. The distribution model, not to say that the two are exactly the same, is exactly the same:

1. Team + VC: 40% (UNI ) vs. 44.4% (ARB)

2. DAO (Community): 43% (UNI) vs. 42.8% (ARB)

The total amount of ARB is 100 100 million. The total creation amount of UNI is 1 billion.

In the picture, the Airdrop + DAOs framed in red are the initial airdrops, adding up 12.7%, 11.6% voted for personal addresses, and 1.13% targeted sponsorship of outstanding projects in the ecosystem. 12.7% is 1.27 billion coins. This part can be regarded as having all entered circulation.

The Team & Advisors + Investors enclosed in blue boxes are the team, advisors and investors, and can be considered the project parties. This part is currently locked. Unlike many currency issuance projects, where the project team and the community unlock together, Arbitrum does not know whether it is to highlight the pattern, or to "wait for the bull market to fatten up before killing." Anyway, the project team promised not to unlock it in the first year, starting from March 16, 2024 Linear unlocking begins again for 3 years.

The picture below clearly shows the timeline for unlocking each frame:

The DAO Treasury enclosed in a green frame is the community treasury. Although this part is nominally available immediately, it is locked in the smart contract and must be voted by the community before it can be used. Therefore, the higher the community’s consensus on spending this part of the budget, the easier and faster it is to release it. to the market; otherwise, it will be more difficult to flow out to the market.

Therefore, it can be considered that the only amount that has actually entered the market circulation is the 1.27 billion ARB initially airdropped.

If we look at some data websites such as cmc, we can also see similar numbers:

Arbitrum DAO has just voted to adopt a "long-term incentive pilot program". It is planned to distribute 41.815 million ARB within 12 weeks (approximately 3 months) to incentivize ecological projects.

A simple rough calculation shows that this will increase the current market circulation by about 3.3%.

And this time window was chosen just before the project was unlocked.

Is this to test the market’s ability to withstand pressure?

After the project team begins to unlock, the number of unlocks per month will reach as high as 120 million. The time lasts from March 2024 to March 2027.

Normally speaking, the project side will also take advantage of the bull market to release benefits at the right time and create opportunities to sell on highs, right?