The following reflects the views of L2BEAT’s governance team, composed of @krst, @Sinkas, and @Manugotsuka, and it’s based on their combined research, fact-checking, and ideation.
We reviewed the proposal with the help of L2BEAT’s research team, and we wanted to share our internal discussion to potentially help delegates better assess the proposal. Currently, USDT on Arbitrum has been upgraded to USDT0, so all USDT value on Arbitrum, as far as L2BEAT is concerned, is considered externally bridged, as USDT0 is a LayerZero OFT token (see risks associated with OFT tokens here).
If the proposed upgrade passes, it will prevent further bridging of Ethereum USDT to Arbitrum through the canonical custom gateway. Currently, most deposits flow through the LayerZero external bridge anyway, although there are indeed some sporadic deposits through the canonical bridge even after the migration (e.g., L1 deposit and L2 mint).
There are currently about $140,000 USDT in the gateway, while there’s more than $1,000,000,000 in the LayerZero lockbox. As you can see from the L2 mint transaction, canonically deposited USDT tokens are already minted as USDT0, so the Arbitrum holder trust assumption remains unchanged.
Disabling the legacy bridge will prevent users from using it, avoid the seven-day delay, and prevent any funds from being lost if the bridge is used by a smart contract on behalf of a user. These changes result in a better user experience with minimal effort.
Pushing users to an external bridge, however, is not entirely harmless, and it’s essential to unpack the nuance so delegates can make an informed decision. For example, if all USDT is in the L1 LayerZero lockbox, then withdrawing USDT depends on the DVN and the liveness of the lockbox owner. That trust assumption does not exist for canonically bridged tokens, making it less risky.
Additionally, to further clarify what @MinistroDolar mentioned above, this proposal aims to disable the legacy bridge and remove it from the gateway controller, which the Arbitrum DAO controls. It does not seek to replace the bridge in the gateway controller with the USDT0 bridge by Tether. Essentially, users will be ‘pushed’ to bridge via the external USDT0 bridge by Layer Zero.
As far as we’re concerned, the outcome of this proposal is largely irrelevant, as its passage would essentially be a rubber stamp of a decision that Tether has already made. Arbitrum and the Arbitrum DAO had no involvement in the decision to move to USDT0 — the DAO’s only control is over the gateway controller. In our opinion, it doesn’t make sense to maintain the legacy bridge when 99% of the liquidity is on the Layer Zero bridge.
However, while we’re not opposed to disabling the legacy bridge (as it is sensible from a practical standpoint), we’re also not comfortable endorsing the USDT0 setup and the liveness and safety trust assumptions that come with it.
As a result, we’ve decided that, if and when the proposal goes to a vote, we’ll abstain.