Abstract

This AIP combines and puts forward three separate proposals for the ArbitrumDAO to consider: Remove Cost Cap on Arbitrum Nova, Update the Upgrade Executors, and Disable Legacy Tether Bridge. All of the aforementioned proposals have previously passed a Snapshot vote, reaching a quorum of 3% votable $ARB.

The first proposal will remove the Amortized Cost Cap, which is expected to result in higher gas fees for users on Arbitrum Nova. This increase is necessary to ensure the long-term sustainability of the network and reduce the financial burden on the Arbitrum Foundation.

The second proposal will replace the Upgrade Executor contracts on Arbitrum One, Arbitrum Nova, and Ethereum mainnet with upgraded versions. The modernized version introduces an additional function that enables the Upgrade Executor to execute an upgrade by directly calling the target contract, rather than indirectly delegate calling an upgrade contract.

The third proposal seeks to disable the legacy USDT bridge for Arbitrum One, given the activation of the new USDT0 bridge in January 2025. This proposal seeks to disable the legacy bridge entirely, rather than continue with the current configuration, which subjects depositors to a week-long delay and risks loss of funds if the depositor is a smart contract.

Motivation & Rationale

Remove Cost Cap on Nova

Arbitrum Nova was initially positioned as a cost-efficient alternative to Arbitrum One, offering 30-50x cheaper transaction fees at launch. However, several developments have significantly reduced Nova’s competitive advantage:

• EIP-4844 blobs: The introduction of EIP-4844 significantly reduced the cost difference between Nova and Arbitrum One, from 30-50x to a mere 2x. This difference is negligible given the already low costs on Arbitrum One.
• Orbit adoption: Orbit chains have become a more attractive option for teams seeking gas sponsorship and customization. Their ease of deployment has led many teams to prefer Orbit chains over Nova.

Given the now-minimal cost advantage over Arbitrum One and the rise of Orbit chains, maintaining an amortized cost cap on Nova — which currently prevents batch posters from recovering full L1 costs — is no longer justifiable. Removing the cap will stop the Arbitrum Foundation from providing subsidies and align cost recovery with actual usage.

Accordingly, removing the cap (i.e., setting it to 0 bips) would:

• Ensure batch posters are able to recover 100% of their L1 posting costs.
• Eliminate recurring deficits currently paid by the Arbitrum Foundation.
• Reflect Nova’s lower strategic priority within the broader Arbitrum roadmap.

Historical data on Arbitrum Nova batch poster deficits can be seen here. ​This data highlights the ongoing inefficiencies and justifies the removal of the amortized cost cap.

Update the Upgrade Executors

The Upgrade Executors controlled by the DAO are responsible for carrying out critical upgrades on Arbitrum One, Arbitrum Nova, and Ethereum such as protocol contract upgrades, system parameter changes, and more. Currently, the traditional Upgrade Executor contracts in place only support one function for executing an upgrade: execute(). When called by the owner of the Upgrade Executor, the execute() function will perform a delegate call to an upgrade contract, which facilitates subsequent calls to target contracts and ultimately executes the upgrade. This indirect method of calling and execution can complicate upgrades and require additional development and deployments.

The modern version of the Upgrade Executor introduces a new function, executeCall(), which allows the Upgrade Executor to directly call target contracts and execute upgrades, removing the need for delegate calls to upgrade contracts. While the existing execute() call is still supported, the new executeCall() function enables the Upgrade Executor to implement upgrades in a lighter weight fashion. In the future, upgrades that use this method may not require dedicated action contracts, simplifying the process and saving development energy.

Disable Legacy Tether Bridge

Historically, the existing USDT bridge for Arbitrum One was the primary path for bridging Tether to and from Arbitrum One. The new USDT0 standard introduced a modernized alternative that has become the go-to solution. However, the legacy USDT bridge is still technically enabled, which presents several issues.

First, withdrawals from the legacy bridge to L1 are subject to a seven-day delay, which is meaningfully slower than the new USDT0 bridge which can process bridge transactions in seconds or minutes. Also, once this delay has elapsed, deposits are auto-withdrawn on L1. This inconvenience can be addressed by disabling the legacy bridge and directing users exclusively to the new USDT0 bridge.

