Tokenomi Arbitrum (ARB)

The Arbitrum (ARB) token is an ERC-20 equivalent token launched on Arbitrum One on March 16, 2023, with a fixed total supply of 10.00 billion ARB. The token's primary function is governance, empowering the Arbitrum DAO to manage the ecosystem.

Issuance Mechanism

The ARB token has a fixed total supply of 10.00 billion ARB. The issuance mechanism is primarily based on a pre-defined allocation and vesting schedule, rather than continuous inflation or mining rewards.

The token contract is an upgradeable proxy contract that uses a "fallback" function to delegate calls to an implementation contract. While the contract was searched for superuser functions, the only one explicitly found was a Mint function, indicating that the total supply could potentially be increased via governance, although the initial supply is fixed.

Allocation Mechanism

The total supply of 10 billion ARB tokens is distributed across six main categories, with the largest portion allocated to the Arbitrum DAO Treasury.

The allocation breakdown is as follows:

Note: The Arbitrum Foundation's 7.5% allocation includes 50 million ARB (0.50%) immediately available and 700 million ARB (7.00%) vesting linearly over four years.

Usage and Incentive Mechanism

The ARB token's utility is centered on governance and ecosystem incentives.

Governance

ARB serves as the governance token for the Arbitrum DAO, which governs the entire Arbitrum ecosystem (Arbitrum One and Arbitrum Nova). Tokenholders can participate in off-chain governance via Snapshot and on-chain governance via Tally. The DAO has significant control over the protocol, including:

• Enacting changes to Arbitrum One and Arbitrum Nova smart contracts.
• Allocating treasury funds (including sequencer profits).
• Amending the Arbitrum DAO Constitution.
• Authorizing new Orbit Chains.

Tokenholders can vote on governance proposals and delegate their associated voting power to another address.

Incentives and Ecosystem Funding

ARB is used to incentivize ecosystem participants through various programs funded by the DAO Treasury:

• User Airdrop: Approximately 1.16 billion ARB (11.62% of total supply) were airdropped to wallet addresses on March 23, 2023, based on pre-defined eligibility criteria.
• DAO Airdrop: 113 million ARB (1.13% of total supply) were airdropped to various DAOs and protocols.
• Short-Term Incentive Program (STIP): Allocated 50 million ARB (0.50%) to ecosystem protocols, with an additional 21.52 million ARB (~0.22%) allocated via the STIP Backfund.
• Long-Term Incentives Pilot Program (LTIP): Allocated up to 45 million ARB (0.45%) to protocols that were recipients of STIP or the STIP Backfund.
• Gaming Catalyst Program (GCP): Approved in June 2024, allocating up to 225 million ARB (2.25%) to gaming projects over a three-year period. This funding is broken down into Build Grants (25 million ARB), Investments (135 million ARB), and Infrastructure Bounties (25 million ARB).
• Arbitrum Foundation Funding: In September 2024, 250 million ARB (2.50% of total supply) were approved to bolster the Foundation's Strategic Partnerships Budget.

Cash Flow and Rewards

The protocol generates cash flows primarily through Sequencer profits (the difference between fees collected from L2 users and fees paid to Ethereum L1), which are transferred to the DAO treasury.

Currently, there are no active incentive programs in which users or tokenholders earn fees, additional tokens, or compensation simply by holding or interacting with the network. However, the DAO may allocate the treasury funds for such purposes in the future.

Locking Mechanism and Unlocking Time

The ARB token distribution includes significant lock-up periods for core stakeholders to ensure long-term alignment.

Locking Mechanism

Tokens allocated to Offchain Labs (Team & Advisors) and Offchain Labs (Investors) are subject to a four-year lockup.

Unlocking Time and Vesting Schedule

The vesting schedule for these locked tokens is structured as follows:

1. Initial Cliff: The first major unlock event occurs one year after the token launch (March 23, 2023).
2. Monthly Vesting: Following the one-year cliff, the remaining tokens vest linearly on a monthly basis for the subsequent three years.
3. Full Vesting: The ARB token supply is projected to be fully vested by March 2027.

The vesting process releases approximately 1.1% of the total supply monthly.

For example, the daily unlock data shows that the cumulative amount of unlocked tokens reaches 9,997,999,955 ARB by April 16, 2027, representing 100.00% of the total allocation.

The monthly unlock schedule includes contributions from the Offchain Labs Team & Advisors, Offchain Labs Investors, and the Arbitrum Foundation. For instance, a snapshot of the projected unlock for July 2025 shows a total unlock of 108.56 million ARB, distributed among:

• Offchain Labs Team & Advisors: 56.1 million ARB
• Offchain Labs Investors: 36.5 million ARB
• Arbitrum Foundation: 15.9 million ARB