[Non-Constitutional] Arbitrum Airdrop 2 - Builder Appreciation Drop

[cupojoseph]

Proposal: Arbitrum Airdrop 2 - Builder Appreciation Day

Non-Constitutional

Abstract

Initiate another major airdrop and growth campaign of 500 Million ARB from the DAO treasury. With 50% being given to builders who deployed contracts on Arbitrum or its Orbit chains, weighted by gas fees generated by those contracts. And 50% to users of Arbitrum or its Orbit chains, weighted by actions they took which grew the DAO and gas fees spent.

Motivation

Next month will be the 2 year anniversary of the original ARB airdrop. Combined with the incentive detox, Arbitrum has been offering significantly less direct rewards to builders than new competing chains like Unichain and Optimism, which are both offering significant retro-active token grants, for example.

Unichain Builder Program:

Rationale

Arbitrum must do more to attract builders and talent to the chain. Opening the possibility of future airdrops will be a solid move to do that, and bring users home. The previous airdrop created a period of significant growth, and since that has wained, TVL has largely stagnated long term. We should aim to double Arbitrum TVL over the next year, which will require attracting a lot more users, which requires more builders and the possibility of more retroactive incentives for good behavior.

Timeline & steps

1. Snapshot as of the block that the BoLD upgrade goes live later today or tomorrow.
2. Work with the foundation or a third party (like Tally or Aragon) to setup a secure claiming site
3. The DAO votes on which groups to include and create a working group to scrape and verify addresses and weights by April 15th.
4. The DAO votes on approving the final list created by the working group and funding the merkle tree contracts for the airdrop by May 15th (2 weeks to discuss and vote, 2 week to verify and build the lists)
5. Intend to launch / deploy all funds in early June.

Specifications
The exact specifics for who to include should be part of a larger discussion and unique proposal voted on the DAO in April.

The first step is to fund a small working group to work with ARDC to make a recommendation on which groups to include and vesting requirements.

1. 250M ARB to users of Arbitrum and all Orbit chains.
2. 250M ARB to builders who deployed contracts on Arbitrum. Half of which is directly part of the airdrop, half of which is vested over the course of a 6-12 months. With a non-binding ask that these funds be used to grow protocols on arbitrum further.

Overall Cost
$100k USD in funding for a 6 person working group to create lists, present to recommendations to the DAO, and do all the data scraping and merkle root setup over the next 2-3 months.

500 Million ARB (roughly half the size of Airdrop 1)

Edits

edit 1:

re: this needs a clear plan before we can support
re: we need more analysis
re: have you calcualted xyz
re: this is not a fully flushed out plan we need more details to decide

I’m not responding to any of these^ kind of questions directly.

This project is MASSIVE. It will be extremely important to get lots of things right:

• vesting terms
• who to include
• exact amount
• delegation on claiming plan
• integration with ARB staking that is coming soon
• governance risk analysis
• price impact analysis
• any other strings we can attach to project distributions so these rewards are used to grow arbitrum
• lots more details

Figuring those things out shouldnt come from just me or any one person. It should be part of a long term discussion with input from hundreds of people. Getting that input and creating a solid plan is a full time job for several people for months. This is a proposal to get started and we have already solicited many good ideas that should be taken into account. Keep them coming.

[cp0x]

I didn’t quite understand the motivation:

1. Arbitrum has been constantly giving incentives since its launch, and it is incorrect to say that since there is no retro-financing, other chains spend more on incentives. Retro-financing is almost never used in Arbitrum, but there are grants that other chains do not have in such a volume.
2. Let’s say we distribute 500,000,000 ARB.

• Have you calculated how much of these funds will simply go to the exchange and reduce the price of ARB?
  In connection with such a reduction, the DAO will have to redo all agreements and grants.
• How will this affect voting, when the average number of votes now is 140 million ARB, and then an additional 500 million will immediately appear?

[AranaDigital]

Thanks for the proposal @cupojoseph and for your work building on Arbitrum through One Dollar and now Nerite. I find the proposal compelling and would be interested in the further exploration of the framework and effort a widespread airdrop such as this may require. We all saw with prior programs such as STIP that not only was it inefficient for the DAO to decide on such a variety of proposals but also resulted in an ineffective distribution of funds. The sting from that lack of success has severely reduced motivations to give large scale grants to the ecosystem. It is clear that airdrops, though potentially posing risks to price, do offer instant attention and a spir of excitement in the ecosystem. It begs the question of what setting a precedent of additional airdrops may lead to down the road, but for now we can focus on this proposal.

