After an uproar, the Arbitrum Foundation plans to break up a controversial governance package into separate votes, including on its 750M ARB token allocation

Arbitrum will hold a standalone vote on its 750 million token allocation. — Join the most important conversation in crypto …

CoinDesk 2023-04-03 Danny Nelson

Context & Ripple Effects

Arbitrum had just set a course to distribute ARB and transition the Layer 2 network toward DAO governance through its planned ARB airdrop and DAO transition. The dispute tests how that transition operates when a foundation proposal combines several consequential decisions.

The governance question matters beyond tokenholders because Arbitrum had already been positioned as infrastructure for applications, including Reddit's Community Points migration to Arbitrum Nova. A process seen as accountable can affect confidence in the network's decision-making layer.

First-order effects

The Arbitrum Foundation will replace a bundled governance package with separate votes, giving DAO participants a distinct decision on the 750M ARB allocation.
The allocation faces standalone scrutiny rather than being decided alongside unrelated elements of the original package, while the foundation must run a revised proposal process.

Second-order effects

Separating the votes raises the burden on the foundation to explain and defend the allocation on its own merits, and gives governance participants a clearer signal of support or opposition for that specific use of ARB.
For projects building on Arbitrum, the episode makes the timing and legitimacy of network-governance decisions a more visible operational consideration as the DAO transition proceeds.

Third-order effects

If similar disputes recur, token-governed networks may move toward narrower, more modular proposals for treasury and token-allocation decisions rather than omnibus packages.
The broader test is whether governance can provide meaningful checks on foundation-led execution without making upgrades and ecosystem funding excessively difficult.

The trend: This is one instance of blockchain networks shifting from foundation-led launches to more contested, process-driven tokenholder governance.

