Most of the agreements did not involve moving a penny, but there were also agreements to "divide the spoils on the spot."
Written by: unex, Amir Ormu and Atomist
Compiled by: Luffy
A few months ago, Arbitrum airdropped over $125 million worth of ARB tokens to the protocol DAOs within its ecosystem. The Arbitrum airdrop was the most watched airdrop event this year, and we wanted to know: what did these protocols that received the airdrop actually do with the millions of dollars?
Governance Token Distribution
On April 24, the Arbitrum Foundation began distributing 112.8 million ARB tokens to eligible protocols within its ecosystem.
In total, 137 protocols received token airdrops. To avoid centralization of token distribution, the Arbitrum Foundation worked with Nansen to develop an airdrop strategy to expand the diversity of projects with different KPIs and use cases.
Arbitrum DAO airdrop landscape by size and category
These protocols have full autonomy to decide how to use the airdropped tokens they receive. They can use the funds to reward users directly or retroactively, use the funds to bribe votes, or use them as operating funds.
In a blog post discussing this particular airdrop, the Arbitrum team articulated the underlying goal of the token distribution as “localization of community governance.” Allocating tokens directly to the Arbitrum protocol’s treasury is intended to enable them to take on governance responsibilities and participate in decision-making processes within the ecosystem.
This approach enables the protocol to leverage the airdrop to support its operations and drive the platform or product forward, ensuring a better future for the protocol and the Arbitrum ecosystem behind it.
In the months after the launch of the ARB token, some may ignore L2, thinking there are not many opportunities left. But we believe that even in this crypto winter, the L2 ecosystem is full of catalysts, including:
EIP-4844
Stylus Launch
Sequencer is gradually decentralized
Fee Switch
The content of these catalysts is beyond the scope of this article and we will not explain them in detail here.
On-chain survey results and Dune dashboard
In this report, we highlight our on-chain research findings surrounding the Arbitrum airdrop. Our goal is to provide market participants with insights into capital flows and the integrity of each DAO’s funding decisions.
The protocol and its metrics as of June 23, 2023
Additionally, our member Shogun has created a Dune dashboard that provides an overview of the initial ARB allocation and current balances across all protocols, in addition to a range of metrics such as number of users, number of transactions, and accrued fees.
Disclaimer: As we are unable to consistently track the movements of all 139 vault wallets, the findings in this article are limited to movements as of June 23rd.
Stranded whale
Among the protocols that received the largest airdrops, GMX (8 million ARB), Uniswap (4.3 million ARB), SushiSwap (4.2 million ARB), and Curve (3.3 million ARB) have not yet used any of their airdropped tokens, nor have they issued any notable governance proposals to distribute funds. Arrakis is proposing to distribute the airdropped tokens received by Uniswap to liquidity providers on DEXs through Arrakis.
4 of the top 5 recipients have not yet transferred and used any ARB tokens
Balancer, Radiant, and Stargate Reward LP
Balancers has initiated and approved a proposal to reward LPs. The protocol received 3 million tokens and plans to reward 1 million tokens in batches (100,000 ARBs every two weeks) to active liquidity providers. In addition, the proposal suggests using the remaining 2 million tokens to deploy POL (Protocol Owned Liquidity) through the liquidity pool BAL/AURA/ARB combined with Aura.
Radiant received 3.4 million ARB tokens and was another large airdrop recipient. Radiant has approved the governance proposal (RFP-18) regarding the airdrop allocation:
40% will be airdropped to all new 6-month and 1-year dLP lockers.
30% will be distributed to all Arbitrum dLP lockers next year
30% is kept in the vault for future use.
Stargate DAO received 1.7 million ARB, and their latest proposal on the distribution of these tokens has been approved, with 70% of the tokens used for liquidity mining incentives on Arbitrum and STG release suspended until ARB is exhausted. In practice, this means that all LPs will migrate to the new contract to receive ARB rewards.
Stargate plans to distribute the remaining 30% to partners, encouraging greater collaboration to further advance the Arbitrum and Stargate ecosystems.
TreasureDAO Funds Game Developers
TreasureDAO (8 million ARB) published an interesting proposal on the governance forum on May 9th, which was voted on on June 1st.
According to the proposal, 2 million ARB tokens will be allocated to reward contributing game developers. Initially, 500,000 tokens will be distributed to builders through donations or treasury swaps. The remaining 1.5 million tokens will be reserved for future rewards or grants. The game studios receiving rewards include: The Beacon, Realm, Tales of Elleria, Knights of the Ether, The Lost Donkeys, Smithonia, Ruffion Reborn, CastleDAO, Power Plins, City Clash, Smol Age, Billy's World, and Kasumi Dungeons. The specific allocation amount is not yet clear.
