ARB is the native governance token of Arbitrum. The token is used to pay transaction fees on the Arbitrum network and serves as a means of governance for the protocol. Holders of $ARB can participate in decision-making processes, such as proposing and voting on protocol upgrades or changes. ^[4][5]

Overview

$ARB is an ERC-20 governance token used within the Arbitrum ecosystem to participate in decentralized decision-making through the Arbitrum DAO. It exists on Arbitrum One, a Layer 2 rollup chain. It enables token holders to vote on governance proposals that impact the Arbitrum One and Arbitrum Nova networks, including protocol upgrades and treasury allocations.

Voting power is proportional to the amount of $ARB held or delegated, with smart contracts enforcing token-weighted governance. Delegation allows token holders to assign their voting rights to others without transferring ownership. The token launched with a fixed supply of 10 billion, with the possibility of annual inflation capped at 2%, subject to DAO approval through constitutional proposals. ^[14]

Tokenomics and Airdrop

On March 16, 2023, Arbitrum announced the launch of the new governance token, ARB, and a self-executing DAO governance model.

“Today, the Arbitrum Foundation is extremely excited to announce the launch of DAO governance for the Arbitrum One and Arbitrum Nova networks, alongside the launch of ARB,” - the team tweeted.

The $ARB airdrop claim started on the Arbitrum One chain on March 23, 2023. The airdrop is estimated to end on September 23rd, 2023. Based on data taken on a snapshot on February 6, 2023, 12.75% of the total supply was allocated to the Arbitrum Airdrop. The initial supply of the $ARB token is 10 billion. ^{[3] [4]}

Initial Token Allocation

| Percentage of initial supply | Number of tokens | Allocated to || ---------------------------- | ---------------- | ------------ || 42.78% | 4.278 billion | Arbitrum DAO treasury || 26.94% | 2.694 billion | Offchain Labs Team and Future Team + Advisors || 17.53% | 1.753 billion | Offchain Labs investors || 11.62% | 1.162 billion | Users of the Arbitrum platform (via airdrop to user wallet addresses) || 1.13% | 113 million | DAOs building apps on Arbitrum (via airdrop to DAO treasury addresses) |

AIP-1 Controversy and Governance Reforms

On April 1, 2023, a proposal known as AIP-1 was introduced to the Arbitrum DAO community, seeking approval to transfer 750 million ARB tokens—worth nearly $1 billion—to the Arbitrum Foundation. The tokens fund administrative expenses, special grants, and reimbursements. However, the proposal sparked backlash due to concerns over its broad scope and the Foundation’s control over many funds. Community members were especially critical upon discovering that a significant portion of the tokens had already been moved before the vote concluded.

Specifically:

• 750 million ARB were transferred to a separate treasury without prior approval.
• 40 million ARB were loaned to a financial institution.
• 10 million ARB were converted to fiat for operational use.

Blockworks Research, among others, voted against the proposal, citing a lack of transparency around fund management and unknown wallet signers. ^[7]

Foundation Response

On April 2, the Arbitrum Foundation acknowledged the criticism and stated that AIP-1 was unlikely to pass. In response, the Foundation announced plans to break the proposal into smaller parts so the community could vote on each section individually. A separate vote would be held for the 750 million ARB transfer, and the Foundation proposed introducing measures such as a four-year vesting schedule to improve accountability.

They also rebranded the Special Grants program to the "Ecosystem Development Fund" and committed to more transparency about fund use. The Foundation clarified that tokens sold so far were only to cover current operating expenses and pledged not to sell more soon. ^{[8] [9]}

New Governance Proposals

On April 5, the Foundation released drafts of two new proposals:

• AIP-1.1 focuses on setting a smart contract lockup schedule, budget allocations, and transparency requirements.
• AIP-1.2 proposes amendments to the founding documents and lowers the threshold for submitting proposals from 5 million ARB to 1 million ARB, improving accessibility to governance.

The Foundation stated it would not move any of the remaining 700 million ARB until the DAO approves a formal budget and lockup schedule. These proposals were published for public feedback and scheduled for a snapshot vote after a 72-hour discussion. ^{[12] [13]}