There is no doubt that part of the TVL gains from the first airdrop were also from the sheer creation of capital via $ARB tokens and while this may have a similar impact, distributing purely to builders are unlikely to result in the assets then finding themselves used throughout the ecosystem.

I would be curious to hear your thoughts on the the following:

• How might you plan to assess the “stickiness” of capital and builders post-incentive distribution?
• How might we approach something like this that differentiates Arbitrum from the mentioned competitors, proving our ecosystem more attractive?
• As a builder, why would an airdrop such as this personally impact your product and decision on where to build? Is it mostly about inspiring loyalty?

Knowing the DAO, a more detailed breakdown justifying a $100k spend on the initial working group would also be required as such costs over a 2-3 month period seem quite high; however, handing a sum of up to 500M $ARB is worth getting right.

[Tekr0x.eth]

Thanks for the proposal. It is very straightforward.

Airdropping 500M ARB to builders sounds like a good way to reward and encourage builders to grow Arbitrum. On the other side, it would also result in huge selling pressure. Also, 500M ARB is 17% of our treasury. This would significantly decrease our runway and budget for any other proposals. Also, it could result in crashing our DAO structure by introducing such a big VP to the market at once.

Since Arbitrum DAO is a leader in decentralized governance, let’s not try to copy things from others. Let’s experiment. Let’s try different ways to reward builders and users. So many great proposals are rolling in that require way less funding but just might be innovative enough to make a difference. We don’t win by copying others but by inventing new ideas.

[Chris_Areta]

Thanks for bringing this straightforward proposal @cupojoseph

@cupojoseph

The first step is to fund a small working group to work with ARDC to make a recommendation on which groups to include and vesting requirements.

Incentivizing builders and users to drive on-chain growth is not a bad idea. However, its important to get the right approach. Do you think the proposed mechanism (i.e., airdrops) is the most effective option, given the budget size and DAO context? We would like to see more research / analysis around this.

We would rather see the ARDC conduct some impact assessment on this proposal and check relevance for ArbitrumDAO as a next step. With that, we can determine whether to progress with funding a working group to execute, deciding on program specifics, etc.

[paulofonseca]

love this! let’s put it for offchain vote asap =)

but what about:

1. airdropping vested tokens or at least some percentage of them vested to the first group as well?

2. the claiming website requiring people to delegate those new tokens to active delegates to be able to get their new airdrop, like Safe did?

1 would ease the selling pressure and 2 would revitalize the governance in this DAO with more voting power being distributed, and helping with reaching quorum more easily as well.

[pedrob]

Hi

In my opinion, airdrops are a terrible idea. They don’t reward long-term commitment or contribute to the Arbitrum chain growth.

@cupojoseph

Arbitrum must do more to attract builders and talent to the chain. Opening the possibility of future airdrops will be a solid move to do that, and bring users home

I don’t understand how you relate this rationale—which I could agree with (there’s always room for improvement)—to conducting an airdrop to achieve it. If there’s one thing airdrops attract, and the reason they are in decline, it’s mercenary capital. At least the STIP and LTIPP tried to implement liquidity mining to bootstrap protocols, aiming for them to become self-sustainable afterward and put in place stickiness mechanisms.

The airdrop trend emerged due to regulatory uncertainty, as a way to distribute tokens to protocol users (after ICOs boom). This had some value in 2020 when airdrops became popular, but after 3 or 4 successful airdrops, it turned into a mercenary capital scheme aimed at gaming the system for maximum benefit at minimal cost—plus VCs dumping on retail investors. It’s not necessarily wrong, but I don’t think it’s the behavior that Arbitrum should be encouraging through the DAO.

I do find the builder appreciation approach adequate, though I believe it’s something Arbitrum DAO is focused on (which again, doesn’t mean it cannot be improved): the Stylus Sprint, Questbook grants (New protocol ideas & Dev tooling + Orbit new one), the gaming investment initiative, and the upcoming incentive programs. The framework Entropy has been working on is particularly interesting (see working group calls for more info).

[Argonaut]

We don’t think distributing a second airdrop is a good idea. There’s a high chance that most of it will end up being sold on the market. The DAO needs to ensure ARB’s price remains stable, otherwise, there’s no incentive for people to hold it.

Check the price action of ARB:

Just 10 days ago, we were at All-Time Lows. As a DAO, we need to avoid initiatives that contribute to sell pressure. Otherwise, demand for ARB will decline, and people will lose trust in the DAO’s ability to create value for ARB holders.

There are far more effective ways to allocate 500 million ARB to drive growth. We could use it to incentivize liquidity to migrate to Arbitrum instead of competing networks or to encourage more protocols to deploy on Arbitrum (for example, Morpho and Euler).

