Arbitrum Airdrop is Helping Smaller DAOs Survive the Bear Market
Layer 2 Network Airdropped $150M To 137 DAOs
By: Owen Fernau •Dive
Arbitrum’s unique airdrop is throwing some crypto projects a lifeline.
Arbitrum, an Ethereum scaling solution, made airdrop history by distributing tokens to treasuries of decentralized organizations, not just to individual wallets. Of 1.3B tokens airdroppped, 8.9% were gifted to 137 DAOs.
Now, projects big and small are deliberating on what to do with their stack of ARB – a windfall that in some cases amounts to more than the value of projects’ treasuries.
The Arbitrum airdrop is the latest example of how blockchain projects can use tokens to incentivize and reward their users and ecosystem. While individual users are usually the main recipients of token distributions outside of the project team and investors, Arbitrum is adding DAOs to the airdrop, which should increase the variety of participants in governance and incentivize developers to continue building on the network.
The side effect of Arbitrum’s airdrop strategy has been to provide crypto projects with extra cash as the market recovers from its 70% crash last year.
Over $10M Airdrop
Arbitrum distributed 1.13% of its total token supply to ecosystem DAOs. The top 10 DAO recipients of ARB tokens by airdrop size received over 44M ARB tokens, or $56M at recent prices. The top two recipients got over $10M.
Tokens received as a share of the projects’ total treasuries varied widely, from less than 1%, to between 10% and 40% in most cases.
The case of CAP Finance, a decentralized exchange for a kind of futures contract called a perpetual, is notable in that the ARB tokens it got are worth three times its treasury. The project has a $1.5M treasury, but stands to receive an airdrop of ARB with $3.7M, as of Mar. 29 prices.
The project’s CAP token has reacted favorably since the Arbitrum announcement on Mar. 16 — it’s up roughly 64% since then.
Not all DAOs receiving airdrops have seen their token move upward. TreasureDAO, a gaming ecosystem, received one of the two largest allocations of ARB at 8M. Even with the project’s 26.5M treasury, the airdrop constitutes an over 38% increase in terms of the assets it controls.
Still the TreasureDAO token, MAGIC, is actually down roughly 6% since the announcement of the ARB airdrop.
“Free Money” Debate
Projects are debating what to do with the windfall, which amounts to over $1M for 42 of the 137 which are to receive ARB tokens.
It’s a new wrinkle to the saga that has been airdrops in crypto the past few years — while individuals don’t have to poll anyone about what to do with their “free money,” DAOs certainly do.
Most teams The Defiant contacted said it was too early to decide.
Radiant Capital, a money market protocol which operates across blockchains, is considering distributing the token as an additional incentive for using its platform. The protocol received 3.34M ARB tokens, which is worth nearly $4M as of Mar. 28 and is the seventh-highest amount awarded to any DAO.
Like other projects which received ARB, debate followed — DAO members wondered whether selling the token too early would be a mistake, how to earn yield with it, and the specifics of which actions to incentivize with the airdropped tokens.
Notably, the ARB airdrop hasn’t hit the receiving teams’ wallets, meaning there may be additional sell pressure as another 1.13% of the tokens’ supply enters the market.
A team member at Vesta, a collateralized stablecoin protocol similar to Maker, and recipient of 2.7M ARB tokens, told The Defiant that the project would not simply airdrop the ARB tokens to the stablecoin issuers’ community.
Many community members couldn’t help a cheeky request that their DAO simply redistribute the ARB tokens in a second airdrop. Most projects however, are taking a longer-term perspective.
Vesta, has a forum proposal exploring a few options — first is to potentially use the ARB as a reward to incentivize liquidity provision to a VST-ARB pair. VST is Vesta’s stablecoin. The other route is to become a delegate for Arbitrum, which means not only being an active voter in the governance of the protocol, but also soliciting voting power from other ARB holders.
TreasureDAO Voting Bloc
John Patten, founder of TreasureDAO, the gaming ecosystem which received one of the two largest airdrops, is advocating for a similar approach — he wishes to keep the DAOs 8M ARB tokens to use for voting in the future direction on Arbitrum.
“8M ARB is a lot, but it won’t last forever no matter how you distribute it,” he said on Discord. “Its most enduring impact is as a single bloc vote for Treasure to express its voice in Arbi DAO and advocate for Treasure.”
Aave Temperature Check
It’s not only lesser known projects debating on how to use the windfall of ARB. The lending giant Aave has a similar debate about how to use its $3.2M of ARB. Marc Zeller, formerly an integrations lead at the lending protocol, posted a “temperature check,” on Aave’s forum.
The main options were — keep the tokens to participate in governance, use the tokens as part of a liquidity mining program to incentivize usage of Aave on an Arbitrum deployment, and sell the tokens for stablecoins to boost the Aave DAO’s treasury.
PlutusDAO ARB-Specific Product
PlutusDAO, a project dedicated to locking voting tokens on Arbitrum in exchange for offering rewards, developed a product specifically for the newly launched token — the idea is that people can permanently lock their ARB tokens with the DAO in exchange for Plutus’ plsARB tokens.
Users can then lock plsARB tokens for PLS token rewards, with the project saying a way to convert plsARB back to ARB will launch in two months. Be aware that once people lock ARB with Plutus, they can’t get their tokens back.
DAOs will likely be more deliberate than most individuals with their ARB airdrop — with their treasuries watched and, at least in theory, controlled by their token holders, DAOs need to be more careful.