The freshly established ARB token of Arbitrum decreased over the weekend as the network fought to fix a governance issue brought on by the first vote of its DAO appearing to have failed.
At first, Arbitrum claimed that the vote was essentially irrelevant, but on Sunday, in response to mounting criticism, it reversed course.
The executive team of the Ethereum scaling solution announced that it was establishing a decentralized autonomous organization, or DAO, at the beginning of this month, along with the introduction of the ARB governance cryptocurrency.
Arbitrum: What is it?
As a platform for building decentralized applications (dApps), Ethereum has been rising in popularity quickly. The network is unfortunately faced with a number of difficulties as a result of the fast increase in usage, including a bad user experience (UX) brought on by high transaction charges and sluggish transaction speeds. To solve network problems, the Ethereum community developed a technique called Arbitrum.
Arbitrum was developed by Offchain Labs and is a layer-two (L2) rollup technology that offers rapid performance.
In addition to adding additional private capabilities, the layer-2 solution project Arbitrum seeks to speed up and scale Ethereum smart contracts.
The platform is designed to make it simple for programmers to execute Ethereum Virtual Machine (EVM) contracts and transactions at layer-2 while still benefiting from Ethereum’s excellent layer-1 security.
The Ethereum-based smart contracts that are now in use have several problems, which is why Arbitrum was created. Long-term contracts and pricey execution are some of the drawbacks.
What is the mechanism?
In order to perform groups of transactions on cheap, scalable layer-2 sidechains, Arbitrum uses a technique called « transaction rollup » to record them after they have been transferred to the Ethereum main chain. By using this method, much of the processing and storage burden that Ethereum is now bearing is reduced, enabling a new class of dependable layer-2 based aApps.
This technology supports the growth of smart contracts from Ethereum by transmitting messages between them and those in the second chain layer of Arbitrum.
In addition, the bulk of transactions will be processed at layer 2, and Arbitrum will record the results in the main network. This process can considerably improve the system’s operating efficiency and speed.
The validity of a following block can then be verified by submitting a rollup block by any verifier. A « rollup » is the term used to describe the process of rebuilding the whole chain history from optimal entries using publicly available data. The process guarantees appropriate code execution.
How does the ARB token operate?
The coin’s utility within the Arbitrum DAO determines its value. Owners of ARBs have the power to shape the future of the network by voting on proposals like AIP-1, which outlines the organization of the DAO and the Foundation that supports it.
More than 78% of the ARB tokens required to vote on AIP-1’s proposal have been submitted against it. AIP-1’s plan was first described as a formality by a member of the Arbitrum team named Patrick McCorry.
Or was there a communication breakdown?
Employee Patrick McCorry of Arbitrum said the following in a blog post:
“We think that much of the negative opinion around AIP-1 was caused by misunderstanding around the idea of AIP-1 being an approval and not a proposal. When decentralizing a network, there is a chicken and the egg [problem] that needs to be addressed, and the purpose of AIP-1 was to notify the community of all the choices that were taken in advance.”
Considering that the steps outlined in AIP-1 had already been implemented, the community’s opposition and votes against the plan appeared to be meaningless.
A cleverly created technology
This governance error should not be seen in any way as lowering the technological prowess of Arbitrum, whose engineering is actually pretty excellent.
Like most other blockchains, the Arbitrum network permits server involvement from a single entity. Validator nodes, which keep track of the chain’s progress and complete nodes, aid in the combination of Layer-1 transactions. Aggregators that send transactions to the layer-1 chain are compensated in ETH, but other user transaction fees are distributed to other network users like validators.
In the layer-2 solution project’s block rollup challenging phase, other validators check the block’s correctness and « challenge » it if they believe it to be false. The assets of the dishonest verifier will be taken if the challenge is declared invalid or the block is determined to be wrong. Every verifier must follow the guidelines at all times and accept responsibility for their activities thanks to this method.
Additionally offered on the platform is the Arbitrum Virtual Computer, a custom virtual machine. The Arbitrum Virtual Machine (AVM) is where Arbitrum smart contracts are performed. The AVM is built on top of EthBridge, a smart contract library that interacts with the Arbitrum network. Instantaneously converted to work with the AVM are smart contracts for Ethereum.
A path ahead?
After receiving criticism, Arbitrum said late Sunday that it would split AIP-1 into different parts that would be voted on separately in an effort to resolve this impasse. This announcement was virtually a U-turn.
The Arbitrum Foundation’s allocation of 750 million ARB tokens for grantmaking, compensating service providers, and defraying its operating costs has drawn the greatest criticism of all the provisions of AIP-1.
The reasoning for the figure was compared to decisions made by analogous networks in McCorry’s study. The Foundation already “begun to use these currencies in the interest of the DAO, including conversion of some money into stablecoins for operational reasons. begun to use these currencies in the interest of the DAO, including conversion of some money into stablecoins for operational reasons.”
Arbitrum later disclosed on Twitter that about $10 million worth of ARB had been converted into stable coins. In a debate on how AIP-1 would be divided into distinct proposals, Arbitrum later said that its Foundation « never sold enough tokens to finance its present running costs » and repeated that it « only sold enough tokens to finance its near-term intentions to sell more tokens. »
Arbitrum claims that it also plans to propose rules to address concerns with transparency about the potential usage of tokens donated to the Foundation.
Variations in price
According to CoinGecko, the price of ARB decreased during the network’s about-face on Sunday, falling as low as $1.15 or 11.5% before rising back to $1.19. ARB now holds the 41st-place position in terms of market capitalization, with a total market value of around $1.5 billion.
A Dune monitor reveals that more than 550,000 digital wallets received more than 1 billion ARB when Arbitrum airdropped its new coin on March 23.
As an Ethereum scalability choice, Offchain Labs developed Arbitrum. It seeks to reduce transaction costs and speed up Ethereum transactions by conducting transactions on a separate network and then relaying their receipts in bulk back to Ethereum. But at the same time, it also minimizes processing costs.
With the help of this very efficient rollup technique, Arbitrum can significantly reduce costs. The project still provides adequate incentives for validators despite the lower transaction costs.
Investors are cautioned, meanwhile, to keep in mind that, as a novel technology, security concerns are likely to remain until they are resolved and that this is basically uncharted area. A well-planned smart contract scam cost consumers roughly $2 million in February, for instance, when a stablecoin powered by Arbitrum fell prey to it. Reputable Web3 security company CertiK attracted attention to the incident when Hope Finance informed consumers of the scam through a tweet.
Over 1300% Growth in TMS Network (TMSN) Presale
The crypto world has witnessed an astonishing gain of 1300% in TMS Network (TMSN) despite Arbitrum’s (ARB) problems, which has sparked interest among traders and purchasers. With a portfolio that includes traditional asset classes, TMS Network (TMSN) would provide investors and dealers with a totally decentralized market.
TMS Network offers customers who purchase TMSN tokens premium services including real-time on-chain data, trade calls, and arbitrage signals through the use of Ethereum smart contracts. TMS Network (TMSN) gives consumers the convenience of around-the-clock trading with its bespoke trading bot system. Traders may place trades using this feature even if they are not close to their devices. TMS Network (TMSN), through its price aggregator, also guarantees its consumers the best deals accessible across a range of marketplaces.
Coins are now being sold by TMS Network (TMSN) for $0.046 during the second round of its presale. Experiential bitcoin investors are increasingly favoring TMS Network (TMSN) as a top investment option after it sold stocks valued at more than $500,000 during the first round of the presale.
