Is Governance All It’s Chalked Up To Be? Arbitrum’s First Governance Vote Sparks Debate

Is Governance All It’s Chalked Up To Be? Arbitrum’s First Governance Vote Sparks Debate

Decentralization and governance go hand in hand. Since Bitcoin’s inception, crypto maximalists have embraced the core components of decentralization, and while ‘governance’ is not specifically mentioned in the Bitcoin whitepaper, it is considered to be one of the biggest elements of decentralized environments across the entire crypto ecosystem.

We are fifteen years away from the Bitcoin whitepaper, and the concepts around governance are certainly higher than ever. But not everything is in unison. One of the hottest chains on the block, Arbitrum, played host to some governance-related drama over the weekend.

Shutdown and Governance

The Arbitrum token (ARB) has been less than a month since it went public (the chain, of course, has been around much longer) and it is already at the focal point of the drama – a true ‘crypto moment’.

The chain’s first DAO proposal (or at least what many seemed to perceive as such) was released last week and community members voted against “AIP-1: Arbitrum Improvement Proposal Framework” by a count of 100 million ARB tokens to 16 million tokens (with 14 million abstaining).

A major sticking point is the token allocation allocation, which details 750 million tokens allocated to the Foundation – approximately 7.5% of the total allocation. However, despite the vote not passing, the 750 million tokens actually already was transferred to the Foundation, who argued that AIP-1 was a ‘notice’ (or as they described it, a ‘ratification’) rather than a vote. Arbitrum is effectively ‘telling’ community members about tokenomics, not ‘asking’ them – which is actually quite common (well, the tokenomics part)… just not by those means.

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Life, death, taxes and yes, token allocation divergences. But this one had a new twist.

Arbitrum (ARB) has seen relative volatility during community debate around an unusual governance vote. | Source: ARB:USD on

Why not everything is doom and gloom

As our team at Bitcoinist described the movement behind the ARB token’s price action earlier in the day on Monday; the token dropped ~20% and then recovered, which many would argue is a ‘better than expected’ performance. The total amount locked in Arbitrum has also remained largely untouched, showing optimism from the defi crowd, standing at over $2.2 billion at press time.

Beyond numbers, the situation around Arbitrum reflects the need for greater communication between Foundations and their communities in general; Generally speaking, crypto communities have generally accepted and not provoked token allocations to foundations with the understanding that there needs to be some sort of capital allocation for organizers to operate.

Regardless of your stance on tokennomics, proper communication with community stakeholders is critical and largely at the root of this situation – but certainly not ‘irreparable damage’ to the chain.

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