Ethereum Layer 2 governance platform Arbitrum Foundation has spoken out following the community FUD from its controversial ARB sale.
The Arbitrum Foundation is taking heat for offloading 50 million ARB tokens on-chain without community consent. ARB’s value slumped 11% following the sale, with the Foundation explaining it utilized the proceeds in the DAO’s interest. The Foundation also revealed it loaned 40 million ARB from the total on-chain transfer to a financial markets player. In addition, Arbitrum converted the remaining 10 million ARB tokens to fiat and channeled it toward operational costs. The Ethereum layer 2 scaling solution began selling ARB tokens for stablecoins before securing its community’s approval. Following the backlash from these actions, Arbitrum Foundation moved to address the resulting fear, uncertainty, and doubt (FUD).
In a Twitter thread, Arbitrum also touched on a recent controversial 750 million ($1 billion) ARB token proposal. The governance platform revealed it sold 50 million ARB tokens from the 750 million tokens it allocated itself to fund current operating expenses. The Foundation further stated that it has no near-term plans to offload more tokens going forward.
Arbitrum Foundation Addresses FUD, Including AIP-1 Effectiveness, in Lengthy Twitter Thread
The Foundation addressed some central points raised by the DAO amid the inception of its decentralized governance scheme. On concerns that the Arbitrum Improvement Proposal (AIP-1) is too broad, Arbitrum expressed a willingness to heed the DAO’s advice. According to the protocol’s governance platform, it would split the AIP into smaller parts. Accomplishing the split would allow the community to deliberate and vote on the various subsections. As part of further attempts to alleviate FUD, Arbitrum Foundation also clarified that the AIP-1 failed to articulate its governance scheme properly. As the Foundation put it:
“One of the mistakes in drafting AIP-1 was a failure to note at the outset that this proposal was intended to act as a ratification of the initial setup of both the Arbitrum DAO and the Foundation that has been created to serve the DAO.”
Arbitrum also added that AIP-1 was planned to communicate community decisions made in advance.
Although the Arbitrum Foundation ratification ends today, the outcome of the token decision-making process already appears set in stone. As it stands, an overwhelming 70% of the community has voted against the proposal.
On lessons learned and concerted efforts toward further improvement, Arbitrum said:
“We believe that having a Foundation that is empowered to act in the service of the DAO is important for Arbitrum’s success. We clearly could have communicated that better, and will take this opportunity to improve and continue to build Arbitrum as the most community-centric L2.”
Other central points addressed include the 7.5% total ARB token supply sent to the Foundation becoming more accountable. According to Arbitrum, these staked tokens will have a vesting period of 4 years and cannot be used to vote.
ARB tokens changed hands at $1.22, as of press time, after sliding approximately 11% in the last 24 hours. On March 23rd, the protocol’s native governance token’s airdrop took place, allowing a multitude of users and DAOs to claim ARB.
Arbitrum’s network constitutes 65% of Ethereum’s Layer 2 market share.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
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