Arbitrum (ARB): Discussion about self-governance – Does the foundation keep plans?

Originally posted here.
By: Stephan Fiedler

Overview

Arbitrum (ARB) has been freely traded for just over a week. But already there is trouble in the community. This is because the Arbitrum Foundation […]

The Post

Arbitrum (ARB) has been freely traded for just over a week. But already there is trouble in the community. This is because the Arbitrum Foundation has had funds at its disposal before they were allocated to it by the self-administration (DAO).

At Arbitrum (ARB), a tangled situation in the relationship between investors and the project team is already brewing shortly after the successful stock market launch. Over the weekend, it became known that the Arbitrum Foundation had accessed 50 million ARB (current value around 60 million US dollars), which it was not officially entitled to until after the community had decided on funding issues in a referendum. The events caused Arbitrum’s price curve to dip by about 8 percent, and the problem could become even bigger.

The concrete bone of contention is “AIP-1 “, a package of proposals on how the Arbitrum Foundation should be set up organizationally and financially. As provided for in the self-governance agreement (DAO) on Arbitrum, “AIP-1” is to be decided with ARB as the ballot, and the deadline for participation is not until tomorrow, Tuesday. Until Sunday noon, it looked like “AIP-1” would get a clear majority, adding about 3.5 billion ARB to the endowment. But when it came out that the Arbtitrum team is already acting with part of the funds, the mood turned. Currently, it appears that the proposal “AIP-1” will not receive approval. An attempt from the foundation to explain the processes in a longer text contribution  has rather strengthened the defensive attitude of the community.

For it is now clear that, in anticipation of a positive decision on “AIP-1,” the Arbitrum Foundation has already exchanged 10 million ARB for fiat and given 40 million ARB to a “highly developed market participant” as a loan. The had been done to resolve the “chicken and egg problem.” The foundation needs funds to begin its work in a serious manner and thus also to secure self-governance, the statement continues. But with the transactions one should have probably rather left oneself time up to the agreement. Criticism is now also being voiced about the part of “AIP-1” according to which the foundation wants to hold 750 million ARB in a fund, which it can dispose of without voting, in order to make Arbitrum and the ecosystem more attractive with initiatives.

Still trying to save “AIP-1”, the Foundation stiffens to call the vote a “ratification”, quasi a “pro forma matter”. But the distrust expressed in the voting trend in the referendum itself, and also reflected in the crypto markets, is not reflected by the position of the Arbitrum Foundation. What it should do if indeed in the end “AIP-1” does not find a majority is unclear. Rolling back the transactions with the 50 million ARB in question is unlikely to be an option.

Conclusion: Arbitrum with home-made problems – ARB under pressure

Arbitrum appears to have gotten itself bogged down in the first application of self-governance in a situation that will take diplomatic skill to resolve. The dispute exemplifies that the concept of self-governance of a cryptocurrency via DAO relies on a foundation or team that abides by rules and acts in a fiduciary capacity. The proposals in “AIP-1” for ARB were industry standard in themselves – but lack of patience and clumsy communication policies now threaten to damage the Arbitrum Foundation at the founding stage and take away its legroom.