Arbitrum’s newly-launched ARB token sank Sunday as the network sought to clear a cloud of confusion that descended over its DAO’s first vote—which organizers say was effectively meaningless.
The leadership behind the Ethereum scaling solution announced earlier this month that it was forming a decentralized autonomous organization or DAO, which coincided with the launch of a governance token named ARB.
The token’s value comes from its role within the ArbitrumDAO. People who own ARB can play a role in shaping the network’s future by voting on proposals, such as AIP-1, which outlines specifics like the structure of the DAO itself and its associated Foundation.
More than 70% of ARB tokens cast in AIP-1’s proposal voted against the measure, as of this writing. However, an Arbitrum employee named Patrick McCorry explained AIP-1’s proposal was just a formality.
“We believe that a lot of the negative sentiment around AIP-1 was driven by confusion around the notion of AIP-1 being a ratification and not a request,” McCorry wrote in a blog post. “There is a chicken and the egg [issue] that needs to be solved when decentralizing a network, and the point of AIP-1 was to inform the community of all of the decisions that were made in advance.”
1/ There’s a very lively discussion on the Arbitrum governance forums regarding AIP-1. Decentralized governance is working as intended. We are all one community and fierce public discourse will yield the best outcomes.
🧵👇
— Arbitrum (💙,🧡) (@arbitrum) April 2, 2023
For example, McCorry said there were multiple elements of Arbitrum’s transition to being governed by a DAO that had to be established and put in place prior, including the formation of a Foundation that would be responsible for administering the DAO’s decisions and earmarking certain funds.
Since the measures outlined in AIP-1 have already been implemented, the community’s opposition and votes against the proposal are essentially moot.
One element of AIP-1 that has drawn the most scrutiny is the allocation of 750 million ARB tokens to the Arbitrum Foundation for making grants, reimbursing service providers, and covering its administrative and operational costs.
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
McCorry’s post included a justification for the figure that compared similar decisions made by other networks. He added that the Foundation has already “begun to use these tokens in the interest of the DAO, including conversion of some funds into stablecoins for operational purposes.”
Arbitrum later clarified on Twitter that the total amount of ARB converted into stablecoins was around $10 million.
6/ Regarding the on-chain transfers of 50M $ARB tokens, 40M $ARB tokens have been allocated as a loan to a sophisticated actor in the financial markets space. The remaining 10 million has been converted to fiat and dedicated towards operational costs.
— Arbitrum (💙,🧡) (@arbitrum) April 2, 2023
The price of ARB fell 7.7% on Sunday to $1.18, according to CoinGecko. ARB is currently the 42nd largest cryptocurrency by market capitalization with a total value of around $1.5 billion.
Arbitrum airdropped its new ARB token on March 23, and over 1 billion ARB was claimed by over 550,000 digital wallets, according to a Dune dashboard.
Arbitrum is a scaling solution for Ethereum built by Offchain Labs. It is designed to make Ethereum transactions cheaper and faster by processing them on a separate network and then relaying their receipts back to Ethereum in bulk.
The proposal of AIP-1 was created by Lemma LTD, which McCorry said is one of a “few different service providers” the Arbitrum Foundation is working with to “bootstrap itself and be in a position to properly serve the DAO.”
Stay on top of crypto news, get daily updates in your inbox.
Source: https://decrypt.co/125252/arbitrum-declares-first-dao-vote-moot-cites-chicken-and-the-egg-problem-as-arb-falls