Dopex and Cap: Liquidity and Incentives
Dopex received an airdrop of 3.8 million tokens, and founder tztokchad said on Discord on April 25 that the airdrop will be divided into dpxETH margin, incentives, and rewards for long-term holders. Now, almost 2 months later, the protocol has used 300,000 ARB to provide liquidity for options products. In addition, 30,000 ARB tokens were sent to 0xde…7d0b and then distributed to addresses suspected of staking contracts.
Tztokchad’s response on April 25, 2023
Cap Finance used airdrops in a similar way. They sold 1 million tokens for 576,000 USDC and 311 ETH to provide liquidity to their trading pool. In addition, they distribute 100,000 ARB tokens to users every month based on trading volume.
PlutusDAO
Plutus (received 2.7 million ARB) distributed 500,000 tokens to team members without waiting for any community resolution.
In addition, Plutus stated that it will use 300,000 ARB to repurchase plsARB and distribute it to plsARB stakers. Interestingly, for plsARB holders, there is no official liquidity trading pool for them to convert plsARB back to ARB.
The only available pool currently has only 16k ARB in liquidity, with plsARB trading at 30% below the peg. It must be noted that this is not an official pool, and the Plutus team has been waiting for Camelot's centralized liquidity pool to launch a new, more liquid pool. So for the 2,936 holders, they will have to continue waiting (now for more than 3 months) for the team to launch a solution.
plsARB/ARB Liquidity Pool as of June 23, 2023
We found that in order to fill the illiquidity black hole of plsARB, the team used 100,000 ARB to fund the supplier pool to allow plsARB to be used as collateral to borrow ARB. Finally, they provided 200,000 ARB in the loan pool of Silo Finance to obtain returns, and the specific reason is unknown to us.
Other projects with more than 600,000 ARB allocated
DForce (received 2.4 million ARB) used the airdrop for POL: deposited the entire airdrop into its own lending pool.
Beefy Finance (received 1.8 million ARB) used the airdrop for operations and incentives: ostensibly, they distributed 1.3 million tokens as incentives and exchanged 100,000 ARB for USDC for operations.
BattleFly (earned 1.2 million ARBs) sold 280,000 ARBs.
KyberSwap (received 1.1 million ARB) used 152,000 ARB as incentives.
Umami Finance (received 900,000 ARB) created on-chain sell order monitoring.
Multichain (received 900,000 ARB) used 167,000 ARB as incentives.
0x Protocol (received 643K ARB) kept the entire airdrop in the EOA — the only project to do so.
Impermax (received 500,000 ARB) sent 100,000 ARB to EOAs and LPs on its platform.
3xcalibur (received 500k ARB) airdropped 100k ARB to LPs, and will airdrop another 100k ARB if TVL remains at $1m. 3xcalibur also used a portion for bribes/rewards, and plans to use some for operations in the future.
For smaller projects, we recommend using the Dune Dashboard so you can do some data mining on your own. We don't think their movements are worthy of a separate narrative, and the vast majority of projects are still holding airdrops.
We do want to mention all the projects that have sold airdrops: TridentDAO, Damned Pirates Society, Covalent, XToken, Bridge Network, Rice DeFi, ApolloX, CREDA, Aelin, Unmarshal, and ZeroSwap.
in conclusion
In summary, the vast majority of airdropped tokens are sitting idle in multisig wallets (roughly 80% of all airdropped tokens), which appear to align with the foundation’s overall vision for allocating airdrops, which is to empower protocols to take charge of governance and decision-making processes within the ecosystem.
While some protocols directly sold their entire airdrop to fund their own operations, we believe that these funds will be used to stimulate protocol growth and indirectly benefit the entire Arbitrum ecosystem.
A new issue that emerged from our research is that some sellers portray themselves as operating DAOs with community governance, but they are unwilling to share distribution plans with their communities.
ARB holdings by category as of June 23, 2023
Ideally, these projects will:
Reserve tokens for future Arbitrum governance;
Redistribute its value to the community to incentivize product growth within the Arbitrum ecosystem.
By simply tracking on-chain token movements from multi-sig wallets and their behavior, we can clearly distinguish those who are more inclined to participate in the development of the Arbitrum ecosystem.
We call on anyone interested to go to our Dune dashboard and do some on-chain investigation. This should be one of the main points of this article: on-chain accountability of the protocol.
In fact, it is often difficult to truly understand what is happening behind the scenes in Web3 projects. The governance-responsible airdrop on Arbitrum has the advantage of greater transparency and the ability to monitor how effectively these protocols are using the allocated funds. This is the second interesting practice (Optimism is the first), and we think it is an interesting model that will be replicated by other projects in the future.
To further align incentives, future governance airdrop distributions may place restrictions on certain behaviors of tokens, such as limiting sales or enforcing long-term vesting. Nonetheless, we believe the current distribution is fair and a natural selection of which protocols are more aligned with the Arbitrum ecosystem and which are not. If we look back, Optimism's airdrops were somewhat limited.
However, on-chain analysis can only tell one side of the story. For this reason, we would like to invite all relevant protocols to be transparent about their airdrop plans.
