Far be it from me to claim that this happened in this case, but nothing like crypto projects holding back on sensational news to announce as soon as the signs of bull marketsee the 20% increase in the market in the last 7 days.
This time, it was Arbitrum, one of the leading Ethereum scalability projects, announcing the launch of its governance tokens (ARB) for March 23 — with over 600,000 eligible wallets.
First of all, a quick reminder: Ethereum currently processes around 14 transactions per second. Given this limitation, layer 2 projects intend to help Ethereum process more transactions and therefore absorb part of the “operational load” in their own networks. Ideally, this is done in a way that gives relief to the mainnet while keeping the core security assumptions of the mainnet alive.
In our remote work world, the closest analogy I can think of involves Google Meets. You know when your team is in the middle of a complex issue and decides to split into multiple rooms for a few minutes? Is each group able to advance separately on their theme and then all come together again in the main room to “publish the final result”? This is exactly what Layer 2 does with Ethereum.
In summary (if you think that my analogy did not help at all), I ask for a vote of confidence: it is one of the most promising segments of the entire industry, being stated by the creator of Ethereum, Vitalik Buterin, that “the future of Ethereum is layer 2 via rollups”.
Where does Arbitrum fit into all of this?
Developed over years and with more than 18 months of network in production, the project already has more than 55% of the market share in the “tier 2” segment — greater than the sum of all its competitors. The second largest Tier 2, OP, launched its token in May of last year and it catapulted into the top #57 with over $10 billion in market capitalization.
With the $ARB tokens launched, the project intends to decentralize its decision-making process and put voting power in the hand of the token holder with the creation of the Decentralized Organization of Arbitrum (DAO). With this, participants will be able to vote on the future of the network and have more control over its strategic directions.
In fact, part of the future value of the token may come precisely from its right to grant (or not) commercial licenses for the use of the intellectual property of the Arbitrum technology, a model similar to the one Uniswap implemented in its version 3.
Now, let’s get to the positives. In my view, Arbitrum has achieved:
i) find relevant market timing;
ii) combine the launch with the announcement of a new technology (Arbitrum Orbit) in which other projects will be able to use part of its technology to create their OWN scalable networks (yes, we will talk about layers 3 soon);
iii) gave a class on liquid democracy, implementing the governance process 100% on-chain, instead of relying on manual implementations after the decentralized organization vote and;
iv) balanced methods for decisions with a longer implementation period (21-37 days with the Arbitrum DAO) and faster ones in cases of critical vulnerability (Arbitrum Security Council).
Not to sound like I’m a huge fan of the project: keeping such a secret for a long time is challenging, but clearly there were insiders who benefited from the launch information in advance, see Polymarket’s forecast market tripling the probability of the launch before the announcement official audience.
In any case, in addition to the historic milestone for one of the most fundamental projects on the market, if it follows the valuation of its competitor Optimistic (OP), next week we will follow the birth of yet another billionaire valuation project in the crypto market.
About the author
Lucas Pinsdorf has been responsible for new businesses in the Bitcoin Market since 2017, having participated in the launch of the first Brazilian digital alternative assets. In the past, he participated in an alternative asset management operation and worked at Pinheiro Neto Advogados. He holds a law degree from USP.