Abitrum’s Security and the Latest Proposal May Propel ARB Soon

Arbitrum's stellar security record together with a new proposal may revive ARB's price soon.

In a move set to further distinguish Arbitrum from its Layer 2 competitors, PlutusDAO, the prominent governance aggregator on Arbitrum, has recently submitted a groundbreaking proposal. This proposal introduces a novel token locking mechanism and an enticing new incentive program designed exclusively for ARB token stakers.

Arbitrum, known for its efficiency and scalability, has been on the radar of many cryptocurrency enthusiasts. The platform's capabilities have garnered considerable attention, and PlutusDAO's latest initiative aims to fortify its position as a frontrunner in the Layer 2 space.

Token Inflation and User Incentives

PlutusDAO's proposal revolves around addressing token inflation and rewarding ARB token holders who opt to lock their tokens. Under the proposal, the DAO suggests the minting of 1.75% of the ARB token supply, a measure designed to ensure controlled token inflation. It is worth noting that the DAO currently possesses the authority to mint up to 2% of the total ARB supply each year.

The key innovation within this proposal is the distribution of the newly minted tokens to members of the ARB community who choose to lock their ARB tokens for a specified period. This mechanism encourages long-term commitment and active participation within the Arbitrum ecosystem.

The Staking Contract

To implement this incentive program, PlutusDAO recommends the creation of a staking contract. Within this contract, ARB token holders can lock their tokens for a duration of up to 365 calendar days. Crucially, users will have the flexibility to extend or pause their lock times as needed. In return for their commitment, they will be entitled to claim ARB tokens proportional to the number of tokens they have locked.

Penalties for Early Withdrawal

However, PlutusDAO has also proposed penalties for ARB users who prematurely withdraw their locked tokens. These penalties, incurred by those who fail to fulfill their lock-in commitments, will be collected and then distributed among the remaining users who adhere to their respective lock durations. This feature is intended to encourage ARB holders to think carefully before participating in the staking contract and incentivize them to fulfill their commitments.

Mixed Reactions from the ARB Community

Unsurprisingly, the ARB community's response to the proposal has been mixed. Some members have expressed reservations about the linear locking formula and have suggested alternative locking mechanisms. Conversely, others have thrown their support behind the initiative, recognizing its potential to create a more engaged and committed community of ARB token holders.

PlutusDAO's proposal marks a significant step forward for the Arbitrum ecosystem, introducing a unique approach to token incentives and locking mechanisms. As the ARB community continues to engage in discussions and deliberations, the future of this innovative proposal remains uncertain. Nevertheless, it is clear that PlutusDAO's initiative has ignited a crucial conversation within the Arbitrum community, highlighting the importance of user incentives and sustainable tokenomics in the rapidly evolving world of blockchain technology.

Arbitrum Succeeds in Protecting Its Users’ Funds

In related news, Arbitrum, the brainchild of Offchain Labs, has been making waves in the blockchain world with its innovative security features and commitment to safeguarding user assets. Co-founder Ed Felten recently revealed that since its launch in August 2021, Arbitrum has not seen a single successful fraud proof attempt on its mainnet. This remarkable achievement underscores the platform's robust security infrastructure.

In an interview at Korean Blockchain Week on 4 September 2023, Ed Felten discussed the exceptional track record of Arbitrum's security mechanisms. He pointed out that while there were one or two fraud challenges submitted on a version of Arbitrum running on the Ethereum proof-of-work (PoW) fork after the Ethereum Merge, these attempts were defeated.

Felten explained that Arbitrum's security framework relies on interactive, multi-round fraud proofs. These fraud proofs allow a layer-1 verifier contract to determine the validity of a challenger's submission. If a fraudulent activity is detected and proven, the malicious validator faces the severe consequence of having their stake slashed.

Fraud proofs come into play when validators suspect another participant of fraudulently or incorrectly assembling a batch of incoming transactions into the next block. However, Felten revealed that on Arbitrum's mainnet, there has not been a single fraud-proof attempt, let alone a successful challenge. This speaks to the platform's resilience against fraudulent activities.

