Arbitrum’s First Governance Proposal Becomes Chaotic: $1 Billion Worth of ARB Tokens at Risk

04/02/2023 21:06 • Metaverse Matters • 142 views

According to reports, Arbitrum’s first governance proposal became chaotic, with $1 billion worth of ARB tokens at risk. The first attempt to govern the Arbitrum blockchain began on Saturday due to a proposal to let the Arbitrum Foundation control 750 million ARB tokens, valued at nearly $1 billion. These tokens will fund a “special grant” program aimed at promoting the growth of Arbitrum. However, according to the AIP-1 proposal, ARB holders cannot decide to whom or how to allocate nearly $1 billion of the Arbitrum Foundation’s funds. This is because the centralized Arbitrum Foundation does not need to place its grant allocation under “full chain governance.”. (CoinDesk)

Arbitrum community allocates 750 million ARB governance proposals to avoid community governance

Introduction

Recently, the Arbitrum blockchain network saw its first governance proposal turn into chaos, with $1 billion worth of ARB tokens at risk. The proposal aimed to permit the Arbitrum Foundation to manage 750 million ARB tokens, which are worth approximately $1 billion. These tokens would fund a “special grant” program designed to promote the growth of Arbitrum. However, according to the AIP-1 proposal, ARB holders cannot decide to whom or how to allocate nearly $1 billion of the Arbitrum Foundation’s funds. This is because the centralized Arbitrum Foundation does not need to place its grant allocation under “full chain governance.”

The Background

Arbitrum is a decentralized blockchain network dedicated to smart contract executing that operates as a “layer 2” on top of Ethereum. Its aim is to improve the scaling issues faced by Ethereum by allowing activities off-chain, such as smart contract computations, and then settling the transaction with finality on Ethereum. The platform has been eagerly anticipated by Ethereum creators and users, with the network having raised considerable interest from investors.
Arbitrum’s genesis was launched in August 2021, bumping the platform’s trading on the world’s largest cryptocurrency exchange, Binance, to approximately $2.6 billion.

The Problem

The proposed action by the Arbitrum Foundation to handle 750 million ARB tokens was met with resistance, with many ARB holders pointing out that the decision violates the governance rules of the platform. The foundation would be granted considerable power over the tokens that could impact the platform’s future developments.
The governance rules of Arbitrum permit token holders to initiate any proposed changes to the governance of the platform. This includes everything from introducing new rules, making changes to the protocol, and assigning funds for development purposes.
As a result, many ARB token holders recommended that granting the control of the ARB tokens to the arbitrator would be inappropriate, as it would significantly impact the governance of the platform negatively.
The decision of the Arbitrum Foundation to choose certain people and projects who would receive the funds could create tension in the community and raise questions about those who missed out on that grant.

The Solution

To mitigate the risk and apprehensions found in the proposed management of the ARB tokens, the community members have proposed another solution. This proposal aims to provide liquidity provisions and token distribution to the network’s members, among other initiatives. This proposal set to address the concerns of the community while still providing necessary funding for growth and ecosystem initiatives.

Conclusion

In summary, the proposed management of the ARB tokens by the Arbitrum Foundation was met with resistance by the community as this goes against the known governance rules of the platform. Bitcoin maximalist Max Keiser openly expressed his opinion on this proposal on Twitter, which gathered significant interest from blockchain enthusiasts. Despite the prevailing resistance, the community has proposed an alternative solution to ensure transparency and fair distribution of the funds.

FAQs

#Q: What is Arbitrum?

A: Arbitrum is a decentralized blockchain network designed to improve the scaling issues faced by Ethereum by allowing activities off-chain, such as smart contract computations, then settling the transaction with finality on Ethereum.

#Q: Who proposed the management of the ARB tokens by the Arbitrum Foundation?

A: The management of the ARB tokens by the Arbitrum Foundation was proposed by the foundation itself.

#Q: Was there any opposition to the proposed management of the ARB tokens?

A: Yes, the proposed management of the ARB tokens was met with considerable resistance from the community as it goes against the governance rules of the platform.

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