Introducing $ARB Token and On-Chain Governance with Arbitrum

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Arbitrum just launched the $ARB token with self-enforcing on-chain governance. $ARB will play a crucial role in the progressive decentralization of the Arbitrum protocol. Here's how it works: 🧵

Arbitrum chains have a "chain owner" who manages system changes. Chain owner modifies core parameters, pause transactions, and update core contracts. Upgrades are essential for improvements, bug fixes, and Ethereum compatibility.

The problem: "Chain owner" introduces centralization. L1 protocols like Ethereum are governed by social consensus, but L2 protocols like Arbitrum are governed by L1 smart contracts. This requires formal on-chain governance for upgrades.

By the way, you can read this on my blog with more detailed explanations 👇 ignasdefi.substack.com/p/arbitrum-launches-arb-token-and-introduces?sd=pf

Enter the $ARB governance token. $ARB enables decentralized proposals & protocol upgrades. The chain ownership role is given to the "Arbitrum DAO", consisting of $ARB token holders. This DAO is governed by The Constitution that describes how the DAO will operate.

The Constitution is guided by 7 values: • Ethereum-aligned • Sustainable • Secure • Socially & technically inclusive • User-focused • Neutral & open

Arbitrum takes the lead as the first Layer 2 solution with "self-executing governance." Governance happens entirely on-chain, eliminating the need for manual implementation of proposals by the core team. This is the coolest part of the DAO to me. 😎

Yet in emergencies, the Security Council can upgrade the protocol directly, skipping delays. They're bound by The Constitution of the Arbitrum DAO to use powers only for emergencies and issue transparency reports when necessary. 9 out of 12 approvals are needed.

The DAO votes in semi-annual elections for Security Council members. The council can also trigger non-emergency upgrades, which go through a delay period before taking effect. I guess this might cause some discussions soon after the proposals go live.

Voting power is determined by the number of $ARB tokens a voter holds or represents. But token holders can delegate their voting power to otherson @tallyxyz, making it easier for members to participate in governance without constantly reviewing proposals.

What's more, $ARB will govern both 'chains' of Arbitrum: • Arbitrum One for DeFi/NFT • Arbitrum Nova for gaming/social apps Interestingly, the Arbitrum DAO can authorize the creation of new L2 chains via constitutional governance proposals.

The second big announcement is Arbitrum Orbit. Orbit is a framework for L3s that offers massive scalability while retain security guarantees. L3s deployment is permissionless, meaning it won't require the permission of the DAO.