Arbitrum’s dream to decentralize goes down the drain
Arbitrum’s efforts to hand over control to its community have not gone the way it wanted them to. Thus, efforts have been wasted due to critics’ harsh criticism of its first-ever governance proposal. Several critics called the procedure a “Sham Vote,” arguing that it was nothing more than a decentralization theater.
That had further affected the ARB token, which lost a value of more than 18% even before the weekend started. CoinGecko has reported the figure at the time of drafting this article.
Heading straight to the controversy, the DAO has been asked to make amends to its proposal of creating an Arbitrum Foundation, which is expected to be governed by the community while also serving the same. It was requested that $1 billion worth of ARB be gifted to the foundation so that debts could be paid off and the remaining portion disbursed.
Tables turned when Blockworks Research set off the time bomb with a statement that 750 million ARB had already been set aside for the Foundation. Thereby, it signaled that the voting process was just a formality. The same voting process was expected to give community members a right to participate in the governance based on how many ARB tokens they hold. Additionally, 50 million ARB was sent to Binance on March 23, 2023, to commence the trading process.
This would enable the Foundation to sell the tokens.
Jason Schwartz from Fried Frank has wished Arbitrum luck in trying to prove to courts and regulators that the voting process differs from a bank with a suggestion box.
Another member has come out to criticize the move. Olimpio holds 18M ARB and has voted against the proposal. Olimpio later took to Twitter to comment that Offchain Labs could have avoided the controversy by saying it would gift the Foundation 750 million ARB tokens. True, since Starknet and the Optimism Foundation did the same.
Arbitrum Foundation has called the entire incident a blunder of communication.
Patrick McCorny, a Foundation Member, has said that the Foundation has treated this as a ratification of the first-ever setup. Patrick has added that the funds are now being used in the interest of the DAO, including the conversion of funds into stablecoin.
Out of the 50 million tokens sent to Binance, 40 million have been granted to Wintermute in the form of a loan, with the remaining 10 million going to fund the operational expenses of the Foundation.
Amendments are on the way after losing confidence with a three-quarters vote against the proposal. It will now be introduced again by Arbitrum to the community for a fresh vote. A transparency report is expected to be drafted to inform the community about the way in which funds are being spent.
Lastly, the 750M ARB will be subjected to a vesting period of 4 years with no usage during the voting process.