Second, user funds could be lost if a smart contract deposits to the legacy bridge on their behalf. The legacy bridge is currently configured to auto-withdraw funds as soon as possible back to the depositor; however, this auto-withdraw configuration can cause problems for smart contracts that deposit on behalf of end users but do not have withdrawal or refund functionality. While it’s possible to recover funds in this scenario, it is certainly sub-optimal for smart contract operators and end users that delegate to them. Disabling the legacy bridge prevents smart contracts from encountering this issue and putting funds at risk. Also, once the legacy bridge is disabled, any transaction submitted to it will simply revert; this applies to third party integrations as well as direct user interactions.

Key Terms

Remove Cost Cap on Nova

• Amortized Cost Cap (setAmortizedCostCapBips): A parameter within the ArbOwner system contract that limits the percentage of Layer 1 transaction posting costs that batch posters are allowed to recover from the network. Expressed in basis points (bips), where 10000 = 100%.
• ArbOwner Contract: A privileged precompiled contract that allows the ArbitrumDAO to configure core protocol settings, such as the amortized cost cap.
• EIP-4844: An Ethereum Improvement Proposal introducing blob-carrying transactions. Its implementation has significantly reduced the cost disparity between Arbitrum Nova and Arbitrum One, undermining the original economic rationale for Nova’s fee model.
• Batch poster transactions: Transactions that aggregate multiple operations and submit them as a single on-chain transaction. With the enforced fee cap, these transactions become less cost-effective under current network dynamics, contributing to operational inefficiencies.

Update the Upgrade Executors

• Upgrade Executor: A smart contract responsible for executing upgrades on Arbitrum One, Arbitrum Nova, and Ethereum mainnet; owned and administered by the DAO
• Upgrade Contract: A smart contract that contains dedicated logic for a particular upgrade; receives a call from the Upgrade Executor and subsequently calls other contracts targeted in that upgrade
• execute(): The sole function for executing an upgrade in existing Upgrade Executor implementations; relies on indirect delegate calls to upgrade contracts
• executeCall(): A new function for executing an upgrade in the modern Upgrade Executor implementation; allows for direct calls to target contracts. A new audit report was recently completed. Trail of Bits reviewed the implementation of executeCall, assessed it against the proposal’s intent, and checked for unintended side effects. Trail of Bits found no security-relevant issues.

Disable Legacy Tether Bridge

• USDT0: Tether’s new OFT-based version of USDT; more details here
• DisableGatewayAction: A smart contract action that disables a gateway for a specified token from the L1GatewayRouter; the DisableGatewayAction source code can be found here

Specifications & Steps to Implement

Remove Cost Cap on Nova

The DAO will execute a call to the ArbOwner contract on Arbitrum Nova to set the amortizedCostCapBips value to 0, thereby allowing batch posters to recover 100% of their L1 posting costs.

Update the Upgrade Executors

• Deploy the latest UpgradeExecutor contract on each network
• Update proxy contracts on each network to reflect new UpgradeExecutor addresses:
  • Arbitrum One: 0xCF57572261c7c2BCF21ffD220ea7d1a27D40A827
    • upgradeTo: 0x3d745b8815F9be5BF053858165f8aB1F58c77932
  • Arbitrum Nova: 0x86a02dD71363c440b21F4c0E5B2Ad01Ffe1A7482
    • upgradeTo: 0x3d745b8815F9be5BF053858165f8aB1F58c77932
  • Ethereum: 0x3ffFbAdAF827559da092217e474760E2b2c3CeDd
    • upgradeTo: 0x3d745b8815F9be5BF053858165f8aB1F58c77932

1. Deploy new UpgradeExecutor contracts on Arbitrum One, Arbitrum Nova, and Ethereum using the parameters specified above
2. Update proxy contracts on Arbitrum One, Arbitrum Nova, and Ethereum to point to the new UpgradeExecutor contracts. The action described in this proposal is contained inside the payload uploaded to Tally.

Disable Legacy Tether Bridge

Deactivate Legacy Bridge: execute the ‘perform’ function on the DisableGatewayAction contract, disabling legacy USDT on the L1GatewayRouter contract

• DisableGatewayAction: 0x8d3425f7039645223517F6F6e60Ef04C28f4188F
• L1GatewayRouter: 0x72Ce9c846789fdB6fC1f34aC4AD25Dd9ef7031ef
• Legacy USDT: 0xdAC17F958D2ee523a2206206994597C13D831ec7

1. Contract Execution: call DisableGatewayAction contract to disable legacy USDT
2. The audit report for the DisableGatewayAction contract can be found here. The action described in this proposal is contained inside the payload uploaded to Tally.