On-Chain Research: What did the DAO that received the ARB airdrop do with the money?

Original author: unex, Amir Ormu and Atomist Original compilation: Luffy

A few months ago, Arbitrum airdropped over $125 million worth of ARB tokens to the protocol DAO within its ecosystem. The Arbitrum airdrop was the most talked about airdrop event of the year, and we wanted to know: what are the protocols receiving the airdrop actually doing with their millions of dollars?

Governance Token Distribution

On April 24, the Arbitrum Foundation began distributing 112.8 million ARB tokens to eligible protocols within its ecosystem.

In total, 137 protocols received token airdrops. In order to avoid the centralization of token distribution, the Arbitrum Foundation worked with Nansen to develop an airdrop strategy to expand the diversity of projects with different KPIs and application scenarios.

Arbitrum DAO Airdrop Map by Size and Category

These protocols have full autonomy to decide how to utilize received airdrop tokens. They can use these funds to reward users directly or retroactively, use these funds to bribe votes, or as operating funds.

In a blog post discussing this particular airdrop program, the Arbitrum team clarified that the underlying goal of the token distribution is "localization of community governance." Allocating tokens directly to the Arbitrum Protocol's treasury is intended to enable them to take on governance responsibilities and decision-making processes within the ecosystem.

This approach enables the protocol to use this airdrop to support its operations and move the platform or product forward, ensuring a brighter future for the protocol and the Arbitrum ecosystem behind it.

In the months following the launch of the ARB token, some may dismiss L2 as not having much opportunity. But we believe that even in this crypto winter, the L2 ecosystem is full of catalysts, including:

• EIP-4844
• Launch of Stylus
• The sorter is gradually decentralized
• Fee switch (Fee Switch)

The content of these catalysts is beyond the scope of this article, and we will not go into detail here.

On-chain survey results and Dune dashboard

In this report, we will focus on on-chain research findings surrounding the Arbitrum airdrop project. Our goal is to provide market participants with insights into capital flows and the integrity of each DAO's decisions regarding funding.

Agreement and its indicators as of June 23, 2023

Additionally, our member Shogun produced a Dune dashboard that provides an overview of initial ARB allocations and current balances across all protocols, in addition to a range of metrics such as user count, transaction count, and accrued fees.

*Disclaimer: Since we cannot always keep track of the movements of all 139 vault wallets, the findings of this article are limited to movements as of June 23rd. *

Stranded Whale

Among the protocols receiving the largest airdrop amounts, GMX (8 million ARB), Uniswap (4.3 million ARB), SushiSwap (4.2 million ARB) and Curve (3.3 million ARB) have yet to use any airdropped tokens, nor No noteworthy governance proposals have been released to allocate funds. Arrakis is proposing to distribute the airdrop tokens obtained by Uniswap to liquidity providers on DEX through Arrakis.

4 of the first 5 recipients have not transferred and spent any ARB tokens

Balancer, Radiant and Stargate reward LP

Balancers has initiated and approved proposals to reward LPs. The protocol has received 3 million tokens and plans to award 1 million tokens in batches (every two weeks, 100,000 ARB each time) to active liquidity providers. In addition, the proposal proposes to use the remaining 2 million tokens to deploy POL (Protocol Owned Liquidity) through the combination of liquidity pool BAL/AURA/ARB and Aura.

Radiant received 3.4 million ARB tokens and was another large airdrop recipient. Radiant has approved a Governance Proposal (RFP-18) for Airdrop Allocation:

• 40% airdrop to all new 6-month and 1-year dLP lockup users.
• 30% will be allocated to all Arbitrum dLP lockup users in the next year
• 30% is reserved in the treasury for future use.

Stargate DAO received 1.7 million ARB, and their latest proposal on the distribution of these tokens has been passed, 70% of the tokens are used for liquidity mining incentives on Arbitrum, and the release of STG is suspended until the ARB is exhausted. In practice, this means that all LPs will migrate to the new contract in order to receive ARB rewards.

Stargate plans to allocate the remaining 30% to partners, encouraging greater collaboration to further advance the Arbitrum and Stargate ecosystems.

TreasureDAO Funding Game Developers

TreasureDAO (acquired 8 million ARB) posted an interesting proposal on the governance forum on May 9th, which went to a vote on June 1st.

According to the proposal, 2 million ARB tokens will be allocated to reward contributing game developers. Initially, 500,000 tokens will be distributed to builders through donations or treasury swaps. The remaining 1.5 million tokens will be reserved for future rewards or grants. Game studios receiving rewards include: The Beacon, Realm, Tales of Elleria, Knights of the Ether, The Lost Donkeys, Smithonia, Ruffion Reborn, CastleDAO, Power Plins, City Clash, Smol Age, Billy's World, and Kasumi Dungeons. The exact amount allocated is not yet known.