Once people receive the airdrop, they’ll know there won’t be another one anytime soon. This won’t motivate them to keep building, as the incentive will have already been distributed.

[JoJo]

we honestly can’t drop half a billy of arb on top of users. Would destroy every shred of price (despite being “only” 5 months of unlock).

better focus energies on spearheading the 2% inflation of staking and sharing timeboost revenue with builders in a way that makes sense from core protocols, multichain protocols and new protocols.

[Zeptimus]

Thanks for the proposal. While I’m curious about how this would impact governance dynamics, dropping 500M ARB seems too aggressive right now - especially since we hit ATL just 10 days ago as Argonaut pointed out.

I align with Tekr0x about wanting to see more innovative solutions rather than copying other L2s’ retro funding.

Would you be open to exploring more targeted approaches that don’t require such a large token distribution?

[EzR3aL]

While I totally agree that you need to fund and boost the ecosystem with incentives, but throwing this kind of amount in one step will kill the price and thus many initiatives like the GCP and others. They will all ask for more funding and drain the treasury causing the price to crash even more.
Why arent we considering to follow the EF and deposit these assets into Aave, borrow against them with a super high HF and distribute stablecoins over a vesting period?
This way the treasury will stay healthy, when the price recovers that loan can be paid back and the DAO stays solvent or even made some money by depositing.
At the current stage I would be against this proposal.

[Curia]

Thanks for the proposal, we’re not against the idea, but we have some serious concerns. Why would Airdrop #2 deliver more value to the DAO compared to alternative approaches like grants or targeted incentive programs? Airdrops might sound straightforward, but executing them is challenging. We risk giving tokens to the wrong hands, bots or short-term traders who will dump them immediately,resulting in heavy sell pressure that could harm the price and derail many initiatives on Arbitrum plus introducing an extra 500M ARB could seriously skew our governance balance, especially when our current votable supply is around 326M.

Our analysis of the OP airdrop shows that while it initially boosted engagement, much of the effect was short-lived as tokens were sold off. In light of these risks, we believe that exploring more sustainable alternatives might ultimately benefit the DAO more in the long run.

[GensDAO]

This program presents issues of clarity. The allocation of 50% to “builders” based on generated gas fees is ambiguous, as it does not distinguish between valuable contracts and spam, potentially incentivizing artificial activity without real impact. Similarly, the 50% allocated to users lacks concrete metrics to assess their contributions, opening the door to speculative farming.

Furthermore, the precedent set by the first airdrop demonstrates that initial growth can be fleeting if the incentives are not designed for retention. Issuing 500M ARB could trigger massive sell pressure, especially if the funds for builders are not subject to vesting periods. How do they plan to mitigate this risk? Rather than repeating an approach that has already shown limitations, why not opt for more sustainable incentives such as recurring grants or technical support?

There is also concern about the lack of alignment with long-term objectives. Doubling the TVL does not guarantee success if it is not accompanied by user retention and the development of critical infrastructure. Funds could be better allocated to audits, strategic grants, or developer education rather than rewarding transaction volume that lacks added value…

The execution process also appears rushed. Forming a working group, validating addresses, and approving lists within two months is risky, especially in light of previous errors like the exclusion of legitimate users in the first airdrop. Additionally, the selection process for the team is not detailed. How will they prevent capture by specific interests? Why not decentralize the process using community verifiers or transparent on-chain criteria?

[Gabriel]

I like that this proposal is helping to open the discussion of airdrops and the possibility of a future airdrop. I think this topic needs to be thoroughly discussed to create the right incentive alignment, ensuring that the end result translates into a net benefit for the token and the ARB ecosystem. I am more inclined toward smaller, more targeted airdrops rather than a large new airdrop, which would create sell pressure and hurt the token price, ultimately lowering the treasury’s value.

As for the current proposal, I think it is too large, and anyone with some financial knowledge can synthetically sell the airdrop, so the unlock time becomes irrelevant. Also, I disagree with the motivation. Do you have any clear data to confirm that airdrops “attract builders”? Builders in the Arbitrum ecosystem already have access to grants, support, and new programs that are being rolled out to support them.

Lastly, I think the costs and details are a bit vague. I would like to ask who the six people in the group will be and how they will be chosen. What skill sets or experience should/will they have?

Thanks for opening the conversation.

[web3citizenxyz]

@Argonaut

Just 10 days ago, we were at All-Time Lows. As a DAO, we need to avoid initiatives that contribute to sell pressure.

