A proposal to fund the Arbitrum Foundation with 750 million ARB tokens – nearly $1 billion – sparked controversy in the ARB community over the weekend, as the Foundation announced that it was only ratifying a decision that had already been made.
The conflict occurs a few days after the layer 2 protocol will launch its governance token.
According to the AIP-1 proposal in Arbitrum’s DAO, the 750 million tokens would be used to cover “special grants, reimburse applicable service providers […] and cover the ongoing administrative and operating costs of the Arbitrum Foundation.”
At press time, among token holders, more than 70% are against the move.
After facing backlash from community members, the foundation said in a forum post on April 2 that AIP-1 was an endorsement, not a proposal. He also pointed out that part of the tokens had already been sold for stablecoins. In other words, its multi-billion dollar budget and allocations would not be subject to an on-chain governance process.
The Arbitrum Foundation claims that the symbolic first attempt at governance failed due to communication problems and decisions that “clearly were not articulated correctly”:
“One of the mistakes in the drafting of AIP-1 was not realizing from the beginning that this proposal was intended to act as a ratification of the initial configuration of both the Arbitrum DAO and the foundation that has been created to serve the DAO. […] The goal of AIP-1 was to inform the community of all the decisions that had been made beforehand.”
By commenting on the governance forum, community members pointed out that the team de Arbitrum “has been dumping tokens that were initially reported to the community as locked tokens”, stating that “the entire tokenomics page shows only User airdrop + DAO airdrop tokens as unlocked” with the remaining “tokens to unlock in March 2024” .
Arbitrum foundation made a proposal (AIP-1) to allocate 750M ARB tokens for admin and op costs, but $ARB holders voted against it
Now they said the vote was just a formality, and they have already spent 50.5M (6.7%) of the proposed 750M $ARB
Your vote is not vote pic.twitter.com/lvhBbBesum
— Eden Au (@0xedenau) April 2, 2023
Others stood out that under US securities laws, early selling would be considered fraud, and that US citizens who have purchased ARB tokens or participated in the airdrop “are entitled to legal recourse.”
“I’m going to present this to my lawyers and hope to file a securities fraud lawsuit in the next few days. […] Immediately, the Arbitrum Foundation is advised to stop all illegal sales of the token that are taking place without any authorization and against the provisions of the law,” said a community member.
The Arbitrum Blockchain has 65% of Ethereum’s Layer 2 market share, according to data from the Layer 2 analytics site; L2Beat. The long-awaited launch of its native governance token took place on March 23, with hundreds of thousands of users and DAOs qualifying to claim ARB. The overwhelming demand from users made the airdrop request page crashed shortly after its launch, Cointelegraph reported.
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