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Understanding Arbitrum’s Decentralization
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Arbitrum is a level 2 solution for Ethereum boasting significant TVL rankings. Its decentralized governance is facilitated through a DAO alongside the ARB token. This DAO oversees four key aspects: chain ownership, validator ownership, sequencer ownership, and ownership of the Data Availability Committee (DAC). Governance is strikingly centralized, with a DAO that holds high risks due to its ability to compromise the entire network with only seven people. If the Security Council’s nine members are in partnership, the network’s funds could be compromised.
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The Risks In The Arbitrum DAO
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While its sequencer provides a single point of failure, the Security Council uses multisig wallets to take crucial decisions. In case of malice from a majority of members, the system and user funds are left vulnerable. The DAC also carries risks. This committee’s malpractice can compromise the system’s safety. The balance between security and decentralization in the Arbitrum protocol is precarious.
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Hot Take: Evaluating Arbitrum’s Decentralization
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Arbitrum may appear decentralized at first glance, but its governance structure poses significant risks. The centralized sequencer and the potential vulnerability of the Security Council create potential weaknesses in its decentralized foundations. Proceed with caution when investing in this protocol.
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