Entries related to Arbitrum

April 2, 2023

First Arbitrum DAO vote spirals into disaster: DAO rejects $1 billion spending proposal, but Arbitrum already started spending

After a bumpy start to the airdrop that distributed governance tokens to Arbitrum users, the first use of those governance tokens arguably went even worse. Arbitrum submitted a proposal for DAO members to vote on various governance processes, as well as the distribution of 750 million ARB tokens to an "Administrative Budget Wallet" — tokens that were priced at around $1 billion.

The vote, which still has a day left before completion, is currently standing at 75% against and 25% in support. However, it was discovered that Arbitrum had already begun spending those 750 million tokens, including via the movement of a substantial amount of tokens, and "conversion of some funds into stablecoins for operational purposes".

Another Arbitrum team member subsequently published a post in which they claimed that the proposal was not really a vote but rather a "ratification" of decisions that had already been made by the Arbitrum team, leading many to question what the DAO was even for in the first place. Others questioned the fact that Arbitrum was receiving so much money to use however they liked, not subject to DAO approval.

Things got even messier when the Arbitrum Twitter account "clarified" that "40M $ARB tokens have been allocated as a loan to a sophisticated actor in the financial markets space", and the rest had been sold off for "operational costs". The loan of $52 million worth of ARB to an unnamed actor and the conversion of another $13 million to stablecoins led some to accuse the Arbitrum team of "selling off", cashing in far more than would likely be required for foundation costs in a brief period of time.

"Arbitrum Foundation Sold ARB Tokens Ahead of 'Ratification' Vote on Governance, Budget", CoinDesk
"AIP-1: Arbitrum Improvement Proposal Framework", Snapshot
Tweet thread by Arbitrum
"Clarity around the ratification of AIP-1", Arbitrum forum

March 31, 2023

Arbitrum airdrop plagued by downtime, bugs, and scams

(attribution)

A token airdrop from the popular Arbitrum Ethereum L2 illustrated many of the challenges with airdrops: events where tokens are automatically distributed to a group of crypto wallets, in this case based on how much they had used the platform. The tokens will ultimately be used for community voting on protocol changes, but also have value on the secondary market. Users were eager to snap them up, particularly as users speculated that the price could reach $10/token (as yet it has not, remaining around $1.38).

However, the airdrop had a bumpy start, with scammers latching on to the event to proliferate fake airdrop websites. Phishers reportedly scammed more than 10,000 people using these schemes. At one point, Twitter even suspended the real Arbitrum Twitter account after mistaking it for one of the many phishing accounts. Attackers also compromised a Discord account belonging to an Arbitrum developer, using it to post a phishing link to the official Arbitrum Discord server.

Then, when the time for the airdrop came, the token claiming website crashed on the traffic, as did the Arbitrum block explorer. Those who were able to claim their tokens paid exorbitant gas fees, and some wallets attempting to estimate required gas fees malfunctioned, showing estimates in the billions of dollars.

Finally, the airdrop was widely gamed by people commandeering hacked vanity addresses to receive the airdrop tokens allocated to them, with at least $500,000 worth of tokens reportedly claimed by one attacker. Other attackers scrambled to compete with one another to claim tokens allocated to compromised wallets whose private keys had been shared publicly on Github and elsewhere, trying to be the first to siphon the funds. Two additional exploiters siphoned a combined total of more than 1 million ARB tokens from other wallets. One sold them for 713 ETH ($1.27 million); the other transferred the ARB tokens to other wallets.

"Arbitrum Shows Just How Messy (and Tricky) Crypto Airdrops Can Be", CoinDesk
"Arbitrum Foundation Homepage Crashes as Users Rush to Claim ARB Tokens", Decrypt
"Arbitrum airdrop: Hacked vanity addresses used to siphon $500K", Cointelegraph
"Hackers exploit Discord server to launch fake Arbitrum airdrop", Cryptopolitan
"Over 1M Arbitrum tokens lost to phishing attack", CryptoSlate

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