Echoing this ^

While the criteria could be discussed and refined to so that the airdrop goes to ecosystem aligned builders and boosts excitement, we ultimately don’t see an airdrop as an effective method for driving engagement and it risks contributing to downward price pressure.

[newze]

A large release of tokens can cause the price to drop rapidly, affecting market stability and damaging the long-term value of the project. Massive airdrops mostly attract speculators rather than users who genuinely care about the project’s development and use cases, undermining ARB investors’ confidence. Currently, liquidity is very scarce, and I am against it. For the sake of ecosystem development, I hope to see better proposals.

The proposals I support must have a clear plan and specific measurable criteria, rather than simply stating: “We need an airdrop of 500 million ARB tokens to bring users and developers back.”

[danielM]

MAKE ARBITRUM GREAT AGAIN! I support the airdrop initiative. Rewarding builders and users can increase activity and grow the ecosystem.

This will also be a very good advertisement for the ARBITRUM, a marketing move on the part of the project, so to speak. We will gain more recognition and respect from the community. As an example, you can take OPTIMISM and its already successfully played several drops. They had a very positive influence on the project and made amazing advertising. Almost all crypto communities use OPTIMISM as an example to other projects and L2. And this in turn brings more users and developers to the ecosystem. So why doesn’t the ARBITRUM do the same?

But of course, when distributing drops, we need to take into account many nuances.

@cupojoseph

nitiate another major airdrop and growth campaign of 500 Million ARB from the DAO treasury.

Firstly, it is better to focus on several drops in small portions rather than one large one. This will help reduce pressure on the token price and make advertising more long-term. If users know that there will be 3, 4, 5, etc. drops in the future, then activity in the ecosystem will not drop and people will be talking about the project for a long time.

@cupojoseph

The first step is to fund a small working group to work with ARDC to make a recommendation on which groups to include and vesting requirements.

1. 250M ARB to users of Arbitrum and all Orbit chains.
2. 250M ARB to builders who deployed contracts on Arbitrum. Half of which is directly part of the airdrop, half of which is vested over the course of a 6-12 months. With a non-binding ask that these funds be used to grow protocols on arbitrum further.

Secondly, as some delegates already said above, one could think about vesting the drop. It was mentioned in the proposal, but only applied it to builders. It would be better to make a lock for all participants of drop. This again will not significantly dump the price.

Thirdly, it would be nice to include in the drop active delegates who are active on the forum and take part in the life of the DAO. These people have proven that they are interested in the project and the development of the ecosystem and therefore they are unlikely to dump the price by selling tokens from the received drop

[cupojoseph]

re: this needs a clear plan before we can support
re: we need more analysis
re: have you calcualted xyz
re:this is not a fully flushed out plan we need more details to decide

I’m not responding to any of these^ kind of questions directly.

This project is MASSIVE. It will be extremely important to get lots of things right:

• vesting terms
• who to include
• exact amount
• delegation on claiming plan
• integration with ARB staking that is coming soon
• governance risk analysis
• price impact analysis
• any other strings we can attach to project distributions so these rewards are used to grow arbitrum
• lots more details

Figuring those things out shouldnt come from just me or any one person. It should be part of a long term discussion with input from hundreds of people. Getting that input and creating a solid plan is a full time job for several people for months. This is a proposal to specifically create and fund a working group to come up with the plan and different options for all the various details.

[cupojoseph]

@Argonaut

Just 10 days ago, we were at All-Time Lows. As a DAO, we need to avoid initiatives that contribute to sell pressure.

Completely disagree. We are at all time low because we have not been making investments in the future of arbitrum or attracting new builders like we need to be. Will you sit on your hands while you hope and pray the price will come back? is there any time in history that worked? This has been significantly LESS tokens leaving our treasury going directly to users and builders because of the incentive detox and other fear of losing control influenced decisions.

It’s time to invest in the future and grow.

[Argonaut]

In that case, why opt for an airdrop or retroactive funding instead of a forward-looking plan that incentivizes future work rather than rewarding past contributions?

Why not implement a more targeted distribution where recipients are required to add value and complete milestones? Why not use ARB to attract liquidity?

@pedrob

I do find the builder appreciation approach adequate, though I believe it’s something Arbitrum DAO is focused on (which again, doesn’t mean it cannot be improved): the Stylus Sprint, Questbook grants (New protocol ideas & Dev tooling + Orbit new one), the gaming investment initiative, and the upcoming incentive programs. The framework Entropy has been working on is particularly interesting (see working group calls for more info).

Why is half a billion ARB better invested on an airdrop instead of these programs?