Arbitrum’s First Governance Proposal Turns Messy, With $1B ARB Tokens at Stake

The Arbitrum Foundation would get to side-step community governance when issuing “special grants.”

AccessTimeIconApr 1, 2023 at 7:16 p.m. UTC
Updated May 9, 2023 at 4:11 a.m. UTC

The Arbitrum blockchain’s first attempt at governance erupted Saturday over a proposal to give the Arbitrum Foundation control of 750 million ARB tokens, worth nearly $1 billion.

Those tokens would fund a “special grants” program meant to foster growth on Arbitrum, the Ethereum layer 2 blockchain that airdropped its governance token ARB just last week. But ARB holders would not get a say in to whom or how Arbitrum Foundation allocates the nearly $1 billion sum, according to the proposal, AIP-1.

That’s because the centralized Arbitrum Foundation would not need to subject its grant allocations to “full on-chain governance” – the process by which ARB holders shape the blockchain and its ecosystem.

Arbitrum Foundation’s proposed backdoor stands in contrast to other elements of AIP-1 that underscore the claimed importance of token holders. “As Arbitrum is intended to be a public good, it is only right that governance over it should be governed by those for whom such public good is intended for,” read one section.

The vote, which is currently in a preliminary stage before heading for a formal final forum, comes before the Arbitrum Foundation has released key elements of how it will administer the grants program.

“We're talking about $1 billion to start,” said an Arbitrum community member who asked not to be named. “Having seen other governance examples where large treasuries got basically drained for community pet projects, this is pretty concerning.”

The organization that submitted the proposal, Lemma Ltd, could not be immediately reached for comment.

According to the proposal, the “special grants” program’s fast track would stop grants proposals from gunking up governance channels. It would also solve “voter fatigue,” the proposal said. That argument didn’t find favor with the community members CoinDesk interviewed.

“News flash: governance is hard,” one said, but that “doesn't mean you should circumvent due process. Elections are f****** annoying but democratic nations at least pretend to do them for a reason.”

Arbitrum token ARB fell about 7% in the last 24 hours, according to CoinGecko.

Edited by Aoyon Ashraf.


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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.

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