Discussion

@arbitrum @arbitrum on x
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 on x
Thanks to all the DAO participants and delegates for their feedback on AIP-1. It likely will not pass and we are committed to addressing the feedback received from the community. More details in the thread 🧵👇
@cringe @cringe on x
1) Today I looked into what's happening at Arbitrum and what I have found was not very encouraging to say the least. (As someone who holds 1.4mil $ARB) 1. The team moved out 750,000,000 $ARB on the 16th of March 2. The team then proceeded to send out funds to Binance on the 23rd …
@0xedenau Eden Au on x
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 https://twitter.…
@krugermacro @krugermacro on x
The Arbitrum Foundation thinks you are all idiots. https://twitter.com/...
@chainlinkgod @chainlinkgod on x
Glad to see @Arbitrum listening to the community's feedback on AIP-1 Splitting up the omnibus proposal into multiple smaller proposals and providing more transparency/accountability around Foundation spending is a good step in the right direction https://twitter.com/...
@arbitrum @arbitrum on x
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. 🧵👇
@alpha_pls @alpha_pls on x
Obviously the original communication was bad, but good to see Arbitrum listening to the community feedback. Governance stress tests are needed. More transparency around Foundation spending is a good outcome. https://twitter.com/...
@0xmerp @0xmerp on x
Lmao they already started selling https://twitter.com/... https://twitter.com/...
@chrisblec Chris Blec on x
Vote is underway for @arbitrum to steal 750m $ARB from treasury for its “Foundation” to hand out “Special Grants”. No votes on these grants. No mention of security or oversight. 3 ppl control the Foundation. This is a SLUSH FUND for Arbitrum VCs. Total embarrassment. https://twit…
@chrisblec Chris Blec on x
I just want to clarify: There is NOTHING decentralized about Arbitrum or Optimism. Just because you can use a network without permission doesn't mean it's decentralized. Both can halt the chain, modify any code, censor any transaction, freeze any wallet, or steal from the DAO.
@chainlinkgod @chainlinkgod on x
My perspective on the first @arbitrum proposal AIP-1 TL;DR - Split up the omnibus proposal into multiple separate proposals - Clarify key aspects around the Administrative Budget Wallet - Reduce the minimum threshold for proposal creation https://forum.arbitrum.foundation/ ...
@olimpiocrypto @olimpiocrypto on x
My thoughts on AIP-1 in @Arbitrum forums https://twitter.com/...
@0xfoobar @0xfoobar on x
arbitrum drama seems overblown (as an already dumpedoooor) yes they should've ratified in the airdrop claim rather than separate gov proposal but costs insane money to prep for a token launch and very dumb to witchhunt against the people that just airdropped you free money
@0xkarel @0xkarel on x
Original AIP-1 proposal: https://forum.arbitrum.foundation/ ... Clarifying note from the Arbitrum Foundation: https://forum.arbitrum.foundation/ ... @TreasureGov's response against AIP-1: https://forum.arbitrum.foundation/ ...
@icebergy_ @icebergy_ on x
Let's dump arbitrum together https://twitter.com/...
@stoicsavage @stoicsavage on x
i hate arbitrum foundation because they went out of their way to destroy the last fucking narrative we had to psyop exit liquity mf if youre not going to let governance tokens at least govern how am i supposed to dump governance tokens on willing governors at higher prices
@blockchainjames @blockchainjames on x
‘Loaned to a sophisticated actor’ Just say it how it is, this whole problem started because of backend deals behind governance processes. https://twitter.com/...
@iohk_charles Charles Hoskinson on x
Yeah well, that's like your governance opinion man https://twitter.com/... https://twitter.com/...
@bitfinexed @bitfinexed on x
They've already lied to you all once. This is the cleanup after ripping off retail suckers, now they're going to stage a price recovery with the help of wash trading and market manipulation to calm everyone down. They'll think they are getting richer with their shitcoin bags. htt…
@0xsisyphus @0xsisyphus on x
Arbitrum should just drop a new token to make us forget about the first token
@drnicka @drnicka on x
Honestly, insiders should be out of the market for the first 6 months at least IMO. Seems like there's a massive chunk of liquid supply controlled by the foundation that they're already selling. https://twitter.com/...
@albacapmgmt @albacapmgmt on x
LMAO DeCENtrALisEd AuToNOmOuS OrGaNIsATIoN https://twitter.com/...
@pastryeth @pastryeth on x
Incredibly scammy stuff from @arbitrum. TLDR: -Made proposal to transfer 750m $ARB from DAO to admin wallet for “special grants.” -Instead of waiting on governance, they preemptively sent tokens over & began utilizing (selling) them. -Proposal is about to fail now https://twitter…
@hsakatrades @hsakatrades on x
Arbitrum team when the “decentralized governance process” goes against their wish. https://twitter.com/...
@poordart @poordart on x
All the @arbitrum foundation had to do was literally nothing for a month Instead they managed to fck up their immaculate rep as CT-darling most popular L2 (and “alt L1” really) What an epic fumble lmao https://twitter.com/...
@poordart @poordart on x
@TheStalwart Arbitrum foundation (DAO) wants to sell a lot of coins for funding - puts it up for a vote (by governance token holders), vote goes against them - turns out they already started selling and they're now saying “vote was just meant as a formality” https://twitter.com/.…
@zachxbt @zachxbt on x
@0xedenau Bro Arbitrum Foundation is a whale. If they're dumping, it probably IS undervalued because their capitulation probably IS creating a bottom (it did)
@crypto_mckenna McKenna on x
The Arbitrum team made a big mistake with AIP-1. However, they are not going to nuke their reputation over a single proposal. I remain optimistic on an immediate resolution.
@arbitrum @arbitrum on x
2/ There have been several requests for clarity from the Arbitrum Foundation regarding the ratification process and here is a long form response from the Foundation adding additional context: https://forum.arbitrum.foundation/ ...
@armyspies @armyspies on x
3) A cautionary tale on the importance of Cardano getting governance right is currently playing out with Arbitrum. https://twitter.com/...
@poordart @poordart on x
Lol it's not gonna get easier making good arguments against retail investor protection and the SEC tbh https://twitter.com/...
@lookonchain @lookonchain on x
1/ 2.694B $ARB(distributed to Offchain Labs Team and Future Team + Advisors) was transferred to ～140 EOA addresses yesterday via address “0x1e70”. #Arbitrum But according to the docs, all investor and team tokens have a 4-year lock-up period. https://docs.arbitrum.foundation/ ...…
@route2fi @route2fi on x
So Arbitrum wanted to allocate 750M $ARB to their foundation. It was voted down by the community, but yet they've already sold 50M tokens because the vote was just a “formality”. Not sure why they suddenly need to cover “admin expenses” now after years without having a token.
@richardmccrackn @richardmccrackn on x
This post by Eden shows an example of why CIP-1694 for Cardano is so important. On chain votes for treasury withdrawals will automatically execute the distribution if approved, or automatically deny if disapproved. ✅ https://twitter.com/...
@fintechfrank Frank Chaparro on x
Arbitrum reminds me of when I visit home and I ask my sister if she wants the last slice of gabagool and she says yes but I already ate it
@splitcapital Zaheer on x
There seems to be a lot of confusion with regards to what the foundation did wrong. First, no sane person is against the Arbitrum Foundation operating. Second, the Arbitrum foundation shoul 100% receive their 7.5% of tokens over time.
@dzambhalahodl Steven Lubka on x
Arbitrum, a popular ETH L2, recently hosted a governance vote to spend 750 million ARB tokens by the foundation. The community voted against it, and the foundation said “We already spent the money”. Governance is a dumpster fire in De-Fi https://twitter.com/...
@0xsisyphus @0xsisyphus on x
Arbitrum has already made a long statement in response to FUD on the governance forums (7 hours ago), but its likely few have seen it as its on a governance forum https://forum.arbitrum.foundation/ ...

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