Let's dive deeper into how Arbitrum is governed using the ARB token. You can find more detailed descriptions on the Arbitrum Foundation Documentaion.

Arbitrum

Arbitrum is a protocol that enhances the speed and affordability of Ethereum transactions, making it easier for developers to create dApps. It consists of two chains - Arbitrum One and Arbitrum Nova, which were launched in 2021, with the latter being designed for low-cost transactions. In 2022, Arbitrum One was upgraded to the Arbitrum Nitro stack, providing a 7-10x scaling improvement. Governance of both chains is decentralized via the $ARB token, which can be used for voting on proposals and delegates can also be appointed.

Governance

Governance refers to the decision-making process, and in traditional Web2, corporate decisions are made by a board of directors who vote on behalf of shareholders. Web3 technologies like Arbitrum use progressive decentralization to gradually decentralize decision-making. This is facilitated by three elements: DAO formation, governance token launch, and the use of open-source smart contracts that enforce the decision-making protocol. The Arbitrum DAO is a new entity with decision-making authority over the Arbitrum One and Arbitrum Nova chains and their underlying protocols, governed by The Constitution of the Arbitrum DAO. Ownership of the ARB governance token represents membership in the DAO and allows token holders to vote on proposals.

ARB

ETH and ARB are similar in that they are both powered by decentralized blockchain technology and can be owned, bought, sold, and traded through compatible wallets. However, they differ in that ETH is a transactional token used for paying transaction fees, while ARB is a governance token used for democratic decision-making. Governance of Arbitrum is facilitated through ARB and smart contracts, whereas Ethereum's governance is socially handled. Holding ARB gives users a say in governing the future of Arbitrum and indirectly, Ethereum. Possession of ARB tokens is an opportunity to participate in cutting-edge governance mechanism design with society-scale implications.

Arbitrum's Governance

In addition to upgrading the core contracts and authorizing the creation of new L2 chains, the Arbitrum DAO is responsible for other important decisions. For example, the DAO can vote on proposals for changes to the governance system itself, such as changes to the composition or powers of the Security Council. The DAO can also vote on proposals for changes to the distribution or use of the $ARB token, such as proposals to adjust the tokenomics or to fund specific development initiatives.

Furthermore, the DAO is responsible for decisions related to the allocation of resources within the Arbitrum ecosystem. This includes decisions related to funding research and development, supporting community initiatives, and incentivizing participation in the ecosystem through programs such as liquidity mining.

Overall, the governance system of the Arbitrum Rollup protocol is designed to ensure that decisions related to the protocol are made in a transparent, decentralized, and democratic manner. The system is designed to be responsive to the needs of the community and to promote the long-term success and sustainability of the ecosystem.

Refer to the Constitution of the Arbitrum's DAO for a precise overview of the scope of the DAO's decision-making responsibilities.

Delegation

Arbitrum has different stakeholder groups in a stack, with Web3 users at the top. Delegates are similar to elected representatives who can be delegated voting power by $ARB token holders. Delegates are important for decentralization because they allow busy token holders to participate in governance by voting on their behalf. Becoming a delegate requires a significant time commitment, but it ensures that Ethereum's values and those of the delegators are represented in the DAO's decisions. Users have three options to participate in governance: selecting a delegate to vote on their behalf, self-delegating to vote directly on proposals, or becoming a delegate to represent other token holders. Detailed instructions for each option can be found on the official delegation documentaion.

The Arbitrum DAO is a global community of ARB token holders and Delegates who govern the Arbitrum One and Arbitrum Nova chains, the Constitution of the Arbitrum DAO, and the Security Council. The Arbitrum DAO governance forum is a public forum for viewing and discussing Arbitrum Improvement Proposal (AIP)s and other governance-related topics. Additionally, the Arbitrum DAO Treasury is a smart contract on the Arbitrum One chain that contains tokens collectively controlled by the Arbitrum DAO.

In conclusion, the evaluation of the voting power within the Arbitrum DAO has demonstrated that there has been a healthy balance between different delegates since the airdrop of the ARB token two weeks ago. However, a large portion of airdropped tokens has not been delegated yet, which can drastically change the balance of voting power. The analysis of the on-chain activity of delegators showed a relatively weak correlation with the delegation, as this is generally a one-time act.