One of the key reasons behind the scarcity of fraud proof attempts, according to Felten, is the high risk involved for malicious validators. Attempting fraud not only jeopardizes their reputation but also puts their entire stake at risk. Felten emphasized, "If any one person notices it and disputes your claim, then you will surely lose your stake, so there's a stronger disincentive to try."

Currently, Arbitrum operates with a permissioned set of validators, approximately 12 in number, who participate in the fraud-proof game. However, the platform is gearing up for a significant development in its security protocol. Arbitrum is set to roll out a new iteration of fraud proofs called the "BOLD" protocol, which stands for Bounded Liquidity Delay. This protocol aims to provide even faster guarantees for challenges.

Explaining the advantages of the BOLD protocol, Felten stated, "The BOLD protocol says no matter how many stakes they sacrifice, they'll be defeated in about eight days." This enhancement promises to further bolster the security of the Arbitrum network.

Looking ahead, Felten revealed that Arbitrum's fraud-proof feature will transition to a permissionless system, allowing anyone to contribute to ensuring the chain's correctness when challenges arise. This move reflects Arbitrum's commitment to decentralization and community-driven security.

As Arbitrum continues to set new standards in blockchain security, it solidifies its reputation as a reliable and secure choice for users seeking a high-performance layer-2 solution on the Ethereum network.

Price Overview

While the community processed a new exciting proposal for Arbitrum, it also had to suffer through a continuation in ARB’s price drop. The cryptocurrency price tracking website CoinStats indicated that ARB’s price had fallen nearly 7% throughout the past day of trading. This negative daily performance had pushed the altcoin’s weekly performance further into the red zone to -12.14%. Consequently, the cryptocurrency was trading hands at $0.802994.

Price chart for ARB (Source: CoinStats)

ARB was also outclassed by the market leader Bitcoin (BTC) over the past 24 hours, and dropped 7.52% against the leading cryptocurrency during this period. As a result, CoinStats data showed that 1 ARB token was estimated to be worth 0.00003092 BTC at press time.

Technical Overview

Daily chart for ARB/USDT (Source: TradingView)

From a technical standpoint, a descending wedge pattern had formed on ARB’s daily chart. This suggested that the altcoin’s price may break out towards the upside in the next few weeks. The formation of this pattern occurred after ARB’s price broke below the crucial support level at $0.8980 over the past 72 hours - exposing the cryptocurrency to the risk of dropping to its listing price in the coming 2 weeks.

ARB’s price may, however, continue its descent in the short-term before entering into a potential leg up. Adding credence to this short-term bearish thesis is the fact that a significant bearish technical flag was recently triggered on ARB’s daily chart.

During the last 48 hours, the daily Moving Average Convergence Divergence (MACD) line crossed below the MACD Signal line. This signaled that momentum recently shifted in favor of sellers, which may result in ARB’s price declining over the course of the upcoming couple of days. Furthermore, the 9-day EMA line was positioned bearishly below the 20-day EMA line as well - supporting the belief that ARB’s price could continue to drop.

If this bearishness continues, then ARB’s price may drop to as low as the lower level of the aforementioned falling wedge pattern at around $0.72. However, if the chart pattern is validated prior to ARB’s price reaching the apex of the falling wedge, then it may attempt to reclaim the support of the $0.8980 mark.

Thereafter, a daily candle close above this level may be followed by a subsequent daily close above the next threshold at $1.0605. At this point, risk-averse investors may enter into a medium-term long position for ARB. This potential buy volume could then propel the altcoin to above the $1.3490 barrier before it attempts to establish a new all-time high (ATH) higher than $1.82.

Disclaimer: Coinpaper does not recommend that any cryptocurrency should be bought, sold, or held by you. Always conduct your own research and consult your financial advisor before investing in any digital asset.