Dopex and Cap: Liquidity and Incentives

Dopex received an airdrop of 3.8 million tokens. Founder tztokchad said on Discord on April 25 that the airdrop will be divided into dpxETH deposits, incentives, and rewards for long-term holders. Now, almost 2 months later, the protocol has used 300,000 ARB to provide liquidity for options products. In addition, 30,000 ARB tokens were sent to 0 x de... 7 d 0 b, and then distributed to the address of the suspected pledge contract.

Response from Tztokchad on 25 April 2023

Cap Finance used airdrops in a similar fashion. They sold 1 million tokens for 576,000 USDC and 311 ETH to provide liquidity for their trading pool. Additionally, they distribute 100,000 ARB tokens to users every month based on transaction volume.

##PlutusDAO

Plutus (acquired 2.7 million ARB) distributed 500,000 tokens to team members without waiting for any community resolution.

In addition, Plutus stated that it will use 300,000 ARB to buy back plsARB and distribute it to plsARB stakers. Interestingly, for plsARB holders, there is no official liquidity exchange pool where they can convert plsARB back to ARB.

Currently the only available trading pool has only 16k ARB liquidity, plsARB is trading 30% below the peg. It must be noted that this is not an official pool and the Plutus team has been waiting for Camelot's centralized liquidity pool to launch a new, more liquid trading pool. So for 2936 holders, they still have to wait (more than 3 months now) for the team to come out with a solution.

plsARB/ARB Liquidity Pool as of June 23, 2023

We found that in order to fill the illiquidity black hole of plsARB, the team used 100,000 ARB to fund the provider pool to allow plsARB to be used as collateral to borrow ARB. In the end, they provided 200,000 ARB in the loan pool of Silo Finance to obtain income, the specific reason is unknown to us.

Other projects that allocate more than 600,000 ARB

DForce (obtained 2.4 million ARB) uses airdrops for POL: deposit all airdrops in its own lending pool.

Beefy.Finance (acquired 1.8 million ARB) used airdrops for operations and incentives: ostensibly, they distributed 1.3 million tokens as incentives and exchanged 100,000 ARB for USDC for operations.

BattleFly (acquired 1.2 million ARBs) sold 280,000 ARBs.

KyberSwap (acquired 1.1 million ARB) used 152,000 ARB as incentives.

Umami Finance (acquired 900,000 ARB) created on-chain sell order monitoring.

Multichain (obtained 900,000 ARBs) used 167,000 ARBs as incentives.

0x protocol (acquired 643k ARB) kept the entire airdrop in the EOA - the only project to do so.

Impermax (acquired 500,000 ARBs) sent 100,000 ARBs to EOA and LPs on its platform.

3 xcalibur (obtain 500,000 ARB) will airdrop 100,000 ARB to LPs, and if the TVL remains at $1 million, another 100,000 ARB will be airdropped. 3 xcalibur also uses some for bribes/rewards and plans to use some for operations in the future.

For smaller projects, we recommend you use the Dune Dashboard so you can do some data mining yourself. We don't think their movements deserve a special account, and the vast majority of projects are still holding airdrops.

We do want to mention all the projects that have sold airdrops: TridentDAO, Damned Pirates Society, Covalent, XToken, Bridge Network, Rice DeFi, ApolloX, CREDA, Aelin, Unmarshal, and ZeroSwap.

in conclusion

In conclusion, the vast majority of airdrop tokens are sitting idle in multi-signature wallets (approximately 80% of all airdrop tokens), and they seem to align with the foundation's overall vision for distributing airdrops, which is to empower protocols to be responsible for governance within the ecosystem and decision-making process.

While some protocols have directly sold entire airdrops to fund their own operations, we believe that these funds will be used to fuel protocol growth and indirectly benefit the entire Arbitrum ecosystem.

A new issue that emerged from our research is that some sellers portray themselves as operating DAOs with community governance, but are reluctant to share distribution plans with their communities.

ARB Holdings by Category Breakdown as of June 23, 2023

Ideally, these projects will:

• Tokens are reserved for future Arbitrum governance;
• Redistributing its value to the community to incentivize product growth within the Arbitrum ecosystem.

By simply tracking on-chain token movements and their behavior from multi-signature wallets, we can clearly distinguish those who are more inclined to participate in the development of the Arbitrum ecosystem.

We're calling for anyone interested to drop by our Dune dashboard to do some on-chain research. This should be one of the main points of this article: on-chain accountability of the protocol.

In fact, it's often difficult to really understand what's going on behind the scenes of a Web 3 project. Governance accountability airdrops on Arbitrum have the advantage of greater transparency and the ability to monitor how effectively these protocols are utilizing allocated funds. This is the second interesting practice (Optimism was the first), and we think it's an interesting model that will be replicated by other projects in the future.

To further align incentives, future governance airdrop distributions may place constraints on certain token behaviors, such as restricting sales or enforcing long-term redemptions. Nonetheless, we believe the current distribution is fair and a natural selection of which protocols are more in line with the Arbitrum ecosystem and which are not. If we look back, Optimism airdrops had some limitations.

However, on-chain analysis can only provide one side of the story. For this reason, we would like to invite all relevant protocols to be transparent about their airdrop plans.