Token Economics Chapter 1 Token Distribution Structure and Secondary Market [ARB]
There is no doubt that ARB, as the leader of Ethereum layer 2, has won the favor of many airdrop hunters even before it went online. To this day, ARB is still talked about by currency people due to the giant whale's misjudgment and the violent rise after the market wash. (As a 1 billion market with relatively dispersed chips, being able to raise 20 points in four days is considered a violent rise.) .
Although except for secondary markets like Binance Square, other forums are unanimously optimistic about ARB, and even believe that ARB is the "future of L2 public chain" and "real blockchain technology". In the future bull market, ARB will Help Ethereum regain its glory. But only those who actually hold ARB in the secondary market can realize how weak and tortured the ARB token itself is.
Therefore, we have to think about why the public’s evaluation of ARB deviates so much from the actual holding feeling? In the traditional financial market, the primary market and the secondary market are in a mutually reinforcing relationship. The secondary market (equivalent to an exchange, CEX and DEX) provide liquidity to the primary market (equivalent to early project financing, on-chain platform) and determine the market price of assets (tokens), while the primary market provides initial pricing to the secondary market, affecting future trends (technology Breakthrough), restricting scale (tokens are more about market control).
But can this law be translated to tokens? At least not ARB.
A pure "blood-sucking disk"? All the investment in the secondary market is used as a wedding dress for the so-called "technology"?
There are many projects in the currency circle that provide airdrops, and they all use the following distribution model:
Venture capital + on-chain technical team (DAO) + retail airdrop + project team
The tokens belonging to the project party may be distributed under different names, but you have to know that this part can be disposed of at will by the project party. Even if they say this is a "lock-up" or that a community vote is required, Only then can it be used (99.999% probability of selling).
ARB has a similar allocation structure:
17.53% (1.753 billion coins) allocated to Offchain Labs investors
1.13% (113 million) allocated to the DAO in the Arbitrum ecosystem
11.62% (1.162 billion) allocated to users of the Arbitrum platform through airdrops
42.78% (4.278 billion coins) allocated to Arbitrum DAO treasury
26.94% (2.694 billion) allocated to Offchain Labs team, future team and advisors
It can be seen that the fourth and fifth items are the tokens that belong to the project side mentioned above. In April this year, the ARB Foundation privately sold nearly 1 billion US dollars of tokens without the "approval" of community voting, and then conducted a first-cut vote and received 70% opposition. The tokens were sold anyway, so you have no objection. Useless.
In addition to the project team's selling, ARB will continue to allocate tokens to the technical teams building dapps. On September 23, ARB allocated 50 million tokens to outstanding projects on the chain through a short-term incentive proposal. This part should belong to the second part, the DAO in the ARB ecosystem. In today's deep bear environment, the technical team is short of money. This behavior will definitely trigger a sell-off. Coupled with such fragile liquidity, it will have a negative impact on the market. The blow is immeasurable.
It is foreseeable that this proposal passed with a high vote, and there will definitely be several such incentives in the future. If the voice is high, the project party can also use ARB from the national treasury to subsidize the technical team. As for the so-called dapp development and technological breakthroughs, everyone You can also feel that there is almost no hype in the secondary market, and it has all become the entertainment of insiders.
ARB has no investment value? Would it be better to choose OP?
Personally, I actually don’t support any extreme ideas. As the leader of Ethereum L2, if you want to measure whether ARB has investment value, the most reliable standard must be ETH. In other words, for us ordinary people, what we need to consider is: "I use the same money to invest in ETH and ARB, which one has higher returns?"
If ETH is used as the benchmark return rate of the market, what we want to measure is ARB's excess return. But obviously, we don’t need to discuss this. You only need to click on the weekly K-line and daily K-line of ARB and ETH to get the results intuitively.
On the other hand, you may say that ARB has hype value in the bull market, so OP who is also L2 is more suitable for comparison. It is also intuitive that OP is more volatile and its trend is more independent than that of ETH. Moreover, OP’s market maker style is aggressive, so there may be more room for growth in the bull market.
I don’t want to discuss the market too much. This is not the main content of token economics. With the aforementioned foreshadowing of the ARB token structure, let’s briefly introduce the OP’s token structure:
19% is used for user airdrops
17% allocated to investors
19% is allocated to core builders (project parties, lock-up)
25% goes to Ecosystem Fund
20% is used for retrospective public product funding
Different from ARB, OP’s share held by the project party is relatively vague. In principle, the ecosystem fund cannot be misappropriated, and only the 19% share can be determined.
However, OP has more than one round of airdrops, because ARB and OP are essentially voting tokens. This may also cause OP to experience selling pressure.
OP also had his own black swan event. Last year, 20 million of the tokens allocated to the market maker wintermute by the OP were stolen, but this seemed to be a technical problem rather than self-inflicted theft that is rampant in the market now.
In fact, what I want to say in this article is...
The token distribution structure directly determines the later selling pressure. For example, Bitcoin has natural shorts, that is, miners, and Ethereum is unlocked by pledgers. They can choose to hold the currency and wait for it to rise during the cycle, because it is only part of their investment portfolio. . But the technical team is different from airdrop hunters. They acquire tokens and then sell them.
The Ethereum Foundation taking the lead in selling coins can be hyped as a big negative, and sooner or later they will too.
Original statement: BinanceSquare Token Economists team
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