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  • Writer's pictureDavid Manion

ARB Drops After Reports Of Token Sale Before Governance Approval


Apparently, the Arbitrum Foundation did not wait for its governance community’s consensus before it started selling the ARB tokens for stablecoins. An Arbitrum employee reported via a blog post early Sunday that the governance community of tokenholders had not yet ratified the $1 billion budget for this initiative. As the blog statement came to light, the ARB token experienced a sharp decline in price. It dropped 9% in 24 hours and hit a low of $1.17.


According to the report, a lot of the negative sentiments were spurred by the misconception that the proposal was a ratification and not a request.





Token Launched Amidst Controversy

The Arbitrum Foundation had airdropped over 1 billion ARB tokens to nearly 300,000 wallets as a part of its initiative to limit power centralization and create the ArbitrumDAO, which was supposed to hold the governance vote on matters like those proposed in the Arbitrum Improvement Proposal (AIP-1). However, the ratification vote for AIP-1 did not concern voting on budget proposals. Instead, the Foundation had moved on to spending the tokens that were supposed to be part of the vote. The matter was not received well by the Arbitrum community, which is even considering rejecting the AIP-1.


Lead Developer Addresses Community Concerns

As Arbitrum lead developer Patrick McCorry, pointed out, the Arbitrum Foundation made the assumption that the AIP-1, which was an omnibus governance package, contained the “ratification” of decisions already taken, such as receiving 7.5% of all ARB tokens.

McCorry writes,

“Nothing here is intended to minimize that there was very clearly a shortfalling in communication. One of the mistakes in the drafting of 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; this was spelled out at the end of AIP-1 in the section “Steps to Implement,” but it should have been made clear earlier on.”

“Foundation Should Be Allowed Discretionary Power”

McCorry, who is also one of the founders of the Arbitrum Foundation, stated that the ratification of AIP-1 was intended to allow the Foundation to assume certain obligations associated with infrastructure and service providers in order to continue providing the ecosystem everything it needs to thrive in a highly competitive environment.

He also explains why it is crucial to have a well-funded Arbitrum Foundation without limiting its discretionary power to negotiate deals with large institutions on behalf of the DAO.

He writes,

“It’s clear that it’s within the DAO’s best interest to have a voice in these arenas, and the DAOs ability to choose the Foundation’s directors give it direct control to replace, remove, or augment its representatives.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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