Arbitrum, an Ethereum scaling solution, launched its official decentralized autonomous organization (DAO) in late March, in conjunction with its governance token, ARB. However, in his first voting proposal, everything was a failure, we will tell you what happened.
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First of all, Arbitrum is a scalability or rollups solution, which works as a kind of lateral network on top of Ethereum. Such has been the growth of this network that it has managed to surpass, on occasions, Ethereum with respect to the number of daily transactions.
After years of operation, operating as a protocol managed by the Arbitrum Foundation, a private organization, on March 16 the foundation announced that its next phase would be decentralization. This means that the rollup would now be governed by the administration of ArbitrumDAO, a decentralized organization, whose ARB governance tokens would be distributed, in part, to the user community through an airdrop.
Following the distribution of the ARB tokens, ArbitrumDAO released its first ballot proposal, AIP-1 (Arbitrum Improvement Proposals). Among one of the points of the proposal, it was defined that the DAO of Arbitrum would use more than 750 million ARB, equivalent to more than USD 1,000 million, in operating expenses.
A complicated vote
The approval vote for AIP-1 began on March 27. Only ARB token holders could participate in such voting. Voters would have three options: choose to be in favor (for), against (against) or abstain (abstain) from the proposal.
The vote would end on April 3. However, just a few days into the process, the trend was clear: the holder community was voting against the proposal.
An important point within the vote was the number of votes against and from whom they came. In total, there were more than 90 million votes against the proposal. It should be noted that, for a holder, each ARB means 1 vote. If he has 10 ARB in his wallet, he can vote 10 times. Now, of the 90 million, 61.5 million votes came from only 6 different entities.
This means that more than 50% of the votes of the entire vote (more than 110 million) belonged to a small group of users. Although more than 25,900 wallets participated in the vote, only 6 of these were able to choose the destination of the vote.
The final vote ended with a crushing 83% against, against 13.9% in favor. Given the situation of the sale of ARB tokens, Arbitrum published a clarification on the use of funds. The foundation excused itself by saying that AIP-1 was not a vote on a proposal but a “ratification” of a decision already made.
They also explained that, according to them, it was all a misunderstanding since the statement was poorly drafted. However, different media point out that the disagreement of the community did not indicate the amount of funds, but that ArbitrumDAO decided to mobilize them before the vote ended.
The foundation also explained that, of the total 50 million ARB mobilized, 40 million of these were given in loans to “a sophisticated player in the financial markets space,” referring to Wintermute, a “make market” or provider of exchange market liquidity.
The remaining 10 million ARBs, of the total mobilized, were “converted” to fiat (sold), to cover operating costs, Arbitrum explained.
Due to this sale, which is equivalent to more than 14 million dollars (USD), the ARB token had a drop of more than 20% between April 1 and 2. This while the voting was still active. Due to the numerous criticisms that ArbitrumDAO received, its managers guaranteed that they would not sell more ARBs any time soon.
Annoying community and new votes
Although ArbitrumDAO “corrected“, the community was not happy at all. With the justifications given by the foundation for the use of the 50 million ARB, some users, such as Alex Krüger, exclaimed that the foundation believes that “all [users] are stupid“, referring to the fact that they would accept, without further ado, the explanations on the mobilization of funds.
The memes and mockery in the Twitter thread where Arbitrum apologized for what happened in the vote were not lacking. Some mentioned the fact that they used sugarcoating to hide the sale, saying they had “converted to fiat” instead of “selling.”
For its part, the Arbitrum Foundation promised new votes, but with an important structural change. The original AIP-1, according to the foundation, “covered too many topics” so it was not necessary to put so many topics up for discussion in the same vote.
In the future, the AIP-1 proposal will be put to a vote again, according to the Arbitrum Foundation announcement, but segmenting the different AIPs. They also note that the ARB 750 million of the foundation’s funds will be voted into its own AIP independently.
At the moment, Arbitrum has not indicated dates or next steps to take on future votes. They have not given any further explanation about the funds either, since they only justified that they were used for “operating expenses”.
take from: criptonews