Recently, the data of Arbitrum ecosystem has shown a certain downward trend. Since July, the total locked value (TVL) of Arbitrum has gradually decreased and is still in a downturn. Compared with the peak in May, it has dropped by as much as 70%. This trend can be clearly seen on the digital chart, showing the challenges faced by ecological projects.

The price of ARB tokens has also fallen, causing its circulating market value to drop to $1.1 billion, slightly lower than its competitor OP's $1.2 billion. This shows that Arbitrum is currently facing competitive pressure and needs to take some measures to cope with the current challenges.

So, what happened to Arbitrum? Can this once popular project regain its glory? Let’s find out.

Arbitrum’s ecosystem was once extremely prosperous, and it has gone through multiple stages of hype, with various high-profile projects emerging. Although these projects have different life cycles and popularity, they have injected new vitality and innovation into Arbitrum’s ecosystem and even the entire blockchain field.

In October 2022, the Arbitrum ecosystem experienced a wave of hype, with some of the most popular projects including TreasureDao, GMX, GRAIL, and RDNT. Among them, TreasureDao, once hailed as the "Nintendo" in the field of gaming platforms, was originally an NFT project on the Loot ecosystem and later migrated to the Arbitrum network. At the end of last year, TreasureDao launched a game called "Beacon". In just one month during the testing phase, the NFT transaction volume exceeded 50,000, showing its strong community support and user base.

GMX is a successful example in the field of derivatives exchanges and has always occupied the top position in the Arbitrum TVL rankings. Launched at the end of 2021, the GMX V1 version adopts the GLP (Generalized Liquidity Provider) model, provides a concise and effective trading model, and creates the narrative concept of "real returns", which plays an important role in the field of derivatives DEX protocols. Many other projects have been inspired by the GMX V1 model and have carried out similar developments. The GMX V1 protocol captures a large amount of fees, with protocol revenue reaching US$108 million in the past year, ranking ninth among all projects and first in the field of derivatives DEX.

The continued development of the Arbitrum ecosystem has also attracted great attention from the traditional financial community. In May of this year, Morgan Stanley pointed out in a research report that second-layer networks such as Arbitrum will "reshape the landscape of the crypto ecosystem" and bring more opportunities to DeFi, NFT and other fields. This attention shows that Arbitrum still has great potential in the crypto world and is expected to continue to play its role in leading innovation.

Entering the second half of 2023, affected by the overall market, Arbitrum's ecosystem showed signs of fatigue. As mentioned earlier, Arbitrum's total locked value (TVL) and token price both declined. However, in the face of this challenge, the Arbitrum team took positive measures to revitalize the ecosystem.

In September of this year, Arbitrum's incentive working group submitted a proposal called "Arbitrum Short-term Incentive Plan" (AIP) in the Arbitrum community forum. The goal of the proposal is to allocate up to 75 million ARB tokens from the DAO treasury as rewards to reward projects and community members who actively participate in the Arbitrum protocol. This proposal was passed unanimously by the community, showing the community's strong support for the incentive plan.

Subsequently, on October 13, the first round of voting for the short-term incentive plan ended, with a total of 29 projects selected from the 95 projects that participated in the voting. These projects will have the opportunity to receive incentive funds of up to 50 million ARB tokens allocated by Arbitrum, which will help increase the activity of the ecosystem and attract more users and liquidity to Arbitrum.

Among the selected projects, those that received the most votes include Camelot, JonesDAO, Dopex, and GMX. These projects are native projects on Arbitrum and their popularity is widely recognized in the community.

It is worth noting that normally, proposals on Arbitrum need to go through two rounds of voting, first a poll vote on Snapshot, and then an on-chain vote on Tally. However, the funds for this incentive plan have been allocated to the multi-signature address STIP-ARB 5/9 by an independent proposal that received over 99% approval on Tally. The signatories of this multi-signature address act as managers of funds on behalf of the DAO. This means that there is no need to vote separately on Tally for each project, but only to decide based on the on-chain vote results on Snapshot.

Therefore, the proposal to apply for the Arbitrum grant needs to meet two conditions in the Snapshot vote to pass: more than 50% majority support the proposal, and more than 71.51 million ARB (3% of the total votes) participate in the vote.

The scale of this incentive program is unprecedented and has attracted widespread community participation. Since anyone can make suggestions and comments on the project, many projects have adopted community feedback and made corresponding improvements. This reflects the openness and transparency of DAO governance and the community's positive attitude of working together to promote the development of the ecosystem.

This incentive plan is expected to become a classic case of DAO governance. Coordinating the interests of all parties to promote ecological development has always been a difficult problem in the crypto field. I hope that Arbitrum can continue to explore feasible and efficient DAO governance models in the future and lay a solid foundation for the development of Web3.

In addition, from a macro perspective, the Arbitrum team is also looking for breakthroughs. In terms of technology, the project is about to launch Stylus, BOLD, and introduce a decentralized Sequencer. These updates will provide users with efficient and highly secure Layer 2 solutions.

The decentralized sequencer is also a key direction for the development of Arbitrum technology. It will provide users with an efficient transaction sequence management mechanism while protecting its security. The application of this technology will further enhance the performance and attractiveness of Arbitrum, and is expected to attract more developers and users to join the ecosystem.

In addition to its technical efforts, the Arbitrum Foundation is also actively promoting business development. In addition to the short-term incentive program mentioned above, a student ambassador program has also been launched. This program aims to train student ambassadors so that they can represent Arbitrum in their universities and local communities. This will not only help expand Arbitrum's visibility, but also provide the younger generation with the opportunity to participate in the crypto ecosystem and build personal influence.

Arbitrum launched its third week of Odyssey this week, which runs from October 23 to October 28. This series of activities aims to inspire and encourage community members to participate in the construction of the Arbitrum ecosystem, while also providing project owners with more opportunities to promote and develop their applications.

This week's Odyssey tasks are for Uniswap and APEX. Uniswap needs no special introduction. It is one of the most frequently used decentralized exchange (DEX) platforms by users, and many users may already use it in daily transactions. The completion of Uniswap tasks may be relatively easy for the majority of users.

APEXPro is a permissionless, non-custodial derivatives exchange (DEX). It provides a familiar order book interface, enabling users to trade in a secure and efficient environment with relatively low fees, up to 30x leverage, and instant settlement. The addition of APEXPro adds diversity to Arbitrum Odyssey activities and attracts more users who are interested in derivatives trading.

Judging from the experience of past Odyssey events, these events usually significantly increase the usage of the Arbitrum network. For the project side, this means that they have more users using their applications, which increases their exposure and contributes to the development of the project and the growth of the community. The Odyssey event has become a key factor in the Arbitrum ecosystem to promote ecological development, encouraging more innovation and participation.

In general, Arbitrum’s Odyssey event is not only a community motivation mechanism, but also an important tool to promote ecosystem growth, attracting more traffic to the Arbitrum ecosystem through incentives.